The stock market today acted as usual during earnings season — with a big dose of intraday volatility. Yet major indexes showed a modicum of bullish action Thursday, trimming early losses on the day after IBD made a key change in the current outlook. Microsoft eyed a key sell signal despite pulling off its intraday lows.
Meanwhile, growth stock Interactive Brokers flexed unusual strength, working on a nearly 5% gain for the week amid a fresh breakout. The popular discount broker cleared the top of an erratic-looking cup base as shares rose 2% in above-average volume. Shares rallied 2.3% to 91.04 on a 40% jump in volume vs. its 50-day average.
Arguably, Interactive Brokers formed a handle in recent weeks that gave a solid buy point of 87.09. The 5% buy zone from 87.09 goes up to 91.44. Therefore, shares are nominally in the buy zone. Avoid buying strong movers more than 5% above the proper entry. IBKR is a member of IBD SwingTrader.
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A slightly bigger than expected increase in weekly jobless claims (227,000 vs. the Econoday consensus estimate of 225,000) likely did not move the needle much in the early going.
More likely, poor reactions to earnings from wireless technology giant Qualcomm (down 8% in heavy trade), marketing and electronic payments software firm HubSpot (down 11% in more than triple average volume), and a few other tech-oriented companies sparked initial bearishness.
Yet the stock market began turning upward roughly an hour and 15 minutes into the regular session.
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The Nasdaq 100 turned a 0.7% initial drop to a slight gain briefly in late-afternoon trading before closing with a drop of less than 0.2%. The Nasdaq composite edged 0.1% lower, a touch better than tiny losses for both the S&P 500 and the iShares Russell 2000 exchange traded fund. These two indexes eased around 0.2% to 0.3% after falling more than 0.6% and 1%, respectively, during early morning trading.
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The Dow Jones Industrial Average edged less than 0.2% lower. Volume ran sharply higher on the Nasdaq vs. the same time Wednesday, yet mildly lower on the NYSE, early data showed.
The higher turnover on the Nasdaq reflected more activity in Nasdaq-listed stocks following earnings. And as noted in this Stock Market Today story, several megacap tech giants are due to report quarterly results after the regular session closes.
Interestingly, breadth on the Nasdaq was virtually flat.
According to Thinkorswim data, advancers at one point numbered 2,142 vs. 2,135 decliners during the final hour of trading. But by day's end, losers edged winners by a 6-5 margin. On the NYSE, losing stocks outweighed gainers by more than a 3-2 ratio.
Among IBD's 197 industry groups, big losers included cable and satellite gear firms, down 6.4%; airlines, nose-diving 4.2%; electronic parts, travel booking, lodging and specialty enterprise software, each off more than 3%; and farm machinery, down 2.7%.
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On the stock market upside, at least four oil and gas industry groups ran ahead 1.8% or more. They included U.S. exploration and production, international explorers, and oil and gas field services firms.
Going back to Microsoft, the megacap stock has no doubt scored a phenomenal run in 2023. Shares at their year-to-date peak have risen as much as 52% from the 2022-year-end close of 239.82.
However, the cloud computing, business software and generative AI behemoth has done something for the very first time since it crossed a breakout point at 276.76 in mid-March: Microsoft lost buying support at or near its 50-day moving average.
Notice on a daily chart how on July 27, shares fell 2.1% in vigorous volume and undercut the 50-day line (the red line drawn below the price bars). MSFT rebounded quickly, but did so in lighter volume. This indicated a lack of fresh institutional demand.
Further declines would squeeze gains from both the 276.76 buy point from a good flat base as well as a handle entry at 292.08. IBD readers who aim at short- and medium-term position trades know that it's important to use sell signals to preserve hard-earned profits, wait for a new base to form, then reenter the stock.
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Notice on a weekly chart how MSFT is currently trading slightly more than 3% below its 10-week moving average. A sharp thrust below the 10-week line can serve as a timely sell signal.
Last week, Microsoft reported a 21% jump in fiscal fourth-quarter profit to $2.69 a share. That marked a second quarter in a row of earnings growth acceleration. But sales rose just 8% to $56.2 billion, continuing a string of single-digit top-line growth.
In the five prior quarters, the Redmond, Wash., firm's sales jumped 22%, 20%, 18%, 12% and 11% vs. year-ago levels.
Outside the tech space, Thursday's IBD Live show continued to highlight a few emerging leaders in the energy space.
Halliburton is working on its sixth straight up week and is close to testing potential resistance near 40. HAL shares on Thursday rose 1.7% to 39.70, 8% below the current base's peak of 43.42.
Fellow oil field services giant Schlumberger, which has rebranded its corporate name as SLB, rose 0.9% in very thin volume. Watch for a potential handle to form on its six-month cup pattern.
SLB's cup shows a healthy 28% decline from head to toe. It retook the 200-day line in heavy turnover on July 7, a sign that large funds are grabbing shares with enthusiasm.
Both stocks hold a Composite Rating topping 95 on a scale of 1 to 99.
On Thursday, front-month crude oil futures on the Nymex roared 2.6% higher to $81.55 a barrel. That marked the eighth gain in 11 sessions. Light sweet oil now stands 16% below a 52-week high of $97.01 hit on Aug. 29, 2022.
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