Futures for the S&P 500 index edged higher Thursday morning after the major averages rebounded strongly Wednesday.
X Apple (AAPL) moved into buy range for the third time in a month after announcing plans to repatriate nearly all of its "overseas" cash to the U.S. But volume was just so-so, Apple's relative strength line remains near recent lows, and iPhone chipmakers such as Broadcom (AVGO) and Skyworks Solutions (SWKS) generally continue to struggle.
Meanwhile, chip gear maker ASML Holding (ASML) blasted past a buy point on strong earnings, while collaboration software maker Atlassian (TEAM) moved firmly into a buy zone a day ahead of its quarterly report. Both ASML and Altassian moved in strong volume with encouraging gains in their RS lines, signaling the stocks are outperforming the S&P 500 index
S&P 500 futures climbed 0.15% above fair value. Dow futures rose nearly 0.2% vs. fair value. Nasdaq 100 futures were a fraction above fair value.
Apple
Apple announced plans to repatriate nearly all its overseas cash to take advantage of tax reform changes. The Dow industrials component will pay $38 billion in taxes, give a $2,500 bonus to employees, and boost its advanced manufacturing investment fund to $5 billion from $1 billion.
Shares of Apple erased intraday losses to rally 1.65% to 179.10 in Wednesday's stock market trading, reclaiming a 176.34 flat-base buy point yet again, following one-day moves over that entry on Dec. 18 and Jan. 12. But the same three problems remain that should make investors wary.
Volume: Apple's volume rose 12% above normal, which is actually a little better than the prior two moves into a buy zone. But the volume is well below the minimum 40%-50% above-average increase you'd like to see to reflect institutional buying.
Relative strength: Apple's RS line — the blue line in the chart below — is near the bottom of its recent consolidation, and Thursday's move didn't mark a big shift. Apple's 1.65% gain wasn't that much better than the S&P 500's 0.9%. Apple's RS line hasn't made much headway since May.
IPhone ecosystem: If Apple's prospects are so strong, then why aren't iPhone chipmakers also breaking out, or at least making moves toward doing so? Broadcom is stuck below its 50-day moving average, while Skyworks Solutions and Qorvo (QRVO) are below their 50-day and 200-day lines. All three have lagging RS lines.
Can Apple's low-volume, lagging-RS move into buy zone work? Sure, but the odds of big gains are lower, while the risks of failure are higher.
ASML Holding
The Dutch chip gear maker tried to clear a 186.47 cup-base entry on Tuesday, but with the market reversing lower ASML settled for a 3% rise to 186.38. On Wednesday, ASML gapped higher on a surprise earnings gain and better-than-expected revenue. Shares blasted past the entry point and traded part of the session in the 5% buy zone before closing up 6.9% to 199.18, slightly extended. Investors should look to see if ASML pulls back into the buy zone or, eventually, to its 50-day moving average for an entry point.
ASML roared higher on triple normal volume. The stock's RS line moved above a recent consolidation, providing some confirmation of the bullish price action, while approaching the late-November peak.
Another reason to be bullish about ASML: Unlike Apple chipmakers, several chip equipment makers made bullish moves and/or news. Ichor Holdings (ICHR) shot up 20% on strong preliminary revenue figures and bullish sales guidance, skyrocketing back above its 50-day line. After the close, Electro Scientific (ESIO) leapt more than 20% on its own bullish guidance, signaling a move toward a buy point.
KLA-Tencor (KLAC) reclaimed a buy point in volume that was so-so: 22% above normal. Applied Materials (AMAT) and Lam Research (LRCX) rose strongly as they build the right side of bases.
Even if none of these stocks looks as good as ASML, industry-group moves are important for even leading stocks.
Atlassian
Atlassian, like ASML, also tried to break out on Tuesday, but closed below a 53.55 cup-base entry. On Wednesday, shares popped 3.9% to 54.87 in volume that was 69% above normal. The RS line is above a very short-term high and is making progress on reaching the highs of the left side of the consolidation.
But Atlassian reports earnings on Thursday evening, with investors expecting a 33% EPS gain to 12 cents. Buying or holding a stock into earnings can be risky. Investors may want to consider adopting this earnings options strategy.
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