Nasdaq Undercuts Support In AI Sell-Off; Guardant Health, Fortinet, Ezcorp In Focus

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0:25Ed Carson:good afternoon everyone and welcome to stock market today for tuesday june 23rd it's alissa quorum here and a lot of the red on the screens today we will get into and the nasdaq composite undercutting a key support level joining me now to discuss the action in today's session and a couple of stocks for our radar is my colleague, IBD News editor Ed Carson. Ed, great to see you. Great to see you, Allie. Yeah, I want to take a look at three stocks that are not involved in that sell-off, Garden Health, Fortinet, and EZ Corp. All right, well, I guess that's the reason for looking at them, right? If they're holding up better than the rest of the market.

1:04Ed Carson:Worth revisiting. Those, all right, let's take a look at the major indexes. The Nasdaq composite on the day down 2.2%, closing below the 50-day moving average. Meanwhile, the NASDAQ 100 down 3.3 % on the day. So definitely a large cap tech bent to the sell-off today. The S &P 500, in comparison, down 1.4 % on the day, still above that 50-day moving average. The Dow only down a fraction, some one-tenth of a percent here. You can't even really see the sell-off in blue chips. Meanwhile, the Russell 2000 small cap index down about 1%, still looking in character there. So with tech bearing the brunt of the selling, Ed, talk to us about what happened today.

1:54Yeah, there was heavy selling overnight. It's interesting because on Monday, the QQQ only fell 0.2%. So, you know, when the Nasdaq fell 1.3 % and a lot of that's the fight. Now, some of the divergence was SpaceX, which plunged yesterday and was up a little today. But also Google sold off. There was a number of bad mega caps and the Q's really didn't have a bad day. A lot of really the big winners rallied strongly on Monday. I mean, it was it was sort of an unusual divergence. Well, South Korea didn't go along with that. Let's just sort of say like there's that EWY, I think, is the ETF there. It's dominated by memory chip giants Samsung and SK Hynix.

2:33And they both sold off more than 10 percent. And it was, you know, I think regulators there were trying to rein in margin, you know, how much margin people are using. So that triggered a sell-off. But, yeah, so there was really heavy losses in AI stocks, which was a complete reversal from yesterday. So, yeah, it was just sort of, you know, a really big shift in there. And it's something that investors have to pay attention to. I mean, there were some big losses. We've seen a lot of volatility in several weeks. and you could say, well, okay, there was this SpaceX reason, that reason, but still the NASDAQ went below its 50-day line.

3:10The S &P is almost there. So you could see some real big breaks. There might be some jitters ahead of Micron. So who knows what will happen? We could sell off or rebound tomorrow and then do the opposite after whatever Micron actually does. And obviously, would it be surprising if Micron sold off over several days to the 50-day line? Not really. It's done that in the past. So it's gone on a monster run. And the same goes with all the names in that memory space or these other things. So it's just something to be aware of. What can you tolerate? I mean, the thing is, those who held on have generally been happy.

3:46I'm glad I held on. If you held on, I did not own Micron. But if you did, through all these things, you're happy. But at some point, you will not be. Or at some point, you'll give up when it's down 40%, you know, or, you know, kind of thing. Or you've taken it. Again, you can take things, you can scale in, scale out and try to get back in. But I'm just saying is that you have to have a plan, you have to have a strategy. And yeah, it was really ugly action today. And investors have to take note of that. I'm still trying to figure out how much I want to take note of it. And I'll probably react and think about it tomorrow.

4:21If the market balances it okay, I took a little bit of action, but I may take more action if the market sells off more and we're an hour into the trading session tomorrow. Yeah.

4:31Ed Carson:And I think, Ed, what you're highlighting is a big question or a big struggle for a lot of active investors in a volatile environment like this. You take that step back and we've been in a very powerful trend for months looking at the SMH here, hitting a new high yesterday, but a bumpy ride along the way, at least in the month of June. So how much, to your point, do you take some profits off the table, whether that's into strength once you see these big hits, or do you buckle in for the bumpy ride that's ultimately so far been leading higher? Yeah. And I think another thing is that if you sold off a few, if you sold, took down your exposure, which was totally understandable a few weeks ago, and now you made some recent buys, well, a lot of those buys, there's some names.

5:25We're not going to, but I was just thinking about Maxilinear or Microchip. Those are just a couple of names that just pop off that, you know, one could have bought yesterday. And well, they're down a lot. It's one thing to take a 7 % haircut on a stock that you're up 150 % on. It's another thing to be down right away. So, you know, you might have to cut some recent buys or maybe there's the stocks that are falling below sharply below the 21-day lines and others are holding up. So you might decide, I don't care about things. I'm not going to worry about my exposure levels, but you should still be taking – you have to follow your rules on individual stocks as well.

6:01So there's a lot of different things. And, yeah, and part of it is that do you hold for that long run or do you go shorter term? It's not necessarily an easy answer on that. Holding for longer has really worked for during this rally. And it's just to see if that continues.

6:18Ed Carson:Yeah, but like you said, at some point it won't. And we did on yesterday's show, as well as IBD Live in the morning, highlight some breaks of upper channel lines. That can be a strategy that investors use to take some off the table. So, you know, whether it's a new buy, like you're saying, maybe cutting your loss, looking at those levels, knowing what your portfolio risk is for those new buys. And then for those positions that you have more profits in, okay, what is your strategy? Are you one who likes to sell into strength? Are you one who likes to wait for a break of support at a moving average before you make your move?

6:57Ed Carson:Also, how are you thinking about maybe big percentage declines on a day like today in context with the market circling back to the Nasdaq closing below the 50-day. I think that's worth reiterating here, Ed. We are, of course, trading at a level higher than a couple of weeks ago, but this is the first close below the 50-day line in this rally. I think if you take a step back to yesterday, we were right there at the 21-day line. That's the key level for the power trend. 26 ,000. I mean, we're well below both of those. So if the selling here does continue, which after today, you know, it does look like the odds have increased for that.

7:42Ed Carson:There's no guarantee, but it does seem like next stop would be the lows from earlier in June to see if we can get some sort of support there. Yeah. And you got it. So because we have that prior lows, you could argue, well, I'm not, you know, again, it's not all or nothing. But, you know, if we sell from here, I think there's definitely arguments that you should be cutting back. And certainly if we went below those lower lows, because then we'd be decisively below there. And we'd be below a lot of the pauses. A lot of the buys over the last six weeks, you know, would be probably would be under.

8:13Now, some have flown. I mean, I know that, but a lot of them will have not. And you can say, OK, NVIDIA. OK, Google. Oh, SpaceX. These are the names. But it's like at the end of the day, you can't say, let's just exclude half the market cap. You can't do that and say everything's fine. We look at these indexes for a reason. And yeah, so in addition to Micron earnings Wednesday night, on Thursday morning, we'll get the Fed's favorite inflation gauge. So which, again, if the market's shaky, just you don't, you know, if there's any reason there, their market's a little bit more concerned about inflation lately with the last week's sort of hawkish tone from the Fed.

8:51So Thursday morning could be very interesting, positive or negative. So just be ready for that. Yeah.

9:00Ed Carson:I mean, it's pretty clear that we are now in an environment of heightened volatility. So we've got to be prepared to roll with those punches. And let's go to the S &P. Here's a look at the SPY ETF, faring a little bit better, but not a whole lot. also below the 21-day line. That's the green line on the chart. The 50-day line, it's barely above that level. So support still very much in question. I would say the other thing to keep in mind here, Ed, as we're talking through this, is the last pullback to the 50-day line turned out to be a great buying opportunity. So as this week progresses and with the potential catalysts that you mentioned, I think actively managing the portfolio is important, but that goes both directions, right?

9:53Ed Carson:Cutting back and being open to the fact that, hey, what if we do get another bounce? We have looked at some of these bull market precedents, you know, like the late 90s. It's a choppy ride on the way up and you do get some of these more or less violent pullbacks. I completely agree with that. And you're right. I mean, this could be environment where you one day you were cutting and the next day you're adding and that just sort of could be the way it is. I mean, there definitely were buying opportunities. And that's what makes these support levels so important. I mean, it's sort of like game sevens of playoff things.

10:29It's like both teams won three games or one moves on, one doesn't. You know, it's sometimes the market, if the market breaks from here, that's really important. If it rebound from here, that's really important. And so I just, yeah, I think those are all just have to be flexible. Have your exit strategies ready, but have your watch list ready. And there's been a lot of churn in that because some of these names and we've, you know, and it's not just to necessarily go back into AI. It could be that you, for whatever reason, just because of choice or because you need to, you scale out of some AI stocks.

11:00We say, well, I'm going to go into cybersecurity or I'm going to go into a regional bank or I'm going to go into this testing firm. You know, there's other things out there. again, it's not, you know, it's these little things. Are we broadening out? Are we rotating? You never know until after the fact, but there, you know, definitely don't just have your focus on AI. I think those who didn't have entirely AI, and I'm probably too much in AI, you know, we're thankful because there's a lot of 8%, 10 % losers out there. And it's not fun to have a portfolio chock full of that.

11:32Ed Carson:Yeah, I'm right there with you, Ed. All right. All right. Let's continue digging into the nuances of the market action here. Let's go to the Dow and the Russell real quick, Ed, before we take a look at some sector ETFs. It shows you that the Dow wasn't so bad and that found support at the 10-day line. And that's coming up. That RRS line is coming up again. Then the same thing with IWM. And I think the Russell actually didn't even touch the 10-day line. You know, I know this is ETF, but the actual found support there, but I think the Russell didn't actually test it if I got that right. So even though it fell almost a percent, you know, that looks that looks fine.

12:16You could say, you know, you know, and then, you know, I think RSP and QQQE, those are some, you know, trying to hold that 21 day line looks in much better shape. But then again, you know, one good day, you could be really strong and the other one, you know, another way. But QQQE, pretty big loss, not as bad as QQQ, still holding that 21-day line. You know, one good day, and we're talking about right at record highs again. So a little better situation here. Again, you don't want to make too much of it, but there was – the chart looks better. Maybe the individual days weren't necessarily better, but the chart looks better on this and a lot of the growth layers.

12:55Ed Carson:Right. I mean, I think it is a concern for some of these charts where, you know, it does on the one hand, it does look like we're running out of steam a little bit coupled with that volatility. But like you said, in a couple of days, couple of weeks, we could we could be looking back on track here in no time. So we're going to continue to monitor the action on a daily and hourly and, you know, minute by minute basis as we as we like to do here at IBD. OK, moving on, let's take a look at the 10 year yield. Your thoughts on how this is acting? You know, I mean, it's sort of it's it bounced yesterday.

13:39It really, you know, today I'm sure it was just falling because of the market action and stocks. We're still holding the 50 day line. And it's interesting, you know, there's been more movement in the two-year yield, which is closer tied to the Fed policy. So this one, you look at this and go, why is everybody worried about the Fed? Well, this isn't where, if you're worried about the Fed, this isn't where you look at it. And the two-year yield is at highest levels in like 16 months. So this is a little bit more of a combination of maybe concern about how the Fed rate hikes might, potential Fed hikes could affect the economy.

14:09So this isn't sort of where the game is in bonds, I think, right now. Yeah.

14:14Ed Carson:OK, let's one more question for you on the Korea thing. Ed, if this impacted the U.S. market so much today, do you think some investors are going to be looking to the next session for Korean stocks as some sort of potential? You know, I mean, there's no guarantee, but some sort of tip off for the reaction. I'm sure. Sure. I'm going to pay attention to it. I write an overnight column, but I'm going to pay more attention to the COSP than I usually do. And we'll just see. And then, of course, we'll do it again after Micron earnings. We'll see not just how Micron performs, but how the Korean memory chip giants perform overnight on that.

14:57So, yeah, this is an important market since this is such a heavy AI. This is the closest thing to a global AI index almost because it's 40 % Samsung and SK Hynix, I think.

15:11Ed Carson:Right. Big waitings there. Okay, let's look outside of AI. Quick updates elsewhere. Not all good. So here's a look at XME, the metals and mining area, definitely taking a big hit today as well. Yeah, stronger dollar, maybe concerns about the economy and who knows. But yeah, this has really taken a hit in the last several days. Yeah. And I would say, you know, already undercutting those earlier June lows versus some of the other areas still holding above that. So keeping that in mind as we're looking at relative strength or weakness, let's check out the biotech area holding up incredibly well. up on the day.

15:54Ed Carson:Eight-tenths of a percent continuing the breakout here, Ed. Yeah, this is one of the stronger areas. There's a lot of biotechs and a lot of testing firms, and I think Garden Health is in this one. I'm not sure, but definitely some of those kind of firms are in it. A lot of strength. Definitely people should be looking at that and probably more geared toward the ones with rural revenue and profits, but I think this one is the bigger names, and this is a safer way to play it. Okay. And you mentioned cybersecurity. So let's check in on the HAC ETF. Definitely hanging in there, too. Yeah, there's a number of cybersecurity firms that look quite similar to this.

16:31And, you know, does it base out? Does it bounce off the 21-day line? Or like some other names, does it finally falter? So this is one to watch. I think you'd want to see some strength before doing anything new if you don't already have a position. But very interesting action right now.

16:48Ed Carson:Yeah, maybe some sort of trend line. I also could see maybe a little bit more of a shakeout before it moves up. That old buy point of the 50-day line right there, you know. Yeah, exactly. And you mentioned regional banks as well. So checking in on that area, outperforming today in a notable way up 1.6 percent. Yeah, and there's a lot of banks are doing well. I mean, this and regional banks aren't even the strongest, but this is closer to a buy point. A lot of these banks, big global banks, U.S. and foreign, are already extended, but a lot of strength in the banks right now.

17:52Ed Carson:Hey, moving on. Let's take a look at GH. This is Gardent Health. We've been tracking this flat area, a shelf pattern. One might call it ed. Let's also take a look at the weekly chart. I would say some pretty tight action there on the weekly. after really powering higher about, what was that, six weeks or so ago to break out of the base here. So one to watch, not AI and in medical, which we've seen some notable strength. Yeah. And it's just like, this is great action because it went up so much and it's like, gosh, it was pretty extended from the 50-day line, even the 21-day line when it broke out.

18:38And yeah, if it can stay in here, it would have a three weeks tight, but just getting above, I think that pattern, the top area, if you get above that area, yeah, it was sort of flirting with that today. RS line is strong. There's strong revenue growth. This is a strong area of the market right now. So, yeah, this is a leaderboard name. Yeah, and, you know, it's not powering higher, which is sort of nice because this isn't the kind of day I really want to be adding things. I mean, I know you can because there were some things, but, man, it's hard when the NASDAQ 100 is down over 3%. So I'd rather, but this is one to watch for sure.

19:17Ed Carson:Yes. Okay. And in cybersecurity, Fortinet also looking quite strong here, clear level of resistance around the 150 area. And seems like this is the best looking cybersecurity name. I mean, it looks even stronger than that HackETF. Yeah, I agree. And this one busted out on earnings and it lifted some others. While the others, you know, of course, they had already rallied. But this one moved on the earnings. The other ones like Palo Alto and CrowdStrike sort of fell on earnings. This one's held up the best. Yeah, they're fine. And Palo Alto, Palo Alto looks pretty good. CrowdStrike sort of looks like hack, I think, you know, in the sense like coming down to the 21-day line.

19:58So that's fine. But Fortinet, yeah, the strongest. On a weekly chart, it has a three-weeks tight. And so, you know, I like it a little longer. I mean, you know, usually for a new position, but I do think people who did get this could get it. I mean, you can do whatever you want. I mean, it's better than buying anywhere in the middle of nowhere. But I prefer that for an add-on rather than a new position at this point. Maybe if it was at least another week, I might be more interested or attest that the 21-day line came off of that. But a lot of strength. Softwares tried to make a recovery. This is, you know, a lot of them have pulled back when this one really didn't.

20:36So, yeah, you have to take notice of that.

20:39Ed Carson:Exactly. And I think to your point about the buy point to use, like you said, three weeks tight, usually an add on opportunity. I think it also depends on market conditions. If we were still in that super steady lower volatility power trend pre early June, I think aggressive traders might be more willing to initiate a new position with, you know, more of a non-traditional type entry point. But yeah, you know, it's getting close to feeling like a flat base or a high shelf here maybe. All right. Let's go to EZPW. This was our stock of the day today, right? Yeah. And it faded just a little bit at the end of the day.

21:25There's that trend line. It bounced above the 50-day line. Intraday, it was, for most of the day, it was decisively above that 50-day line. So I'm not sure when that faded off. Yeah, it was just sort of that final hour. Just sort of gave up some gains. It was a tough day. This one has had some wild action. I mean, let's be clear. It's like that reversal from there on earnings, not great. And then, you know, so it big drop there. This is tough. We've seen that with some other, saw that with some AI names, like some of the AI energy plays. They sold off and then they came back. I would have liked a little more strength.

22:01I think, you know, when it was at the highs, it seemed more like, OK, it was actionable because it was making such a powerful move. But it gets a little bit higher. I think a little bit of strength. Yeah. Right above that line would be a little bit more convincing. The earnings are strong. I mean, there's, you know, it's a K-shaped economy, affordability issues. People turn to pawn shops. While gold prices are well off their highs, it's still after a mammoth run. And gold prices, people turn in gold. And that's a big factor. High gold prices have been a big driver. So that's a trend that has helped some of these pawn shop operators.

22:37So, you know, you can see the RS line has made a pretty nice run over the prior year. It's not, this isn't just one that's been chugging along sideways where you park your money. You know, it's been doing very well. And again, when you can have an RR, this is the kind of thing you want to be looking for stocks for showing relative strength that are outside of AI. So you can have a little bit of diversity without giving up leadership, you know, and so nice action here.