[ad_1]
The Dow Jones Industrial Average started in May on a sour note, falling as low as 2.7%, or 648 points, amid fresh concern over the state of economic relations between the United States and China. Up to 12 of Dow’s 30 industrial stocks fell 3 points or more, led by UnitedHealth (UNH) Goldman Sachs (GS) and Caterpillar (CAT).
X
McDonald’s (MCD), which earlier this week reported a 17% decrease in adjusted earnings in the first quarter due to a 1% increase in sales, was also the downside for the Dow Jones.
But McDonald’s 4-point drop has not brought the world’s # 1 restaurant chain below its 50-day moving average. That is bullish. Currently, the stock is working in a deep cup-like pattern after it failed to complete a well-made cymbal base with a strong break.
Around 1 p.m. ET, the S&P 500 slashed 2.9% after recovering nearly 13% in April. The Nasdaq compound fell more than 3.3% in equity trading earlier today. On Thursday, President Trump complained that China should be held accountable for its actions amid the global coronavirus outbreak, which started in the densely populated commercial city of Wuhan.
This remains the golden rule of investment; This is why
What to look for in the Dow Jones, Nasdaq, S&P 500 indices now
Watch to see if volume increases on both major exchanges versus Thursday’s heavy trading session.
A significant decrease in higher volume by the Nasdaq or S&P 500 would mark a new distribution day, or an outbreak of unusually strong earnings by mutual funds, banks, hedge funds, insurers, and the like. A series of strong distribution days in a short period of time (IBD calls this a vertical breach) could derail the month-long tradable bounce that was confirmed by a follow-up day on the eighth day of a new S&P recovery attempt. 500 on April 2.
Read more about this key change in the current market trend in the April 2 Big Picture column.
Late last year, the White House agreed to refrain from adding new tariffs on Chinese imports after a trade dispute that started in January 2018.
According to CSSE at Johns Hopkins University, confirmed cases of Covid-19 have exceeded one million in the United States, almost five times the amount in Spain.
Innovator IBD 50 (FFTY) sank nearly 2.8% and was back below its 50-day descending moving average.
Join IBD Live! Learn the main charts readings, points of purchase, sales rules, portfolio techniques from professionals of CAN SLIM
Outside of Dow Jones: China’s shares plummeted
In the meantime, Alibaba (BABA) has cooled for more than two weeks after a strong rebound at a March 23 low of 169.95. Shares fell 4% in volume today, running more than 70% above the 50-day average rate.
A severe drop below the 50-day moving average in high volumes offers a timely exit point for growing stock investors, especially if the company in question has made solid progress. In fact, the breakout of stocks below the 50-day line on February 21, followed by a large price gap next session in accelerated volume, triggered a key defensive selling rule for the IBD.
However, at the same time, stocks hold relatively well. At this morning’s low of 193, Alibaba stood 16% below a 52-week high of 231.14.
The stock is not yet at a suitable point of purchase. But if the stock shows signs of further institutional accumulation, be careful that it recovers above the 50-day moving average first.
A cup with a handle has formed, but Alibaba is still close to passing an entry point of 216.20, or 10 cents above the high of 216.10.
Why does Alibaba Stock rank prominently in the IBD database?
According to IBD Stock Checkup, the e-commerce and food retail titan has an impressive composite rating of 98 IBD on a scale of 1 (crummy) to 99 (creme de la creme).
Overall, stocks with a composite rating of 95 or above, in other words, the top 5%, are much better positioned to lead the market higher with a strong break from a good base to new highs. This rating studies the most important fundamental, technical and fund ownership criteria for selecting excellent growth stocks.
The street sees Alibaba earnings fall 33% in the first quarter to 86 cents a share in a 9% sales jump. But as China continues to recover from the Covid-19 pandemic, analysts surveyed by FactSet also see earnings improve to just a 1% drop in the second quarter, then gains of 8% and 10% in the third and fourth quarter, respectively.
A key stock list for May
Virtually no stocks have fallen into the high prices section of the Moving Stocks table. Wholesale costco (COST) weathered the decline after testing the 300 level. Stocks showed a fractional decline after rising more than 1%.
The discount retail giant is also finding support at the 50-day moving average as it forms a soft cup with a handle that shows an entry point of 322.73.
In other financial markets
Crude oil challenged the profit-taking session on US stocks. West West Intermediate oil futures for June delivery rose more than 4.2% to $ 19.85 per barrel.
The benchmark US Treasury bond. USA At 10 years it showed a yield of 0.62%, compared to 0.19% for two-year notes and 0.09% for 3-month Treasury bills.
Follow Chung on Twitter at @SaitoChung and @IBD_DChung For more information on growth stocks, buy points, breakdowns, sales rules, and market insights.
YOU MIGHT ALSO LIKE:
IBD 50 growth stocks to see right now
Take advantage of large market declines – do this now
Inside The Big Picture: 7 Reasons Why It’s Time To Go Fishing
Start building your watchlist now – top stocks in the leaderboard today
[ad_2]
