We have discussed all this, so a little tech talk for fun…
Tuesday’s heavy stock market losses showed one common trait among four of IBD’s Sector Leaders: sharp rebounds from early sell-offs.
Though the rebounds by Align Technology (ALGN), YY (YY), Abiomed (ABMD) and Arista Networks (ANET) were similar, they left investors facing an array of chart situations.
Arista and Abiomed recovered from the steepest declines. Arista dropped 9% at the start of trade, then closed that gap to 1% at the end of the day. Abiomed dropped 7% early on. It also narrowed its loss to less than 1%.
The implications of the two moves were somewhat similar.
Arista’s dive stopped well short of a test of its buy point at 245.75. So the stock didn’t threaten a round-trip sell signal. Arista’s latest base was third stage, which means the stock is less likely to mount a large advance. The wide daily trading range is a little worrisome, and can be a sign that a stock is turning volatile — just what you do not want to see after a third-stage base.
Still, the strong reversal should make investors feel positive about the stock.
Arista chalked off a similar wide daily range in early December, just as it began its prior base. It posted another Nov. 2, after reporting its third-quarter results. Both of those declines occurred in much heavier volume than Tuesday’s move, and neither resulted in a significant rebound.
Arista is scheduled to report its fourth-quarter results after the market closes on Feb. 15.
Abiomed’s early tailspin stopped even further above its most recent buy point than did Arista’s. Abiomed is extended from its 200.38 buy point in a flat base cleared Jan. 5.
The primary difference is that Abiomed’s base was a fifth-stage pattern. That is late stage, and suggests the stock is due to consolidate.
Investors could potentially read Abiomed’s October 2016-through-April 2017 base as a reset of its base count because it was a long, substantial consolidation. This reading is unconventional, which carries risk in itself. But it would imply that the stock is not due for a significant consolidation.
Abiomed reports its fiscal third-quarter results before Thursday’s open.
The recoveries were a bit less spirited for Align Technology and China’s YY. Both stocks fell more than 10% just after the open, and both gradually trimmed their losses to around 2% to 3%.
Align’s loss took the stock 8% below its 266.51 buy point. That triggered an automatic sell rule, and effectively killed the buy point. But the positive reversal meant that institutional investors bought on the dip.
As with Arista, the base is third stage, and the big one-day range raises the possibility that volatility is rising. Also similar to Arista, Align posted a wide range in much heavier trade on Dec. 4, and did not rebound from the loss like it did Tuesday.
The stock rose after the close but gave up gains following the company’s earnings, which beat expectations. If the stock rallies Wednesday, investors might have a chance to buy. But a decline would not leave immediate room for a new entry.
YY’s nose-dive stopped shy of a test of its 10-week line, and far short of its prior buy point at 83.10. That alone gave shareholders some working room. The stock remains nearly 60% above that prior entry, so investors have the option to lock in at least some profit, if they have not already done so.
In contrast look at the NVDA chart. no real sell off at all!
http://stockcharts.com/freecharts/candleglance.html?algn,ane…
NVDA, strong like bull!
Here are all of Saul’s current holding in case you want to see how they all reacted. PSTG very nice - minor dip on lighter volumen even after multiple days of run up before today, SQ was good too.
Always looks at the volume compare to day before and to the average. A sell off on light volume is fine. A bounce back on strong volume is very good.
http://stockcharts.com/freecharts/candleglance.html?TOP:,SHO…
http://stockcharts.com/freecharts/candleglance.html?MIDD:,TL…
http://stockcharts.com/freecharts/candleglance.html?SMALL:,P…