The stock market doesn’t care about your opinions. The stock market doesn’t care about what was true yesterday, only what’s true right now. As an investor, you need to set aside your preconceptions and be ready to adapt to changes in the market direction and individual stocks. Apple (AAPL), Alibaba (BABA), Facebook (FB), Boeing (BA) and Taser maker Axon Enterprise (AAXN) have all gone through good times and bad.
Apple is now a leading stock, but it just a few weeks ago it had been lagging the S&P 500 index for months. Alibaba and Facebook had long slumps soon after their IPOs before big runs. Boeing moved sideways for years before suddenly becoming the biggest Dow Jones gainer in 2017. (Alibaba, Facebook and Boeing are once again in a state of flux.) Much-smaller Axon Enterprise went through a years-long slump before doubling in the last few months.
As for the the major stock market averages, the S&P 500 index rose for 14 out of 15 months before stock market volatility returned. The S&P 500 and Dow Jones struggled to move and hold above their 50-day moving averages since early February, but they did so last week.
Bottom line, if you want to make a dime in the stock market, you have to be ready to change on a dime.
Apple
Go back to April 27. Apple’s stock had fallen through its 50-day and 200-day moving averages amid growing signs of flagging iPhone demand. The relative strength line, which tracks a stock’s performance vs. the S&P 500 index, was falling. The RS line had peaked in early November and hadn’t made progress over the past year — or the past five.
At this point, investors had every reason to be wary of Apple.
But then Apple went on a nine-day, 17% winning streak, which only ended Friday with a 0.8% dip. Early in that run, Apple reported better-than-expect profit and announced a $100 billion stock buyback. A few days later, Warren Buffett announced that Berkshire Hathaway (BRKB) had bought another 75 million shares of Apple in the first quarter, bringing its total stake to nearly 5%. That sent Apple stock blasting through a double-bottom base and to a new high on May 4. Its RS line also set a record high.
IPO shot up at the open of its May 2012 debut, but closed near session lows and just above its 38 IPO price. Facebook then slumped for months, hitting 18.03 in August. Remember, back then it was unclear if Facebook would successfully transition to mobile in terms of users and especially ad revenue. The stock looked like an overhyped IPO bust, much like Snapchat operator Snap (SNAP) has since its 2017 debut.
Facebook didn’t break out of a base until July 2013. It didn’t set a new high until September 2013.
Since then Facebook has been on a huge run, back by mammoth earnings and revenue growth.
More recently, the RS line trended lower since November. Facebook crashed in late March over the Cambridge Analytica scandal. Shares have rebounded since then. But after retaking its 50-day and 200-day lines on April 26, the stock has risen in low volume.
On Friday, Facebook stock rose 0.8% to 186.99. Technically, Facebook cleared an odd-shaped double-bottom base, but the weak volume and price gain raises concerns.
Low-volume breakouts can work, but a strong gain in heavy trade would be encouraging.
Alibaba
Alibaba came public at 68 in its September 2014 debut, but jumped to an intraday peak of 99.70. The fast-growing Chinese e-commerce giant pulled back for a few weeks, then rallied and cleared an IPO base with a 99.80 entry. The stock ran up to to 120 by November 2014. Great stock, right?
But shares actually reversed sharply lower on that November 2014 record day. By year-end, Alibaba was below its 50-day line. The stock kept falling until September 2015, when it finally bottomed at 57.20, more than 50% below its all-time high and undercutting its IPO price. Terrible stock, right?
The top Chinese stock then underwent a long consolidation. Shares finally broke out in August 2016. That worked for a while, but shares then nearly roundtripped the buy point. Shares set up and broke out again in February 2017, triggering months of outperformance vs. the S&P 500.
More recently, Alibaba has moved sideways. Much like Apple, its RS line has been flattish for months, trending vaguely lower since November peak. But since April 25, the stock has trended upward, approaching a double-bottom entry. Unlike Apple, it has not broken out and its RS line is not at highs.
Investors should keep an open eye and open mind about Alibaba.
Boeing
Boeing moved sideways from late 2013 to late 2016. Its RS line trended slightly lower. Dead money?
As it turns out, the Dow Jones aerospace giant was finally ready for takeoff.
Boeing shares broke in October 2016 in its heaviest daily and weekly volume in eight months, on better-than-expected earnings. The RS line was at consolidation highs. Boeing also broke out of flat bases in January 2017, again in the spring and once more in late summer. Boeing went on to be the top Dow Jones stock in 2017. Shares kept rallying and outperforming through February.
The stock pulled back, falling below its 50-day two weeks later. Boeing has largely traded below that level since then, though it reclaimed that support last week. It’s working on a new consolidation. Its RS line is off highs, but not radically so.
Axon Enterprise
Axon Enterprise, formerly Taser, ran up from 2012 to June 2015. The stock then sold off until January 2016. It rallied somewhat, but then moved sideways into early 2018.
Once known for its Taser guns, the renamed company is focusing on body-worn cameras and data storage of that footage.
Axon briefly cleared a long cup-with-handle in mid-February, pulled back to its 50-day, but entry still valid.
Then Axon reported blowout earnings, sending the stock skyrocketing 28% on Feb. 28. Well above the buy zone, the breakway gap offered a buying opportunity. The stock has kept rising and hasn’t formed a new entry point. Axon blasted 22% higher on Wednesday following her latest earnings, then rose into the end of the week.
In less than 3 months, Axon stock has more than doubled.
