Dow futures rose slightly Monday morning, right beside Nasdaq futures and S&P futures, with new tariffs counter-balancing positive Chinese data. Apple (AAPL) is consolidating at a profitable zone. But Amazon, Shopify, Microsoft (MSFT) and Zscaler (ZS) are revealing a sell rule that is always important to follow.
Large institutions will often buy top stocks at 10-week moving averages. But when a stock plummets under this important level in heavy trading, it shows the end of the run.
Meanwhile, Apple’s AirPods were big sellers over the holiday. And overall online sales continue to skyrocket, which is great news for Amazon.com (AMZN) and e-commerce tech company Shopify (SHOP). Mall visitors dropped on Black Friday, but increasing buy-online-get-offline orders show that traditional outlets like Target (TGT) are coping well with lockdowns.
Dow Jones Gives Big Signs
Dow Jones futures increased 0.2% vs. fair value, after going as high as 0.5%. S&P 500 futures went to 0.2%. While Nasdaq futures hit 0.2%. Note: Premarket moves in Dow futures doesn’t always lead to real world trading in the next session.
These futures rose on optimistic Chinese factory data, combining gains on new Trump tariffs vs. Argentina and Brazil.
Chinese activity increased for the first time in half a year. Going up 0.9 point to 50.2, above the break-even level of 50 and defeating forecasts. The non-manufacturing index also jumped from 1.6 points to 54.4. Also, the Caixin survey had Chinese manufacturing increasing at a faster pace, ticking up 0.1 point to 51.8.
The ISM manufacturing index will be out on Monday at 10 a.m. ET and the services gauge out Wednesday and Friday we have the November jobs report.
Meanwhile, in the AM on Monday President Trump tweeted he was reinstating aluminum and steel tariffs vs. Argentina and Brazil, saying they were guilty of “massive” currency depreciation, hurting American farmers.
The market rally is looking great. Even after Friday’s small pullback, the Dow rose 0.6%. The S&P 500 went up 1% and the Nasdaq increased 1.7%.
Growth stocks also had a great 7 days. With the best ETFs such as the iShares Expanded Tech-Software Sector ETF (IGV) gaining 1.9% and the Innovator IBD 50 ETF (FFTY) going up 2.3%. While the VanEck Vectors Semiconductor ETF (SMH) increased 1.5%.
Should You Hold Or Sell Apple?
Apple has gained 21% from its flat-base buy point of 221.47. It has now moved into the profit area of 20%-25%. Which is seen on the Marketsmith charts as the lime green area.
With these numbers, most stocks will consolidate or pullback greatly. You may watch a stock go sideways. Or you might see some or all of your gains evaporate. So it’s a great idea to withdraw some profits from stocks after a 20%-25% gain. (If a stock rockets 20% in the first two weeks after a surge, try to hold it for eight more weeks.)
But on the other hand, some stocks will keep going for long runs. So how should you handle this?
It’s all based upon your confidence in the company and stock. If you believe Apple will be a big winner yet again, you might keep most of your holdings.
The Sell Signal To Watch: The 10-Week Line
Now of course, the market doesn’t care about your emotions or hopes. When a company goes past the 10-week line in large weekly volume, it’s an obvious sign that big funds are selling. Chances are great that the stock will keep falling. Also take into account the relative strength line, which follows a stock’s performance versus the S&P.
Let’s Discuss Amazon
In 2018, Amazon was winning in a multiple year run. With its huge role in cloud computing and of course e-commerce, Amazon seemed unstoppable.
But the stock went down in the week of Oct. 5. Ending just below its 10-week as the market correction started. The next week, Amazon dropped again in the biggest volume in three months, well under its 10-week. That showed a clear sell signal.
Two weeks after, Amazon went below its 40-week line, which then became another resistance area. Amazon has not yet returned to old highs.