Monday Gap Up Doesn’t Hold; Neurocrine Bio, Rush Street, Burlington In Focus — Stock Market Today

[00:00:00] Speaker ?: *music* [00:00:30] Alyssa Coram: Good afternoon everyone and welcome to stock market today for Monday, July 20th. It's Alyssa Coram here and we started off the week with a fade. We'll put the action into context for everyone and here with me now to do just that is my colleague, Justin Nielsen. Justin, what do you have for us today? [00:00:57] Justin Nielsen: Yeah, I mean, we're going to try and focus on the positive, but there was a lot of negative closes out there. A lot of things that closed at the low part of their ranges, including the indexes, which you'll cover in a moment, but a few bright spots. Let's take a look at Neurocrine Biosciences, NBIX is the ticker there, Rush Street Interactive, RSI, and then as our final stock, let's go with Burlington, B-U-R-L. [00:01:21] Alyssa Coram: All right, it sounds like a plan. We'll do that. But first, a look at those major indexes. We're going to kick things off with the S&P 500 today. It's right at that 50 day moving average, but today closing below that level for two straight sessions. Here, Justin, and today at the lows of the day reversing lower down two tenths of a percent by the end of the day. The Nasdaq closed almost flat, but slightly lower. But if you put that into context of how we started the day, definitely quite a notable fade as the session wore on. And then looking at blue chips, the Dow now two sessions below its 21 day moving average. And then the Russell 2000 now also below its 21 day line still holding above the 50 day for now. So with the S&P 500 here, Justin, what stands out to you? [00:02:21] Justin Nielsen: Well, my concern is actually with all of the indexes that you just showed, all of those charts, it's kind of your second day below a major moving average line. And what you don't want is for the indexes to get comfortable there, right? That kind of just tells you, hey, this is going to be a little bit more of a challenging market if it can't stay above those indexes. It already has been a challenging market, to be frank, with a lot of the leaders coming down as much as they have. And it's funny because when you look at the indexes themselves, you're like, well, gosh, you know, it feels worse. The S&P 500 is only down like two and a half percent. But it feels like it's like a correction at this point. I mean, in order to get to like eight, nine percent, you'd have to come all the way down to probably like 640 on this on this chart, you know, lose basically all of the gains from this rally. And that would be your run of the mill, you know, eight to 10 percent correction. So the indexes are not reflecting kind of the reality of what a lot of people are feeling in the leaders, especially those AI driven data center power, all of those things that, you know, the microns, the sand disks, all of those that we've been, you know, talking about for so long. It is. Yeah, they're they're they're coming off quite a bit. And while we have been looking at some of these areas of rotation, the areas of rotation, I'll be honest with you, I wasn't I wasn't that thrilled. I mean, XPI, that's not a good look. You know, another one where a reversal and XLV that we covered on Friday as well, that had a reversal on Friday and fell further today. And that's despite a lot of the stocks in these areas looking very strong. The ETFs really kind of taking it out on the chin, KIE, which is a little bit more on the defensive side. This is the insurance ETF. You know, that was an inside day, nothing really to write home about. But let's look at RSP, which is the equal weighted S&P 500. You know, that closed lower and was basically trading lower the entire day right there at the 21 day moving average line. So I don't want to make too much of it. But at the same time, when you start seeing kind of nothing working, that is a cause for concern. Now, one area that we don't watch that that much, but I couldn't ignore the technical action here is let's look at TBT. This is basically the 20 plus longer term Treasuries, the yield here, because this is short the bonds, which is basically the same direction as the yields. The yields and bonds go in contrary positions. So this kind of, you know, looked a little interesting in terms of this setup and we can look at TNX, the 10 year Treasury yield as well. Kind of a similar situation there where it just seems like it's potentially poised for a breakout. [00:05:25] Alyssa Coram: Double bottom with handle, anyone? [00:05:27] Justin Nielsen: Right. That's not that's not really what we want to see, you know, the the the yields going higher for for bonds. So, yeah, I think there's a lot of reasons to be again on the cautious side. That's one of the reasons why we lowered exposure. I think that's why we've been talking a lot more about defense on this show. And oh, just one more to kind of, you know, we showed some of them, but let's look at SMH, because as we were on IBD Live this morning. That was looking, you know, pretty strong and not a not a great look there by the close. So, yeah, just just lost a lot of ground. So again, Monday Monday mornings are already hard enough. But when you gap up like that and you just can't hold it, that seems to be kind of the situation we're in. We just can't hold gains. Any any type of positive action just doesn't seem to last. So that's a problem. It is. [00:06:27] Alyssa Coram: And I think there's a temptation for active investors, aggressive traders to see the reversal or the close off lows, the positive reversals. Right. That we saw at the end of last week and then see today's open and get that FOMO. And, you know, we were talking about those scalp trades, those smaller positions, those, you know, taking quick gains there. But I think that traders should be very careful here with that temptation, because a lot of these leaders that we saw coming out of that early April timeframe are not in a strong position right now. I mean, even if you just take the SMH, for example, right, it was living below its 50 day for a number of weeks. And then we did finally get that that turn in the market. Right. And moving back above the moving average was a really great signal to get in early. Right. You didn't have to catch the bottom to have the odds in your favor and to have the wind at your back instead of in your face. Yeah, no, absolutely. [00:07:43] Justin Nielsen: And it's just again, we're trying to make things easier on ourselves here again when when things are going in our favor, when the odds are in our favor. And and right now I think it's a it's a question mark. I'm not saying that I think this market is doomed by any stretch, but at the same time, I don't want to lose, you know, the gains that I got from from the rally. I don't want to give them all up. You know, I've already taken a drawdown. I just, you know, at a certain point don't want to lose more because at the end of the day, it's not the money that you make. It's the money that you keep. And so when you do go through these corrective phases, these pullbacks, you want to make sure that you're keeping as much of that as possible. And so that's meant, you know, scaling back, being more on defense. And while, as you said, there is the temptation for FOMO, I'm trying to make sure that my buying is limited, either with smaller position sizes, smaller number of positions in general. And I'm trying to make sure that I'm making progress before I dole more money out. So that's what the market has to do. It has to earn my money. And at this point, it looks okay in the morning, but not by the afternoon. And so I'm kind of grateful that I'm saying, okay, I'll buy two stocks and then stop until I make progress. [00:09:00] Alyssa Coram: Exactly. Well said. Because, and there also, there were other reversals in here that didn't last. So, you know, just because you get a move off lows doesn't, you know, mean it's time to plow in. It's like you said, have some limits for yourself. I think that's such a smart idea, Justin. Okay, let's move on here and take the look. We also do energy, you know, oil, of course, a big factor in the market today. We've been seeing that come off lows as those mid east tensions continue to weigh on investors here. And then we can also take a look at the energy sector, XLE, continuing to move up the right side of the base here. XOP, you've been pointing out, Justin, looks very similar. And CRAK as well. I mean, a breakout that is continuing to add to its gains. [00:09:57] Justin Nielsen: Yeah. And so, again, we kind of covered this one a little bit more on Monday's show last week as kind of the beginning of this. It's extended now. And, you know, we were particularly focused on Sinclair Dino. Yeah. So, you know, it's just it's just up and out of there now. I mean, that's a 20% gain from its initial breakout. So and it was already kind of extended even last week. But yeah, it's definitely sticking up and out of there now. Certainly an area of strength, certainly worth watching, but not much that you can do with it now. [00:10:34] Alyssa Coram: Yeah. Other than maybe lock in some profits. Yeah, that's true. Thank you very much. [00:10:39] Justin Nielsen: Yeah, that's what that green little shaded area is for. And while a lot of times we talk about an eight-week hold rule, oh, if it can make that 20%, 25% gain in, you know, one to three weeks, you know, then maybe it's something that you hold on to for longer. You know, with oil and the headlines and a market that's not so strong, I'm less about coming up with a time rule to hold. So that's something I use a little bit more early in a market trend, not in a later market trend. [00:11:12] Alyssa Coram: Yeah. If you have a great market and an elite stock on your hands, maybe that's, you know, with high conviction, maybe that's how you treat it. It doesn't feel like this is that stock, at least for me. And we're not in that kind of market. And like you said, you do have that added news risk. So headline risk there. [00:11:31] Justin Nielsen: And kind of back to what you said, Allie, is the wind at your back or is it in your face? Yeah. And right now the market certainly seems like it's putting that wind in your face. [00:11:40] Alyssa Coram: It is. Okay. Well, what stocks are holding up well in these kinds of conditions other than the HF Sinclair here? Well, we have a couple on our list to check in on. One is in that biotech space, and this is Neurocrine Biosciences in BIX. Up on the day, even with a broader group that XBI reversing lower, this one holding up, shares gained more than 1.2% on the day, Justin. [00:12:07] Justin Nielsen: Yeah. And again, I was trying to do a screen of, oh, what things are, you know, finishing kind of higher in their range. And this one came up, especially if you consider the true range, right? If you're looking at where did this come from, from the close of Friday, this was a lot more mid-range as opposed to at the lows of the day, like a lot of things. You know, so again, taking that true range into consideration. What I like about it is it came down to that 21-day moving average line, maybe a little sharper than I would have liked, but then it stopped. It really seemed like the sellers just kind of lost interest or there was enough buying in there to absorb it right there at the 21-day moving average line. You really had kind of the situation. Now, on the flip side, if this were happening where a stock was moving up and then it couldn't make progress further to the upside, that would be a concern. On this, in this case, you've come down and you can't really make any progress to the downside. Well, that's kind of a positive. So not only are you getting that support right there at the 21-day moving average line, you're kind of getting it right there at that 170 level, which was your previous area of resistance. So the fact that that former area of resistance is looking like it's become support. I also do like that little horizontal line that you made over the highs of the last three days. You know, it seemed like we got above that. Now, again, we did start kind of challenging it coming down into it, you know, by the end of the day, but I'd like to see this hold above that. So this is one that looks interesting. And again, it's in the right space, despite the ugly look of XBI. There's still a lot of these profitable biotech, development biotech that look very strong. Mm hmm. [00:13:54] Alyssa Coram: And zooming out to the weekly chart here, you can see the improvement in the earnings line. And also it's just been a couple of weeks, Justin, that this stock is in new high territory after a long sideways period. It seems like the most recent earnings report was a big catalyst for the recent performance here. And we do have the next earnings looks like coming up in about a week and a half. [00:14:22] Justin Nielsen: Yeah. So that is something. Look, we're right in the throes of earnings season. You know, you got hundreds of companies that are going to be reporting in the next couple of weeks, you know, hundreds just on the S&P 500 itself. So that is something to be aware of. You know, you don't want to be kind of caught by surprise because, of course, earnings can always move stocks quite a bit. One more thing to, you know, since we're on the weekly chart, one more thing to just kind of point out is certainly the change in trend for this relative strength line. You pointed out how we've really, you know, this just hasn't participated for a while. And the relative strength kind of shows that it just has been a laggard, but that trend really seems to have changed. And you've got your moving average lines on the RS line, which really kind of show, hey, this is starting to trend in the way that we want to see it. Yeah. So a lot of things going forward. And you're right, that last earnings report seemed to be a catalyst. But unlike a lot of stocks that we're seeing that kind of, you know, make these gains and then lose them, this at least is making higher lows. It's trending in the right direction. And for the most part, it's holding above those moving average lines that we like to see right now, especially the 21 day moving average line in 50 day. Both of those going in the right direction and trending higher. Yeah. [00:15:39] Alyssa Coram: All right. Elsewhere. Let's check out RSI. This is at Rush Street Interactive. Look at the day that this stock had, Justin, up 6.2%, a very impressive uptrend going back to the February timeframe here. And it looks like we must have talked about this on IBD live or stock market today. Previously, you had the earnings gap. And then what do we say a lot of times? Okay, let's see what the next setup is like. This one, it did have an orderly pullback down to the 50 day line, clear to trend line. And it looks like that was a good time to be getting into this one, Justin. It's had a nice move since then. Yeah. [00:16:17] Justin Nielsen: So this is not your typical buy right here. Again, you did get that support at the 21 day moving average line on Friday. It closed high in the range, like a lot of things did. And this is the kind of follow up action that you want to see. And this, this got just stronger throughout the day. Let's go ahead and take a look at the intraday chart. Wow. You know, and you can see where this actually, by the time I chose it, it actually went higher. And I promise this was not something that I did. I don't, I don't have a position in this one, Justin. Yeah. But yeah, this, this actually, you know, had, had it quite a move just in the time that I, you know, put it, put it into our, our little sheet here. But yeah, the, the things that are kind of not fading, the things that are holding up well, you do want to be very well aware of those, even if it's not something that you buy. And again, I skipped this one because it's out of there. You know, I think as you mentioned, the time to buy this was off of that bounce from the 50 day moving average line. I love that kind of where it has a gap up and it holds the bulk of the gains or gives you another setup opportunity. And that's what I think this one did, but Hey, I'm going to still keep my eye on this because there was a decent amount of volume relative to Friday that came in. And that was, I believe that was an options expiration on, on Friday. And so it's still beat that volume really high and really strong action. So yeah, maybe not something that we are acting on right now, but certainly one for watching. [00:17:48] Alyssa Coram: And let's go over to BURL. This is Burlington stores also close high in the range today, Justin. And it is right near a buy point. Yeah. [00:18:01] Justin Nielsen: And so this one did start a little weak. If we go to the intraday chart again, whereas a lot of things were really gapping up at the open. This was, this was running into a little bit of trouble, but look at the, look at how the buyers came in to support this stock. And so now this is, you know, back, back above that area. Um, that, that we wanted to see, uh, going back to the daily chart. It's, uh, yeah, it looks like a breakout, uh, support, uh, upside reversal. Now I don't like the action that we saw on Friday on this one kind of almost started looking like a breakout failure, but sometimes you do get these stocks that'll kind of squat. And there was a, a sense of, okay, we still don't really know where the money's going. You know, there, there, there seems to be a lot of sloshing around a lot of uncertainty, which personally I don't like. That's why I'm a little bit lighter right now. Um, but at the same time, I still want to be aware of those that are holding up a little bit better. And the fact that this has a base, it is breaking out. Uh, that's one that I want to make sure that I keep on watching to see, Hey, is this an area, uh, to keep our eye on? And just as a revisit to something we talked about on Friday alley, uh, let's take a look at eat, uh, Brinker, um, because that one had a good look on Friday and a really nice gap up and held the gains, uh, today. So, uh, we're just looking for more of those, um, and, and less of the sloshing around, but it's again, the, the, the wind is in our face a little bit. So if you are having difficulty seeing some of these stocks, um, you know, it's, it's okay to, to kind of step aside and go light right now. [00:19:42] Alyssa Coram: Yeah. And earning season is picking up steam, Justin. So how should that factor into the portfolio management decision-making this week? [00:19:52] Justin Nielsen: Well, um, you know, a few things that I normally do with earning season is I, I, first of all, I want to make sure, Hey, do I have a cushion on this stock? If I'm going to hold something through earnings, um, do I have a cushion on it? And that means a lot of times I don't buy stocks right ahead of earnings, unless I have enough time to potentially get that cushion. And then I can reassess. And a lot of people want to kind of, well, what do you mean by cushion? How much is that? Well, a lot of times what I'll do is I'll go to the options market to kind of get a sense of what the expectation is, uh, cause the options market does have implied volatility as part of the premium. So if you take the, at the money, put the, at the money call, add those two together. And this is of the near term expiration, the expiration that happens right after earnings. Um, if you take those two together, add them up, that can kind of give you a sense of how many points is expected for that stock to move. [00:20:46] Alyssa Coram: Um, and, uh, I can also just use the shortcut. If you're lazy, like me, uh, use that market maker move that's available on, on, on think [00:20:55] Justin Nielsen: or swim. Yes, exactly. That's another way to do it. Um, and you know, I've had Tom Sosnoff on who was the creator of think or swim. And, you know, he, he's done a lot of research on, on that. And it's basically about 67% of the time. Um, maybe a little bit more than that 68, uh, it stays within, it stays within that range. So it's a good, uh, kind of expectation. Now, remember there's still a third of them that will go outside of that range. So just be aware of that, but it's a good kind of rule of thumb of, okay, if it did go outside of that range to the downside, cause again, it doesn't tell you the direction. Um, it does let you know, okay. And would I be comfortable with that kind of loss? Is that within my risk tolerance parameters? Uh, and, uh, for those that maybe that was a lot, uh, I think you and I did a clip years ago on this, uh, kind of using the options market, uh, for, for earnings season. So that's something that you can kind of check out. Yeah. [00:21:51] Alyssa Coram: You can find that on our YouTube channel and we're going to be covering earnings season. like we always do at investors business daily with the insights and analysis. You need on investors.com on IBD live this show, your podcast, lots of opportunities to engage with and get the team's perspective on how to handle stocks, how to react to the reports. And, uh, our take on what the results mean about the, the market's direction and the leadership. So always a fun time for us, busy time, but very fun. [00:22:28] Justin Nielsen: Yes. Uh, well, sometimes more fun than others, right? Yeah, it is. [00:22:32] Alyssa Coram: Yeah. And you know, that's another interesting thing. [00:22:35] Justin Nielsen: That's another thing that's kind of interesting about earnings season is sometimes there will be a tone to the season. So I think that's something to just be kind of aware of. Are there a lot of earnings surprises to the upside? Um, are there more disappointments? Are there a lot of situations where the companies are beating on earnings, but they're still getting clobbered because you do see that sometimes where it's just not a very forgiving environment. You know, if you're, uh, if you're. It feels like we're in that right now. Yeah. Right. [00:23:05] Alyssa Coram: Exactly. [00:23:06] Justin Nielsen: Unfortunately. [00:23:07] Alyssa Coram: It does feel that way. [00:23:08] Justin Nielsen: It's, it's important to kind of get that gauge. Um, and so, yeah, it's, it, it, it can be just one more data point. Absolutely. [00:23:15] Alyssa Coram: Yeah. I am, I am concerned right now about the changing sentiment for the AI trade. So I hope I'm wrong. I'm, I hope the earnings reactions prove me wrong, but, uh, it feels, it feels like the vibe has shifted. [00:23:31] Justin Nielsen: Yeah. And there's nothing wrong with hoping for the best, but preparing for the worst. [00:23:36] Alyssa Coram: Right? Exactly. I, you know, I love being bullish, so we'll see what we get. All right. Thanks, Justin. Appreciate it. And thanks everyone for tuning in. That's it from us for today. We will be back with more tomorrow morning on IBD live investors.com/IBD live for all the details. We'll see you there. And then we'll also see you right back here tomorrow. After the close. After the close. [00:24:00] Speaker ?: After the close. After the close. After the close. After the close.