Investors continued to see multiple shades of light red Thursday as biotechs continued to struggle in the wake of the postelection market surge. But other sectors showed signs of renewed strength as major airlines started to grab the attention of fund managers. Meanwhile, oil stocks shined as crude futures rallied on the stock market today.
↑
X
How These Technical Indicators Can Show A Change In Market Trend
In late afternoon trading, the Nasdaq was down mildly, off less than 0.4%. At the day’s low of 19,109, the composite index still held a 27.3% gain year to date. The S&P 500 was off just 0.3% with an hour left in the regular session. The Dow Jones Industrial Average’s loss increased to nearly 0.4%.
Volume was running 10% lower on the Nasdaq exchange vs. the same time on Wednesday and nearly 3% lighter on the New York Stock Exchange. This price-and-volume action indicated large fund managers were reluctant to flood the exits. Yet small caps backtracked sharply again; the Russell 2000 lost 1.1%. The S&P MidCap 400 eased almost 0.7%.
Further, crude oil lost some luster as it closed with a 0.3% gain to $68.67 a barrel.
Despite a cooling among key indexes, department store, plastics, airline, hospital and leisure product industry groups rallied nicely. All of these gained 2% or more on a price-weighted basis. See the full daily performance of all 197 industry groups at IBD Data Tables.
Stock Market Today: American Airlines Gaining Interest
Within the airline group, American Airlines (AAL) appears to be gaining more interest among fund managers. Up as much as 4.7% to 14.67 on Thursday, good for a six-month high, the major carrier has flown ahead more than 30% for the current quarter.
Since bottoming at 9.07 in early August, the stock has done a good job of building the right side of a cup base or even a saucer-style pattern. Shares are up for a sixth straight week.
Notice on a weekly chart how the 10-week moving average, drawn in red, is on the verge of crossing its still-falling 40-week line. That’s positive. Please go to a weekly chart at MarketSurge or another chart service to see this chart action.
Quarterly results have remained dour. In the third quarter, earnings fell 21%. Sales lifted just 1% to $13.6 billion. However, with fuel prices well off recent highs, Wall Street sees a potential strong lift-off in earnings. For 2025, analysts who cover American Airlines see a 37% boost in the bottom line next year to $2.02 a share.
According to MarketSurge, this promising earnings estimate gives American a forward price-to-earnings ratio of 7. The current price-to-earnings ratio of 10 is 60% lower than the S&P 500. American’s mediocre Composite Rating of 56 on a scale of 1 to 99 cements its status as a cyclical stock idea and potential turnaround play.
United Airlines Turns It Around
In the same group, United Airlines (UAL) has emerged as a true turnaround and leader in the stock market today.
United shares rose 2% for the third gain in four sessions. At the session high of 93.33, the stock has soared 87% from a 49.67 perfect entry point in an early-stage double bottom.
Wall Street expects profit to accelerate from a 2% increase this year to $10.21 a share to 19% growth in 2025 to $12.15.
The Accumulation/Distribution Rating for UAL is top notch at A+. The stock also holds a 12-month Relative Strength Rating of 98 on a scale of 1 to 99.
Updated 2:02 p.m. ET
Beazer Runs Past Buy Point
Beazer Homes (BZH) broke out on earnings. A small cap in IBD’s residential building industry group, Beazer ran past a buy point of 35.20 in a seven-week base and remained in a 5% buy zone.
The company posted a 6% decline in fiscal fourth-quarter profit to $1.69 a share, even as revenue grew 25% to $806 million. But with its recent rebound from summer lows at 25.58, Beazer Homes has grown back to a market value exceeding $1.1 billion.
The 5% buy zone from 35.20 goes up to 36.96. At one point, the stock advanced to a new high of 38.22.
Updated 12:27 p.m. ET
The Mouse Roars On Stock Market Today
Among blue chip stocks, Walt Disney (DIS) roared like a bull, at one point gaining more than 11% on fiscal fourth-quarter results that included revenue of $22.6 billion and adjusted earnings of $1.14 a share.
The media and entertainment giant reportedly noted that it sees a modest decline in first-quarter Disney+ core subscribers vs. the just-ended September quarter. The stock is now quickly forming the right side of a new base. At the day’s high of 114.81, Disney traded just 7% below the base’s left-side high.
Inside IBD’s Big Picture: Is This A FOMO Market?
Financial components in the Dow Jones initially resisted the decline, but Goldman Sachs (GS) turned mildly lower. JPMorgan Chase (JPM) gained more than 1 point for a fifth up day in a row.
American Express (AXP) added 2 points and has climbed more than 18% since a re-breakout past a flat base and its 244.41 entry point.
Choppy Moves Among Biotechs
For some investors, the road to profits has been a rocky one. Just take a look at iShares Biotech (IBB). Down 0.7% Thursday morning, the exchange traded fund is on track for a fourth straight down session. The year-to-date gain of 4.9% is trifling compared with 25.3% for the S&P 500.
Even S&P Invesco Equal Weight (RSP), off 0.2%, holds a solid 16.2% advance since Jan. 1.
Notice on a daily chart that the biotech ETF’s relative strength line has been spiraling lower in recent weeks. You’d prefer to invest in both leading stocks and ETFs with a rising RS line, not a falling one. Why? A rise indicates the security is outperforming the S&P 500.
Eli Lilly (LLY), a huge winner from 2022 to end of June this year, slumped 1.3%. It continues to hover below its long-term 200-day moving average. Another failed test of retaking the 200-day line would mark a short-selling opportunity.
Lilly’s 49 Relative Strength Rating means it’s outperformed just 49% of all stocks in the IBD database over the past 12 months.
Looking For ‘Less Well Covered’ Stocks
Vertex Pharmaceuticals (VRTX), which got reduced to a quarter-size position on IBD Leaderboard Thursday, slipped as much as 1% and briefly undercut its 21-day exponential moving average. The company is developing a non-opioid pain treatment that is set to release Phase III clinical trial results in the near future.
“We look for stocks that are less well covered,” Niels Peetz-Larsen, partner at Boston-based HighVista Strategies, told IBD in a recent interview. “With this strategy it’s more likely the price (in the stock market) is wrong, and there’s a higher chance of getting it right.”
Peetz-Larsen says his team looks for biotech and medical stock opportunities across all sizes of market cap. Yet he acknowledged “at the index level small caps have not kept with large caps. Liquidity is critically important. Yet today, it’s more likely the market cap of a biotech at $1 billion is wrong than saying a stock such as Google (operated by Alphabet (GOOG)) is mispriced.”
That said, the biotech area is not the only one to see some stocks suffer negative reversals as investors sold into strength following the postelection surge. Contract electronics firm Fabrinet (FN), Japan’s gaming and consumer electronics giant Sony (SONY) and tech services firm TaskUs (TASK) offer recent examples of breakouts failing.
10:27 a.m. ET
Chevron Climbs, Nu Falls
In the early going, the more interesting move came from the energy sector. News reports noted the International Energy Agency raised its future demand forecast. Chevron (CVX), a member of the Dow Jones, rose 1% and crossed a trendline entry near 160. A daily chart, however, shows that Chevron is trading well off the left-side peak of its base, so the risk of a pullback is still substantial.
Meanwhile, some fast movers got hit in the early going. Nu (NU), a Brazil-based fintech platform, slumped as much as 9% and briefly dived below its 50-day moving average. The stock is also close to falling 7% below its 15.16 buy point.
Hims & Hers (HIMS) got slammed 16% before rebounding a touch, while Super Micro Computer (SMCI), a big winner in 2023 that has issued multiple sell signals in the summer and fall, lopped off as much as 14% to an intraday low of 17.36 after delaying its Q3 report.
Hims & Hers, which has risen on enthusiasm over its offerings in the weight-loss treatment space, traded just below a breakout point at 23.74. From June to early November, the midcap stock built a deep cup with handle, setting up a 23.74 entry. To find the buy point, locate the highest price within the handle, which in this case is the Oct. 22 high of 23.74.
Beyond The Stock Market Today: Bonds Rebound
The yield on the U.S. Treasury 10-year note edged down 3 basis points to 4.41%. Weekly jobless claims growth remained mild at 217,000, coming in below expectations of 225,000, according to Econoday.
Producer prices rose at a milquetoast level too, up 0.2% in October vs. the month of September. But the September figure got revised from flat to a 0.1% increase. Yet year over year, wholesale inflation was tame, up 2.2%. Economists expected a 2.3% rise.
Please follow Chung on X/Twitter: @saitochung and @IBD_DChung
YOU MIGHT ALSO LIKE:
IBD Live: A New Tool For Daily Stock Market Analysis
Want To Find New Breakouts? Consult This List Each Day
What Is Relative Strength, And How To Use It To Find Winners In The Stock Market Today
