Dow Jones futures rose modestly early Wednesday, along with S&P 500 futures and Nasdaq futures. In Tuesday's weak stock market session, Okta (OKTA) broke out powerfully, as leading software stocks and especially cybersecurity plays fared well. Apple (AAPL) reversed slightly lower in heavy volume Tuesday and threatened to undercut its buy point early Wednesday. Advanced Micro Devices (AMD) fell back below its entry on Tuesday.
Apple stock and AMD stock have flawed charts, while Okta stock showed several bullish qualities.
XDow Jones Futures Today
Dow Jones futures rose 0.25% vs. fair value. S&P 500 futures advanced 0.25%. Nasdaq 100 futures climbed 0.2%. Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Current Stock Market Rally
Amid concerns of an expanding U.S.-EU trade war, the major averages retreated. The Dow Jones lost 0.7% while the S&P 500 index and Nasdaq composite retreated 0.6%. The small-cap Russell 2000 skidded 1.2%.
Apple stock — which had provided some intraday support for the Dow, S&P and Nasdaq — closed down 0.3% Tuesday. AMD tumbled 4.5% as the VanEck Vectors Semiconductors ETF (SMH) sank 1.1% after seven straight gains.
Software Stocks
A top ETF in the current stock market rally, the iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.1%, with big weights Microsoft (MSFT) and Salesforce.com (CRM) modestly lower. But many of the top software stocks in the current stock market rally showed positive action. Zscaler (ZS), which plunged nearly 9% last Thursday, rose 2.3% on bullish analyst comments for the cybersecurity name. Fortinet (FTNT) advanced 1.4%, near a buy point. ServiceNow (NOW) continued to find support at its 50-day, while Workday (WDAY) moved back above that key support.
Okta Stock Breakout
Okta stock shot up 5.7% to 92.65 Tuesday, clearing an 87.82 flat base buy point within a base-on-base formation. Volume spiked 120% above normal, a sign of institutional support.
The relative strength line hit a new high with Okta stock, a bullish sign. The RS line, the blue line in the charts below, tracks a stock's performance vs. the S&P 500 index.
Okta stock sold off hard a couple of times in early March, but then traded tightly at its rising 50-day line.
Shares of the 2017 IPO are now slightly extended from the 5% chase zone.
Okta stock was added to IBD SwingTrader on Tuesday.
The biggest flaw for the 2017 cybersecurity IPO, like 2018 IPO Zscaler, is that Okta is unprofitable. But revenue growth is strong.
Apple Stock
Buoyed by a hopeful analyst note on China iPhone trends, Apple stock rose 1.7% intraday to 202.85. But shares reversed to close down 0.3% at 199.50 in above-average volume. Don't make too much of Tuesday's action. Apple stock fell less than the major indexes and held above its 197.79 cup-with-handle buy point.
Still, Apple stock had broken out Monday in below-average volume. Throughout the nine-day winning streak, trading was light except for the first day's fractional volume increase.
Meanwhile, the midpoint of the handle was just above the midpoint of the base. That leaves a lot of potential overhead resistance for Apple stock.
Apple stock fell 0.35% to 198.80 early Wednesday, after briefly undercutting its buy point. HSBC downgraded Apple stock to reduce from hold. It did raise the price target to 180 from 160, but that's well below Apple's current price level.
AMD Stock
AMD stock tumbled 4.5% to 27.24 on Tuesday, back below a 28.21 cup-with-handle buy point cleared last week. The buy point is still valid, but that was not encouraging action. As IBD noted at AMD's breakout, the base was more than 50% deep, lowering the odds for success.
AMD stock rose 1.3% early Wednesday.
Several other recent chip breakouts, including Microchip Technology (MCHP) and ASML (ASML), held above their buy points.
Wait For Better AMD, Apple Stock Bases?
One possibility for AMD stock and Apple stock is that they will form short, tighter bases within, next to or slightly above their current deep consolidations. That could offer safer entries for investors.
Okta stock previously broke out of a messy, deep base before forming its tight consolidation. Many other leaders have been forming base-on-base or base-within-a-base patterns in recent weeks.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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