Rally Picks Up Steam As Retail Sales Impress: Shift4, Macom, AFRM In Focus

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0:25Ken Shreve:Good afternoon, everyone, and welcome to Stock Market Today for Thursday, July 17th. It's Alyssa Coram here. And the Stock Market Rally is picking up steam, and so is earnings season. We'll take a look at Netflix earnings out after the close. And joining me now to discuss today's action and a couple of stocks for our radar is my colleague, Ken Shreve. Ken, what do you have for us? Well, another up day for the market. NASDAQ outperformed. We had a pretty solid retail sales print before the open, so we can talk about that. Three kind of different names to talk about today, stocks I'm watching. The first is Shift4, ticker F-O-U-R.

1:07Also a data center chip name that probably many people haven't heard of. It's called MECOM Technology Solutions, MTSI. And then let's finish up with Affirm, A-F-R-M.

1:20Ken Shreve:All right. We'll take a look at those stocks. But first, let's take a closer look at the major indexes. So the NASDAQ up three quarters of a percent on the day, outperforming the major indexes like the S &P 500, which was up about a half a percent or so on the day. And it looks like, let's see where we closed at, 6 ,297. Was that above the downside reversal high? Not quite. Looks like it was not quite, but we're very close there, Ken. And then the Dow on the day also up about a half a percent, continuing its rebound after that nice upside reversal on Wednesday. And small caps also had a strong showing today with a rebound here up 1.2 percent.

2:04Ken Shreve:So this market rally continuing to pick up steam, Ken. We haven't had a pullback yet. So maybe we're just going to continue climbing this wall of worry as money remains on the sidelines waiting for a pullback. but earnings season could have a lot to do with the market action. Yeah, I mean, I think it probably could be a whippy earnings season, but I have to tell you the market just continues to perform well here. We've gotten a fair amount of good economic data. I mean, I think what moved the NASDAQ today was that pretty decent earnings report from Taiwan Semiconductor, the world's largest chip foundry.

2:44They reported a nice acceleration in revenue growth. You see that in Q1, revenue was up 36 percent, and then it expands to 54 percent. So, you know, when you're a company producing, you know, not only strong revenue growth, but revenue growth that's accelerating, you know, the market usually takes notice. So I think Taiwan Semiconductor left their capital expenditure plans in check. But nice move for the stock. That lifted the NASDAQ composite. And, you know, SMH had that little sell-off yesterday but closed up near its high. So, you know, markets dealing with a lot of good news right now. Was worried about the economy.

3:30Was worried about tariffs and their effect on inflation. And, you know, it still could have an effect, but we've been kind of waiting for it to show up in the data, and it hasn't yet. So, you know, this is just a really, really strong, you know, market uptrend. And, you know, the NASDAQ's been rising so much that 50-day keeps rising right along with it. So even when it looks like the NASDAQ is starting to get extended from its 50-day moving average, it's still kind of holding in this, what, 6 %?

4:02Ken Shreve:Let's check it out. 6.7%. 6.7. Okay. So it's getting up closer to 7%. So it's in kind of that area where you want to start paying attention. It was back in early June when the NASDAQ started to – early June last year when the NASDAQ started to pull back. I think it was 8 % or 9 % above its 50-day moving average. So, you know, very, very strong. Still looks good. Yeah. There you go. There you go. 8.9 % on July 10th of last year. Right, right. And that's when it kind of settled into a little bit of a pullback. So, you know, NASDAQ's not at a warning level yet in terms of its extension from the 50-day moving average.

4:48But, you know, we're still seeing, you know, volume picked up the pace again. So that is, what, three days in a row where volume has expanded to the upside. So that tells you that, you know, maybe some cash that has been on the sidelines late getting into the market is coming in here. So another strong day. Yeah.

5:09Ken Shreve:So the Nasdaq surpassing that stalling action from a couple of days ago. And the S &P 500 looks like it's right there, Ken, after a trip nearly down to the 21 day on Wednesday. Yeah. I mean, it's not quite over Tuesday's high, but this looks just as strong as the NASDAQ, as leadership has broadened out quite a bit. I mean, financials were among the best performers today in the S &P 500. So nice performance for this index as well. Yeah. So here's a look at XLF. XLF came down to that 50-day moving average, almost touched it, reversed higher yesterday, and extended gains today. So it took a little while for the financials to start participating here, but we've had kind of a mixed bag of earnings so far in the financial sector.

6:10But nice to see the XLF holding well here above the 50-day line and not far from highs at all. Okay.

6:20Ken Shreve:And let's get your thoughts, as always, quickly on blue chips and small caps. Here's the Dow. Yeah, hard to believe the blue chip index is on the verge of another breakout here, 44 ,885. That marked high. This almost looks like another, you know, when a stock adds a handle, it kind of drifts lower, shakes out sellers. The Dow Jones kind of came down to the 21-day moving average and now two straight up days back above the 10-day. So, yeah, hard to believe that the Dow is in kind of a long, big, big cup with handle base here and could try to break out soon. So that's encouraging. And here's a look at the Russell 2000 small cap index.

7:03Ken Shreve:Ken, what are you seeing here? Same with the Dow, right? That breakout over 2170 moved above the 200-day moving average. And now it's just been another little minor shakeout here down to the 21-day line, just like the Dow. came down to that round number of 2200. And now it looks like it has its sights set on last week's high here. So, you know, a lot to like about this market. Like I mentioned on IBD Live this morning, it's easy to, you know, start getting complacent, you know, when you're seeing your portfolio up a lot, whether it's your 401k or your IRA or however you're investing in the market, you know, Things are pretty good.

7:46You still want to be diligent. Like I said, that's why we're kind of just keeping an eye on where the NASDAQ is in relation to its 50-day moving average, but still acknowledging a lot of underlying strength in this market.

7:58Ken Shreve:No doubt. All right. And I also want to quickly touch on RSP. Let's see what's going on for the average stock out there. So RSP is the equal-weighted S &P 500 ETF. So whereas we had the S &P 500 up about a half a percent today, RSP did outpace that with a gain of eight tenths of a percent today. And Ken, it looks like on Wednesday and even Tuesday, this was a bit on the ropes, right? With a test of the 21-day line and not just coming down to that level, but undercutting it. But it seems like we got support right where you'd like to see. So in terms of that overall health of the market, looking underneath the surface, how is that average stock performing?

8:44Ken Shreve:Well, I'd say it's definitely hanging in there. You got plenty to like here as well. But you're right. There was some pretty heavy selling in RSP on Tuesday. And there was some volume. You can see volume wasn't huge, but it did pick up the pace from the prior session. The good thing is, is that when the selling continued on Wednesday, you know, volume was heavy again. Volume rose from the prior session. But, you know, you had buyers lifting RSP off lows yesterday. So it was a good show of support. Kind of a lower volume gain today, but back up near highs. And honestly, this looks like it might try to break out over last week's high as well.

9:26Ken Shreve:Yeah, and a powerful trend. We're obviously paying the most attention, as you said, to the Nasdaq and the S &P 500. But this is also something, RSP, that is something that our senior market strategist, Mike Webster, looks at as a secondary signal of breadth. So in a power trend, like we want the major indexes holding above the 21-day line, the green line on the chart, we also want to see your average stock holding that trend. And as of now, we are continuing to see that acting as a good support level here. Yeah, and also those symbols in market surge, GMIAA, also shows the advanced decline line and where it is in relation to the 10-day moving average.

10:15So you can see it kind of dipped below the 10-day moving average, starting to – we'll see if it can start to trend higher and get back above the 10-day line. but in GMI AB kind of in a similar situation. So ideally we'll see this advanced decline for both indexes start to trend back above the 10-day moving average. But all in all, I think after looking at RSP and QQEW, I think the underlying strength of the market is pretty clear to see.

10:50Ken Shreve:Sure is. Okay, let's take a look at a couple of stocks. 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. Investments are subject to risk and may lose value. Our audience's radar out there. Shift for payments breaking out of a cup with handle today. Ken, up 2.7 % here. Yeah, it's pretty amazing that you're still seeing stocks breaking out. Three months into a market rally here based on the follow-through day that we saw for the NASDAQ and the S &P 500 on April 22nd, 23rd, whatever day it was.

11:36But back around that time, it's just been a great rally for the market. And you're still seeing stocks breaking out. Of course, the risk here is stocks have been moving for a while. And if stocks are just now starting to move now and break out, do they run the risk of being laggard stocks? I think shift for payments still looks good here. It was a pretty sharp decline when the stock started to correct. It started with a pretty harsh gap below the 50-day moving average. But the move back up has had plenty of higher volume gains. And I particularly like the action in recent days as the stock drifted lower and formed a little handle here.

12:17So volume picked up the pace today. We have been seeing more breakouts follow through in recent days. So I think that the real test for FOUR tomorrow will be, can this breakout follow through? Because we've seen some breakouts that kind of stall and stutter. but I think Shift4 is still a fundamental leader in its industry group. You've got a high composite rating of 97, and this is one of the first buy now, actually not buy now, pay later, but just a payment processor and looking very good.

12:55Ken Shreve:Yeah, they work with restaurants for their to-go delivery order checkouts. That's how I've used the platform before myself personally. They're also big in a lot of sports arenas, too, around the country. There you go. Multiple verticals there. We've got earnings coming up in two weeks, so we'll keep that in mind. But, Ken, it seems like in a strong bull market, two weeks can be enough time to build a profit cushion into an earnings report. There's no guarantee, of course, but there's a little bit of time for this to have some room to work. Yeah, well, we put VRT on the leaders list today for leaderboard, and they report in less than two weeks.

13:39So we're hoping we can build a decent cushion here as it tries to move out of this little handle area. But you can see earnings due in 13 days. So those are calendar days. So, yeah, it's about two weeks away.

13:54Ken Shreve:Okay. Next on our list, we want to check in on MTSI. This is MECOM Tech Solutions in the semiconductor manufacturing group, triggering an entry here as we're seeing strength in the semiconductor sector. Yes, and not a name that I've heard. We don't talk about it a lot. Yeah, yeah. But it's interesting. It's a data center adjacent. They made a small acquisition in November last year. They acquired a company called Engine IC. It was a small acquisition, but it's really getting them more on the data center side of things. So Maycom is in a beautiful cup with handle base right now. And today was kind of a setup day for the stock, I think.

14:44So we're going to keep an eye on that 144.15 buy point. But, yeah, this is another data center chip stock that is, you know, seeing a lot of strong growth. You can see the last four quarters of earnings and revenue. Very, very impressive here. Estimates still look good. So, yeah, I think this one still has a chance of working here. Obviously, a lot of chip makers have been working well. This has been a nice rally off lows, but a nice little handle formed here. and a good day for the stock today.

15:20Ken Shreve:All right, let's check out Affirm. This in the digital, mobile, commerce, financial payment space, up 3.4%. Yeah, this is Buy Now, Pay Later, one of the first to come to market with this service. And it's actually a pretty crowded industry at this point. I mean, Affirm is not the only company that offers Buy Now, Pay Later, but they were one of the first to market. Kind of a similar setup here. You know, nice rally off of that low near 31 and forming a handle here and trying to come out, trying to break out. Relative strength line looks okay. It's still pretty far off the high of the left side of the base here, but this is just another fundamental leader, a company that has been losing money right on the verge of profitability here.

16:18You see the top line growth has been impressive. So, again, kind of a jagged technical setup on the weekly chart. Pretty deep pullback, but you're still seeing a lot of setups there. And, again, with money still coming in from the sidelines, I think these names are worth keeping an eye on. The risk right now is that, Allie, there's just a lot of extended stocks at this point. So while you see stocks like Affirm and Maycom setting up, that's a good thing. But a lot of the big leaders came out a few months ago. So you just want to be very discerning with new buys. But I think these stocks look good.

17:00Ken Shreve:Yeah, no doubt. Very sharp sell-off, but also a very impressive recovery. The stock has more than doubled off of its lows. So just now, like you said, shaping up a proper buy point more or less. But I think that was also one of the tricky things off of the market lows is you did have those leaders presenting really solid buy points. But a lot of stocks that have doubled, you know, it's where do you get in, right? So we're just now seeing some of these setups develop a little bit more. Hopefully they can turn into more. But as you said, the market has been running a while. So you do have that elevated risk of a pullback at this point.

17:40Yeah, the whole point about this is this handle that's been forming for about two weeks now. You know, as you do, this is just a nice little shakeout going on. I mean, this is a stock that rallied, you know, powerfully over the 60 level. But there was a five-day pullback there that, you know, that was able to shake some sellers out of the stock. And, you know, the thinking is that that's going to, you know, clear the way for a decent breakout. So three up days in a row. Accumulation distribution rating looks good at B plus. So we'll keep an eye on this only because it's a very compelling growth story still in the market.

18:19Again, top line growth is there right just now turning profitable. Good fund sponsorship. A lot of checkmarks here. All right.

18:28Ken Shreve:And before we wrap, we do need to check out Netflix, which reported earnings after the close here. Full disclosure, I do own the stock. And it looks like we're seeing a somewhat mild reaction here, which I think if traders did the stock, I don't mind it, Ken. And obviously, you want every stock to have a big blowout earnings report where it's up huge. But for those who have been able to enjoy gains over the last couple of months, I know Leaderboard has been in this stock. You know, a 1 % decline on earnings, I think, will take it. Yeah, pretty muted reaction. A little bit of a pullback ahead of earnings, but held nicely above the 50-day moving average.

19:13So pretty, you know, muted response right now. It could be different in the morning. It could be a nice up session or not. But I think so far, so good. I haven't had a chance to pour over the report yet, but I did see that they did raise their full year revenue guidance. But a stock has done very well since the follow-through day in the second half of April. And that's when we put it on leaderboard as it was in early stages of breaking out over that 9.98, 70 area. So, you know, nice profit cushion here. And hopefully, you know, it'll hold above the 50-day line. And if it's going to pause, if it pauses just in mild fashion, that's fine too.

19:56Ken Shreve:And we'll have to see what management says on the quarterly conference call. But one factor perhaps influencing this early stock reaction, Ken, is that I'm seeing from the numbers I'm seeing, it wasn't that big of a revenue beat. It was a beat, but barely. Very small. Mostly in line. Revenue earnings did beat here. But we'll have to see if management can provide any more color. And, you know, analysts love having follow-up reports. after these big earnings. So we'll have to get that take as investors and analysts alike digest this earnings report. But so far, not too shabby. Yeah, and I did know that they did raise their revenue guidance for the full year above guidance that they gave in the first quarter.

20:47So that's a good sign. Never gonna scoff at raised revenue guidance. So again, we've seen a lot of stocks making really, really strong moves ahead of Q2 earnings reports. So, you know, seeing a sell the news scenario is not going to be surprising in some of these cases. But to see it only down 1 % here, I think is, you know, we'll take it, like you said.

21:11Ken Shreve:All right. Thanks so much, Ken. We appreciate it as always. See you next time. And thanks to everyone for tuning in. That is it from us for today. But we will be back with more tomorrow morning on IEBD Live. investors.com slash ibt live for all the details on our daily morning live stream and with earnings season ramping back up that means we have our earnings cheat sheet show with our very own Alexis Garcia and Ed Carson dropping every Friday they give you all the cliff notes on what you need to know for the week ahead for the big earnings reports next week we've got Tesla and Google to name a few.

21:49Ken Shreve:So check that out when it drops on our YouTube channel and at investors.com slash videos Friday morning. We'll see you back here tomorrow as well after the close to wrap up the week. Thanks again, everyone.

22:33Ken Shreve:of medical surgical products and supply chain solutions serving all points of care. With a focus on what healthcare needs next, Medline strives to make healthcare run better. See how Medline is woven throughout healthcare and learn more at Medline.com.