Markets Rebound, Have The Winds Changed? Heico, O’Reilly, Ollie’s In Focus

0:00Alissa Coram:This podcast is brought to you by Federated Hermes. We put our investments through a ruthless vetting process because the market can be unpredictable and we don't think your investments should be. Learn more at FederatedHermes.com slash US. Investments are subject to risk and may lose value.

0:25Good afternoon, everyone, and welcome to Stock Market Today for Monday, August 4th. It's Alyssa Coram here and a big bounce back to kick off the week after a two-day tumble. Impressive gains for the major indexes. And joining me now to break down all of the action is my colleague, Justin Nielsen. Justin, what do you have for us today?

0:46Alissa Coram:Yeah, I'm coming to you from a different location. This is my daughter Stella's room. So we've got a remodel going on. So a new background for me. But we've got some great stocks to look at. We'll see how they do for the rest of this week. But a strong start to this week with Heiko, O 'Reilly, Automotive, and Ollie's. Yeah, you're feeling peachy to kick off the week. I'm feeling peachy, yes. Good stuff. All right. Well, we'll take a look at those stocks. perhaps some earnings out after the bell. And first, let's take a look at the major indexes. Like I mentioned, very powerful way to kick off the week here, Justin, after weakness at the end of the week last week that had a little bit of a character change in the market after that steady-eddy uptrend that we saw.

1:29But today, the Nasdaq up almost 2 % by sessions closed. Meanwhile, the S &P 500 up 1.5 % on the day, the Dow up 1.3%, and the Russell 2000 with a gain of about 2%. So when you do get these big tumbles in an uptrend, not surprising to see some buyers come in. But what do you make of the change in complexion of the market given that downside reversal off highs and then the big gap down on Friday? Now we're snapping back. Yeah.

2:03Alissa Coram:And a lot of times when you do see that downside reversal, you do expect weakness to follow. You know, sometimes it doesn't happen. We call that an expectation breaker to the positive side. Friday, look, you don't always know how bad it's going to get. And Friday was pretty bad. And it was a definite character change. But as you and Webby talked about on Friday, we have a lot of precedence for when you're trending above the 21-day moving average line for a long time, what happens afterwards. And look, the data's mixed. Sometimes you come right back and everything's fine within a week or so. Sometimes it takes a little bit longer, but there does tend to be a little bit of choppiness for a little bit.

2:44Alissa Coram:And that's what we're seeing right now. So as you said, Allie, I think you're absolutely right. Getting a little bit of a rebound here, completely normal. But I think what's going to be telling is over the next couple days and maybe even into next week, how do we recover here? There were a lot of stocks, and we'll go over some of them, that looked pretty good on Friday. We saw some upside reversals for as ugly as the indexes looked. There were some individual stocks that looked pretty great, and they just followed up on their moves today. So you also have to make sure that it's not just about the indexes, right?

3:20Alissa Coram:At the end of the day, it's about our individual stocks. That's where we're really kind of making our money. And so you have to be very aware of what's happening on the individual stock level as well as the indexes. Exactly. Looking for that hidden leadership on Friday in a week tape and what was continuing to follow up on that today. Like you said, we'll take a look at some of those. One more thing here for the major indexes, that 21 day line, which you mentioned in a power trend, so important. We do have examples of what happens from here. But in terms of taking things day by day and where we are at today, we're back above that level.

3:58So now it seems like, Justin, do we want to stay above it? How meaningful is the 21-day as well as Friday's low, I think? I think that's another level to watch.

4:11Alissa Coram:Yeah, absolutely. And this is the case with individual stocks as well. You had some of those reversals. So a lot of the things that we were putting on Swing Trader, for instance, we were using Friday's low. If Friday's low was too far away because we really need to be making sure that we manage our risk, sometimes we're using Friday's close. But I'm glad you brought up the 21-day moving average line because not only did we clear it on the NASDAQ, or close above it, I should say, but the low cleared it. In market school, that's one of our buy signals. So, yes, we got the downside reversal. We got the break below the 21-day moving average line.

4:46Alissa Coram:But now that we've broken back above and the low has cleared it, we want to just see, can it stay up there? And now if it does start doodling around and kind of going under, coming back up, you kind of know, OK, the trend may be sideways for a little bit. But right now, the fact that that low cleared it is a big indicator. It almost filled in that entire gap. So it was definitely a time to at least be adding back some exposure that you might have trimmed on Friday. And again, there were stocks. There was merchandise out there to buy that looked good. Mm-hmm. OK, let's take a look at the S &P 500 as well, retaking its 21 day.

5:29The low, not quite above it like the NASDAQ, but we did get a nice close above that level. And taking a look at the intraday, I mean, we finished at day highs. It was a strong open. And Justin, that strength continued throughout the trading day today.

5:43Alissa Coram:You know, I'm glad that you showed the intraday because one of the things, especially with gap ups on Mondays, A lot of times you do expect some weakness to come in at some point. And testing the day's lows, very, very normal. But this market was so strong, it didn't even do that. It didn't even come down to the lows. It kind of did that action very quickly at the outset and then held, making a little bit of progress, but also closing at the peak of its day for the closing range. So that was the case for both the S &P 500 and the NASDAQ. That's a good look. It shows that there was more strength than you would typically expect.

6:20Alissa Coram:So whenever you see that, we tend to lean into it until proven otherwise. You know, it's one of those things where we don't say, oh, well, this has happened, so it must continue. But we say, oh, this is what's happening right now. We better go with the winds as they're blowing. Right. And I think the other thing to point out here is the importance of incremental decisions, whether those decisions started happening last Tuesday on the downside reversal, Thursday's more pronounced downside reversal, or if you were trying to give stocks a little bit more room, maybe Friday's close below the 21 day was your signal.

6:57But it's not like you want to totally get rid of everything if you are in stocks that are working, right? Right. Because, you know, today, like you said, you kind of flip that switch or the change of the winds, as you said in our headline today, maybe incrementally add. So using sort of like a dial versus a light switch.

7:20Alissa Coram:Yeah, absolutely. Because, yeah, the dimmer switch is much better here. And this is where you've got to kind of find the style that's right for you. Some people are more active traders and that works for them. Some people are like, look, I work during the day. I can't go in and out as much. And you definitely want to make some of your decisions a little bit slower because you don't have the ability to make quick decisions because of your workday. So you have to find what works for you. But one thing, you know, we had on iBody Live, we had David Ryan today, we had Mike Webster, we had Scott St.

7:51Alissa Coram:Clair, and of course, you do a wonderful job hosting. You know, one of the things that Scott Sinclair said was, oh, I had been light already because he was kind of, you know, selling into that strength. And he just ended up not finding anything to replace those stocks with because everything was extended. So he was light. So this is a buying opportunity for him. In fact, for a lot of people, I think the downside reversal could have been your cue to just lighten up a little bit. you probably would have lightened up a little bit more on Friday, not taken as hard of a hit. But then with some of those reversals that you saw on Friday and the follow ups today, you've got the option to now add and in some cases even get a better price or a better entry, at least in order to manage your risk.

8:36Alissa Coram:Because as you said, that Friday low is now kind of a floor. If you go below that, well, you know, this reversal isn't working. But if you stay above that, That is giving you information, especially if it's staying above it, staying above the 21 day moving average lines on the indexes. And it just continues that trend. There's a lot of times where you might break the trend and it's just a temporary thing, you know, a week. And then it's right back into another long trend. We saw those examples. So, again, what you and Webby covered on Friday, so important to maybe look at some of those precedents.

9:08Alissa Coram:So, you know what's happened in the past and you can just be prepared for a number of different scenarios. Yes. Check out that episode if you haven't already on our YouTube channel or at investors.com slash videos, the Friday stock market today. Okay, let's get quick thoughts, Justin, on blue chips and small caps, starting with the Dow. Well, the Dow definitely on the weaker side. I mean, this came down to the 50-day moving average line, but it did get support there. It had already broken below its 21-day moving average line on Thursday. So certainly a weaker index. You see that with the relative strength line.

9:43Alissa Coram:But it was nice to see that there was participation to go around. So that was also a very good positive. And small caps outperforming today. Basically, same gain as the NASDAQ, but a strong bounce back, maybe a little stronger. Yeah, we say outperforming, but the truth is it was getting hit harder, right? It's been getting hit harder. And again, the relative strength on this one has been tougher. The Russell 2000 just moves more. So, you know, sometimes it's going to get hit harder and rebound harder. Now, this one did close below the 50-day moving average line on Friday. So that was a key thing to be looking at.

10:23Alissa Coram:Like the Dow, it also fell on Thursday below its 21-day moving average line. Look, if you go to the weekly chart in the Russell, this has been tough. There have been all of these, you know, kind of it looks like it's ready to go. And the trend lasts for maybe two weeks and then you get hit really hard. So I like that it's tightened up a little bit more recently. And I mean, I was trying it again, I think a few weeks ago. But we'll see. The rebound here, strong, back above the 200-day moving average line. But this has got to trend for longer than a week before it gets my money. Exactly. There's a reason why, at least as of right now, we are focusing the bulk of our attention on the NASDAQ and the S &P.

11:07Alissa Coram:Absolutely. All right. Let's check out a few ETFs before we move on. We saw a lot of strength in aerospace and defense today. And to your point, Justin, in your opening thoughts, looking at stocks with that hidden strength underneath the surface on Friday by where they closed, maybe down on the day, but high in the trading range, you saw a lot of that out of aerospace and defense. Yeah, I mean, that is just a beautiful bar there where it got support, closes at the top of its range. And when you compare that to the market indexes, it just looked very different. A big picture of strength. This is one of the things I love to do in market surge.

11:44Alissa Coram:On a day like Friday, especially at the end of the day, I'm looking at the things that are closing in the upper part of the range when the indexes are closing in the lower part of their range. That just gives me a sense of, okay, where is the relative strength? Now, I'm not just saying, hey, this is absolutely going to work because sometimes you get that sector rotation that only lasts a day. Sometimes it's longer. But this is something that has been already trending very nicely. The aerospace and defense area, it's not like this is, oh, it's this beaten down area that's now getting attention.

12:16Alissa Coram:This has been doing well for a while, and it just continued to show its resilience and strength on Friday. So this was definitely an area that you wanted to keep a close eye on. Yep. We'll take a look at one standout name in the area soon. Now let's go over to the gold miner ETF, GDX, another area of strength today. Yeah, this was kind of interesting, you know, for as much as we were looking at a lot of the gold miners and gold as, you know, kind of that hedging idea. We've been talking about this for a while, how there have been these setups. It seems to me it's been a little bit easier to buy on pullbacks than on breakouts because some of the breakouts have quickly failed.

12:56Alissa Coram:But what did we get on Friday? This was something that closed up. And look, that's often the case where you have weakness in the markets. You know, people kind of go to gold as that safety, that hedge. But what happened today? You know, a strong day on the market and even stronger for the gold miners. So that was a nice little kind of, you know, again, expectation breaker to the positive side for gold. And, you know, I'm looking at the gold miners right now. There were a lot in this area that looked good. They looked good on Friday. They looked even better today as they followed up on their move.

13:31Alissa Coram:So that's definitely an area to be watching a lot of breakouts. Again, this has been tricky because the breakouts have been a little bit tougher here. But if you had gotten some of these on Friday because of that strength, I think you were rewarded today and had the chance to add. Yes. KGC among those that we looked at on IBD Live this morning. All right. And last but not least, let's check in on the chips in terms of SMH, the closing range on Friday, 61%. So down on the day, but well within the upper half of the range. And then outperforming today versus the broad market at 2.2%. Yeah, a little bit surprising, right?

14:08Alissa Coram:When you see the market down that much, you kind of expect, oh, okay, chips, of course, are going to get hit. They're so important for the market. But again, this was a kind of a surprise to me that they acted so strong on Friday. So again, this was telling you something. So a nice follow-up today, not as much as the gold miners, not up as much as they were, But still a very solid move back above the 21 day moving average line. You almost could kind of, you know, put your thumb on this and it looks pretty flat. Even not putting your thumb on it, it doesn't look that bad. You had kind of a shakeout underneath that prior low, but it came right back.

14:42Alissa Coram:So it's almost like a no harm, no foul. But again, we have to see, can it hold above this area? Yeah. And I think this week we do have a number of chip related earnings. We've got AMD coming out this week. We also have A-Lab and SMCI, among others. So we'll have to see how that impacts the action in this sector. Absolutely. Harvard Business School Executive Education creates powerful connections for leaders from around the world. Their programs strengthen organizations and individuals by deepening relationships and fostering new ones. participants leave with lifelong friends new potential business partners and a powerful globe-spanning network of fellow change makers learn more at hbs.me slash breakthrough that's hbs.me slash breakthrough okay so speaking of aerospace and defense outperforming hyco got a lot of attention on this morning's ibb live show with its nice move today up 3.8 percent by sessions close following up on some nice tight action last week.

15:51Shakeout, reversal. Let's look at the closing range for this on Friday, Justin. 86 % quite strong there. And then a breakout from a flat base to kick off the week.

16:02Alissa Coram:I'm so glad you started with the weekly. It's almost like Arnie Gutierrez is here with us on the weekly's first scene. Look at how tight that action was. The flat base, only 6 % depth. This is something that had such a strong move after its breakout. a number of weeks up, and then just didn't give any of that away. It just let that 10-week moving average line catch up to it. This is something that David Ryan has been talking a lot about in his appearances. We actually did a stock of the day on this today. Our very own Juan Carlos Adam Cibia, you know, wrote about this. Really, you know, it's so important to kind of, again, get the background on some of these.

16:42Alissa Coram:And it should also be mentioned, look, aerospace defense, number seven, industry group out of 197. A lot of other stocks, you know, we already looked at ITA, but there were a lot of other stocks that looked very good in this space. One of the ones we talked about was ESLT on the IBD Live today that got added to leaderboard. I do have a position in that myself. Joby, that one has just been going crazy. That was up 20 % today. You've got Rocket Lab, you know, that one is in the aerospace defense. It's kind of been stronger. Look at UFO. I mean, that was in the space area that had such a strong move.

17:21Alissa Coram:It's been pulling back, kind of came up. So, yeah, there's just been a lot of stocks in this area that have looked very strong. But Heiko definitely, you know, is setting the pace. That flat action was very attractive and a very strong breakout. So, again, Friday was kind of your tell in terms of the strength, getting support at the 21 day moving average line, closing high in the range. and today it was just a nice follow-up like we saw in a lot of stocks. And IBD Live viewers, some of the first to get it on their radar this morning. One more thing. I'm glad you pointed this out. I should have myself.

17:57Alissa Coram:The volume on this was pretty incredible. That was a nice bout of volume. And again, multiple attempts at the 21-day moving average line each time getting support. Very compelling. We've also talked about the monthly. What a monster. Monster from a longer term technical perspective. Pretty stable earnings. Earnings line headed up into the right. And you already talked about the strength of the basing action on the weekly RS line at a new high. So quite compelling. We'll see where it goes from here. next on the list O 'Reilly automotive O-R-L-Y it was up on the day on Friday following up on an earnings breakout not too long ago yeah I mean this one it was kind of like what what pullback what what correction that just looked like such tight action especially compared to the indexes you know Friday's action was was just very strong it was just basically going tight from that breakout, not giving up any ground.

18:59Alissa Coram:And then you kind of have this area right around 100 that was acting as resistance. And there's something, you know, Jesse Livermore noticed this a century ago about, hey, round numbers psychologically. Sometimes when you go through it, it's even stronger. If you go to the weekly chart, like HIKO, this also has a pretty good earning stability. You know, the EPS growth rate at 14 % is, okay, it's not that great. But for a retailer with earnings that are that stable, and then this one too, you go to the monthly chart, and it's kind of surprising how far O 'Reilly has gone. I mean, it's just been an incredible move.

19:39Alissa Coram:Now, this has been on the long-term leaders list on and off. Usually the reason it goes off isn't because of the fundamentals or the earnings. It's because of the relative strength getting weak. If we're going to be getting into an individual stock, we want to make sure that we're outperforming the S &P 500 in those stocks. But another thing I like about O 'Reilly is that this one has a lower ATR. So a lot of the stocks that were looking interesting, I know we've been talking about a lot of these big high flyers, but the ATR on this one is only like 2 % for the 21-day ATR. Average true range. Average true range.

20:17Alissa Coram:Yes, thank you, Allie. So it's not one that is going to be a wild bucking bronco for you. And consider that that 2 % average true range is actually on the higher side for this one. You can see that this has actually been moving quite a bit lately, you know, in the last 21 days. So that 2.09 % is actually on the higher side for this one. So I think this one might be a little bit easier to handle. We did add it to swing trader as a half position. this does tend to do well in recessions autozone was a big winner of bill o 'neill's back in 2010 um you know just this nice steady move and that's what o'reilly and autozone tend to do sometimes they give these nice steady moves that are kind of easier to handle instead of the very whippy uh stocks that a lot of people like to talk about but it's really hard to stay in them yeah to balance out the high octane heat in one's portfolio right absolutely all right let's round things out with a look at Ollie's Bargain Outlet.

21:17Talk about a reversal on Friday. Yeah.

21:22Alissa Coram:And of course, David Ryan has been talking about this one for a while. He got in on this on a really strong move. If you look at the monthly chart, you know, very early on. And it's tough. You know, out here in LA, we don't see Ollie's. You know, this is one of those things that you have to be kind of aware of and sometimes be looking at the chart and then kind of digging deeper and see what's going on. But the relative strength certainly has been very strong lately. It's been trending nicely. And on the weekly chart, you can see the breakout recently. It had one test of the 10-week moving average line.

21:54Alissa Coram:Sometimes that's an opportunity to potentially pick up some shares as it tested that previous, not only the 10-week line, but that previous kind of buy point. It came back in there and now it's been off to the races. So a very strong, and look at the weekly last week. It was again, one of these, like what correction, what, what, what weakness, it just didn't show up on this weekly chart. A little bit wild on Friday, but still the way that it closed, I think was a tell. It was something that was saying, Hey, this is something that's worth looking at. A lot of retail, a lot of areas in the retail space were looking interesting.

22:33Alissa Coram:A few worth honorable mentions, urban outfitters was something that was mentioned on IBD live today. I did pick up some shares on this. We added it to Swing Trader. TPR, that has earnings coming up, but that one has been looking interesting. Tapestry, that's the old coach, if I'm not mistaken. That's had a really strong run. Look, that didn't even touch its 21-day moving average line as it pulled back. Certainly, some interesting areas there in the retail apparel space. Yes. Okay. And like I mentioned, we've got a lot of other earnings coming out this week, including after the close today, one of the notable reports, Palantir.

23:16Full disclosure, I do own that one. Let's check it out.