AI, Metals Lead Market; Caterpillar, Century Aluminum, Lumentum In Focus

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0:39Ed Carson:Good afternoon, everyone, and welcome to Stock Market Today for Tuesday, June 2nd. It's Alyssa Coram here. And AI stocks and metals leading the day. Joining me now to discuss that and more is my colleague, Ed Carson. Ed, as always, so great to see you. What do you have for us today? Yeah, Ali, I have Caterpillar, Century Aluminum, and Lumentum. All right, we'll take a look at those stocks. But first, let's take a closer look at the major indexes. We have quite a few up days in a row here for the NASDAQ Composite finishing in positive territory ever so slightly to keep that win streak alive today.

1:19Ed Carson:Just a fractional gain there. Meanwhile, the S &P 500 up 0.1 % on the day, closing above 7 ,600. We also had the Dow today up almost a half a percent. So a little outperformance there, but not to be outdone. The Russell 2000 up nine-tenths of a percent on the day. Ed, your thoughts on the index action from today's session? Yeah, there's been stuff underneath here and there about things lagging and leading. But, yeah, the indexes are all rising. There's generally wind streaks for most of them. The Dow is at a new high. The S &P just eked out an intraday high. The Nasdaq's at a closing high. Small caps are not, but, boy, they led today.

2:07It's pretty good. I mean, there's good action underneath in terms of there were some buying opportunities the last couple of days. I mean, sometimes they were blinking. You missed it. But the market is acting very well. We are definitely in a power trend. And yeah, it's a time to be acting that way too.

2:28Ed Carson:Yeah. And it seems like underneath the surface, we're seeing different groups showing strength. Are you getting a sense, Ed, that it's more money coming from the sidelines and, you know, a rising tide lifting more boats as it were? Or are we seeing notable rotation out of some areas as well? You know, until a couple of days ago, I would have probably said it's rotation because there seemed to be a rotation out of some AI hardware stocks. I don't want to make like opticals and a few others. And then software was running up. But now it feels like, well, OK, software was down today, but that's been trending higher.

3:09And a lot of the names that were hard hit were really strong the last few days. So metals came up. There just seem to be a lot of areas that are trending up in other areas, you know, ETFs that we haven't been looking at as much. But, you know, biotech's had a bad day, so maybe there's a shift. So I'm not sure where it is. I mean, the thing is, is that it's a little tough. I mean, biotech's had a really bad day. There might have been some specific news that just sort of spooked people or maybe people are shifting over. Maybe they're saving some money for SpaceX and all those things and Anthropik and OpenAI.

3:45So probably a little bit of both. Uh, and I think that investors have to be nimble. The AI stocks are generally done pretty well. You can find things. If things don't work, you need to get, you should back out of them. And, and, but you know, there have been things that have worked and have worked very well for the last several weeks. So yeah, it's, uh, it's, it's a, it's a little tricky in that front, but, uh, it seems like there's, there's plenty of stuff to buy and maybe more stuff, more sectors participating than there were a little bit, but it is always revolving, evolving. Mm-hmm.

4:17Ed Carson:And I think perhaps the key is looking at a lot of charts, right? Looking at individual movers, looking at the sector level as well to see what sort of shifts that you're seeing, because we know a lot of the AI stocks have very strong relative strength lines, right? So the stocks that are on the move now, you're not going to have that same kind of relative strength, but perhaps, you know, a crossover of the moving averages, right? So that was something that you could look at with the XME, for example. We have a couple of RS moving averages on that relative strength line. It was able to take that out alongside clearing this 125 level that Justin and I took a look at yesterday.

5:02Ed Carson:So perhaps looking at relative strength through a shorter term lens. And, you know, for the high flyers, that's not to say that if they pull back that their moves are over. Pullbacks can be healthy. Pullbacks create new buying opportunities. But if you're seeing that deterioration, the relative strength coincide with notable deterioration below moving averages, heavy volume, number of down days versus up days, then it seems like there are more red flags there to be concerned about in that type of situation. Yeah, absolutely. I definitely think people are paying attention to RS lines, and that's a good way to look at things when there's rotation of areas that haven't been leading for a while.

5:46That's a great example. And XME, it actually had been leading at various times. It's gone through these periods. The overall trend has been positive. It's not like this has been lagging for months and months and months and months. Right. You know, there was a strong uptrend before. But, yeah, so this was definitely, and there's a lot of areas, including central aluminum, which is a component in that. But a lot of names in this space really looking strong again. So definitely an area, if you're not, it's not, I'm sure AI has something to do with something, but at least it's not as all part of the AI trade in the same way that some of the other names are, you know, giving you a little bit of diversity without giving up some decent strength here.

6:25Right.

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7:15Ed Carson:And I think perhaps there was a little bit of a short-term concern about getting maybe a little bit of overheated action around new highs with some stalling or pausing there. But nope, here we go. Once again, SMH up 4 % on the day. So considerable outperformance once again from the chips. Yeah, I do have a position in this. And, you know, aside from when it came down to the 21-day line, it was, you know, I'm watching that. But since then, there hasn't really been anything to worry about with this ETF, other than the fact that it's getting too hot. And it's amazing. Marvell surged more than 20%.

7:57And all it took was NVIDIA to say, yeah, I think this stock is going to go to a trillion. Obviously, it's only a$200 billion stock. But it's just amazing how much it moves on just that comment after moving so much. And that's what I like. there were a lot of big movers in AI today. And SMHs and things like that are just a good way proxy to quickly see how are some of these hot AI stocks doing. And mind you, there are things which much more volatile than SMH. But yeah, a lot of strength there.

8:31Ed Carson:Yeah. And I do own a little piece of Marvell. Of course, wish I owned more of it. But I do want to give a shout out to Jim Ropel for this one. This was one that he flagged on the monthly market report before we even had the follow through day in April. It was showing that incredible relative strength. So once again, pointing back to that, it was breaking out and the relative strength line was in a strong position when the market was still looking very vulnerable. and then, you know, waited for a new buying opportunity. It was aggressive. It wasn't perfect. I went with the small position and used the 21-day to keep me in.

9:13Ed Carson:So we've been talking about, you know, on IBD Live this morning, David Ryan was pointing out how traders are having to deal with a lot of volatility in leading stocks in this market. This one has an average true range of 7.5%. So, yeah, it can be like trying to ride a bucking bronco with some of these AI stocks. But, yeah, risk management rules can help with that. Or, you know, you can't kiss all the babies. I've also gotten shaken out of a fair amount of AI stocks, including Lumentum, which we're going to be talking about a little bit later. And, you know, and that's the thing. You're going to miss some things and, you know, risk management can help.

9:53But sometimes you do pass them up for a variety of reasons. I mean, it's not like even at that aggressive buy, it went up and then it came down. It's like, oh, you know, I can see how people would have gotten shaken out. It didn't go below the 21 day, but people might have been, I'm down 7%, you know, I mean, depending on where they bought it in that little area. So it's not easy at times. And yeah, but you're following the rules and in a power trend, you're hoping you can be a little more aggressive and just, you know, but still following those rules and hopefully you can, you know, be right most of the time and not terribly wrong almost, you know, almost never.

10:27So, I mean, that's really what you're looking to do.

10:29Ed Carson:Yeah, exactly. Okay, let's take a look at some stocks. Let's go to Caterpillar up 5.1 % on the day. So a considerable move here for a stock with an average true range of 3.1%, Ed. Yeah, nice move here, sort of breaking a trend line, bouncing, you know, bouncing above the 21-day line. I suppose you could use that high from last week as another way to get into this. And I believe on a weekly chart, this is a five-weeks height. It's not nearly long enough to be a base, but just the right, you know, so there's a lot of tight action there. You could almost treat this almost as a flat base, especially after this week, even though it will not be.

11:13It almost hit the 10-week line. There's a lot of things here. I mean, this is one that is given a little bit of time. It's still actionable. Where some names, this one only has a 21 ATR of 3%. This is one that you could still be buying. Where other ones are up 10%, 15 % over a day or 20 % over two days, it's like, well, you had your chance and then it was gone. This one is a little bit more. It's another one that's been moving into AI. The fundamentals are just turning around the last couple of quarters, but the market was pricing that in and a pretty solid growth seen ahead. And so, yeah, this is on leaderboard and was added to swing trader today.

11:58So a solid performer. This is not going to be probably your hottest stock, but it's also probably not going to be the stock that gives you the most heartburn either. on the way down. But I would still use the 21-day line or some other thing to be looking to get out if it closes below that.

12:15Ed Carson:Yeah. I mean, look at that relative strength line with that kind of ATR. That's pretty compelling there. All right. Thank you for that, Ed. Next on the list, let's go on over to Century Aluminum breaking out today up 7.6%. Yeah. So breaking out the RS line is not in a new high, but, you know, I got above sort of this little pause, you know, and it's not that far off highs. It had a pretty strong uptrend. It's not been lagging for that long. You know, it's like any stock that formed a base is lagging. I mean, so it's like at some point, that's just the way it is. It's, you know, it sort of bounced off the 10-week line a bunch of times.

12:57It basically found support at the 10-week line a bunch of times. I had a shakeout week that turned out to be very bullish ultimately. And it's not that extended from other things. So not many base breakouts. Let's be honest, in this kind of market, there's not many base breakouts. And this is one that doesn't have a long lagging action. really strong earnings. Yeah, there's AI stuff in there, but I think there are tariffs, there's Mideast stuff. I just mean, the pricing power, the whole group is doing very well, not just the broader, but certainly the subsector. The aluminum stocks are doing very well right now.

13:34Alcoa broke out last week. At times, Century Aluminum is outperforming, but Alcoa has actually extended, a number of others are, but it's not like Century is way behind. It's like it feels like it's a couple of days behind, not like, oh, three or four weeks later, let's join in. So yeah, real strong grower, and that's not quite in the AI space.

13:58Ed Carson:Yeah, bottom line growth, really impressive the last couple of quarters, triple digit growth there, and it looks like triple digit growth is expected. looking ahead. Okay, let's round things out with a look at Lumentum in the AI Space Upside Reversal Week taking shape. And what a shakeout this was because, you know, if you're using the relative strength line moving averages, it's definitely triggered that sell rule. Also for those who use a break of the 50-day. But on the other hand, if you use a decisive close below the 10-week, it did not trigger that. But this one shook me out a couple weeks ago, Ed.

14:48Ed Carson:But that's what happens. I think that it definitely was actionable today, if not yesterday, with that upside reversal right at the 50-day, clearing a trend line and getting above that round number of 1 ,000. Yeah. And this one's, I mean, it depends on where you got it. If you got in the last several weeks, you know, gains were gone and turning into losses. Even if you bought it at the 800 level, it was sort of close to wiping out because there was sort of a range that a clear, yeah, sort of in there. That was a pretty good gain that was getting wiped out. So even then, And, you know, so I totally understand why people would be getting out of that.

15:25And there was a lot of, there was some big losses. It was falling a lot. It, you know, sort of weak, weak bounce. And then it quickly got turned back. Yeah, you could have started yesterday. This is maybe one of those situations where, you know, you start and then you add to it. Again, it's easy to say after the fact, but like, you know, because it's, because it's already pretty extended. Now it feels like, yeah, you could have bought it at the thousand level. That is a good spot, but it feels like maybe the downward sloping trend line or the 960 spot or yesterday, those were all places to go.

15:55And now it just feels like you can still buy it, especially if you already have a position, but it's getting up there already. And I just, this is why, this is the kind of stock, and there's others that are more, like AAOI, which is another optical stock. That went crazy. That one makes this one look calm. Like this one, Lomentum looks like Driving Miss Daisy compared to this name. and this one just flying off of there. So you just have to be building these watch lists, you know, with pullbacks, with bases, you can sort of, okay, it's forming, it's coming in. Oh, the handle is forming. I mean, you want to be on paying attention, but with these pullback buys, sometimes they come down and then they are just, that day, they go down and then they come back up here.

16:36Ed Carson:In a blink. Yeah, a few minutes before it was a sell signal or at least a yellow flag. Yeah. And then it's coming up. And then today, by after tomorrow, you know, like if you let's go to a five minute chart, perhaps on this one. And just today, like there was probably areas where, you know, right around. Yes, I'm there. You know, after that point, you know, it's like it's just getting it's getting elevated. And again, I could certainly work out there, but it's just so you just want to be paying attention to these things to have opportunities. You know, if you're going to be buying these pullbacks, especially to the 21 day, you may not have a lot of time.

17:12Now, there's some like Caterpillar. You know, you could even do it tomorrow. I missed it. I could still buy it tomorrow maybe. But others, maybe not. So this is just where you want to prepare and then be paying attention. Maybe set up some alerts like with market search. So, I mean, because you can't be glued to this stock, you know, at all times. But just you want to be prepared so you can take action when the time comes because it's just hard to do so like a few hours later. Sometimes it's missed.

17:40Ed Carson:Yeah. Well said on all fronts. And this is a stock that was up 14 % today. So like you said, it's made a considerable move. And I think that also shows that actively managing a portfolio in these kinds of conditions, it can be tricky. But, you know, I'm trying to remind myself that, you know, I don't always have to go with those aggressive buys out of a short consolidation into new highs. Even strong stocks do eventually set up better with those pullbacks for the 50-day or 10-week. That's something that I really like leaning on. You know, I know you and I, we like to try to position trade where we can versus swing trade.

18:28Ed Carson:Yeah. So I think the 50-day and 10-week is really helpful for that style of trading. Yeah, absolutely. Okay. Do we have any earnings to look at after the close, Ed? Palo Alto. Okay. Let's go to there. They beat views not by a ton, but they beat views and they guided higher. And so this stock is really moving. And it's not like it hasn't moved already. There's been a lot of other positive news and Fortinet. So, you know, I could certainly have imagined that this had good news and guidance and it still falls, but it's not, you know. So this one continuing on. So software had a down day, but this is positive.

19:08Later this week, we'll get CrowdStrike, which looks a lot like Palo Alto. That one was up nicely after the close. There's also Rubric, which has been a little weaker, but still, I mean, arguably that one has more of a potential to provide a buying opportunity perhaps than those other names. So, yeah, strong action here. yeah, I missed that comeback of the software. I didn't really believe it. And that just hasn't really provided a lot of opportunities, some of these really hot names. But this is really showing that strength once again.

19:41Ed Carson:Yeah. Well, you know, since we do focus on the relative strength, I think when a lot of these were buyable, it was still, you know, we did see some improvement in the relative strength line, but still in a relatively weak position. And then a lot of them didn't stop to form a handle, right? So by the time you got the breakout, it was getting extended. But in this kind of market, sometimes I guess stocks that look extended can get even more extended before they ultimately pause. But we have been covering these on IABD Live. So hopefully some folks have been taking advantage of that. I know CIBR has the cybersecurity ETF has been on Swing Trader.

20:27Ed Carson:So that team covering from that perspective as well. But what an impressive comeback, Ed, for software and particularly cybersecurity. All right. And so speaking of, we'll have to see how ultimately Palo Alto closes tomorrow. And then if we do get any follow-on buy points setting up in the days or weeks ahead. We actually just had a video from our very own Rachel Fox drop yesterday talking about breakaway gaps. In Palo Alto's case, it will be more of a continuation gap than a breakaway gap, but there are potential buy points that can develop after you see that kind of strength. So check out that video for more, And also check out IABD Live for the teens discussion come tomorrow's regular trading session.

21:23Ed Carson:And thank you, Ed. We appreciate it. Thank you, Allie. Thanks, everyone, for tuning in. That's it from us for today. And we will be back with more tomorrow morning on IABD Live. Like I mentioned, if you want to watch the show, go to investors.com slash IABD Live for all the details. We'll see you there. And then we'll also see you right back here tomorrow after the close.

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