As many as 11 blue chips gained 1 point or more to help drive the Dow Jones industrial average to a gain of 0.6% amid bullish afternoon trading in the stock market today.
Meanwhile, Tesla (TSLA) jumped 7% before trading on the Nasdaq got halted on news that CEO Elon Musk is ready to take the electric vehicle pioneer private. Trading near 367, Tesla has a current market value of $62 billion.
Apple (AAPL) wasn’t one of those 11 components within the 30-stock Dow Jones industrials to rally sharply. Yet a thin loss of less than 0.8% to 207.42 for the iPhone and Apple Watch marketer proved less than a door ding to its impressive six-day winning streak. The streak sent the largest company by market value into the rarefied air of $1 trillion.
The Dow Jones industrials enjoyed solid gains by Caterpillar (CAT), Goldman Sachs (GS), UnitedHealth (UNH), Chevron (CVX) and Walt Disney (DIS), each up 1 point or more. At the day’s high so far of 25,692, the blue-chip index hit its highest level since Feb. 27. Media giant Disney reports results after the close.
Cat is struggling to lift back above the falling 50-day moving average and stands 17% below a 52-week high of 173.24. Home Depot is crafting a new base, a six-month shallow cup with handle that right now furnishes a 204.35 proper entry point.
Please read this IBD New Highs story on how Disney has cleared a correct buy point and is rising solidly ahead of its fiscal Q3 results.
At 2 p.m. ET, the S&P 500 and the Nasdaq composite rose roughly 0.4%.
Small caps briefly rallied in lockstep with their larger brethren, but began to trail. The Russell 2000 gained nearly 0.3%.
Volume is running lower vs. the same time Monday on the Nasdaq and higher on the NYSE.
Going back to Apple, it’s already well known now that the consumer electronics giant has successfully posted another quarter of double-digit earnings and revenue increases. Warren Buffett, the value-oriented mega-investor, owns a ton of shares. And Apple, trading at 19 times earnings over the past 12 months, may still look like a “bargain” for certain institutions.
Yet the real reasons for a continued potential rise in the megacap tech include the company’s commitment to innovation, continued solid earnings estimates, delivering shareholder value, ambitious goals to take market share, and growing sales across the world.
Tim Cook, Apple’s CEO, noted that his team is “very excited about the products and services in our pipeline.” This comment likely points to new versions of Apple’s super-popular products including the iPhone X, the HomePod smart speaker and the cellular telecom-enabled Apple Watch.
Meanwhile, CFO Luca Maestri noted that in the June-ended quarter Apple returned almost $25 billion to investors through share buybacks and cash dividends. The current annualized dividend yield for Apple is 1.4%.
In other words, the company, which now has a user base of 1.3 billion active devices, is on the path of making good on its pledge to return $100 billion in capital to investors. That’s a sizable buyback program, roughly 10% of the company’s total market value of $1 trillion.
Wall Street, meanwhile, has ratcheted its profit estimates for the Cupertino, Calif., firm higher. Analysts on on consensus see earnings rising 27% to $11.73 for FY 2018, ending in September, and another 16% to $13.55 in FY 2019.
Apple is now up more than 15% past a 179.04 proper buy point in a seven-week perfect double-bottom base. The stock also went on to form a new base-on-base pattern that shows a roughly seven-week flat base containing a 194.30 buy point. This forms when a stock breaks out of a primary base, but does not rise 20% from the correct buy point before forming a brand-new base.
The Nasdaq-listed company would need to reach the $253-$254 price level to hit $1.25 trillion in market cap, based on 4.926 billion diluted shares outstanding as of June 30.
According to IBD Stock Checkup, Apple now shows a top-shelf 99 Composite Rating on a scale of 1 to 99. That certainly wasn’t the case back in Jan. 6, 2017, when Apple initially cleared a bottoming base in the form of a first-stage cup with handle.
The Composite Rating combines IBD’s proprietary Earnings Per Share Rating, Relative Price Strength Rating, SMR Rating (for sales, margins, and return on equity), Accumulation/Distribution, and recent stock price action.
Savvy growth investors prefer to focus on those growth companies that are poised to break out from a solid-looking base and generally have EPS and RS ratings of 80 or higher. In some cases, certain successful turnarounds will show ratings lower than 80 at the breakout try.
Meanwhile, a handful of software and hardware tech stocks showed strength and good breakouts following quality earnings results. They included Five9 (FIVN) (up as much as 25% to 44.07, surpassing a 39.65 cup entry); Twilio (TWLO) (soaring 22% to as high as 77.31, gapping well past a 65.47 entry in a gigantic cup with handle); RingCentral (RNG) (up as much as 10% to 90.05, retaking a prior base buy point of 81.30); and Zebra Technologies (ZBRA) (rising 17% to 166.50, surging past a 150.76 buy point in a seven-week double bottom).
Ring Central initially broke out of the nine-week base on July 17, but didn’t advance much. Then shares dropped sharply below the 50-day moving average and sank more than 8% below the 81.30 entry point. That triggered the automatic loss-cutting sell rule.
However, RingCentral muscled its way back fast in recent sessions. There hasn’t been enough time for the expert in business communications software to form a new base. So, the recent action can be viewed as a second breakout attempt.
The Belmont, Calif., firm reported a 90% leap in Q2 earnings to 19 cents a share, smashing the Wall Street consensus forecast by nearly 27%. Revenue picked up 34% to $160.8 million, a quarterly best. That top-line increase also matched the 34% year-over-year increase seen in each of the prior three quarters.
After-tax margin at RingCentral bulged 290 basis points to 10%, also likely a company record. Analysts on consensus see full-year earnings rising 91% to 65 cents a share this year, then another 26% to 82 cents in 2019.
Jazz Pharmaceuticals (JAZZ), up more than 2.5% to 181.12, is rising nicely above its 50-day moving average. The leading member of the ethical drug group has been crafting a new flat base since topping at 184.
Jazz reports Q2 results after the close. The Street sees earnings rising 26% to $3.23 a share. That would follow a 4% drop in the year-ago second quarter and EPS gains of 23%, 9% and 29%.
Jazz has joined IBD Leaderboard as a call option play ahead of its earnings announcement.
Elsewhere, WTI crude oil futures edged up 0.1% to $69.09 a barrel. The yield on the benchmark U.S. Treasury 10-year note rose 3 basis points to 2.97%.
Please follow Saito-Chung on Twitter at @IBD_DChung for more analysis and commentary on growth stocks, breakouts, buy points, sell signals, and financial markets.
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