Dip buyers snapped up stocks to start the week with the NASDAQ, DOW and S&P 500 each up at least 1.5%. The tech-heavy NASDAQ led the way, gaining more than 200 points, finishing Monday’s session with a 1.87% gain. You know how much we love it when the NASDAQ leads the way, especially forward.
Monday’s upswing brought a number of favorable developments along with the sizable gains, the big three indexes broke a September long downtrend, moved our momentum model to borderline buy (a little bit higher from here is all it will take), the NASDAQ and DOW finished the day above their respective 50-day moving averages (the S&P 500 need another three points to make it three for three.)
Before we get too carried away, there is a chance Wall Street could take a little away from the fast start before the revving the buying engine again. The indexes gapped higher at the open, the NASDAQ’s final print on Friday was 10,913.60 and 11,084.40 was the new week’s first print for the index. The difference is what’s called a gap, in this case up.
Many times, gaps are filled, meaning prices revert to the previous day’s closing price before resuming the direction of the gap. Again, up in this case. So, we would not be surprised to see the NASDAQ flirt with 10,913ish, the DOW with 27,200ish and in the neighborhood of 3,300 for the S&P 500.
Sometimes, a gap can be a reversal point that marks the end of trend and the beginning of a new trend without backfilling the gap. If the indexes close higher on Tuesday than Monday’s intraday highs, then it’s highly possible that Monday’s move was a reversal from the September swoon.
Index investors might think about adding Invesco QQQ Trust (QQQ) when either of the scenarios outlined above materialize.
First Trust Dow Jones Internet Index Fund (FDN) was the second-best performing exchange traded fund (ETF) in the last week, according to our sector scorecard. FDN gained a touch more than 2% in the last week and we like what we see on its chart.
Much like the NASDAQ and DOW, Monday’s action took the ETF to the better side of its 50-day moving average, broke a downtrend line, produced a technical buy signal (bullish MACD Crossover) and relative strength is on the rise.
If Wall Street keeps pushing prices higher, we could see First Trust Dow Jones Internet Index Fund (FDN) returning to its 52-week of $207, set on September 2nd.
Veeva Systems Inc. (VEEV) is one of our favorite stocks at the moment in the FDN portfolio. The Health Information Services company provides cloud-based software for the life sciences industry. VEEV offers investors one of the top ROIs (return on investment), sales, earnings growth, and stock chart profiles of First Trust Dow Jones Internet Index Fund’s 41 equity holdings.
Wall Street analysts see sales rising 28.7% this year and 19.8% next year. Additionally, earnings per share (EPS) are slated to increase to $2.68 this fiscal year form $2.19 last year and to $3.09 next year. (1) Earnings and sales growth on the back of a health ROI of 15.78%, a number that might impress Warren Buffet (he reportedly looks for companies with at least a ROI of 15%.)
Shorter-term, VEEV’s stock chart suggests the stock could be on the move higher right now. Upward momentum is accelerating on strong volume, along with a bullish technical buy signal (same MACD crossover as FDN).
VEEV could be appropriate for higher risk investors/traders who are willing to accept a lot of volatility.