Top growth stocks cooled off, crude oil fell more than 1% and the Nasdaq looked set to give back a decent chunk of last month’s oversize gain. Leaders in the retail, health care and transport sectors — namely Apple (AAPL), Union Pacific (UNP), HealthEquity (HQY), Alarm.com (ALRM) and Ollie’s Bargain Outlet (OLLI) — bucked the drop in the stock market today.
Apple, meanwhile, recouped much of the day’s losses. The iPhone, iMac and digital services titan surrendered just 0.2% following a five-week sprint run that started with a mild test of the 50-day moving average and sent shares up 20%.
The leading megacap tech, trading near 227.94, remains up 34% since Jan. 1. IBD’s Stock Market Today column covered Apple frequently as it set up and eventually broke out of a first-stage bottoming base with a 118.12 correct buy point back on Jan. 6, 2017.
At around 2:45 p.m. ET, The Nasdaq composite slumped 1%, after falling as much as 1.6% in the early going. The leading index is trying to test a potential floor of support at the 8000 round number. At 8008, the tech-heavy index is up 16% since Jan. 1 and rose 5.7% in August.
The S&P 500 also cut losses, going from a 0.7% morning sell-off to a roughly 0.3% decline. Among IBD’s 197 industry groups, nine of the 10 worst performers hailed from the computer and software sectors. (The daily changes are updated after the market close.) Education and media software firms dropped 3.5%; computer networking, desktop software, gaming software and database stocks slipped 2.8% to 3.3%.
The Dow Jones industrial average rose nearly 0.2%, boosted in part by gains of 1 to 2 points by the likes of Caterpillar (CAT), 3M (MMM), Johnson & Johnson (JNJ) and McDonald’s (MCD), fought to scrape a small gain. 3M is deep in the middle of a new base. JNJ and McDonald’s are also forming what so far look to be the saucer base pattern.
In August, the 30-stock Dow industrials trailed the other key indexes, rising nearly 2.2% that month.
Retail Stock Leader Reports After The Close
A few retailers showed terrific resilience.
Ollie’s Bargain Outlet looked set to stage its 14th gain in a row, at one point rising more than 1% to as high as 88.90. Volume is running sharply above typical levels. It ranks No. 3 for its 97 Earnings Per Share Rating within the discount and variety retail industry group, according to IBD Stock Checkup. A 97 rank means the company has superior profit growth in both recent quarters and in the past three to five years than 97% of all companies in the Investor’s Business Daily database.
Ollie’s is well extended from any proper buy point. The stock cleared a 77.60 correct entry in a 10-week flat base on Aug. 20 and has run up nearly 15%.
The deep-discount outlet, specializing in high-quality closeout merchandise, reports fiscal second-quarter results after the close. Analysts see earnings popping up 33% to 36 cents a share on a 12% increase in sales to $284.7 million. The highest sales forecast among the 11 analysts surveyed by Thomson Reuters is $291.1 million, up 14%.
Ollie’s grew earnings in the past four quarters by 29%, 29%, 31% and 64% vs. year-ago levels.
Other Growth Stocks Showing Strength
Other leading stocks faring well Wednesday include railroad Union Pacific, health savings account expert HealthEquity, and home security software and systems provider Alarm.com. All three stocks rose more than 1% in fast turnover.
HealthEquity reported strong Q2 results as earnings jumped 62% to 34 cents a share, in a 25% rise in revenue to $71.1 million — the biggest total sales for any quarter.
In IBD Leaderboard, Etsy (ETSY) sank more than 5% but bounced off its session low of 46.43. Clearly, the online marketplace for artists and artisans has been feeling selling heat near 50. But the stock remains in a fierce uptrend and has moved up nicely since testing the 50-day moving average near 39 in late July.
Autodesk (ADSK), a relatively new Leaderboard stock, slumped nearly 2% to 150.63 in flat trading. The industrial design software firm for manufacturing companies staged a strong breakaway gap on Aug. 24 following a robust quarterly report. Shares remain slightly more than 5% past a 143.04 conventional buy point in an eight-week flat base.
It’s smart to stick with purchases of stocks while they remain in the 5% buy zone.
However, Autodesk presented an alternate entry point with the breakaway gap. Given the sharpness of the move and the ongoing turnaround in results, one could have bought shares at the Aug. 24 open of 152.39.
Growth Stocks Hit Hard
High-end indoor and outdoor furnishings chain RH (RH) dropped sharply for a second straight session. The stock fell 12% to 133.06 and slid sharply below the key 50-day moving average for the first time since it cleared a long and deep double-bottom base with a 105.56 buy point on June 5. Volume is running more than six times usual levels. The big drop in heavy volume is sparking a key defensive sell rule.
Late on Tuesday, RH reported excellent earnings for the July-ended fiscal second quarter, up 283% to $2.49 a share. Sales rose 4% to $640.8 million as net margin more than tripled to 10.5%.
RH had formed an 11-week cup base that showed a mild correction of 22% from head to toe. The proper buy point was 164.59, but the stock hadn’t yet surpassed that proper entry. On a daily chart, RH appeared to have formed a thin six-day handle that provided a 161.49 entry. However, buying a stock right before quarterly results carries higher risk.
Tuesday’s reversal was negative as the stock briefly eclipsed the narrow handle buy point, but then quickly turned tail. RH finished the day down 4.9% and volume zoomed more than five times its 50-day average. On Wednesday, the stock fell more than 8% below the aggressive buy point of 161.49, triggering the golden rule of investing.
The Innovator IBD 50 (FFTY) ETF fell 2.7%, giving back nearly two weeks’ worth of gains. At 37.32, the exchange-traded fund remains up 12.3% year to date after rallying 34% in 2017.
