Market Continues To Digest Big Gains; Amazon, Twilio, Coherent In Focus

0:09Ed Carson:Good afternoon, everyone, and welcome to Stock Market Today for Monday, August 10th. It's Alissa Coram here and the market continuing to digest gains after a powerful week last week. And as always, we have some interesting names to discuss. And joining me now to do just that That is my colleague Ed Carson, IBD News Editor. Ed, great to see you. Great to see you. I want to take a look at Amazon, Twilio, and Coherent. All right. We'll check out those stocks. But first, a closer look, as always, at those major indexes. And we will kick things off with a look at the NASDAQ composite, finishing down about 0.3 % on the day.

0:51Meanwhile, the S &P 500 down just fractionally here, less than 0.1%.

0:57Ed Carson:The Dow traded fractionally lower as well, down 0.1%. The Russell 2000 down about a half a percent or so. So that digestion continuing there, Ed. So let's kick things off with a look at arguably the most powerful index last week, the NASDAQ composite. Yeah, the NASDAQ isn't at highs yet, but had a really big gain last week. A lot of it was early on, but finished strong. We're basically been pausing since Tuesday or so, last Tuesday, which is fine. I mean, we had a big, big run. This could be very constructive. Obviously, there's a lot of interplays, different sectors, but yeah, this is acting well.

1:43This is doing what a lot of stocks may be forming handles, or just or finishing up bases. So this is this is, you know, very fine. And then if it pauses for a little bit, moves on. Of course, if the market sells off, it goes through the 50 day line, then a lot of things, recent buys, a lot of recent buys will be in trouble, you know, and that would just be a really negative sign. But right now, I think it looks very constructive. I think all the indexes look pretty constructive all overall.

2:10Ed Carson:They sure do. And last week's high to the upside, roughly around today's high, Ed, a key area of resistance for us to poke through. I wonder also, it probably matches up with a level from earlier in June to take a look at there. So I think we might add exposure potentially, at least on an individual level, if we see continued positive action there. But maybe more of a digestion wouldn't be too bad of a thing. And then on the downside, a couple of levels to point out the marked high from July for the NASDAQ, as well as the follow through day low. So that gap up that we had, we are calling this a follow through day, whether it's in spirit or counting the dollar volume, definitely a move of power there.

3:05Ed Carson:And then as you mentioned, that 50-day and 26 ,000. So those are sort of the levels that we're working with to the upside and downside. I also want to get your thoughts on what you're watching for the S &P. I mean, it cleared a new high, which sometimes you can almost argue that's a reason enough to say go to confirmed uptrend. And it did. And with all these things like the S &P and the NASDAQ, they're sort of like, oh, in the Hall of Fame, there's these candidates who are just on the edge. and like, should they get into the good? And it's like that rally that we had for over several days, that was clear power.

3:40I mean, I'm not saying that every bit, that was clear power, very different from all the mini rallies we had in the prior couple of months. And that's what you want to see. Now, again, some follow through days or some confirmed rallies don't start off with the most amazing thing and then they build momentum. But still with this and with Vu, you know, look at the S &P, there is strength. We're at highs, we're pausing now, but we're clearly above some levels. Obviously, we could sink back below, but after a couple of months of just sort of being chop, chop, chop, there's finally a little bit of space in some of these things.

4:13With the S &P, it's above everything, and with the NASDAQ, it's above most things. And so it's just a change from what we'd had over most of the summer.

4:22Ed Carson:And let's take a look at blue chips. So here's the Dow, also a powerful move into highs, right? Yeah. And so this one, you know, wasn't, you know, this one didn't fall like some of the others that held the 50-day line, essentially. But it wasn't weak on the upside either. I mean, five of the magnificent seven stocks are now in the Dow. So it's not like this old, you know, anti-tech index. But there was a lot of strength in there. Yeah. So looking good. Okay. And let's take a look at small caps. Here's the IWM ETF. I mean, a little bit between the S &P and, say, the NASDAQ. This is right at highs.

5:03It got a closing high. It barely missed, I think, an all-time high by just a sliver. But, yeah, looking good. So it's not just a few mega caps, even though, yes, NVIDIA, yes, Amazon. But there's a lot of things going on. There's a lot of sectors that have been acting well. And so it's a really – just a lot of positives. You look at the – there's some strength, but there's breadth as well, not just one sector power.

5:28Ed Carson:Exactly. So speaking of breadth, one measure that we look at is the RSP S &P 500 equal weight ETF. So the uptrend continues here. This is at highs. Yeah, this one never really broke its downtrend. There was a couple of times where it's like, boy, it's starting to get there, but it basically tested its 50-day line almost once. And that's it. So, yes, while there was weakness in AI that dragged down the market and weakness in this and energy, But RSP, yeah, it's been an uptrend the whole time, really. Yes, it has. And then we can also take a look at some things underneath the surface. So, notable headline on the day, oil making a move higher, Ed.

6:14Yeah, there's doubts about maybe there'll be a straight-up Hormuz deal, which is hopes for that and hopes that there wouldn't be a thing that brought oil down. And so, this is just always all those oil-sensitive parts of the market. and there's so many that are to the positive or the negative reaction to price, they're going to swing up and down. I mean, there could be something tomorrow. Maybe tonight there'll be a deal, you know, or maybe, no, no, the fighting will resume. So it's really hard to know where the oil will go here, but there's some big moves. A lot of sectors made big moves today off of that.

6:43Yeah.

6:44Ed Carson:Would you say that at the index level, the fact that we only saw modest declines with this move in oil, is that perhaps a hidden tell? Or is there a certain oil price level, again, at which we would see a little bit more pain for the market? It's nice that we're not jumpy at the first moment it goes up. I mean, obviously, we're sort of trended down after a big drop, you know, for a while. Yeah, at some point, there would be a point where it's like it would be, okay, market isn't going to handle it anymore. But yeah, you're right. I think there was a lot of that where the market didn't, has reacted well the last couple of days.

7:24I mean, when you think about last week, we've over, you know, we had over some of those days, we had some pretty big increases from the middle last week. Like at first, L 'Oreal prices were helping, but now they've been rebounding and the market has held steady with that. So yeah, I think that's really nice.

7:39Ed Carson:Okay. And then if we look at USO, we might as well also take a look at XLE. Here is the energy sector ETF, a sizable move today, up almost 5%. And from a technical perspective, looks pretty actionable here, Ed. I think it definitely was. I just have trouble with this because I don't know what the next day will bring. but headline risk headline risk i mean with the producers those refiners there was all sorts of things that were moving it wasn't just you know so there's a lot of strength in here again you just don't know where things will go uh for the next few months next few days uh but uh really strong action yes and elsewhere let's take a look at jets because this also very tied to the price of oil ed.

8:29Ed Carson:So if oil's up, travel, not the best area. So today, the Jets ETF down 3.4%. Yeah. And this is also when you've got to be really careful on something like this, especially when there's geopolitics, whether with this or with the next, really try to buy off of like an early entry because you don't, you know, you can't expect these runs to go without some kind of shakeout. I mean, you may, it may actually be the case. I mean, you might have, Like if there was peace and oil fell to 50 bucks, the Jets would have kept on rising, rising, rising. But I think especially with something like this where a headline can come in and just immediately change things, you want to try to get in quickly.

9:09And you just have to manage it more like a swing trade unless there's really big gains that could give you a big cushion.

9:16Ed Carson:Yeah, be really dialed in on that risk management piece. And then let's take a look at chips. planning for retirement and all the things that go with it can be stressful that's why fisher investments partners with you to understand your unique goals and needs so that they can build a tailored plan that helps you achieve a comfortable retirement whether you need help with financial planning estate planning tax optimization or social security fisher has specialists to help fisher investments now that's clearly different wealth management learn more at fisherinvestments.com Investing in securities involves the risk of loss.

9:53Ed Carson:We are looking for some repair work here, Ed, off the lows. Some of that has materialized, but you have this situation where a number of the AI plays now look like they're setting up potential shorting opportunities. Chips today down 2.3%, still stuck below the 50-day. There's all sorts of things. Oh, data centers are their concerns. or their concerns about memory prices leveling off. These are high ATR names, a lot of them. So it can be a lot of things. I just think, I really think, I've made this point before, don't cheat just below a buy point or a key levels. And there's a lot of stocks that have been right around their 50-day lines.

10:34And so if this gets above, then maybe in like decisively, not just peak above, but decisively, then I think, yeah, there's a lot of names that you could start doing that with. But this is where they might end up being shorts. You're right. and there's just that concern, you know, getting over that hump and wanted to see a bunch of them getting over that hump. So yeah, it could be that they'll need to back off and then come back, you know, a few weeks later because they've already done this before. You know, you can say, oh no, it comes back. Why are you saying that? It's like, look, it came back a few weeks ago.

11:05It was bouncing back toward the 50-day line and then boy, it fell even further. Obviously, the whole market was weaker, but you could definitely see that situation and, you know, Any individual stocks, even if the chips come back, it doesn't mean that your chip or your optical or your AI hardware stock comes back.

11:24Ed Carson:Exactly. But you should be watching them. They could do something. I mean, look, in a few days, we might be talking about 15 chip and AI stocks just ramping through their 50-day line. You got to get on board, blah, blah, blah, kind of thing. So I don't want to say they're dead. It's just that right now, I think that's watch. Well, I can't help myself, but here is a good recent lesson with the chips, right? You did have resistance right around that 50-day line for a couple of tries in the March-April timeframe and, you know, not predicting a massive gap up here. But once you did have that shift, then it really was off to the races, even though there were a couple of tries before then.

12:11Ed Carson:And the environment perhaps a little bit different now. And I think even for traders who don't short, I think it's never a bad idea to sort of put that hat on for some of the areas that you're really bullish about just to see, hey, is this something that I need to be aware of here as part of that risk management calculation? I think that's a great point. I don't really short too much, but I try on situations like this and thinking, what would a short be thinking? A short might be salivating. Oh boy, here we go. I'm close to doing it. So yeah, this is really key levels for a lot of stocks in this area.

12:49Ed Carson:No doubt. And let's take a look at IGV representing the software sector more broadly. And Ed, we're continuing to see money rotate to this area of the market. it, IGV up 2.3 % today. Yeah, this is one reason why the NASDAQ did so well. And I almost could argue this was the place to buy entered, like sort of a pseudo handle, because a lot of software names have made some big runs. I mean, and so there's some that are actionable, some of them have made big runs. And so you might, you know, I didn't play that very well. And so it's like you didn't get in them, and now some of them are extended. So this might be one way to play it, or something else.

13:29There's other, there's other subsectors like cybersecurity and stuff. So you'd have to decide, do I want an IGV that has some laggards in there? So there's definitely, there's definitely ways to play software, but even some of the laggards are coming up now. And it just seems like, and you just have to know that it's like, look, some of the same concerns might still be out there, but some of the same reasons to buy them. There's sometimes there's just a shift and, you know, and software is more in vogue right now. And it's simply, it simply is, which is something that, you know, investors who are pounding the table on chips and stuff is like, that's not where the excitement is right now.

14:06Software's done really well.

14:07Ed Carson:All right. Well, I think the discussion that we just had really lays a good foundation for the three stocks that we're going to highlight. We're going to talk about a mega cap. We're going to talk about a software name and then one in the AI space that's a little tricky to handle facing some selling pressure. So let's get to it and kick things off with Amazon, which was our stock of the day today. A high handle here, Ed. Also, we were highlighting sort of the spirit of a double bottom breakout on earnings. But all that to say, this is a stock that showed a lot of power, and it's not giving up those gains and setting up a potential new entry here now or even an opportunity to add to the position if traders were getting in on the earnings report.

15:02Yeah, if they were getting on the earnings report, you could be adding here. And there is that, yeah, this was, I like this setup actually because when it went first through, it was so, it'd gone up so much. You were waiting for a pullback at that point. And there is one. And the thing is, when you're expecting a pullback, You're hoping for a pullback like this. You're hoping that it's nice and contained. Yeah, there's a high handle. You do a pretty tight high handle. You could almost argue that a high handle almost lines up with the original buy point of 278. So it sort of all comes together.

15:34I think if it gets above today's high, you could use that as a buy point or add-on entry. There's a lot to like. There's been some acceleration on earnings in the revenue front, on the growth front. So that's a positive. But on the downside, is that the relative strength line on the short, and the part from there has sort of been sideways to slightly lower. And it's definitely, if you go to a monthly, it's been slightly lower since basically six years. It's basically since like August 2026, 2020. So not great. It's been, you know, so it just hasn't been a real powerful leader. But that doesn't mean it can't go on a decent run, especially if the growth is picking up.

16:15But yeah, just a real game changer with the earnings because it didn't seem like the market was happy with what hyperscalers were doing. But Amazon really sort of turned it on there. And I think that was a really, really big deal for the market.

16:31Ed Carson:It sure was, that triple-digit growth. Very impressive. so it seems like the lows from last week an important level to stay above um you know and i think the gap up on earnings of course that would be giving back quite a bit at that point so an interesting name to watch ed let's go to software and twilio because this had a breakout on earnings on Friday, added to the gain today up 3.6%. So holding perhaps at the top of a buy zone, let's say you. Yeah, you could be buying this. It's nice because it didn't pull back hard. You know, I would like to still see it pause for a little longer. But I think this is showing some really nice action.

17:21You could have treated it, you know, sort of as a pseudo, you know, pseudo double bottom there or something, but it went pretty gapped up. It doesn't matter. It gapped up to the by point you know to the top of the base anyway so you didn't have much of a chance to get in it especially within because this was running pretty quickly i think uh but this is this is acting well i mean again trillio does this this does has a history some big gap up sometimes game changer moments that i can think of there was one a few years ago or like there's been there's been some times like okay you know where it seems to be down in the dumps and then it makes a move uh and you know they can go on some decent runs then then it sometimes pauses is going to go on long things.

17:58So you want to not take too long there. But yeah, you know, AI communication, it just seems to be a lot of the things that people, AI is a negative, AI is now a positive. A lot, that's a theme with a lot of these software names. Trulio for sure, cybersecurity for sure. And yeah, look at that relative strength line. It was not really leading. And all of a sudden, yes, yes, it is.

18:23Ed Carson:That's a good point. Such a good point. All right. And let's round things out with a look at Coherent, which I imagine the Relative Strengths line not looking as improved as it did last week, which actually let me stay on the weekly chart and let's just see what kind of power we had last week. Wow. 42%, 44 % last week, giving back some of that today here, Ed, down 14 % to kick off the week. So maybe from just purely a technical standpoint, a little bit of the give back, not too surprising. but the selling here towards the open was pretty instantaneous it seemed like scottst claire commented on this one on our show uh pretty early on your thoughts heading into earnings yeah this is something that david ryan who's our guest on tuesday with us we're talking about it just takes much effort to get up there i mean that was a huge run last week it's a little bit like somebody it's like who's a sprinter who's late for a race and has to run to the starting gate and then is expected to run.

19:34It's like, well, I mean, how well are they going to do? And again, obviously it kept on moving for a while. And maybe in a couple of days, this will have earnings. But it was looking powerful. Hey, it's getting decisively over the 50-day line. But this is sometimes where we talk about liking a pause because there's such a risk where Amazon had more of a contained pullback. This one was pretty fierce. That's 14%. Somebody who bought near the close yesterday, that was a big drop and breaking through the 50-day line like that. And we don't know where earnings will go. I mean, this could go up 25 % on earnings.

20:09This could go down 25%. I mean, I don't think that would really surprise anyone, one of those moves. So it's just something you can still watch. But there was so much effort in there. And again, this is why earnings season, even now, you have to be careful buying ahead earnings. this isn't an earnings reaction, but just sort of like, if you bought, there's no cushion, you're down, and you have to make a decision. And I just think there's still just a lot of things to watch out for. The AI names, still dangerous, and there's 10 % ATRs add to it. Because as you say, in the context of going up 44%, 14 % isn't that bad.

20:50But how much can you, that's a lot to take. That's a lot to take. So we'll have to see how it does on earnings. I'll just say the Lumentum, they have earnings, I think, a day before then. They're tomorrow night. A little better, but pretty good-sized hit. If you bought on that pseudo-clearing that entry, because I was looking right at that level, that was like, okay, but didn't close above there. But if you bought right around there, it's a big, big drop with earnings right around the corner. So, yeah, so even when things get above the 50-day line, there may be reasons why you aren't going to want to jump in and pull the trigger right away.

21:28Ed Carson:That's such a great point because that's what we were looking at with the SMH, right? Using the 50-day as a signal. But I think having that added nuance of, okay, how far has the stock come in a short time? What's the ATR and some of these other elements to really help you know whether it fits your risk management profile or if, hey, maybe this does need a little bit more time. Also, earnings coming up, which we've mentioned a couple times now. I mean, I think a lot of us on the team aren't really buying in size. There might be some exceptions right ahead of earnings with the intent of holding through.

22:15Ed Carson:So that just adds even more risk. So kind of a risky stock here, Ed, when you put the whole picture together. Yeah, yeah. There's just risk upon risk upon risk. And it's just, and there's, we're not even sure if this is really, you know, this whole air sector isn't necessarily in a leadership position. This might, this is trying to be one of the ones that is going to try to lead, but that adds to it as well. So yeah, I think there's a lot of reasons to be one to watch for sure in a couple of days, but there's a lot of risk. Yeah. Could look a little different after earnings, but only time will tell.