Growth stocks and some cyclical names showed mettle Monday in the face of uncertainty over whether President Trump’s pledge to slap tariffs on steel and aluminum imports will show big teeth, or possibly fester into something even more serious.
The Innovator IBD 50 (FFTY) exchange traded fund, tracking some of the best growth companies in the U.S. stock market, rose nearly 0.7% to 33.47. Watch to see if the hot ETF, which rallied 37% in 2017, can end four weeks of trading beneath the key 50-day moving average.
The Dow Jones industrial average led the way, rallying nearly 1.4% after sliding 1.7% last week. At least eight of the 30 components in the Dow industrials gained 2 points or more, including bank, industrial and consumer-oriented names.
McDonald’s (MCD) was among those eight names, rebounding 2.76 to 151.03 in fast turnover. But no proper buy point is in sight yet for the world’s largest restaurant chain. Shares are still more than 15% below a 178.70 all-time high, and McDonald’s is trading well below its 50- and 200-day moving averages, a sign of underperformance.
The Nasdaq composite and the S&P 500 rebounded 1% and 1.1%, respectively. Volume fell on the Nasdaq vs. Friday, according to early data.
Winners beat losers by a nearly 3-1 ratio on the NYSE and by a 2-1 margin on the Nasdaq. Meanwhile, the Dow Jones transports sprang off their intraday low to turn a 1.6% early loss into a small gain of less than 0.2%.
A wide band of software firms flexed impressive power and hail from a wide array of industries, from real estate information to pharmaceutical business management to data security.
Proofpoint (PFPT) rallied more than 4% to 115.51 and marked new highs in heavy turnover for a second straight session. The security-as-a-service software provider broke out of a shallow double bottom at 94.73 on Jan. 4 and rose 10% in less than four weeks before testing the correct buy point in early February.
The stock has now gained as much as 22% from the 94.73 entry. An investor could decide to take at least partial gains because it’s triggered one of IBD’s offense-type sell rules. One could also decide to keep holding for a potential gain at 30% to 40%.
Proofpoint has grown earnings per share 183%, 32% and 61% vs. year-ago levels in the past three quarters, and the Street sees Q1 earnings ramping up 33% to 16 cents a share.
As seen in IBD’s time-saving research tool IBD Stock Checkup, Proofpoint holds an excellent Composite Rating of 97 on a scale of 1 to 99, and yet the top of Stock Checkup shows four more companies in the security software group with a 97 rank or even higher.
Meanwhile, as seen in a weekly chart on MarketSmith, Proofpoint is benefiting from expanding ownership among mutual funds and hedge funds, with 537 funds owning shares at the end of the fourth quarter in 2017, up from 482 funds, 504 and 514 in the first three quarters of that year.
Such institutional fund sponsorship data is found in a mini table right above the quarterly sales and year-over-year sales percentage data on the left side of MarketSmith’s unique data charts.
Go to the middle top area of the weekly chart, and you’ll see that Proofpoint also has a
Veeva Systems (VEEV) jumped nearly 4.7% for a fourth up day in a row. The expert in sales, regulatory practices and marketing management software for large ethical drug and biotech firms is highlighted in IBD’s New Highs column.
Veeva, an October 2013 IPO, revised its fiscal 2019 profit estimate sharply higher and also expects earnings growth to re-accelerate in the April-ending fiscal first quarter.
Zillow (Z) extended its rally to a fifth straight session, rising more than 4% to 51.48 and getting further past a 48.59 buy point in a long cup with handle.
Zillow is highlighted in Monday’s Stocks Near A Buy Zone column.
Analysts expect robust earnings increases for the leader in online real estate data for both this year (85 cents, up 60%) and in 2019 ($1.18, up 39%).
Elsewhere, chemical and agriculture-related names led the upside.
CF Industries (CF) soared more than 6% to 44.56 in volume that hit the highest levels since mid-January. The specialist in nitrogen-based fertilizers formed a compact double-bottom base that was almost seven weeks long and featured a 43.07 entry. CF ran past that proper entry point on Feb. 21, then slid back into the base last week. The stock is now back in buy range.
The buy point in a double bottom is found by adding 10 cents to a middle peak in between the two sell-offs that form the base.
In the first sell-off, CF dropped more than 10% from a Jan. 5 high of 43.98 to a first low of 39.35 before rebounding. After forming the middle peak of 42.97, the midcap stock dived again, properly undercutting the base’s first low by hitting a new low of 35.90.
Deerfield, Ill.-based CF joined IBD’s Swing Trader premium service earlier on Monday.
(Please follow Saito-Chung at @IBD_DChung and MarketSmith at @MarketSmith on Twitter for more insights, analysis and commentary on top stocks, investing techniques and financial markets.)
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