Market Ends Losing Streak;  5 stocks near buy points

Dow Jones futures were little changed in extended trade, along with S&P 500 futures and Nasdaq futures. Lululemon, Costco and Broadcom posted gains after the close.




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The stock market rally rebounded slightly on Thursday, but only recouped a fraction of the losses incurred over the past few days. Investors should still be cautious amid volatile market action. The S&P 500 remains below its 200-day line, with most indexes also hitting resistance at their 21-day moving averages.

Semiconductor stocks performed well with the chip maker Nvidia (NVDA) among the top performers in the S&P 500 on Thursday. But chipmakers are generally in better shape KLA Corp. (KLAC), Axcelis Technologies (ACLS) and Ultra Clean Holdings (HTTT) flashing buy signals Thursday. ASML (ASML) and Applied materials (AMAT) are among the relatives buy points.

Key wins

Costco Wholesale (PRICE), Lululemon Athletics (LULU) and Broadcom (AGO) was reported late Thursday.

Shares of COST were little changed overnight after Costco’s earnings and sales just missed showings. Costco shares lost some of the regular session on Thursday, but are down nearly 11% so far this month.

Shares of LULU fell in extended trading after the yoga apparel retailer steered slightly lower for the critical holiday quarter. Lululemon’s earnings slightly beat third-quarter views. Shares of Lululemon rose 0.6% to 374.11 on Thursday, closing in a range of a 370.56 handle cup buy point. But it is set to fall out of that buying zone.

Shares of AVGO rose modestly after hours as Broadcom’s earnings and guidance beat estimates, and the chip and software giant also raised its dividend. Broadcom shares closed up 2.4% at 531.08, just below the 200-day line. Last week’s high of 552.42 may offer some kind of entry.

LULU stock included IBD ranking as a profit option. KLAC shares included IBD long-term leaders.

Dow Jones futures today

Dow Jones futures were flat at fair value. S&P 500 and Nasdaq 100 futures rose 0.1%.

Crude oil futures rose slightly.

Remember this night action in Dow futures and elsewhere does not necessarily become an actual trade in the next regular Stock Exchange session.


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Stock market rallies

The stock market rally had a solid session, with indexes largely lower after the first hour of trading.

The Dow Jones Industrial Average rose 0.55% on Thursday Exchange Trading. The S&P 500 rose 0.75%. The Nasdaq Composite rose 1.1%. The small-cap Russell 2000 advanced 0.7%.

U.S. crude oil prices fell 0.8% to $71.46 a barrel, with some big intraday swings. Crude oil futures are now at levels that the Biden administration has signaled would prompt a refill of the Strategic Petroleum Reserve, which was depleted to long-term lows this year to lower energy costs.

The yield on the 10-year Treasury note jumped 8 basis points to 3.49 percent, but that was an intraday after falling to 3.41 percent on Wednesday.

ETFs

Among the growing ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose by 1.8%. VanEck Vectors Semiconductor ETF (SMH) jumped 2.55%. Shares of Nvidia, ASML, KLA and AMAT are holdings of SMH. Reflecting the more speculative stocks of history, the ARK Innovation ETF (ARKK) gained 2.4%, and the ARK Genomics ETF (ARKG) 2.2%.

SPDR S&P Metals & Mining ETF (XME) rose 0.3%, and the Global X US Infrastructure Development ETF (PAVING) advanced by 0.8%. US Global Jets ETF (STREAMS) submerged 0.3%. SPDR S&P Homebuilders ETF (XHB) grew by 0.6%. Energy Select SPDR ETF (XLE) and Financial Select SPDR ETF (XLF) rose 0.1%. Select Healthcare Sector SPDR Fund (XLV) grew by 0.9%.


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Chip stocks near points of purchase

Several chipmakers are in or near buying zones. Semiconductor equipment makers generally have some bleak forecasts for next year, but chip stocks often bottom out before business turns around.

Shares of KLAC rose 2% to 395.92, clearing some buy points between 392.60-396.02. Trading was very light, but there were a number of big gains on increasing volume as KLA recovered from the bear market bottoms of October and November. The line of relative strength is at an all-time high, even with stocks well above their January peak. KLA stock is a long-term leader, but the time to buy a stock like LTL is when it’s closer to the 200- or 50-day lines.

Shares of ACLS jumped 4.9% to 81.93, returning above an 80.34 handle cup buy point, according to MarketSmith analysis. Axcelis is quite extended from the 50-day line, but the 21-day line is racing up. The RS line for ACLS stock is at a 15-year high.

UCTT shares rose 5.6% to 36.59, above 36.10 cup-with-handle buy point and reaches its best levels since April. A base is formed right at the bottom, without a preceding uptrend. But the handle has largely formed above the 200-day line. The RS line for UCTT stock is at an 8-month high.

ASML shares rose 0.9% to 606.89. The stock rallied from its bear market bottom on Oct. 13 through Nov. 15. Since then, the Dutch high-end semiconductor equipment giant has consolidated comfortably above its 200-day line, at its best levels since April. The 21-day line is close to catching up. A break above recent highs may suggest an early entry. Ideally, ASML will break away from the 21-day line or create a suitable base.

AMAT shares rose 2.4% to 108.61 on Thursday. Shares are just above the 200-day line after Oct. 13-Nov. 15 runs. Applied Materials has a three weeks straight pattern suggesting 112.22 buy point. Investors could use a short trend line, perhaps with Thursday’s high of 109.43 as a trigger, as a slightly earlier entry.

Meanwhile, chip giant Nvidia rose 6.5% to 171.69, bouncing off its 21-day line. Shares of NVDA are now just below the 200-day line. An aggressive trader can use a decisive clear of the 200-day line as a buy signal. But it might be better to wait for Nvidia stock to clear the 200-day and form some kind of consolidation, a la ASML or AMAT, to spy a safer entry.

Market Rally Analysis

The stock market rally snapped a recent losing streak with modest to solid gains. But this did not fundamentally change the technical picture. The major indices are moving sideways, finding support at key levels but also meeting resistance.

The S&P 500 just managed to move back above its 21-day moving average. The benchmark index should return above its 200-day moving average and its high since December 1.

The Nasdaq Composite maintained support at its 50-day moving average, reclaiming the 11,000 level but closing slightly below its 21-day. The Russell 2000, which fell below its 200-day and 21-day lines earlier this week, gave up its 21-day intraday.

The Dow Jones, which closed slightly above its 21-day moving average on Wednesday, rebounded modestly on Thursday.

Markets may not make a decisive move with key news coming.

The producer price index for November is due to be released on Friday morning. Wholesale inflation should show a continued steady deceleration. But the real concern is in the prices of the services. The November CPI report is scheduled for December 13, with the Fed’s year-end meeting concluding the following day.

These events can be the catalyst for large market moves up or down. Sure, the indices have had big moves over the past month around the October CPI, Fed chief Powell’s speech and more, but the sideways, choppy action has continued.


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What should we do now

Some stocks flashed buy signals on Wednesday, including KLAC, ACLS, United on loan (URI) and Dexcom (DXCM). Investors could eat some of it — or not.

Overall exposure should remain low. The current market trend is sideways and choppy. It’s just a tough environment to make progress in stock trading. If you are making new purchases and making a decent profit, consider taking partial profits quickly. Too many promising stocks are up 5%, 10% in the last few weeks.

A number of stocks from different sectors are created. So keep your watchlists up to date and stay engaged.

Read it The big picture every day to stay in sync with market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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