Stocks Soar, Oil Plunges On Iran Cease-Fire News: Flextronics, Lattice Semiconductor, Citigroup In Focus

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0:29Ken Shreve:good afternoon everyone and welcome to stock market today for wednesday april 8th it's alissa quorum here and a big day in the stock market with huge gains for the major indexes on iran's ceasefire news and oil plunging joining me now now to break down the action from today's session is my colleague, Ken Shreve. Ken, good to see you. What do you have for us? Lots of stocks to talk about today, Allie, on a nice update for the market. I just had so many to choose from, I had to kind of boil it all down. But let's take a look at a contract manufacturer called FlexTronics, ticker F-L-E-X. Also wanted to take a look at a name in the semiconductor sector called Lattice Semiconductor, LSCC.

1:14And a lot of financials reporting earnings next week. So let's take a look at Citigroup, ticker C.

1:24Ken Shreve:Sounds like a plan. We'll do that and add more context to today's move. So let's take a look at the NASDAQ composite here. Up 2.8 % by sessions closed. The Dow was up 2.7 % on the day. The S &P 500 up some 2.4 percent and the Russell 2000 also with a strong gain up 2.8 percent on the day can. So we've been in this rally attempt and now we have a day of power with a lot of the major indexes retaking key levels here. We did finish off of the opening levels so we had a very strong start But I would say overall for the heft of this move here, we held a bulk of the gains today. What do you make of the action?

2:17Yeah, I wasn't so much concerned that the NASDAQ closed off its high, but I was really encouraged that it was able to hold 22 ,500 and more importantly, hold above the 50-day moving average. And I think that was encouraging. So it was able to hold a couple of key technical levels, not only the 50-day line, but also that round number of 22 ,500. So I think that was encouraging. Yeah, some sellers knocked the index off highs. The intraday gain was better than 3 % at one point, but it was really a good, solid day. You can see a really, really explosive gap higher at the open. So it was a really, really strong day for the NASDAQ.

3:05It was a tough volume comparison. Volume was very heavy yesterday on the NASDAQ. A lot of that volume yesterday was caused by a lot of penny stocks, a lot of low-priced stocks. But volume was pretty heavy on the NASDAQ today on the sixth day of its rally attempt. So we got that sign of strength that we like to see. And I would say the close above the 50-day moving average was encouraging. good breadth in the market today. It weakened a little bit as the day progressed, but it was still, you know, positive at three to one positive on the NASDAQ and even a little better on the New York Stock Exchange.

3:44So overall, a positive day here. And we'll see if this rally can amount to something after the sign of strength that we got today.

3:54Ken Shreve:Yeah. And I think in addition to the levels that you pointed out, Ken, this 200-day line, We were quite worried about the indexes conquering that level. A lot of our historical research shows that bad things happen below the 200-day. So the fact that we were able to get above that and the 50-day line, I mean, I think that just shows the magnitude really behind today's move. So now it's a matter of if we get some sort of retracement, what does that look like? Or do we continue to power higher here? We are in a very news-driven environment. So what are you looking for as the days progress to show you, yes, this is the start of something and the signals that you're using to get more invested in this market?

4:44Yeah, well, that's a very, very good question. You know, I'm not going to be really, really disappointed if in coming days we fall below 22 ,500 or if we fall below the 50-day moving average. You know, that's not going to be a sign to run for the exits. I do know what we don't want to see over the next couple of days is a violent down session in heavy volume. So we know from historical research that over the next two, three, four days, we don't want to see a higher volume decline. We don't want to see a violent distribution day. We don't want to see a 1%, 1.5 % down session in heavy volume. We don't want to see all the breakouts that we saw today, all these wonderful moves, growth stocks breaking out of bases.

5:43We don't want to see these breakouts immediately fail. We don't want to see downside reversals in heavy volume one, two, three days from today. So if we can see maybe a down session in light volume, or if we can see indexes just hold on to these gains, see the NASDAQ kind of float above the 50-day moving average, that's fine. So we don't want to see distribution days. We see a distribution day a week from now, a couple weeks from now, that's fine. But nothing too soon after today's sign of strength. So that's what we're looking for. But we basically want to see all of the strength in individual stocks that we saw today.

6:32We want to see these gains hold. And if we see declines, we just want to see orderly declines. We want to see the volume kind of lighten up to the downside. and, you know, as we see, you know, gains from here, you know, hopefully some volume behind the upside. So we know what to look for and, you know, it's just really a matter of just wanting to see distribution, professional selling, you know, signs of that on a very tight, tight leash. We don't want to see a lot of it and that would be a good sign.

7:08Ken Shreve:Mm-hmm. Very encouraging today's action, not only on the index level, but also those individual stocks that you mentioned. If you're in the type of environment where it's hard to pick the names to talk about or you have so many stocks to choose from to add exposure to your portfolio, that is a good signal as well. And totally agree. We want to see that continue. We want to see those leading stocks continue to act well. That would increase our confidence in the market action. Let's also go to the S &P 500, Ken. A nice move above the 200-day line and the 50-day line here as well. So a lot of power for the S &P today.

7:52Yeah, a nice close up near its high as well. Now, we didn't see that volume expansion like we saw on the NASDAQ today, but we did see slightly higher volume on the New York Stock Exchange. It was below average, but it did pick up the pace a little bit from the prior session. But again, the S &P 500 could have run into some resistance today at the 50-day moving average, but it just kind of poked right through that 50-day moving average and closed at its high and closed above the line. It stopped just short of that 6 ,800 level. Again, that's a round number where it could face a little resistance there.

8:35It didn't quite touch 6 ,800 today. But again, the fact that it closed up near its high and closed above its 50-day moving average, that was technically a strong move for the S &P 500 today as well.

8:47Ken Shreve:That it was. And I think today's low becomes an important level to watch as well as the true range, of course, from the close of the prior day. So we have a lot of room for that low, of course, but we'll have to see if we can hold that low or if that's too tall of an order. I also want to show the audience really quickly an interesting tool that we have, a retracement. Just looking from the high in January to the low a week or so ago to see if we are now back in the upper 50 % of this retracement. And it looks like we are, Ken. So let's see if we can live in the upper half of this range from the highs to the lows over the last couple of months.

9:35Ken Shreve:I think some traders, including our chief market strategist, Mike Webster, also looking at that. And for the S &P here, it looks like that coincides with the 200-day. So I just wanted to point that out as well. Yeah, the old Fibonacci retracement, something that I'm learning myself. But these market surge, these new charts have a lot of great new tools that I'm kind of learning myself as well. But this is Fibonacci retracement is very, very popular. And I'm kind of learning the ins and outs of this myself. So lots of great new tools to familiarize yourself with. Absolutely. Okay, moving on. Let's just get quick thoughts on the Dow and the Russell, and then we'll take a look at some sector ETFs.

10:22Ken Shreve:So let's start with the Dow. Yeah, Dow's a little more interesting here. Good close for the blue chip index. It also closed up near its high, but here the Dow is kind of running into that 48 ,000 level. That's a round number, maybe getting some resistance there, closed a little bit off its highs. It's also running into its 50-day moving average. So this is an example of an index that could possibly be running into some resistance here, ran into the 50-day moving average, closed a little bit off highs. But I think the thing to pay attention to here is that this was a good solid percentage gain for the blue chip index and a close near highs.

11:06Volume, nice and heavy in the Dow as well. Much higher than the prior session and less you. And a nice close for the Dow up near highs. A good session for the blue chip index as well.

11:23Ken Shreve:Thanks, Ken. And let's check in on the Russell. So closes nicely above 2 ,600, closes in the middle of its range, but more importantly, just really powers through the 50-day moving average. I thought it was a great technical performance for the small cap index as well today. So overall, it was a really solid up session for all four indexes. And we'll talk about a lot of ETFs that really performed well today and a lot of good action in individual stocks. And, you know, Ali, on IBD Live, even last week and this week, you know, we were talking about a lot of individual stocks underneath the surface, even yesterday in the big picture.

12:07And in recent days, there have been a lot of growth stocks that have been acting pretty well even up until today. So there were some hints that, you know, this market was maybe ready to start acting well. We were up several days in a row before, you know, today's rally. And I was encouraged by the action underneath the surface myself. So, you know, encouraged. We could have some left here. We'll see.

12:34Ken Shreve:Yeah. And of course, with the headlines, it's no surprise to see the big drop that we saw in oil today. I'm just pulling up USO. This is a fund that tracks roughly the price of oil here, Ken. And we know just how big of a move oil has made in recent weeks as the Iran conflict continued to develop here. So no surprise to see this come off a bit. Also taking a quick look at the 10-year yield, that coming off some too, though finishing off lows. Can you talk a little bit about some of these other dynamics that we are seeing out there that are in play in the market right now? Well, yeah, I mean, I still think oil is going to be volatile in coming days.

13:24And I still think the headlines out of Iran and, you know, the U.S., I think there's likelihood. I mean, even today, Iran was saying that the U.S. has violated the ceasefire agreement already. And I don't know the specifics, but that was a headline late in the day that they're complaining that the ceasefire agreement has already been violated. So I think we're going to see volatile headline flow, and that's probably going to result in some market volatility as well and some oil market volatility as well. XLE is another oil ETF. I think that came down and actually, yeah, came right down to the 50-day moving average and bounced right off it today.

14:08So I think we're going to see volatility in the oil market. In terms of interest rates, I think the market is still weighing the possibility that the Fed could cut rates one time this year. That narrative has changed quite a bit, but we still could see one rate cut this year by the Federal Reserve. Interest rates were volatile today. I think that 10-year yield went all the way down to 4.23 % today. It did, as you can see, close well off lows. So there was a lot of bond buying early in the session, but that 10-year yield did pair losses. So probably see some volatility in interest rates and oil until this Iran situation fully settles.

14:54But, you know, I think it's going to be volatile for sure and probably see some market volatility as well. Yeah.

15:01Ken Shreve:As of now, it does seem like these two instruments are moving in lockstep. Yes, they are. Or in large part. All right. Moving on, let's take a look at SMH, the chip sector, lighting it up in a big way here, Ken. It was on the ropes with some potential resistance at the 50-day line, but coming back in a big way today, up 5.8 percent, very close to all-time high territory. Yeah, I think people that follow the NASDAQ and are bullish on technology are very encouraged to see the way that semiconductors are acting here. We were talking about the chip equipment stocks today. We're going to look at LSCC in just a little bit, but there was a lot of great action in semiconductors today.

15:53I mean, this was a really bullish move for SMH, you know, stopped right at the 50-day moving average yesterday after five up days in a row. Volume picked up the pace. Higher volume today went right up to its all-time high. So, you know, just really, really strong move in the semiconductor space today and just broad-based strength among the chip designers, the chip makers, the chip equipment firms. So really encouraged to see semiconductor stocks still outperforming here.

16:27Ken Shreve:And let's go to KRE. This is the regional banking ETF, a day of strength here, up 2.9%. Yeah, I'm really encouraged. You know, earnings season is really kicking off in spades. Next week, we've got a whole slew of, you know, financial stocks. We've got some tech names as well. We've got Taiwan Semiconductor. And we've even got Netflix reporting next week, but it's really all about the financials. That's why we're going to take a look at Citigroup as well in a little bit. But, you know, and financials, this could be another catalyst for the market. We're seeing a lot of financials starting to act well.

17:05This is another pocket of, you know, potential leadership in the market. And if we can get some good news from the financials next week, this could be another catalyst for the market. So it was encouraging to see the regional banking ETF gap above the 50-day moving average. A lot of bank stocks whose relative strength lines hit new highs today, even though some of these banks were not hitting new highs themselves, their relative strength lines were hitting new highs. So a lot of good action in the financials today. Take a look at Citigroup in just a little bit. But I think it's encouraging as many get set to report earnings next week.

17:47Ken Shreve:Yes. And one more ETF that we want to take a look at, and that is the material sector up 3.3 percent on the day. And you have a couple of names of note in this group to check in on as well. Yeah, well, this was another top performer. And you can see XL. Yeah, this one closed right at its highs. So two top performers, two top-weighted holdings in this fund, Freeport, MacRan, and also Newmont. Yeah, Newmont Mining, gold stocks were very strong today. And so Newmont Mining, very, very strong. And Freeport, copper prices were up today. Freeport made a very strong move. That's back up near all-time highs.

18:31And then gold stocks were very strong. A lot of gold stocks closed off highs, but Newmont is also a top holding in the XLB. That closed off highs, but yeah, gold stocks did very, very well today. So XLB, very, very bullish move as well, was one of the S &P 500's top performing sectors today. So hats off to FCX and Newmont, two of the top holdings here. Good days for both of those stocks. Yeah.

19:02Ken Shreve:Hi, this is Alex Osula, host of the WSJ's What's News podcast. We bring you the biggest news of the day, from business and finance to global and political developments that move markets. If you're looking for more insights and tools to understand the latest headlines, consider becoming a subscriber to The Wall Street Journal. Visit subscribe.wsj.com slash what's news to subscribe now. So some honorable mentions there, but let's now go to the three stocks that we want to take a closer look at today, starting with Flex, a blue dot breakout here, meaning that relative strength line hitting a new high as the stock is breaking out, underscoring its relative strength versus the S &P 500.

19:45Ken Shreve:The gain today, 7.3 percent in above average volume. Ken, tell us more about what you're liking here. Well, the industry group is still strong. These contract manufacturers, you know, back in the day, a lot of them were known for making these printed circuit boards, but a lot of them are really making money hand over fist as suppliers to these. They're making a lot of the AI wares, and Flextronics, they're actually based in Singapore. So they're doing a lot of the AI hardware. A lot of them are in new growth mode. And when you get the sign of strength that we got in the stock market today, you want to see a fair amount of stocks breaking out of bases.

20:35We've seen this throughout market history, and we saw a lot of stocks breaking out of bases today. We saw stocks breaking out of bases yesterday, even before we got this sign of strength today. So Flextronics, good breakout. I mean, yeah, the stock did close off highs. We did see a lot of stocks kind of giving back some gains late in the day. Not a big deal, but Flextronics did close in the middle part of its range. It's still in that blue shaded area, meaning it's still in that 5 % buy zone. Volume picked up the pace again, so there was some conviction behind the buying. Sometimes these breakouts, you do want to see some follow-through.

21:16So we'd like to see buyers come in and see some follow-on buying tomorrow. So you do like to see stocks follow through after a breakout day. If they don't, it's not a deal breaker, but you do like to see follow-through. So we'll see if Flex can follow through after today's breakout, but saw a lot of really nice breakouts today. So that's encouraging. The industry group is strong. JBL made a nice move in this group today. And, you know, the industry group is, like I said, there's probably, you know, three or four leaders in this group that are acting well and ranks, what, 38th, 40th out of 197.

21:58So a lot of strong performing stocks in this group.

22:04Ken Shreve:Absolutely. And before we move on, Ken, you know, I always love to give our audience a frame of reference for in the future if they are looking to add new positions. What should they be thinking about in terms of risk management? So that comes down to a couple of different levers, right, where you're entering, but your position size and then where you're setting your stop. So on a move like this, what are some of those parameters that you're looking at for risk management here? Well, so, you know, in a market like this, you know, when you're dealing with a strengthening market, you know, it's really, you can start a new position.

22:51Some people may start a new position in a strengthening market. you could start a position maybe at a 5 % position in a market where you're maybe not entirely confident. Some people start smaller positions, say two and a half. But in a market like this, I bought a stock earlier today. I started it at a 5 % position, feeling that the market is acting stronger. So that's really a personal thing. Some people may like to start a 7.5%, a half percent position. Some people start even bigger. But, you know, this is this, you know, some people may want to start a five percent position here. And then just in terms of, you know, managing the position, you know, you always just want to always have an exit strategy, you know, before before you buy.

23:43So in terms of managing risk, listen, you always want to see a stock follow through, but sometimes new buys don't go as as planned. So if a new buy doesn't doesn't work out. You always want to, you know, protect, protect your capital and, um, you know, trim, trim a position back if it starts going, you know, the wrong direction and, you know, just, just manage, uh, manage your losses. And, you know, if this is, uh, the stock that I had bought, you know, I'm going to just kind of manage, manage the, manage the position. And if it, uh, if I need to, to trim the position back, if it's going in the wrong direction, I'll do that.

24:20And, But if it starts going in the right direction, you may increase the position. It's all about managing the position, and it's a learning process. It takes some practice, but it's all about managing risk. And it takes a while to figure it all out. But, you know, with buying breakouts, it's a good idea to start small and you can build it up. And if it doesn't work, you got to trim it back.

25:03Ken Shreve:Well said, Ken. Okay. You mentioned the strength in the chip sector and lattice semiconductor. So let's go there. This is another blue dot stock on the verge of a breakout from a traditional entry above that 108 area. Shares up 10 % today, but arguably an earlier entry here was triggered. If you take a look at a trend line, that round number at 100 that I know a lot of traders like looking at, it did top the traditional entry today. But I think whether or not you're using that or an earlier entry, this one did have an actionable look to it today. Give us your take on this. Yeah, I mean, it was just a breakout from a consolidation.