A broad sell-off in the software sector turned the Nasdaq composite into a rare underperformer in stocks today. At 3:30 p.m. ET, the Nasdaq eased less than 0.2% but the Dow Jones industrial average rallied 0.7%. Hot new Chinese IPO iQiyi looked set to snap a huge four-week winning streak.
XRed Hat (RHT), the expert in open source business software, gapped well below the 50-day moving average and plunged 12% in huge turnover despite posting decent fiscal Q1 results (EPS up 24%, revenue up 20%). The big drop triggered a sell signal for new shareholders.
Those who have a large profit cushion in the stock could afford to wait. Why? The stock still trades above its long-term 200-day moving average.
Red Hat's desktop software industry group fell 4.9%, the worst among 197 industry groups tracked by IBD each day.
Strength in the oil patch helped the Dow Jones industrials' cause following OPEC's decision to raise output by 1 million barrels a day.
The S&P 500 rose nearly 0.4%. But at 2759, it's poised to fall nearly 0.7% for the week. The large-cap benchmark rallied a combined 2.5% over the prior four up weeks.
The small-cap S&P 600 edged 0.2% lower. But at 1039, the index still boasts a solid 11% gain since Jan. 1. (For updates on this story and other market coverage, check Stock Market Today.)
Chevron (CVX), San Ramon, Calif.-based integrated oil and gas titan, at one point rose almost 4 points to 126.57. It continues to etch the right side of a potential cup with handle.
The Street sees Chevron growing its earnings 114% this year to $8.10 a share, then adding 4% to $8.40 in 2019. In the past four quarters, revenue has boosted 18%, 20%, 19% and 13%.
The Bulls Return To Oil
U.S. crude oil futures soared more than 4.5% to $68.52 a barrel. Among IBD's daily ranking of 197 industry groups, oil-related groups held seven of the top 10 slots in terms of gains. Drilling, U.S. exploration and production, Canadian E&P, field services and oil and gas machinery firms rallied 2.8% as a group or higher.
See the daily performance of all 197 industry groups by going to Data Tables in the Stock Lists section of Investors.com.
Marathon Oil (MRO), a former energy play on IBD Leaderboard, jumped more than 7% to 21.43 and erased Thursday's sharp losses. The stock is also triggering a follow-on buy point by rebounding off its 10-week moving average near 20.29.
That price level, as seen in a weekly chart, is above the integrated oil and gas firm's original breakout point of 18.76. On May 3, the stock broke out of a perfect 13-week cup with handle. To find the correct entry, add 10 cents to the highest price within the handle, or 18.66 + 10 cents.
Marathon has ended a long drought on the bottom line with earnings of 7 cents and 18 cents a share in the past two quarters. The Street is forecasting Q2 profit of 18 cents a share vs. a net loss of 24 cents in the year-ago quarter.
Revenue jumped 26%, 23% and 62% in the past three quarters.
Marathon is a classic turnaround play. Watch to see if its IBD ratings continue to improve, as seen in Stock Checkup.
Meanwhile, amid a correction in China mainland equity indexes, the hot money seems to be taking more profits in the country's streaming video firms.
Sell Or Hold?
IQiyi (IQ), dubbed the Netflix of China, bounced hard off Friday's low, but still fell nearly 3% to 37.92.
At that price, iQiyi still carries a terrific 84% gain after thrusting past a 20.60 buy point in a narrow IPO base. Shares went public March 29 at 18 a share.
Those who have long-term conviction in the online video platform can decide to hold through the next inevitable correction. In the IPO base, iQiyi fell 23% from high to low.
Short-term traders could decide to lock in gains if the stock struggles to hold above the 10-day moving average, currently at 39.19.
Another technical price level to watch: the medium-term 50-day moving average. It's rising fast, but at 24.90 the 50-day line is still sharply lagging iQiyi's share price.
Outstanding stocks, after breaking out of sound bases, often pull back to the 50-day or 10-week moving average as some institutional investors lock in profits. But in a solid market uptrend, the 50-day line can offer a follow-on buy point.
One Of The Worst Sector Performers Friday
In the software sector, Dropbox (DBX), Ultimate Software (ULTI), ServiceNow (NOW) and Salesforce.com (CRM) all dropped 1% or more.
Dropbox fell below its prime entry of 34.93 after clearing its own IPO base last week, triggering a sell signal. The cloud-based data storage play went public in March at 21 a share.
Elsewhere, the Dow utility average rallied nearly 0.7% as the yield on the benchmark U.S. Treasury 10-year bond looks headed to finish below the critical 3% level for a fifth week in a row.
At 695, the Dow utilities still lag the key equity indexes with a 4% loss since Jan. 1.
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