Too Soon To Declare Victory In Tech Bounce? Amazon, Heartflow, Ethos In Focus — Stock Market Today

[00:00:00] Speaker ?: Субтитры сделал DimaTorzok [00:00:30] Speaker 1: I guess maybe Justin should have done the intro, but good morning. [00:00:39] Speaker 2: I'm willing to wait. I'm willing to wait. [00:00:42] Speaker 1: Good afternoon, everyone, and welcome to Stock Market Today. It's Alyssa Coram and Justin Yilson here with a look at the action in today's session. Monday, October 19th, and it was a tech-led bounce, but is it too soon to declare victory? We will dig into that. Justin, what stocks are you going to throw our way today? [00:01:02] Speaker 2: Well, you're going to notice it's not really filled with the chip names, so we'll go with a little bit of retail in Amazon.com. I do have a position there. We'll also revisit some medical with HeartFlow, a little bit medical, a little bit software there, and then also we'll end with Ethos, which is an insurance company, and we'll talk a little bit about that. [00:01:23] Speaker 1: Sounds like a plan. We'll get to those stocks, but first, a closer look at the major indexes. Here's the NASDAQ composite up 1.1% on the day to lead. We also had the S&P 500 up 0.4%, a little bit of resistance perhaps at the 50-day line. The Dow was down on the day by just a fraction, down less than one-tenth of a percent, and the Russell 2000 was up a quarter of a percent today, still in a weak position below that 200-day line. So, Justin, and I mentioned the resistance at the 50-day for the S&P, but you can also see that pretty clearly here with the NASDAQ composite, even though we did have a gain of more than 1% on the day, and a lot of stuff that got hit hard last week kicked off the week with a bit of a comeback. What are your thoughts? [00:02:18] Speaker 2: Yeah, certainly, look, this is where it's important to do more than just look at the percentage gain. This is where the charts really do give us some information in terms of, okay, let's put that in context and in the context of the drop last week. And look, Friday was ugly, okay, make no mistake, but it was an ugly week. So, Friday was just kind of the cap on the tombstone, if you will. So, this was a really ugly week, a real bad slice through the 10-week moving average line. That's going to take some work to recover from, and today, as strong as it was, I just don't think it was enough. I think we need more evidence and probably more time for some of these stocks. When you look at SMH, and look, the chips were one of the standout areas of strength, but here again, a good percentage gain, but look at where you closed, you know, kind of in the lower part of the range, just not a really great-looking chart there. There's a lot of damage that was done, and 1% isn't going to do it, you know, 2% isn't going to do it. You've got a lot of recovery work to do. So, yeah, it's one of those things where sometimes it pays to not get too excited by a single bounce. Sometimes these can be opportunities, really, to do some selling that maybe you should have done earlier, but, you know, I don't think that's necessarily the case here, but I'm not getting super excited about this bounce yet. I'm, you know, basically kind of took the day off almost today. Didn't really do much trading. It was more of a, okay, let's see what happens. It was more of a meetings day than a trading day for me. [00:03:53] Speaker 1: Right. Exactly. Same here, Justin, and we had this same posture this morning on IABD Live, even with the somewhat powerful gap up. Inside day coming up to that 50-day line, but basically more progress we need to see. We need to see some traction, more repair work after that damage last week. Like you said, it wasn't just Friday, it was the entire week pretty brutal, at least the last half of the week. That could perhaps take some time to play out. And who knows, even if we do have a quick recovery, because, hey, we're in earnings season now, anything can change in a matter of a couple of days, right? We still have levels that we're watching to the upside that we want to see the indexes get back above. And then in terms of stocks that we're looking at, yeah, I mean, chips, they've got a lot of work to do before they look good again. [00:04:50] Speaker 2: Yeah. And, you know, we've been talking a lot about RSP, which is the equal-weighted S&P 500. You know, I thought that the Friday look there was not great. You know, this was finally coming up to its 50-day moving average line after having conquered the 21-day moving average line. And, you know, it kind of was like, oh, finally we're seeing breadth, but, gosh, you looked at a lot of the stuff and it was like, ooh, your staples, it's Coca-Cola, you know, leading the way. You know, that's not exactly where you want to get your breadth from. So a lot of this was a little bit more on the defensive side. And when you, you know, when you have a move off the bottom that gets you up to the 50-day moving average line, my tendency is to always be a little suspicious until you can, again, conquer the line. And instead, on Friday, what happened? It got turned away and a little bit more weakness today on the RSP, the equal-weighted S&P 500. So I think, again, that speaks to weakness all around. So, again, just not quite strong enough for me on the day. Now, as I was looking at tech and I was looking at all of these different areas of strength, you know, mags did stick out because the Magnificent 7 is still, I mean, that's not looking bad. I mean, it was a break of the 21-day moving average line last week, certainly had its pullback, but this is kind of still getting support at a reasonable level, kind of the top of that previous base. This is still trading above its 50-day moving average line. And look at where this closed in relation to the SMH or the NASDAQ, a lot stronger in terms of that. And you have some of the stocks like Apple and Meta and Microsoft and Amazon, which we'll talk about in a little bit later. I do have a position in Amazon. You know, those are some of the leading members of the Magnificent 7 that, again, they don't look like anything bad happened last week. It's like they just completely kind of skirted that whole ugliness. Another area, XLY, that did stick out to me, the Consumer Discretionary Sector Spider Fund. Now, this is still below the 200-day moving average line, which I don't particularly like. But here again, where did it close in its range? It closed at the top of its range. It closed above its 50-day moving average line, still below the 200. So, again, not excited about that. And I always kind of look at the flip side of the equal weighted component. And in this case, that's RSPD. And RSPD, not quite as strong. So, what does that tell me? Okay, a lot of these Sector Spider Funds are dominated by a couple stocks. And in the case of the Consumer Discretionary, it's Tesla, which, hey, that had a great day today. And you can kind of see where that XLY look comes from, below the 200-day moving average line, getting above the 50-day moving average line. And then the other big component for that in terms of market cap weight is Amazon, which, again, I do have a position. But that did conquer the 50-day moving average line today and is above the 200-day moving average line, unlike XLY and Tesla. So, those are a couple things that I was just noticing in terms of the sector moves today. Energy, still probably something that's worth keeping an eye on, whether that's through XLE or some of the other funds like XOP, the Explorers and Producers, which kind of had an interesting look. You know, the refiners with CRAK. So, those are some areas to watch. Now, of course, this is always the fear that, oh, something happens with Iran, either makes oil go up a lot or down a lot. But overall, this has been kind of a decent trade recently. So, still an area to be watching. [00:08:36] Speaker 1: Yes, absolutely. [00:08:37] Speaker ?: Yes, absolutely. [00:08:37] Speaker 1: All right. And, Justin, tell me a little bit more about how traders should be thinking about the energy trade in terms of their overall portfolio exposure, would you say? [00:08:49] Speaker 2: Well, and this is, again, kind of comfort. A lot of people, myself, sometimes I forget about the energy trade because they're cyclical. This isn't something where you can typically look at the fundamentals and be saying, oh, you know what? Hey, this has strong revenue growth and earnings growth and all those things. Usually with cyclical stocks, a lot of times, by the time the earnings growth is there, that's kind of when they're done, you know, because of just the way the cycle works. So, sometimes you have to kind of go for these when the earnings and sales are not that great. The growth isn't that great. When we look at our model book stocks, when we look at some of the best performers going back 100 years, you do find some of those cyclical stocks taking, you know, maybe a quarter of the model book stock portfolio or, I guess, you know, sub-sample is these cyclical stocks, these turnaround companies. So, it's certainly worth keeping your eye on. I first learned that in 2005, I learned it the hard way because I didn't play any of them and it wasn't until I saw Bill O'Neill, the founder of Investors Business Daily, investing in them and I'm like, whoa, why are you doing that? You know, and he's like, because they're working. Look at the charts. These are beautiful charts and that's what we're seeing in a lot of these energy stocks and really, really good charts. So, you can go in with smaller position sizes in order to manage your risk that way. You know, maybe you increase them as you're getting cushioned, but there's a lot of different ways to handle that to protect yourself because, sure, there is headline risk there, but isn't there always? [00:10:29] Speaker 1: Yeah, exactly, right? Great points, Justin. So, you mentioned consumer discretionary. So, let's go ahead and chat about Amazon AMZ and definitely a standout in today's session of 5% volume behind the move and an early entry for investors. So, it seems like you weren't doing a lot of trading, but this was one trade that you went with today, it sounds like. [00:10:58] Speaker 2: Yeah, so, and actually what we did was we put two trades on Swing Trader today and both of them are going to be ones we discussed today. So, HTFL was the other one, but Amazon was the one later in the day. And look, this is kind of taking it from the alley playbook, the retaking of the 50-day moving average line. I know you've had some success with that kind of trade. So, certainly the retail and consumer discretionary has been getting a lot more of our attention lately. Just look at, I guess, any of the SMT videos last week. It was a lot less tech and a lot more of some of these retail names that we haven't talked about so much lately. So, Amazon, I think I would include in the list. And look, it's not that Amazon is just retail here. Let's not forget the whole Amazon Workspaces, Web Services, AWS. That is a big component, the AI component there. There's a lot to be said for that. And so, you've got kind of that combination of the consumer side of things, which showing some strength. You've got the Magnificent Seven side of things. We already saw how that's showing some strength. You've got a little bit of the AI in just in case that tech comes back, but you're mixing it in with a lot of other things. So, I think that's one of the appeals we saw for Amazon on Swing Trader. And again, why I got a position myself after that 30-minute restriction period. [00:12:23] Speaker 1: Yeah. And I think also looking at the personality of this stock, this definitely, as of right now, seems like one where you really do want to go with those earlier entries versus a breakout to highs. This likes to pull back a lot. So, I think that that strategy makes a lot of sense here. I also really like the earnings line, Justin. I feel like sometimes these big companies get so big. You know, Amazon's been around a while. You do tend to see the law of large numbers or some sort of slowdown, but we are seeing a pick up again in the earnings. Maybe this quarter was a one-off. I can't remember exactly. Maybe Ed was saying something to that effect. I don't know, I can't remember if it was Amazon or another company, but at any rate, we are seeing that earnings line headed in the right direction. And in the earnings report and the analyst conference call with executives in a week and a half, we will hear from the executive team, no doubt, about all of the different buckets or arenas that Amazon has operations in, right? All the tentacles, so to speak, of the different businesses, but particularly the AI piece, very much front and center. What do capital expenditures look like and can that be a catalyst for the stock? So, setting up, heading into earnings and perhaps enough time here to get a profit cushion or one instance where you would look at those past earnings reactions and look at what the options market is pricing in. And then adjust your risk accordingly. [00:14:06] Speaker 2: Yeah. Gosh, you and I did a video on this years ago. I know, at this point. Yeah, it's like probably five years ago. Five years. Six years ago. Yeah. So, yeah, the options market is a great way to kind of get a feel for that. What is the at the money call and the at the money put? You add those two premiums together for the near term expiration after the earnings report is done with and that can give you an idea of what kind of expected move there is according to the implied volatility of the options market and that can give you a sense of it. And I'm so glad, Ali, that you brought up the earnings line because, as you said, the law of large numbers really does make it difficult for some of these huge companies to, you know, keep on doing the phenomenal growth. But I want you to just point out here on market search, we see an EPS growth rate. And again, this is using like either a three or five year growth rate of 78%. So for you to have a company that is, you know, and let's just point out that in the bottom, when we're talking about those raw number of sales, I want to make sure everyone understands that, you know, when we're talking about 200, that's that's a B with a billion. Right. You know, that's that's a that's a lot of money every year that is being added to it. And the fact that they're still able to grow at this phenomenal rate, a 78 percent, you know, 78 percent annualized growth rate is pretty incredible. If I could do that to my salary, I'd just consider that a big win. [00:15:38] Speaker 1: Right. I would say probably my share of spending on Amazon probably has grown at a 78 percent clip, Justin. [00:15:48] Speaker 2: Yeah, exactly. I'm going to I'm going to put as my proof point my porch. [00:15:53] Speaker 1: Yeah. Yeah. There you go. OK, well, an interesting. [00:15:57] Speaker 2: But it never has my name on it. I'm just going to admit, you know, I you know, sometimes my wife is like, why why why don't you clean up this porch? I'm like, my name isn't on anything. [00:16:08] Speaker 1: Yeah. But you're the are you the designated box breaker downer? [00:16:14] Speaker 2: You know what? My wife and my mother in law do a lot of it. But every now and then and we got a we got a nice electric box cutter from Amazon so that we can really do some damage there. Yeah. Yeah. Saves a lot on the grip. [00:16:29] Speaker 1: Keeping keeping the the delivery ecosystem afloat as well as the recycling centers with our cardboard intake. All right. Justin, let's move on to the next stock that we want to cover today, and that is Heartflow HTFL, a big earnings breakout in August and some sideways action over the last couple of months straddling this 50 area. And that 50 day moving average is now catching up to the price. [00:17:04] Speaker 2: Yeah, I love when something it's not so much that this came down to the 50 day as it just waited and let the 50 day moving average line catch up to it. So a really strong move after that earnings and it's just held all of those gains really interesting. And, you know, in the same way that I was talking about how Amazon has a little bit of those tentacles and other things. Right. You've got the Magnificent Seven thing going for it. You've got this AI going for it. You've got the consumer discretionary for Heartflow. So for me, it's it's got the software, the medical software in particular, another component, you know, another member of this group is VEV, V-E-E-V, which also looks very interesting. So you've got kind of this this sector that looks very strong. So it's still software, but it's not kind of what got hit recently. These have been holding up very well and I would also say that when you look at when you look at some of the software names, I'm really impressed with some of the computer software enterprise names, how well they've held up. I'm just going to throw two out there, but there's many more team, for example, Atlassian that that's held up very well. Again, it had a downside reversal on Friday, which isn't a great look, but what is that your eight EMA that it's holding above? You know, you're you're not even you know, you're not even going below your short term moving average lines, APPN, another another one in this space. You know, these were some of the other ones I was I was considering for the show today. So with Heartflow, you've got kind of that software component, the software that's working, the software that isn't going down, that's holding up. That's doing a number for its relative strength, having the relative strength hold up above its moving average lines. Plus, you've got the medical angle. Medical was just an area that we see more and more strength. It did kind of have that little ugliness a couple of weeks ago in a lot of these names, but Heartflow just didn't really lose any ground. It just stayed right there by its 21 day moving average line. So very compelling in that regard. So definitely one one I'm watching. And again, we did put this on Swing Trader and buy it myself because, again, I wasn't doing that much today. So I regulated myself to just Amazon, but this is certainly one one worth watching. [00:19:23] Speaker 1: Mm hmm. And I guess, you know, you mentioned all of the sort of the boxes that it's checking. Right. And I guess one other box would be AI. But yes, it also seems like if you're going to be a software company today and you're not doing anything with AI, I don't see that happening. Right. [00:19:47] Speaker 2: So so maybe software AI is sort of one if you want to if you want to survive, you better be putting that if you want to survive, you better be putting that in your conference calls. Otherwise, people are going to be like, you know, when when they have AI do the counts of how many times AI was mentioned, you're going to lose that game. Right. Keeping up with it. [00:20:08] Speaker 1: Also, I just noticed this, Justin, this medical software group is very highly ranked. So you pointed out anecdotally, hey, you know, gave us a little color about some of the other stocks holding up. Not sure. There's probably not a ton of stocks in this industry group, but I do want to point out that it is ranked number one right now. [00:20:27] Speaker 2: So yes, yeah, that is definitely we've seen. And this is something that you and I covered in the show, IBD Live this morning. We went through an industry group spreadsheet and we have seen a lot of kind of jostling around in the top groups. But computer software medical wasn't really one of them. This has been actually in the top 10, top 15 for probably I'm going to say since August 10th. So that's quite a while that the computer software medical space has been up there. So this is not a new new member to the top tier of the industry groups, as you mentioned, in terms of the number of stocks in there at 24. So, you know, a decent number and a lot to choose from, I think. Just keep in mind that our groups are weighted market cap weighted. And so Veeve is going to be the big component there. You can see what the market cap looks like there in terms of compared to the other members. And so Veeve is definitely a big reason why that computer software medical group is doing so well. [00:21:36] Speaker 1: Absolutely. Okay. And then let's round things out with a look at Life, life insurance company named Ethos. And I think I've seen a number of advertisements that they're doing on TV, Justin, and the stock action pretty compelling. That big run that it had in early August got those ants signaling not only power from a price perspective, a percent move, up days versus down days, but volume behind the move as well. And now forming a base that we can trade off of. So your thoughts on that and also the fundamentals here, how we should interpret them. [00:22:18] Speaker 2: Yeah. So a few things here. Now, speaking of kind of that jostling in the industry groups, insurance has been one of those groups that has, let's just say, seen a little bit more jostling because this group is what, number 38? Is that what that says? [00:22:36] Speaker 1: 39. [00:22:36] Speaker 2: 39. Okay. So it's, it's number 39. You know, last week it was for that 75, the week before that it was 67. So it's kind of come up to the top tier a little bit more recently. It was kind of up in the top 50 back in the end of August and September. But this has, you know, it, it came in a little bit, came down to its 50 day moving average line in terms of ethos here. But what I thought was really interesting is I was kind of doing analysis of our growth to 50. And this is a, this is a algorithm that is basically scouring for strength in the market. And what I noticed is that insurance keeps on getting stronger and stronger and more represented in that growth to 50 list. As of Friday last week or the run over the weekend, it's now 7.7% of that growth to 50 is insurance stocks. So a little bit more on the defensive side, make no mistake. You know, and I think that the hit that we saw to tech is part of that reason. But you can also see something like ethos here. This had a nice move. You see those ants that you pointed out, which is kind of saying, Hey, there's a lot of very powerful buying here. It based, it came down to that 50 day moving average line, got support. And this is just holding up in a very different way than the indexes are. And a lot of these AI traits that we've been seeing that, you know, couldn't hold their 50 day moving average lines. And again, it's not just about ethos here. It's about the whole group having a lot of members that are, you know, showing the same type of action. Even, you know, going back to a Dow component travelers, TRV had earnings, you know, last week and look at that, you know, strong move that it had kind of a breakout. So again, life is not alone. Um, I would be remiss if I also didn't mention, in addition to what you were saying on all the commercials that are out there, there is also a big, uh, short, uh, piece by Hunterbrook. Uh, I think they call themselves like a journalistic, uh, you know, uh, thing. They, they have a journalism investigative journalism side that will write about these things. Um, you know, but they short them right before that. Uh, so they did, they, they did something about how ethos has a lot of multi-level marketing kind of ties. Um, so it's, you know, one of those things to, to just be aware of that piece is out there, but right now I'm not really seeing, you know, that news has been out there for the whole month and the chart just really doesn't look like anybody's caring at this point. So, uh, something to just know is out there, but, uh, again, you've got a group move here that's looking very strong and ethos is just a part of it. [00:25:14] Speaker 1: Yeah. Well, it is setting up. I'm keeping a close eye on the 40 level. Justin, not sure if I personally would be taking a stab at this one. Uh, but that would be the level to watch for those who are interested buyers. [00:25:26] Speaker 2: Yeah, it's tough earnings is something that we really like to see. And again, this is maybe more cyclical in nature. Um, so it's not going to follow those same rules. So you might have to go a little bit more on the chart side, uh, for that. But if you do like to stick with strong fundamentals, then this might be a pass and that's okay. There's a lot of stocks that you're going to pass on that are going to go up. That's just part of the game. Uh, can't kiss all the babies as Bill O'Neill used to say. [00:25:51] Speaker 1: Well said. All right, Justin, we appreciate it. Thanks so much. [00:25:55] Speaker 2: Thank you. [00:25:56] Speaker 1: 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. [00:26:21] Speaker ?: Редактор субтитров А.Семкин Корректор А.Егорова