Apple (AAPL) helped boost the Nasdaq composite to new all-time highs and a mild gain. Merger fever in the semiconductor sector also helped lift the Nasdaq.
Apple, up 1.1% to 174.36 and new all-time highs, has now jumped more than 11% past an Aug. 2 breakout from a flat base with a 156.75 entry. The iPhone and iMac giant is also steadily gaining ground from its newest buy point, a nearly eight-week cup with handle at 160.97.
At 4pm ET, the Nasdaq composite held on to most of its moderate gains, rising 0.3%, while the Dow Jones industrial average and the S&P 500 notched gains of around 0.1%. But the latter two indexes closed nearly at session highs, a bullish sign.
Strong rallies by certain computer and internet-oriented tech stocks offset sharp declines by stocks in the supermarket, medical services, medical supplies, drugstore, automaker, gaming software, meat and other defensive food industry groups.
The S&P SmallCap 600 rose 0.2% and the Russell 2000 gained 0.3%. Volume fell slightly on both exchanges. The Dow transports fell 0.2%; the Dow Jones utility average dropped more than 0.5% after a huge gain in crude oil prices following political turmoil in the highest levels of government in Saudi Arabia.
WTI futures jumped 3% to $57.36 a barrel on the NYMEX.
Back to Apple, it's important to remember that the best time to buy Apple over the past 12 months actually came in January, when the megacap name burst out of an excellent cup with handle.
That top-notch pattern, repeated time and time again by many of the greatest stock market winners in history, featured a 118.12 buy point. (Find the proper entry in a cup with handle by adding 10 cents to the highest price within the handle portion.) Since shares have already gained more than 45% from that proper entry, it obviously will be more challenging for Apple to rise another 20% from its latest proper entry points.
However, Apple has shown it can maintain conservative guidance, and over-deliver. Fiscal Q4 earnings jumped 24% to $2.07 a share, the best gain in eight quarters, on a 12% pickup in revenue to $52.58 billion. And the Street thinks Apple can grow its earnings in the double digits for at least a fourth straight quarter (up 12% to $3.76 a share).
Three more reasons why the market bears shouldn't knock Apple:
One, the up/down volume ratio in Apple's Stock Checkup (a proprietary tool available only at Investors.com) is now back at 1.1, above the neutral 1.0 level. Prefer those companies that show a ratio of greater than 1.0, which means that volume is heavier on the stock's up days in price vs. down days over the past 50 sessions.
Two, the RS line is hitting new high ground (see it in blue in IBD's daily and weekly charts, and in MarketSmith).
Three, the Relative Price Strength Rating (different from the relative strength line, which graphs a stock's performance against the daily action of the S&P 500) is approaching a nine-week high of 89.
Chips Still Chipper
The Philadelphia semiconductor index, known as the SOX, rallied 1.3% and is now up 45% year to date. The possibility of Broadcom (AVGO) acquiring wireless chip technology expert Qualcomm (QCOM) has fueled speculation of further consolidation in the massive industry.
Among IBD's 33 sector rankings (see them in IBD's stock research tables, part of IBD's Data Tables), the Chips sector is ranked No. 1 in terms of mid- and long-term relative performance. Broadcom, which has thrived since its merger with Singapore-based Avago Technologies in 2016, rallied more than 1% to 277.53 and is out of buy range after clearing a 259.46 flat-base buy point on Oct. 30.
In IBD Leaderboard, Palo Alto Networks (PANW) is trying to recover after a summary sell-off in the security software industry. Palo Alto fell after peer Check Point Software (CHKP) plunged more than 12% despite Q3 results that beat on the earnings side (EPS up 15% to $1.30 a share, 6 cents above the Thomson Reuters consensus view).
Palo Alto, which is growing its earnings and revenue at a faster pace, gained 1% to 147.77 in quiet trading and is now back above an aggressive entry near 144. (On select stocks, the Leaderboard charts offer annotations pointing to exact buy points and sell signals.)
The Street sees fiscal Q1 earnings rising 25% to 69 cents a share following EPS gains of 126%, 100%, 136%, 62%, 47%, 33% and 39% vs. year-ago levels in the prior seven quarters.
Palo Alto gets the highest EPS Rating within IBD's Computer Software-Security industry group at 99 on a scale to 1 to 99. Qualys (QLYS) has the second best EPS Rating, which covers long- and short-term profit growth and is compared with all other companies in IBD's database, at 96.
However, Palo Alto, a mid-cap software play, is still trying to reach 52-week highs as it exits a long, deep bottoming base pattern. This helps explain why Palo Alto, with a so-so Composite Rating of 83, is what Apple was at the end of last year: a potential turnaround play.
Qualys is having a terrific time since clearing a 10-week flat base with a 44.45 buy point on Aug. 3. Shares have since risen more than 28%, justifying the move to take at least some gains based on one of IBD's top sell rules: taking gains at 20% to 25% from a proper entry.
Software is ranked No. 15 out of 33 sectors. Palo Alto's security software group is ranked a so-so 83rd among 197 IBD industry groups and subgroups over the past six months, trailing sector counterparts gaming software (No. 14, please see Activision-Blizzard (ATVI) and Electronic Arts (EA)); desktop software (No. 17, topped by Microsoft (MSFT)); and specialty enterprise software (No. 28, headed by Atlassian (TEAM) and Alarm.com (ALRM)).
The large enterprise software industry group is No. 41.
This Income Stock Broke Out
Elsewhere, REIT stock American Tower (AMT) blasted more than 5% higher to 150.16 in turnover racing 88% above its 50-day average and took out a new 148.81 buy point in a nine-week cup. Average daily volume is 2.08 million shares, and as of 3 p.m. ET turnover has already exceeded 2.9 million shares.
Please go to IBD's New Highs column to read more about American Tower and other highly rated stocks rushing out of new bases and into new high ground.
IBD's TAKE: Taking many gains when your stock has risen 20% to 25% past a proper buy point is an excellent way to build a strong overall return. Not only are you locking in gains in a stock on the way up, but you are also freeing up cash to possibly put into another top market leader. Read more about this offense-type sell signal in this Investor's Corner story.
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