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This Chinese IPO Stock Breaks Out; Apple Holds Steady As Stock Market Trims Losses

The Nasdaq outperformed other key indexes in afternoon trading in stocks today. But in general, investors appear to be brushing off concerns over stability in the East Asia region after President Trump canceled a highly anticipated June 12 meeting with North Korean leader Kim Jong Un in Singapore. A new Chinese IPO broke out.

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The Trump news didn't stop ZTO Express (ZTO), a play on Chinese e-commerce, from breaking out. However, keep in mind that the stock has a penchant for pulling back rapidly after hitting new highs.

At 2 p.m. ET, the Nasdaq shaved a 1% early-morning loss to nearly nil. Key Nasdaq component Apple (AAPL) erased minor morning losses and is trading near 188, up 5% past its latest 179.04 buy point in a seven-week double-bottom base.

The S&P 500 and the Dow Jones industrial average also cut beefy early losses to around 0.2% to 0.3%. The small-cap S&P 600 rose fractionally.

Meanwhile, the Dow transports rallied more than 1.1% as airline, railroad, logistics and truck firms gained ground amid a 1.6% drop in WTI crude oil futures. West Texas Intermediate crude is now at $70.70 a barrel, still up 17% year to date.

Please read Wednesday's Big Picture column on how stocks today are mirroring the bullish activity seen in the prior session. As noted in the Market Pulse table within the Big Picture, the S&P 500 has logged seven distribution days within the past 25 sessions. Yet these instances of pronounced institutional selling have not been enough to swat the key large-cap benchmark far from its all-time highs.

At 2727, the 500 is just 5% below an all-time peak of 2872 and is up 2% year to date.

The Nasdaq composite, benefiting from the strength in FAANG stocks such as Apple and new breakout Netflix (NFLX), continues to lead the major indexes with a 7.5% year-to-date advance.

Breakouts Continue

ZTO rolled past an 18.18 buy point in a somewhat jagged cup base that began a negative reversal Nov. 10. No handle formed on the five-month cup base, so the proper buy point is 10 cents above the left-side lip of 18.08.

The 5% buy zone goes up to 19.09. Read this recent Investor's Corner on the importance of not buying too far extended in price following a sound breakout.

Notice on the weekly chart how ZTO broke out of a first-stage cup-type base at 16.14, rallied 12%, then pulled back sharply to begin a new base. In other words, the stock's action going all the way back to July of 2017 can be seen as a long base on base, one of eight key patterns that savvy growth investors use to time the market and find the right time to buy top growth stocks.

The other seven chart patterns to learn and master: the cup with handle, double bottom, flat base, ascending base, high tight flag, saucer, and IPO base.

ZTO's Fundamentals Rising

The delivery giant, an October 2016 IPO, has grown earnings 7%, 0%, 35% and 70% vs. year-ago levels in the past four quarters. The Street sees Q2 profit rising 67% to 25 cents a share.

On IBD Stock Checkup, ZTO gets an outstanding 98 Composite Rating on a scale of 1 to 99. The Relative Price Strength Rating of 83 means that ZTO has outperformed 83% of all public companies in IBD's database over the past 12 months.

If the stock can maintain its fierce new uptrend, that RS Rating should rise. The up/down volume ratio is very strong at 2.7. See it in the "Technical Performance" section of Stock Checkup.

The Shanghai-based company has a float of 426 million ADS (American depositary shares) and 721 million shares outstanding. The market cap of $13.3 billion makes it a midcap company.

Investors Don't Cut The Cord On Netflix

Netflix (NFLX), meanwhile, added gains after the streaming giant cleared a 338.92 proper entry in a narrow flat base. See today's Stock Spotlight column for a discussion on how Netflix formed two bases, and why the first one was flawed.

Netflix joined IBD Leaderboard on April 5 as a half-position stock, then got upgraded to full-position status on April 17. The company has been on the curated list of top-performing stocks as early as July 2014.

(Please follow Saito-Chung on Twitter at @IBD_DChung for more analysis and commentary on IPOs, growth stocks, charts and financial markets.)

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