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Stocks Off; Apple, Broadcom Cool; Will Tesla Form A New Base?

DATE POSTED:November 14, 2017

Biotechs and megacap techs helped lead stocks moderately lower in Tuesday afternoon trading, and volume was running higher vs. Monday on both exchanges. The action suggests that institutional investors were actively taking profits.

XAutoplay: On | OffIf the Nasdaq composite, currently down nearly 0.3%, finishes at least 0.2% lower and volume climbs vs. the prior session, the leading index will have chalked up a seventh distribution day, a clearly elevated level. However, none of the six distribution days already logged in recent weeks showed a decline of 1% or more.

Read more about why the distribution count matters in IBD's flagship daily markets analysis, The Big Picture.

At 3:45 p.m. ET, the Nasdaq was off as much as 0.7% before paring losses. The S&P 500, also off 0.7% in the early going, was down less than 0.3%. Gains in telecom, food and utility shares helped offset a big slide in the oil patch and commodity stocks. U.S. oil futures at one point fell more than 2.6% but edged up to $55.73 a barrel, still down 1.8%.

The Dow Jones industrial average fell less than 0.2%, a small drop considering at least six of the 30 components dropped 1 point or more.

Market breadth is negative in the stock market today. Losers are outpacing winners by more than a 3-2 margin on the NYSE. The NYSE's advance-decline line has begun to slope a bit lower.

The Nasdaq's advance-decline line is in its fifth week of sloping lower, a negative sign.

Tesla (TSLA), which is struggling to get up to speed with delivering its highly anticipated Model 3 family sedan, eased 2% to 308.67 in flat volume and gave back half of Monday's big rebound. Investors are eager to see Thursday's unveiling of a Tesla commercial-grade semi truck.

Tesla's revenue rose 30% to $2.98 billion in the third quarter, but the Palo Alto, Calif., company also lost a record $2.92 a share, its biggest loss for any single quarter. Tesla, still a large cap with a $51 billion market value, has 168 million shares outstanding.

Watch to see if Tesla can rebound back above the 200-day moving average. At 309, Tesla is currently 21% below its 52-week high of 389.61. Given sharp gains since its April 2013 breakout, the current decline is reasonable enough for a potential new base, such as a cup or a double bottom, to form.

Apple (AAPL) slipped for a fourth session in a row, sinking 1.5% to 171.34. But volume was running much lighter than a normal, a good sign for those who bought at the most recent 160.97 breakout point in an eight-week cup with handle.

The gain from the most recent proper entry is now 6.4%, so shares are still too far extended to buy. After a stock breakout, the stock should be bought at a price no higher than 5% past the proper buy point, or in Apple's case, it would be 169.02.

The iPhone and iMac titan has also lifted its gain from a first-stage cup with handle breakout at 118.12 to more than 45%. Apple broke out of that base on Jan. 6-9, just a few weeks ahead of strong fiscal Q4 results for fiscal 2016.

Broadcom (AVGO), which is reportedly seeing a rejection in its offer to buy fellow semiconductor heavyweight Qualcomm (QCOM), dropped around 1.3% in dull turnover to 261.89. Shares had jumped past a 259.46 buy point in a decent, shallow flat base.

On the downside, new IPO NCS Multistage (NCSM) got trampled by sellers, falling more than 20% to 16.16 in heavy turnover. The member of IBD's oil and gas field services group notched a third-quarter profit of 9 cents a share vs. a 2-cent loss a year earlier and revenue of $56 million, up 95%.

Shares in the thinly traded small-cap energy play went public April 28 at 17 a share.

Canadian oil and gas exploration, oil field services, drilling, U.S. oil exploration, oil equipment and international oil exploration stocks all fell 2% or more as a group. See the daily performance of all 197 IBD industry groups and subgroups by going to Data Tables, found at Stock Lists in Investors.com.

IBD's TAKE: The IBD 50 has showcased companies that are the new powerhouses of the U.S. and global economy. Institutional investors seek to find firms with exceptional earnings and sales growth, an outstanding product or service, and the highest pretax margins and return on equity in their industries. As seen in a graph on page B4 of the IBD Weekly newspaper edition, the price-weighted IBD 50 shows a total return of 750% from April 11, 2003 to Dec. 31, 2016, equal to an average annual gain of 16.9%. The S&P 500 has risen 242% over the same period.

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