The stock market today sought to trim losses during late-afternoon trading, but key indexes still fell for the day. Volume jumped, early data showed. The Dow Jones Industrial Average led the effort, falling nearly 0.5% by day's end after sinking as much as 1.3% in the early going. However, database software firms remained in a trampled state following a dour third-quarter sales outlook by Datadog.
DDOG stock gapped down at the open and slashed through its 50-day moving average in heavy turnover, a key sell signal. Datadog shares closed Tuesday with a 17% slide to 88.04. Volume hopped 529% higher than its average daily figure over the past 50 sessions.
On a weekly chart, the stock fell short of testing its 40-week moving average. However, Datadog fell more than 7% below a recent buy point in a large first-stage cup with handle.
That big loss triggered the golden rule of investing.
Elsewhere, a couple of new IPOs showed positive action.
Two Restaurant IPOs: Watch These Price Levels
First Watch Restaurant, which specializes in breakfast and brunch fare and is closed for dinner, traded near break-even after posting gains in three of the prior four weeks.
Bradenton, Fla.-based First Watch reported 160% growth in second-quarter earnings to 13 cents a share as sales picked up 17% to $216.3 million. And Gen Restaurant, started by two Korean immigrants in Los Angeles, beefed up its weekly gain to 6.8%.
Going back to First Watch: The small-cap growth stock has made quite a comeback after diving more than 55% from its 25.46 peak after the stock got priced at $18 a share during its late September 2021 initial price offering. FWRG is trading within a buy zone after clearing an early entry point at 18.79.
The 5% buy zone for First Watch Restaurant goes up to 19.29.
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GENK shares shot 4.6% higher to 20.22, good for a closing high. The small-cap priced its offering at $12 a share in June.
Gen Restaurant is now trying to clear upside resistance at 20.
Please see this Investor's Corner on how to analyze an IPO base.
The Dow Jones industrials, which appeared to find support near 35,000, performed better than smaller issues Tuesday. The Russell 2000 slid 0.6%, while the Nasdaq composite lost 0.8%. The tech-heavy Invesco QQQ Trust sank nearly 0.9%. And the S&P 500 trimmed its decline to around 0.5%.
The S&P 500 continues to hold a solid cushion above its sharply rising 50-day moving average.
Volume was running higher vs. the same time Monday on both main exchanges. Thus, the stock market looked poised to add a new distribution day.
Please read this IBD Big Picture column, published last week, on why heavy distribution — IBD's jargon for intense institutional selling — helped contribute to a downgrade in the current outlook for growth stocks.
Within the Dow Jones industrials, at least three of the 30 components bucked the decline with gains of 1 point or more.
Caterpillar, which has gotten some airplay lately on IBD Live, rallied off morning lows and added 0.4%. At last week's high of 293.88, the construction, mining and oil and gas equipment titan has made a nifty 17% profit since shares rolled past a 250.89 correct buy point in a five-month cup with handle.
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Also In The Dow Jones
Another Dow Jones industrials component, Amgen, gapped up for the second time in three sessions.
Shares in the biotech giant rallied more than 3% and hit a session high 263.79. The stock cruised past a 256.44 entry in a base that features the elements of a double bottom.
Notice how the 53 Relative Strength Rating reflects the stock's poor performance so far in 2023. Ideally, you want to select stocks with an RS score of 80 or higher.
CAT holds a 92 RS Rating. Four weeks ago, just before its July 11 breakout, Caterpillar held a respectable 86 score.
Year-To-Date Check
Datadog is part of the enterprise software industry group. Headed into Tuesday's trading, the group ranked a strong No. 26 among 197 industries tracked by IBD in terms of six-month price-weighted performance.
The group fell 3% on Tuesday and undercut its rising 50-day moving average. The industry group's year-to-date gain in recent weeks has been shaved to just over 12.1%.
In contrast, the S&P 500 has now begun to outperform with a 16.9% advance since Jan. 1.
The Nasdaq composite, at 13,869, holds a stout 32.5% gain over the same time frame.
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Please follow Chung on Twitter: @saitochung and @IBD_DChung
