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Bulls Regain Control As Nasdaq Gaps Up, Rises 1.4%

The Nasdaq composite gapped up and rose 1.4% Tuesday, reclaiming the 50-day moving average along the way. It was a good day for the bulls as growth stocks continued their recent string of outperformance.

News flow was generally light, but positive sentiment was fueled by growing speculation that the Trump administration is making progress on tax reform. Action could heat up later in the week when Fed Chair Janet Yellen and European Central Bank President Mario Draghi speak in Jackson Hole, Wyo., on Friday.

X The S&P 500 picked up 1% and the Dow Jones industrial average added 0.9%. Preliminary data showed volume on the Nasdaq and NYSE coming in slightly higher than Monday's levels in the stock market today.

Leaderboard name 58.com (WUBA) followed through, rising 1.6%, after soaring 20% Monday on blowout earnings. Continued tight trading near highs could present an alternate entry.

But the news wasn't all good in China as two names got taken to the woodshed. Momo (MOMO) gapped below its 50-day moving average, crashing 20% to 36.02. Headed into earnings, it was struggling to clear a 46.05 buy point. Growth prospects are still bright at Momo, which operates a mobile-based social networking platform in China. Investors might've been spooked by a 189% surge in cost and expenses to $246 million.

Meanwhile, Baozun (BZUN), which had been showing relative strength ahead of earnings, plunged 24% to 26.23. Its 50-day moving average just over 28 is a key support level to watch. Baozun closed below that line Tuesday.

Elsewhere, quarterly results from homebuilder Toll Bros. (TOL) were strong, but full-year sales guidance was a bit soft, causing shares to tumble nearly 3% to 37.28. Toll Bros. had been working on a flat base, but the stock lost support at the 50-day line ahead of earnings.

In the metal ores group, Freeport-McMoRan (FCX) flirted with a breakout but came up short. Early Tuesday the stock cleared a 15.27 buy point of a cup-with-handle base but then slipped back under the buy point. Shares added 2% to 15.07.

Inside the IBD 50, Veeva Systems (VEEV) turned in a solid showing, rising nearly 4% to 65.58 ahead of its earnings report Thursday after the close. Its chart looks pretty good as it sits just below a 66.19 cup-with-handle buy point.

Also in the IBD 50, Paycom Software (PAYC) rose past the 73.71 buy point of a flat base. Shares gained nearly 4% to 73.83 in average volume.

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