Tech Attempts Comeback; Elastic, Analog Devices, Victoria’s Secret In Focus — Stock Market Today

[00:00:00] Speaker 1: Good afternoon, everyone, and welcome to Stock Market today for Monday, October 26th. It's Alyssa Quorum, along with Justin Nielsen here, and a bit of a comeback for tech as another big earnings week kicks off. Justin, what are we going to be discussing today? [00:00:44] Speaker 2: Yeah, so we will go with Elastic, which was our stock of the day today. And when was the last time we talked about a chip stock looking interesting? So Analog Devices will be another one, ticker ADI on that one. And Retail, still showing some interesting stuff. And we'll go with VSEXY, Victoria's Secret at VSXY. [00:01:04] Speaker 1: All right, sounds like a plan. [00:01:06] Speaker 2: I do have a position in VSXY. [00:01:09] Speaker 1: Thank you for that disclosure. All right. Now let's take a look at the major indexes. Here's the NASDAQ composite up about eight-tenths of a percent on the day. Did close off highs, but it was up on the day. Meanwhile, the Dow was up about three-tenths of a percent on the day. Also faded off highs. S&P 500 up seven-tenths of a percent, hitting maybe a little bit of resistance at those converging moving average. We've got the eight-day, the 21-day, the 50-day, all right there. And then let's take a look at IWM representing the Russell 2000. Some resistance at the 200-day line. The 21-day is also there as well. The Russell up three-tenths of a percent on the day. So, Justin, the tech sector did attempt to make a comeback. And I mean, underneath the surface, I was doing some screening in the Growth 250. There are a number of tech stocks that still look good, even though you have the NASDAQ composite in a weaker position. Chips, you mentioned, also having a lot to do with that. So what do you make of today's comeback? [00:02:22] Speaker 2: A nice start, but, you know, it's kind of, I don't want to say show me the money, but it's kind of like that, you know, it's, I need, I need more, right? Especially when we're down below the 50-day moving average line. But look, I like how the 26,000 level basically held here. It did kind of close below there on Friday, but it looked like it was trying to, you know, make a little bit of a comeback here. You know, we were up in the upper half of the range. So as you said, we were off highs, but still in the upper half of the range. So that was a decent, but there's still work to be done, right? We still want to get back above that 50-day moving average line. The 21-day, as you mentioned, right there with the 50-day moving average line. So, you know, it looks like that's probably going to have a cross below. So we need, we need some strength, right? We need some strength to get this back above the 50-day and the 21-day moving average line as a start. But then the next step is we need to stay there because we were seeing a lot of times where a lot of these kind of pops above these areas just couldn't hold. It seemed like September had more of that holding, you know, above those lines, but then we kind of lost them again. So it's first conquer them, next stay above them, and then we can start talking. But the interesting thing is that more setups have started appearing, right? For a while there, our market surge growth 250, it's capped at, I know we call it the 250, but it's capped at 350 stocks. We couldn't even find 350 stocks to meet the criteria. And we did this last week. So that's something a little bit better. And let's talk about some of the makeup of the strength today. XLU and XLP, which have been doing a lot better lately, which are a little bit more on the defensive side. XLP especially, you know, was looking stronger than we'd like, right? So it's kind of nice that this has come in after having basically a breakout from a double bottom base last week. So nice to see that come in because again, XLP, the consumer staples just is a lot more of the fear kind of when you don't want to be in tech and you can't be out of the market like a lot of institutional investors can't be completely out of the market. What do they do? They hide in Coca-Cola, Colgate, and Procter & Gamble. [00:04:46] Speaker 1: Toothpaste, laundry detergent. Yeah. [00:04:49] Speaker 2: And I will say one of my favorite ticker symbols here is PBJ, which is also in the staples. So, um, I, I, I love when you got the, uh, clever, uh, the clever symbols. So PBJ and the food and beverage. Um, but nice to kind of see that come back. The trick here will be, um, and this is what our challenge has been for a while here is the rotations, right? It seems like, okay, as soon as we start going one way, uh, then boom, we start turning and going the other way. So tech has been out of favor. Medical has been a lot more in favor, but you know, XLV, XBI, um, those, you know, kind of took a break today. Uh, what was the strength? Well, SMH, you know, so again, chips, which were 20%, the SMH Vanek semiconductor ETF, that was off. It's just recent high, uh, by 20%, um, you know, going into today and the fact that this was kind of a little bit of a comeback, you know, maybe, maybe this is the start of something, but the thing that's been tricky about this market. And I think SMH is a great example of this is it gets just weak enough, right? There was that line that you have, Allie. I love the line. It tested it a number of times and then cut, undercut it. And then now it's trying to get back above it. So we'll see if this continues, but again, this has work to do. He needs to get back up to the 50 day, the 21 day, all of those things. Um, but it was interesting to see, uh, the chips, which have been kind of dragging the NASDAQ composite down, look a little bit interesting. Um, also software has been an area of strength. I like that it helps. So IGV, uh, that was up today. It wasn't like a rotation out of software and bug. I do have a position in bug. This is your cybersecurity. Um, that also was looking strong today. [00:06:41] Speaker 1: So, yeah, I mean, this, this looks great here. And, uh, another signal of the tricky market, because we were talking on IBD live this morning, how some of the leading names here had, you know, a 17% down week last week, downside reversal, off highs, close at the lows of the week. And then here, look at this and the last four sessions, right? Just coming, roaring back to highs. So it seems like, you know, focusing on the pullbacks, being aware of these rotations too, and keeping that position, sizing, and risk management can hopefully help traders navigate, uh, some of these choppy waters. [00:07:23] Speaker 2: What do you think? Absolutely. It, it, it, it hasn't been easy. And again, as you said, you know, what are you supposed to do when you've got these stocks that are coming down 20%, 17%, 20% in a week? And then, you know, as soon as you say, well, I can't handle that, then, and, and, and, you know, like bug was right there at the 50 day moving average line. Um, and it comes right back and it's in new highs the next week. It's just, it hasn't been easy here. [00:07:46] Speaker 1: Yeah, but, uh, we love to see this. So we're continuing to focus on this cybersecurity area because it is one of those tech growth groups that we, with AI flavor to it too, that is overall, when you take that step back, acting really well, uh, let's also check out ITA. This is on your list, Justin, aerospace and defense, just given the percentage gain today, but not in the type of position that we're, we're typically buying. [00:08:14] Speaker 2: Absolutely. So I wanted to, you know, shout out to LMT Lockheed Martin, which, uh, of course is a big member of this group. I mean, that looks very different, right? But it's kind of a little bit of a lone wolf. Um, you know, so you gotta be careful sometimes when you're scrolling through and you're looking at, oh, what's, what's strong out there. Um, make sure that you're also looking at the position that things are in. And while it's great that it's up, you know, it's still so far below the 200 day moving average line. Um, that's usually for our strategy, at least where we're buying on strength, that's something that is a little bit more untouchable. But again, worth noting that Lockheed Martin, a big component in that group, um, was, was doing well. [00:08:55] Speaker 1: All right. All right. And then just, uh, look at two quick charts here before we get to our stocks and here's a look at USO, a rough proxy for the price of oil after the breakout Friday coming off today. Uh, and then we can also take a look at the 10 year, uh, uh, not a whole lot of movement here, Justin, as it has pulled back to the 50 day moving average, but we have the fed this week. So could we potentially see some gyrations in the bond market as well as for stocks? [00:09:26] Speaker 2: Um, yeah, absolutely. I mean, right now I think the expectation is that there isn't going to be any movement. Um, but you know, it's always a matter of what do they say during the, uh, press conference. Um, you know, how does AI and the algos, uh, react to every last word? If he coughs wrong, whatever, you know? Um, but yeah, this, and look, it's worth noting that the 10 year treasury yield, um, you know, sometimes those correlations, um, don't quite work the way you would expect. You would have expected, right? Oh, 10 year treasury yield coming down. Stocks are going up, right? Didn't happen this time. Uh, so just, just be cautious of that. And look, USO, that was something that did help fuel. Uh, I think oil stocks coming down did help fuel some of the gains today, but you look at XOP, which is the explorers and producers. That looked fine. Uh, that was having a great day today. A lot of the shippers that we've been talking about, uh, shipping that oil, um, you know, they, they were looking just fine today. So, uh, oil might've been down, but a lot of oil stocks were looking just fine. [00:10:30] Speaker 1: Absolutely. Okay. Well, let's be flexible, Justin, and look at elastic. Here's EST. See, see what I did there? [00:10:39] Speaker 2: I do. I do. Low hanging fruit. I was going to go, uh, elastic man or something. [00:10:43] Speaker 1: Well, let's take a look at this stock broke out on Friday above that round number of 100 added to the gains today. Kicking off the week with a move of about 3.8% here. So this is yet another software name that is looking quite compelling. We don't have earnings as an issue here. Justin, it looks like they're due to report in early December. So what do you make of this breakout in software? [00:11:12] Speaker 2: Yeah. So starting to get a little extended here, but I do think, uh, again, it just kind of points to how strong software has been. This is in the computer software database. We already talked about computer software, security, computer software enterprise, the most represented group of our growth to 50, um, and our IBD live watch list. So there's just, uh, and computer software, medical computer software, financial, there's a lot of software stocks that have been acting very well. So this is just one more. And the reason why I wanted to give this a little bit of a shout out was because this was our stock of the day today. Um, so it's always a good idea to read those. When you get a chance, it gives you a little bit of, um, you know, extra information, a little bit of extra analysis on some of the stocks that are either setting up, moving, um, or breaking out. And then in this case, this was a breakout and, uh, again, a little extended for my taste right now, but still, uh, within that kind of actionable blue shaded area, if you're a position trader. [00:12:06] Speaker 1: Yeah. And I think if we are going to nitpick it because, uh, you know, we do try to look at these with a, a close eye, right? Justin and, uh, the fundamentals here, while overall pretty strong, you did have that deceleration in the most recent quarter. So, you know, there are some growth stocks out there that were focused on that are showing much stronger growth that's accelerating. So if I had to give it, you know, one knock against it, it would be that. [00:12:37] Speaker 2: Yeah. And this is where the market search charts can kind of really help on the visual side. If you go to the weekly chart, um, you know, one of the things I like to see is I like to see an earnings line that is, uh, just a little more of an angle, right? You know, I, I, I want to see that incline. I want to see that acceleration, as you mentioned. Um, and Elastic certainly had it, um, you know, uh, a few years ago. Um, but it's, you know, it's kind of settled down and it's interesting. This is another thing is I really want to see, um, not only that angle doing well, but the chart doing well too. This was interesting because that angle was pretty good on the earning side in terms of that acceleration, but the chart really never really got kind of in, in gear. So we'll see if this is something that can, um, again, it looks good on the short term, but there's still some of this overhead supply. That's, you know, back from 2025 that we may be hitting at this point. Um, so it'll be interesting to see what happens there, but certainly a lot of strength in the software space. This is just one more example. [00:13:42] Speaker 1: Absolutely. And, uh, we always love when the breakout happens around a round number, right? That psychological level. [00:13:50] Speaker 2: And that comes all the way back to Jesse Livermore over a hundred years ago. So, um, you know, the, the only difference I think now is stocks don't split as often. And so we have a lot more round numbers that get hit. [00:14:01] Speaker 1: We sure do. We sure do. We have our pick of them. Okay. And you mentioned, wow. You know, it's been a little while since we've seen strength in the chip area and ADI caught our eye this morning and it had a strong close. Shares up 4.3% Justin cleared a trend line and a round number here too, that it got above this one, 400. So, uh, I know a lot of traders on our team, like looking at these trend lines within a handle as a buy point versus waiting for a breakout. So it was arguably actionable today. [00:14:37] Speaker 2: Oh, absolutely. We put this on swing trader. Um, I actually would have bought it myself if it hadn't been for our restrictions. Uh, uh, I just ran out of time, uh, after our restriction period. But yeah, this is exactly the kind of look that I, I, I go for, you know, it got that support at the 50 day moving average line. It broke that trend line. Um, I think it would have been a little bit tougher to buy off the 50 day moving average line just because there was, you know, it was so far down there and, and still only like halfway up the Thursday, um, you know, trading range. So I like how it really kind of cleared it with gusto here and let's contrast this, you know, you mentioned the fundamentals. It's nice to really see a nice chart and nice fundamentals fundamentals on this are a different story. Uh, you see that earnings line really just kind of going at a very nice, steep angle. Um, look, chips can be cyclical, right? You know, they, they, they tend to, uh, have huge demand and then they kind of go over supply. You can see that with the earnings line actually, yeah, it's, it's, it's, it's the, it's the rollercoaster, right? [00:15:39] Speaker 1: Yeah. [00:15:40] Speaker 2: So, um, but right now, and, and usually again, um, you know, you want to kind of be on the earlier side of the cyclical stocks when they turn around. Um, you know, you don't always want to wait for, you know, your, your four or five quarters of good, good earnings, but, um, I do like the setup here. I do like the way that the earnings are, are going. Um, there's a lot of things going for this and it's, it's funny because, you know, you think ADI, that's an old stock and, you know, Texas instruments. Let's go ahead and, you know, take a look at that too. I mean, TXN has been around, um, for a lot longer than I have. And it had kind of the same look here where this was crossing above a downtrend, um, in a nice little cup with handle and look at that turnaround there as well. Um, and I think TXN actually had earnings just come out. So, um, the earnings are behind you on this one and that's something to keep in mind. We've got a tsunami of earnings that are coming this week. Um, you know, hundreds of hundreds of, uh, stocks that are going to be coming out. So something to keep in mind as you're looking, um, you know, make sure that you're aware of when those earnings reports are and the competitors too. Cause sometimes some of these early earnings reports can set the stage for, uh, their, their cohorts. [00:16:56] Speaker 1: Yeah, they sure can. And, uh, you know, I do like with the TXN here, bonus stock analysis, how it is closer to that, uh, prior high from that late September, early October timeframe, but nonetheless, ADI definitely one to watch here. And I think the other thing that got investors excited today was we did officially get that Anthropik IPO filing. Uh, so it'll be interesting to see how earnings season plays out with these renewed concerns about all the spending going on for the data center build out. And then, uh, you know, what the demand actually looks like when Anthropik goes public. [00:17:39] Speaker 2: Yeah, it'll be really interesting to see again, once we start getting those numbers, uh, coming out on a quarterly basis, uh, you know, that that's just one more data point for everyone to either cheer or panic. [00:17:53] Speaker 1: Exactly. All right. And, but with ADI, a good sign here for some signs of life in the chip sector. Let's go to V S X Y we've also seen a lot of interest and rotation into retail related names in recent weeks, Justin and Victoria's secret today. With a breakout above a handle type area, a little bit of a, a digestion on the right side of this cup base here shares up 4.6%. And we did have some above average volume here. What's your take on the action? [00:18:33] Speaker 2: Yeah. So again, this is one I've been watching. I do have a position. Now, um, we put it on both swing trader and leaderboard. So, um, I had a double restrictions to, uh, uh, maneuver today. Yeah. Um, but, uh, yeah, whenever you get some tight action and I like how it tested that line that you drew, that line of resistance, it tested it a number of times. And this was just a solid break above that. So, uh, really kind of, uh, a strong look there. And this is another one where maybe the earnings haven't been that earnings growth hasn't been there for long, but it certainly has come on very strong lately. Um, in the last couple of quarters and estimates also looking very strong. So, uh, those are some things that are certainly, you know, worth, you know, worth noting, um, very strong on the earnings growth rate. Uh, you can see that EPS growth rate whenever you see, uh, a number that's, you know, that high. I mean, just think of if you were growing your salary that much, uh, on an annual basis, you'd just be thrilled. So, uh, I think it's great that, um, when you can get stocks that are doing that. And again, you have to have the chart in line too, because if you've got these great earnings, uh, earnings growth, but the chart is not doing much, uh, it's tough to say, what do you do with that? Uh, there's gotta be a reason why investors are not getting excited about it. But in this case, you have a chart set up, you've got some strong earnings, you've got relative strength. You've got a lot of things going for this stock. Um, so that was, uh, you know, again, a reason why this got added to both Swing Trader and Leaderboard and my own portfolio. [00:20:04] Speaker 1: Exactly. And we also talk about the base structure a lot of times, right, Justin, where the prior base had a depth of about 37%. This one, the depth of 30%. So heading in the right direction there. And then the tight area that it formed over the last couple of weeks, also great to see. Next stop, 100. Let's see if it can get there. And, uh, yeah, the round number to continue our theme. And, uh, yeah, we'll see how it acts if, and when it can test that prior ceiling. [00:20:42] Speaker 2: Yeah. Um, so just to kind of put a bow on the day, I mean, we really are kind of, again, showing, uh, showing strength. Um, I want to maybe give a little bit of more attention to SPY before, I'm sorry, you took your chart down. Um, you know, I was just, just about to get, get in there, but, um, you know, we have the S and P 500. We've got, um, the NASDAQ. We've got a lot of action here that is looking positive, but we just need a little bit more. Cause frankly, a lot of times if, if this didn't work, you'd be like, well, it's obvious. It was getting resistance at the 50 day moving average line. Why were you buying? Um, so I think there is more work to be done here, but the fact that we're seeing kind of these, um, these stocks set up, uh, some of these groups that were, uh, really getting pummeled, uh, come back. Um, it's a good start, but we do need more. So I think it's going to be interesting to watch this week, how some of the earnings go, how the fed, um, reaction goes. A lot of things that will give you some more data points. Um, but you don't have to be in a super rush because there's a lot, uh, still happening. And if this is the lows, which again, S and P 500, the way that this kind of undercut, you know, some of those lines, some of those lines in the sand, um, and is now kind of coming back. Uh, we'll see if it can kind of go from here. Um, but there, there's no reason to try and be too early. Uh, so, uh, just be patient and, uh, keep on building those watch lists and be ready. [00:22:12] Speaker 1: Well said Justin, and before we go, I also wanted to give a little shout out to what's going down later this week. We have our swing trader status update happening on Thursday, Justin. [00:22:25] Speaker 2: So a little bit later than we normally have it, but we were trying to get, uh, a number of things in, uh, our ducks in a row because we wanted to announce some of the changes that are coming there. So we've got that. We've also got Connor Bates coming back, uh, on the podcast this week, uh, from Revere asset management. So we're going to talk a little bit about how the turbo of, uh, the Revere asset management, you know, sometimes you've got to cool your jets and, uh, how they've been handling the D the defense side of things. So that'll be great. Um, and then of course we always have IBD live going on every morning. Uh, David Ryan, who, uh, is, is, is a great, uh, uh, believer in, uh, everything that Bill O'Neill did a protege and look, he won the investing championship, uh, three times himself, uh, in the eighties. So it'll be great to hear his thoughts tomorrow as we continue to muddle through. [00:23:16] Speaker 1: All right. Sounds great. Thanks for that preview of the week, Justin, what we've got on tap. And we'll see you later as the week progresses. Appreciate it. [00:23:28] Speaker 2: Thank you. [00:23:29] Speaker 1: And thanks everyone for tuning in. That's it from us for today. We'll be back with more, like Justin said, tomorrow morning on IBD live. You can check that out at investors.com/IBD live. We start 10 minutes before the opening bell, and we look forward to seeing you there. And then we'll also see you right back here tomorrow after the close. [00:23:53] Speaker ?: Thank you.