Tech Rally Led By Software, Chip Stocks; SiTime, Alcoa, Construction Partners In Focus

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0:25Ken Shreve:Good afternoon, everyone, and welcome to Stock Market Today for Tuesday, February 24th. It's Alyssa Coram here. And it was a tech-led rally today, but there's still a lot of improvement that we'd like to see for the major indexes. And joining me now to discuss the action in today's session is my colleague, Ken Shreve. Ken, how's it going? It's good to be back.

0:48Alissa Coram:Great to have you back, Ali. Yeah, good broad-based canes for the market. Small caps outperformed. You mentioned software, chip stocks. Good day for both of those areas. Wanted to take a look at SciTime. This is a little-known semiconductor stock, and then also aluminum company Alcoa, and then Construction Partners, R-O-A-D.

1:14Ken Shreve:All right, let's do it. But first, let's take a closer look at those major indexes. We'll start with the S &P 500 here, up almost eight-tenths of a percent on the day. Meanwhile, it was the NASDAQ that led today's session with a gain of more than 1%, but still below those key moving average that we closely track, Ken. We also had the Dow up about three-quarters of a percent in the session right at a key level. And the Russell 2000, small caps up a strong 1.24 % or so. This is clearly looking a little different than the rest of the market. We've seen a pretty notable rotation in recent months. What do you make of where we're at?

1:57Alissa Coram:Well, definitely, you know, your Russell 2000 is the leading index at this point, Ali. They came down yesterday, tested that 2 ,600 level, found support at the 50-day moving average. And yeah, just kind of holding an uptrend here and finding support at a key level. NASDAQ Composite today did pretty well, had a nice day of outperformance, sort of had a dead cat bounce in some of your software names today. IGV had a nice recovery today. That was up almost 2%, but you can see the tremendous selling that the software stocks have been under for several weeks here. So nice recovery for IGV today. And then semiconductor stocks, again, had that big, big news from AMD, signed a multi-year AI chip deal with Meta Platforms, very similar to a deal that NVIDIA signed just several days ago.

3:03Alissa Coram:So semiconductor stocks outperformed and that helped the NASDAQ. But again, NASDAQ is still below its 50-day moving average. So we'll still call the NASDAQ kind of a challenged index here, still on a downtrend. Recently pulled back about 7 % off its high here. So it's challenged until it can get back above its 50-day moving average. So when you're on a downtrend like this, even if it can start to rally, it's possible it could rally back up to that 50-day line and maybe get some resistance. But if it can kind of power through the 50-day line and maybe start a new uptrend, that would make the bulls happy.

3:44Alissa Coram:But we'll see what it can do here. But overall, you know, solid day for the market. I think the market's not out of the woods yet, but a good solid day of gains today.

3:57Ken Shreve:Definitely agree. That 50-day line, very key there. And then we briefly looked at the S &P, but just to circle back there, it's so interesting how you have your 10-day, your 21-day, and your 50-day lines, Ken here, all converging. So can we get a move above those moving averages, this downtrend line here? 7 ,000 and those prior highs, not too far out of sight. but we've been going sideways for quite a while here. So it'll be interesting to see which way we can break out of this, break out or break down. I know a lot of eyes are on NVIDIA earnings this week, but there is some sense of tightening up here on this chart, Ken.

4:44Alissa Coram:Yeah, it's been a very mild pullback, Ali, for the S &P 500. S &P off its recent high has only been about a 3 % pullback, pullback and you can see it's just been very very tight orderly pullback it was a bullish gain for the s p 500 on friday it actually you know closed above all of its moving averages so it came pretty close to breaking out of a little downtrend on friday problem is on monday yesterday it followed up that that bullish gain on friday with a distribution day so we had to add a distribution day to the count yesterday on Monday had a higher volume decline. And then today had a decent gain, but you can see the volume was very, very light.

5:25Alissa Coram:So never want to see a distribution day followed up by a real low volume gain. But, you know, it's been a pretty mild pullback so far for the S &P 500. Again, a lot of great movers underneath the surface today. Breath was pretty good in the broad market. It was better than two to one positive on the NASDAQ, not quite two to one positive on the NYSE. But again, a lot of AI stocks on the move again today and lots of lots of good growth stocks on the move. So, you know, market feels a little vulnerable here. But again, underneath the surface, you're seeing, you know, a lot of lots of good action below the surface.

6:05Alissa Coram:So it's kind of a mixed mixed picture at this point. What we know is, you know, we're seeing the indexes definitely in a distribution phase here. We're just going to have to monitor which way the market wants to go here.

6:20Ken Shreve:Right. And speaking of standout stocks, we'll get to the three that you mentioned at the top of the show. But you also, I believe, had a couple of honorable mentions from the IBD50, Ken.

6:31Alissa Coram:Yes. Well, I wanted to just take a look at FFTY because this was a really nice outperformer today because, you know, up for the fifth straight session, people have been used to seeing FFTY outperform because it has quite a few, you know, gold stocks in it. But really, the outperformance today, there were a few gold stocks that outperformed, but there were several gold stocks that were down today. So some gold stocks outperformed in the IBD50, like Anglo Gold, AU was one outperformer that I saw. But it was really, you know, it was outside of the gold space where we saw some good names outperforming.

7:17Alissa Coram:MOD, Modine. This is a cooling stock. MOD was a nice gainer, tight action at the 10-day moving average. And then a name that is reporting earnings tomorrow night, along with NVIDIA that we talked about on IBD Live this morning, FTAI, which made a nice move today. This is a company that leases aircraft engines, and they came out in late December, second half of December, and said that they're going to start a new business called FTAI Power, where they're going going to be taking some of their extra jet engines, going to be converting them to natural gas turbines to power data centers. So it's kind of an interesting story here.

8:01Alissa Coram:It's going to be a kind of a new segment of their business. And the stock made a nice move today. They're going to be reporting earnings tomorrow. This was another nice gainer in the IBD 50 today. So FFTY had a little mini breakout today. So nice, again, talking about some growth stocks acting well underneath the surface. So we'll see what NVIDIA has to say tomorrow night. And this will be an earnings report right along with NVIDIA tomorrow night. So we'll see what both of these companies have to say.

8:30Ken Shreve:Sounds like a plan. And I love that little compare-contrast you did with SMH and IGB. Definitely a tale of two sectors here, Ken, with SMH. A little mini breakout here to highs and IGB just badly beaten down. you can see on the monthly chart here, threatening to undercut lows. That would put it back to its lowest levels in a couple of years here. But again, that chip sector quite strong.

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9:24Ken Shreve:Let's pivot to one such name in the chip sector on your list, Ken, in the same group as NVIDIA. So another little tie-in there to discuss CyTime. Had a good breakout after the earnings report, triple-digit bottom-line growth, And I think it's acting exactly how you would want to see it after an explosive move on earnings.

9:47Alissa Coram:Yeah, it's kind of a it's just a nice little low volume pullback here to the 21 day moving average. And this is this is what kind of caught caught my eye. So it's tracked in the same industry group as NVIDIA. And it's it's it's in the same growth market as NVIDIA in data centers. Now, it's a completely different business. This company is involved. It's in a very niche market, but they do. It's a niche market, so they do what very few companies do. They're involved in precision timing tools. So a lot of people don't know that timing chips are not really familiar with what timing chips do. But when you're talking about data centers and all the data that is being transmitted, it needs to be synchronized.

10:39Alissa Coram:So there is such a thing as timing chips that are used to synchronize this data. And inside of data centers, there are graphics processing units, GPUs. There are central processing units, CPUs. There are networking chips. And when all these chips are working together, you need timing chips to make sure that all this data transmission is synchronized. So you need these timing chips. And this is what SciTime does. You can see the earnings and the revenue down at the bottom. I mean, this is a company that is a legitimate growth story here. Thinly traded, 324 ,000 shares a day, but it is a high-priced stock here.

11:25Alissa Coram:You can see you started highlighting the growth at the bottom here, the triple-digit earnings increases in recent quarters. Look at the top-line growth. They did$113 million in revenue in the fourth quarter. Nice, strong earnings move that you noted recently. And then just a low-volume pullback, kind of testing the top of this prior base in that 387 pivot. If we look at the weekly, just look at the weekly chart here. Yeah. And you can see this is not a tiny company either. It's a market cap of a little over$10.5 billion. So it's firmly a mid-cap stock here. It's not in a late-stage move here. I think it's a really, really interesting company.

12:09Alissa Coram:Maybe it'll come down and touch that 10-week line and make a test here. But, you know, really nice relative strength line. This company was featured in the New America by Patrick Seitz back in early September. So you can go into the archive at investors.com and read about them. But, you know, niche companies are worth paying attention to. There are a few other companies that are involved in timing chips. But Sightime is, again, they're kind of a niche player and really growing well. And it seems like they've got some good growth ahead of them. So interesting name that not many people have heard of.

12:52Ken Shreve:Yeah. Well, thanks for giving us the lowdown on that. We also want to point out, this is what I really like about it, these blue volume spikes on the weekly. Always good to point that out. Absolutely. All right, let's move on to Alcoa forming a base here, working on its fourth up week in a row here, right around the 60 level. Ken, one could argue a trend line also could be drawn on this chart. What are you seeing here?

13:26Alissa Coram:Yeah, I talked about this one on IBD Live this morning, sort of a continuation of we talked about Southern Copper in the same industry group. Yes, earlier this week on IBD Live, but Alcoa is basically an aluminum giant. And this is just sort of a pullback to the 50-day moving average after a breakout. Now, again, what I mentioned earlier this morning is, you know, when you see a stock pullback to the 50-day moving average, typically you like to see that pullback in light volume. And this was not really a pullback in light volume. There was quite a bit of heavy downside volume when it pulled back.

14:05Alissa Coram:And this actually negatively impacted its accumulation distribution rating. The accumulation distribution rating you see is E, which is the worst possible, and it's just hurt by a lot of higher volume declines. Now, it didn't lose a whole lot of ground. It really only corrected about 10 % when it pulled back to its 50-day moving average, so it didn't correct a whole lot. But it's finding support. And you look back over the past five or six days, it managed to close off lows. When it did pull back, it kind of rallied off lows and closed up near highs. So there were buyers in there supporting lifting the stock off lows.

14:44Alissa Coram:And then back to the weekly chart here, you know, this is it's just showing some tight, tight weekly closes over the past few weeks. It's just a nice little seven week consolidation taking shape here. So I could see this, you know, eventually starting to retest that prior high. So we'll keep this one on the watch list and see if it can form a proper base. But I like the way the setup is taking shape here. Support holding at the 10-week moving average. It's a cyclical stock, obviously, Alcoa. So you're going to have some choppy earnings and sales. But technical setup is strong here. And that mining metal or is industry group.

15:23Alissa Coram:You can see number six out of 197. So there's a lot of good strength and top-performing stocks in this group as well.

15:32Ken Shreve:Absolutely. Okay, let's round things out with a look at road. This is Construction Partners, and this building heavy construction group is ranked number 20 out of the 197 groups that we track. It's not number six, but 20 is still pretty good there. We did have a recent breakout here. The right side of the base fueled in part by the earnings report and a pullback. This isn't a proper handle, Ken, because it technically did clear that left side high. But I think we can call this a high handle here in the stock up 6.4 % today.

16:08Alissa Coram:Yeah, and it's technically trying to reclaim that left side high of 138.90 here. So I really look at the stock as still kind of actionable here. You could wait for it to kind of climb over that 140 level as well. This is a company that operates in the Sunbelt area, Alabama, Florida, Georgia, South Carolina. They're basically a civil infrastructure company, as the ticker would indicate, ROAD. So they're involved with roads, highways, airports, but excellent fundamentals as well. You look at the revenue growth down along the bottom of the chart, 44%, 67%, 51%. So they're growing like gangbusters.

16:52Alissa Coram:Great annual earnings estimates. Had a really nice earnings move that fueled a move over that 120 level. And it's just been kind of, you know, biding time right at the top of this base. made a nice higher volume gain today. And again, just kind of flirting with breaking out over that left side high. So, you know, 138.90, kind of trying to reclaim that pivot. You could wait for it to, you know, break out again over that recent high. But this name is still setting up here. Composite rating of 99, really strong accumulation distribution rating of B+. And again, the industry group is very, very strong.

17:32Alissa Coram:Lots of leaders in this group as well. This is not really an AI-adjacent picks-and-shovels data center play, but this group is filled with a lot of sort of AI-adjacent stocks. But construction partners, outstanding fundamentals, and pretty good fund sponsorship as well. So still seeing a lot of great stocks out there with good fundamentals and good technicals. So even though the market alley is a little bit wobbly here with the indexes below their 50-day lines, again, still seeing some good setups out there. So I have to keep paying attention.

18:11Ken Shreve:Absolutely. So with the setups that we talked about and with the stocks that are potentially actionable right now, how are you handling new buys in this market, Ken, with the market conditions that you went over?

18:22Alissa Coram:Yeah, well, my colleague Dave Chung and I, we manage the leaderboard model portfolio. We've been very, very hesitant. We're only about 51%, 52 % invested right now. So on an update like today, we did increase a position in a biotech ETF today. But we've been very, very cautious. You know, we didn't we're not really, you know, just putting money to work aggressively in this market. We raised our invested percentage from 51 and a half percent, maybe up to about 55, 56 percent today. So not aggressive at all. But we're seeing we see some opportunities. We may increase exposure a little bit. But right now it seems 40 to 60 percent seems to be a good range.

19:15Alissa Coram:But really, we want to see, like I said, we want to see that NASDAQ eventually start a new uptrend here. But as long as it's below the 50-day line, we're going to sort of just be cautious until we see the technicals improve a little more.

19:33Ken Shreve:Yep. I'm right there with you, Ken. Thank you so much for your perspective today. Always appreciate it. And thanks so much, everyone, for tuning in. And that is it from us for today. Thanks so much for the warm welcome back. It's great to be with you all and looking forward to seeing you on IBD Live tomorrow morning as well as Stock Market Today on a regular basis once again. So I will see you then along with the rest of the team.

20:35Ken Shreve:Thank you.