Netflix, Chevron, Stamps.com Stocks Are Just Below Buys In This Classic Pattern; S&P 500 Futures | Stock News & Stock Market Analysis

What do Netflix (NFLX), Chevron (CVX) and Stamps.com (STMP) share in common? They are all near buy points in a cup-with-handle base, one of the most common bullish consolidations.

XAutoplay: On | OffCompanies and stocks will change, but human nature doesn’t. That’s why certain bullish patterns reappear through history that signal a higher likelihood of success for a stock that clears the consolidation.

The cup with handle, which should look a lot like a teacup, must be at least seven weeks long. (A cup-without-handle pattern must be six weeks.) The midpoint of the handle must be in the upper half of the overall pattern. The handle, which must be at least five days long, should be flat to downward-sloping, ideally on light volume. A slight downward drift helps shake out weak holders before a new uptrend. If and when a stock breaks out from the handle, new buyers must bid up the price because existing investors aren’t eager to sell.

During Monday’s stock market trading, the S&P 500 index, Nasdaq composite and Dow all hit record highs.

Futures for the S&P 500 index, Nasdaq 100 and Dow industrials were little changed late Monday.

Looking ahead to Tuesday, investors will react to third-quarter production and delivery figures from Tesla (TSLA). While the overall output and shipment figures were in line with analyst expectations, Tesla produced just 260 Model 3 sedans in Q3. Tesla blamed bottlenecks. But that doesn’t bode well for the electric automaker’s goal of Model 3 mass production by year end. Tesla shares fell 2% in late trading.

Meanwhile, Lennar (LEN) will report earnings before the market open. Analysts expect flat EPS and a 14% revenue gain as the builder works its way through a consolidation. Several other homebuilder stocks are at or near buy points.

Netflix

Netflix has been consolidating in a cup base since July 21, really a base on top of a prior flat base. The internet TV giant formed a handle last week, helped by the Sept. 25 tech stock sell-off that acted as a shakeout. That handle lowers the buy point slight to 190.05.

Netflix at the time found support at its 50-day moving average and edged a little higher. On Monday, Netflix fell 2.4% to 177.01, dropping modestly below its rising 50-day line.

Just because Netflix has formed a cup-with-handle base is no guarantee that it will break out. Netflix could fall back if mutual funds and other big institutions don’t step and support and propel the stock forward.

Netflix is a member of Leaderboard, IBD’s premium service focusing on a handful of stocks, mostly growth plays, providing annotated chart analysis.

Chevron

The Dow energy giant fell 7 cents to 117.43, closing near session highs after falling as low as 115.53. But Monday’s action marked the fifth day for Chevron’s handle, which now is fully formed, creating a 118.43 buy point.

Chevron has been consolidating since late December, as crude prices pulled back from recent highs and then began to rise again. Chevron’s fortunes, like those of other oil companies, is largely tied to that of crude futures. U.S. crude, which topped $52 at one point last week, is back to testing the key $50 level once again.

Stamps.com

Stamps.com rose 4.4% to 211.60. That’s just below its 212.75 buy point, which is above its handle in a cup base going back to Aug. 7, following a post-earnings surge. Stamps.com is a member of the IBD 50.

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