Growth stocks with connections to China, e-commerce, consumer spending and technology had a cheery session in stocks today as the Nasdaq composite rallied more than 0.8% and boosted into new high ground for a third straight session.
XMeanwhile, Nasdaq-listed high-growth companies Netflix (NFLX), Etsy (ETSY) and Qualys (QLYS) symbolized an ongoing trend in 2018: institutional investors continue to hunt for innovative companies that are delivering strong increases in earnings and sales. In a bull market, excellent fundamentals often beget excellent stock market performance.
While the Nasdaq 100 shot 1% higher to a new high, the S&P 500 rose slightly less than 0.3%. Dairy, department store and specialty retail, superregional bank, wood product, oil drilling and farm machinery firms dropped significantly. The Dow Jones industrial average edged 0.1% lower, despite 2-point-plus gains by Walt Disney (DIS) and market leader UnitedHealth (UNH). The NYSE composite edged fractionally lower, falling for a third straight session.
Volume edged mildly higher on the Nasdaq vs. Wednesday and slipped nearly 7% on the NYSE, according to early data. Friday will see monthly and weekly options expire, which sometimes results in unusually heavy volume.
A day after the Federal Reserve raised short-term interest rates for the second time this year, institutions jumped back into the U.S. Treasury bond market, buying with fury. On the long end, the benchmark 10-year yield fell 4 basis points to 2.94%.
Meanwhile, the ECB signaled that it's ready to curtail its own form of quantitative easing and initiate a hike in interest rates sometime in the summer of 2019.
French and German equities rallied sharply earlier in the day. The CAC 40 gained 1.4%; Germany's DAX 100 advanced 1.7%.
Netflix, one of those rare growth stocks able to lead the upside in more than one secular bull run, jumped another 3% on Thursday and reached a new session high of 395.03.
At that price, Netflix has scored a 27% profit for those who bought shares at a prime follow-on entry point near 311 during the final week of April. The gain triggered a key sell signal in which one should take many gains at 20% to 25% from a breakout point.
Selling winners on the way up frees up cash in the portfolio for future new buys. Also, many great stocks will take a pause and correct significantly in price after they break out and notch strong double-digit gains.
Why was the 311 price level a valid buy point for Netflix?
A Second Chance To Buy
After its breakout from a three-month cup without handle at 204.48 in early January this year, Netflix rallied valiantly, then tested buying support at the 10-week moving average for several weeks during the market's second intermediate correction that began in late March.
After a solid breakout from a base, the first and second pullbacks to the 10-week moving average (as seen on a weekly chart) or the 50-day moving average (on a daily chart) can offer a secondary buy opportunity.
The online video streaming giant and pioneer joined IBD Leaderboard initially in July 2014.
Etsy vaulted more than 26% to 41.65 in huge volume and at one point rallied 35% intraday. At 41.65, the online marketplace for artists and small businesses has climbed more than 40% since rebounding off the 50-day moving average in late May.
The Brooklyn-based company announced an increase in transaction fees for sellers.
Business Software Names Still Bullish
The Street expects Etsy, also an IBD Leaderboard stock, to grow earnings in the second quarter by 150% to 5 cents a share.
Qualys, a security software play, jumped more than 6% to 94.80 in quadruple usual turnover. The stock has now sprinted as much as 14.8% past an 85.10 proper entry point in a seven week cup without handle.
The company's revenue rose 22% to $64.9 million in the first quarter, marking a quarterly best.
That 22% increase also marked a third quarter in a row of growth acceleration, or a bigger year-over-year gain vs. the prior quarter.
Qualys' top line increased 14%, 17% and 20% in the prior three quarters.
Earnings per share have jumped 30%, 41%, 39% and 80% vs. year-ago levels over the same time frame. No wonder Qualys has achieved a 99 Earnings Per Share Rating from IBD Stock Checkup.
(Please follow Saito-Chung on Twitter at @IBD_DChung for more commentary on growth stocks, breakouts, sell signals, and financial markets.)
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