Apple (AAPL) continued to prove its rally from a bottoming base breakout in both October last year and in January may not be over yet, while biotechs and select chip stocks helped sustain the rebound in U.S. stocks Wednesday.
The Nasdaq composite rallied more than 1.1% as of 2:30 p.m. ET, outperforming gains of 0.8% by the S&P 500 and 0.7% by the Dow Jones industrial average. Small caps are doing even better; the S&P SmallCap 600 gained 1.5%.
XAutoplay: On | Off Turnover is running mildly lower vs. the same time Tuesday on both main exchanges. As noted in the latest Big Picture column, IBD downgraded the outlook on the market to “Uptrend under pressure” due to the sell-off on the Nasdaq in higher volume on Tuesday, known as distribution. A flurry of big distribution days is enough to halt a bull-market advance and even turn it into a bear market.
Despite the lower turnover with less than two hours remaining in the stock market today, volume has been above average in all but one of the past 14 trading sessions for the Nasdaq.
Banking stocks, meanwhile, resumed their advance following comments from Federal Reserve chief Janet Yellen that appeared to indicate that another hike in short-term interest rates is in the cards for the rest of the year. The yield on the 10-year U.S. Treasury benchmark bond edged to around 2.23%, the highest since May 29. WTI crude oil futures added more than 1% to $44.78 a barrel. Silver futures rose 1.1% while gold edged fractionally higher to nearly $1,250 a troy ounce on the Comex.
Apple, up nearly 1.5% to 145.85, is still holding on to a large portion of its gain since its Jan. 6-9 breakout from an excellent cup with handle. That base furnished a 118.12 buy point, 10 cents above the handle’s high of 118.02. Apple then gained as much as 32.5% in the space of just four months.
A further rebound by the iPhone giant would produce a new buy point if shares were to hop back above the 50-day moving average, currently near 149. Watch to see if the stock can retake that line.
The Street sees Apple’s sales rebounding 5% to $226.6 billion in the current fiscal year ending in September, following a rare 8% slide in FY 2016. Profit is expected to climb 8% to $8.94 a share. Apple holds a 1.8% annualized dividend yield.
IBD’s TAKE: While Apple is getting a boost on the top line in recent quarters due to strong demand for its services, some observers question whether Apple will need to make an acquisition to fuel continued revenue gains in that area of business and fulfill its goal of doubling that business by 2020. Read IBD’s latest tech team coverage on this increasingly vital part of Apple’s business model.
As seen in IBD Stock Checkup, Apple’s Relative Price Strength Rating continues to be positive at 84, meaning it’s now beating 84% of all publicly traded companies in terms of 12-month relative price performance.
Meanwhile, the biotech industry group is showing that it’s not intending to backtrack from a leadership position in the stock market today. Some of this large industry group’s biggest names, Celgene (CELG), Regeneron Pharmaceuticals (REGN) and Vertex Pharmaceuticals (VRTX), are all behaving well and all three are trading above their respective 50-day moving averages, a sign of strength.
Celgene, up more than 2% to 134.11, is wiping away losses from the prior two sessions. It broke out of a cup base with a 127.74 buy point last week. The 5% chase zone goes up to 134.12.
Celgene sports a highest-possible 99 Composite Rating, a 98 for Earnings Per Share Rating, and an A+ for Accumulation/Distribution, which means that over the past 13 weeks, the stock has shown evidence of heavy share accumulation by mutual funds, banks, insurers, pensions and the like.
Regeneron and Vertex are extended for now, but could provide follow-on buy points in the future. Watch for mild pullbacks to the 50-day or 10-week moving averages. Make sure that IBD’s current outlook is showing either “Confirmed uptrend” or “Uptrend under pressure,” signifying the odds of making money on a breakout are higher.
Vertex, up more than 1% to 131.05, is now extended more than 7% past a recent breakout past a 122.06 entry in a long, deep first-stage base, similar to that of a bottoming base pattern. In that base, Vertex crumbled 50.2%, creating a massive shakeout.
In the chip sector, Broadcom (AVGO) and Nvidia (NVDA) are also showing leadership-quality gains. The former is also finding continued support along its 50-day line after a recent flat-base breakout at 227.85.
Nvidia (98 Composite, 98 EPS) is extended from a May 10 breakout at 121.02. It has yet to challenge holders with a test of the 50-day moving average, which has been climbing sharply for more than six weeks.
The Street sees fiscal second-quarter earnings jumping 68% to 69 cents a share, which is very impressive in light of the fact that Nvidia scored a 720% increase in adjusted EPS in the year-ago quarter, according to research by William O’Neil + Co.