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NEW YORK — Wall Street rallied to its best day since June on Wednesday after pressure that’s built up on stocks from the bond market relaxed a bit.
The S&P 500 climbed 1.1% to trim its loss for what’s been a dismal August so far. The Dow Jones Industrial Average rose 184 points, or 0.5%, and the Nasdaq composite jumped 1.6%.
Big Tech stocks and others that benefit from easier interest rates led the way. They got some relief as the 10-year Treasury yield eased back further from its highest level since 2007 after a report suggested the U.S. economy may be cooling.
Specialist John Parisi, left, and trader Fred DeMarco work Wednesday on the floor of the New York Stock Exchange. Wall Street was drifting Wednesday ahead of a profit report that could show whether the frenzy this year around artificial-intelligence technology is deserved or overdone.
A 2.2% gain for Apple’s stock and 1.4% climb for Microsoft shares were two of the strongest forces pushing the S&P 500 upward.
Nvidia, another one of the market’s most influential stocks, rallied 3.2% ahead of its highly anticipated profit report.
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Nvidia and a handful of other companies were behind the majority of the S&P 500’s gains earlier this year. Many of those “Magnificent Seven” stocks also benefited from the AI frenzy.
They’ve been under more pressure recently, as yields crank higher in the bond market. When bonds are paying more in interest, investors feel less need to pay high prices for stocks and other investments that can swing sharply in price.
Treasury yields eased Wednesday, taking off some of that pressure. The 10-year Treasury yield fell to 4.18% from 4.33% late Tuesday.
A preliminary reading of U.S. services and manufacturing businesses eased to a six-month low, sending yields down across the bond market.
For now, softer-than-expected data on the economy may be good for financial markets. That’s because a string of surprisingly strong reports recently has raised expectations for the Federal Reserve to keep interest rates higher for longer. The Fed has already hiked its main interest rate to the highest level since 2001 in hopes of grinding down high inflation. But a still-solid job market and spending by U.S. households threaten to make it difficult for inflation to come down the last percentage point to the Fed’s target of 2%.
That’s why the main event of the week for markets could be a speech on Friday by Fed Chair Jerome Powell. He will be speaking at a Jackson Hole, Wyoming, event that’s been the setting for major policy announcements by the Fed in the past.
The two-year Treasury yield, which closely tracks expectations for the Fed, has also jumped recently, though it eased back like the 10-year yield on Wednesday. It fell to 4.94% from 5.05%.
All told, the S&P 500 gained 48.46 points to 4,436.01. The Dow rose 184.15 to 34,472.98, and the Nasdaq climbed 215.16 to 13,721.03.
7 proven strategies to identify potential breakout stocks and boost your investment portfolio
7 proven strategies to identify potential breakout stocks and boost your investment portfolio
A stock that surpasses its support or resistance level is considered a breakout stock. These levels represent the price points that the stock has struggled to move beyond during a specific period. Breakouts are seen as a strong indicator that the stock is likely to continue its upward trend.
However, identifying breakout stocks that will perform well in the future can be challenging. To spot potential winners, using a combination of analysis and intuition is necessary. It’s important to remember that investing in individual stocks can be risky, and there is no guarantee that a single stock will perform well. If you need help with your investment plan, a financial advisor can play a valuable role in helping spot potential breakout stocks by using their expertise to balance risk and potential rewards.
Bankrate has compiled seven ways to identify and profit from potential breakout stocks.
1. Look for companies with a competitive advantage
If you want to look for stocks that might exceed their resistance level, focus on companies with a competitive advantage. These companies are more likely to outperform their peers, increasing the chance of a breakout. Look for companies with patented technology, strong brand recognition or unique business models. All these factors could give them an edge over their competitors, boosting the chance of a stock breakout.
2. Watch for key market trends
Anyone who deals in stock trades should keep an eye on market trends, and breakout stock traders are no exception. By keeping an eye on market trends, you can identify sectors that may experience growth in the near future. Pay attention to areas where demand is increasing, and where there is room for new players to enter the market.
3. Monitor volume and price
One way to identify potential breakout stocks is by looking for those with increasing volume and price momentum. Breakout stocks often have a sudden surge in trading volume, which may indicate growing investor interest. Additionally, keep an eye out for stocks that are breaking through key resistance levels or forming bullish chart patterns, such as cup-and-handle, ascending triangles or flag patterns.
4. Identify companies with strong fundamentals
To identify promising companies, look for those with strong fundamentals, like increasing revenue, growing profits and positive cash flow. Those indicators suggest that they are doing well financially, and these companies tend to be more likely to break out. You can find these numbers in quarterly reports or with a web search for “(Company name) earnings.”
5. Track a stock’s relative strength
Even if a stock appears strong, remember that everything is relative. To evaluate a stock, it’s important to compare it to its sector or peers and ensure it is strong compared with other alternatives. Breakout stocks typically outperform the market and their sector, indicating the potential for further growth. The relative strength index (RSI) is a commonly used technical indicator for gauging the strength of a stock relative to its peers.
6. Keep an eye out for catalysts
Catalysts are recent developments that could drive stock prices upward. These could include successful product launches, favorable regulatory decisions or mergers and acquisitions. Also keep an eye out for positive earnings surprises and upward revisions in earnings estimates. As you can see, anything that creates a positive outlook for the company’s earnings can contribute to a breakout.
7. Exit at your target price
Once the stock reaches your target price, it is advisable to exit the position and take your profits. Typically, stocks that break out beyond their resistance levels often come back down shortly after. This is one reason why it’s important not to drag your feet when it comes to exiting the position. When that time comes, be sure to move on and look for your next opportunity.
Bottom line
Although identifying breakout stocks is not an easy task, it can provide your portfolio with a significant advantage. Look for companies that appear strong by checking their fundamentals, comparing them to the market, and by seeking out companies with a competitive edge. These are just some of the ways you can profit from breakout stocks that are set to break past their resistance lines.
This story was produced by Bankrate and reviewed and distributed by Stacker Media.
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