Investors bought shares in droves Tuesday as the stock market posted its best gains in months and multiple stocks broke out above buy points. Shopify crossed an early entry, while Lululemon moved further past a 406.94 pivot point. German rival Adidas is also close to stepping past a trendline buy point near 98.
The Nasdaq composite soared 2.4% and the S&P 500 added 1.9%. For both, it was the best day since April 27. The Dow Jones Industrial Average closed 1.4% higher.
Small caps blazed even higher. The Russell 2000 spurted 5.4%. That beat a 3.9% jump by the SPDR S&P MidCap 400 ETF. MDY is now trying to challenge resistance at the slightly downward sloping 200-day moving average.
Volume rushed higher on both main exchanges vs. the same time on Monday.
Since IBD observed a follow-through day on Nov. 1, signaling a potential new uptrend underway, the Nasdaq 100 has now lifted almost 8%. The S&P 500, trading above 4500 for the first time since September, has gained as much as 6.3%.
A follow-through day does not guarantee a tradable rally. However, IBD research has found that every major stock market bottom since 1900 featured a follow-through.
While beaten-down solar firms ranked within the top three industry groups, bank, construction, retail and technology sectors provided much more meaty leadership.
Meanwhile, Shopify, which overlaps the tech, e-commerce and consumer spending sectors, broke out past a trendline entry near 63. Shares have gained more than 7% for the week so far.
On Tuesday, the stock gapped up at the open and rose more than 5% in slightly above-average volume.
Stock Market Today: Eye The Breakouts
For sure, more buy points could emerge.
Shopify, the e-commerce platform for small and medium businesses, is approaching a 67.60 proper entry in a four-month-old double-bottom base as well.
The company has posted very strong quarterly results the past two quarters, including a combined earnings of 38 cents a share in Q2 and Q3 vs. a combined net loss of a nickel per share in the two year-ago quarters. Sales at Shopify rose 26%, 25%, 31% and 25% in the past four quarters.
Shopify joined IBD Leaderboard earlier in November as a Watchlist stock. On Tuesday, SHOP joined the Leaders list as a new half-size position. Eleven other Leaderboard stocks also showed strong advances.
The stock was one more than 30 stocks on MarketSmith's list of breakouts today. Others of note included KKR, MercadoLibre, Intuit and housing stocks such as Toll Brothers.
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Lower Inflation, Higher Equity Prices?
The big stock market gains came on the weak, lighter-than-expected inflation in the U.S. Consumer prices were flat in October vs. the prior month. Plus, core prices, which exclude energy and food, rose 4% year over year, slightly below Econoday's consensus view for a 4.1% gain.
Bank stocks thrived. West and Southwest regional banks rose 6.4% as a group.
In the Northeast U.S., The Bancorp outperformed with a 6.6% gain and briefly hit a session high of 40.19. The small-cap lender is close to breaking out past a cup with handle and a 40.18 entry.
Wall Street sees earnings rising 60% this year to $3.64 a share and up another 19% in 2024.
Stock Market Leaders In Retailing
Meanwhile, Tuesday's IBD Live show noted important moves by the likes of Urban Outfitters, Lululemon, Gap and a few more retail and apparel firms.
Urban Outfitters, up 3.9% in average turnover, is close to clearing a 36.10 entry point in a 13-week cup with handle. The company posted 70% earnings growth in the past two quarters amid revenue gains of 6% and 8% on a year-over-year basis, respectively.
The handle shows a very light 5% decline from the handle's high to low. That's ideal. Why?
Within a cup pattern, which shows a much deeper decline, the handle represents the final shakeout of low-conviction holders. Shares move from these weak hands into much stronger ones.
The small cap has 92.7 million shares outstanding; 62% of the shares are held by mutual funds and hedge funds. Banks hold just 1% of the total shares.
Wall Street sees earnings bulging 91% in the fiscal year that ends in January to $3.24 a share, then adding 5% to $3.42 in FY 2025.
LULU: Now A $52 Billion Company By Market Value
Lululemon rallied 3.2% to 430.33, hitting the highest level since December 2021. The large cap ($52 billion market value, 121.4 million shares outstanding) is exiting the 5% buy zone from a flat base-style pattern with a 406.94 pivot point.
The 5% buy zone goes up to 427.29.
Earnings have grown on average 33% vs. year-ago levels in the past eight quarters. Sales at the yogawear and other athleisure apparel have spiked 30%, 23%, 32%, 29%, 28%, 30%, 24% and 18% over the same time frame. Return on equity in FY 2023 (ended in January) was marvelous at 44%. The company showed operating cash flow of $12.94 a share in fiscal 2023 vs. earnings of $10.07 a share.
Its 92 Relative Strength stretches easily over the likes of Nike, which holds a 39 Relative Strength Rating on a scale of 1 (poor) to 99 (terrific);
Adidas, which is basing after getting upside resistance near 100, holds a solid 91 RS Rating. The German athletic shoe and apparel titan is close to crossing a trendline buy point near 98. Analysts think Adidas' earnings could explode 962% higher to $2.62 a share next year after falling 63% to 25 cents in 2023. Adidas has a market value of $34.8 billion.
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