The Dow Jones futures will open on Sunday night, along with the S&P 500 and Nasdaq futures. The stock market rebound came under pressure last week, with Nasdaq and speculative growth names most affected.
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Teslarival of (TSLA) Nio (NIO) and Zoom Video Communications (ZM) reports earnings on Monday, but the two big winners in 2020 are a long way from the highs, along with Tesla’s own shares.
This is a time to be on the defensive and look for actions that are holding up well. Taiwan Semiconductor (TSM), General Motors (GM), HR (HR), Target (TGT) and InMode (INMD) is worth watching to see if they can form adequate bases while the market is resolved.
The market recovery, under pressure, is at an inflection point. Recovering key support levels would be a sign of renewed strength. But a Nasdaq break below last week’s low would send a bearish signal.
Tesla’s stock and Taiwan Semi are on the IBD Leaderboard. Tesla’s and TSM’s shares are at IBD 50. RH was Friday’s IBD day stock.
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Dow Jones Futures Today
The Dow Jones futures will open at 6 pm ET on Sunday, along with the S&P 500 and Nasdaq 100 futures.
Remember that overnight action on Dow futures and elsewhere does not necessarily translate into real trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks at the stock market’s high on IBD Live.
Coronavirus News
Coronavirus cases worldwide reached 113.98 million. Deaths from Covid-19 reached 2.52 million.
Coronavirus cases in the US reached 29.13 million, with deaths above 523,000.
An advisory panel on Friday recommended that the FDA give emergency approval for the Johnson & Johnson (JNJ) coronavirus vaccine. The FDA is expected to approve the single vaccine immediately. This will provide another boost of momentum for vaccination efforts.
Vaccinations reached a record 2.2 million on Friday.
Stock market rally
The stock market rebound had many intraday fluctuations, with major indices ending in a notable decline, close to weekly lows.
The Dow Jones Industrial Average fell 1.8% in last week’s stock market trading, after reaching a record high on Wednesday. The S&P 500 index fell 2.5%. The Nasdaq compound fell 4.9%.
The 10-year Treasury yield rose 9% to 1.46%, after briefly reaching 1.6% on Thursday. While it is good news for many finances, the higher rates weighed on growth stocks.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 6.6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 7.8%. IShares Expanded Tech-Software Sector ETF (IGV) fell 6.8%, with Zoom Video’s inventory being a key component. The VanEck Vectors Semiconductor (SMH) ETF fell 5.1%, with TSM shares at the top.
Reflecting stocks of more speculative stories, Ark Innovation ETF plummeted 14.8% and Ark Genomics ETF 13.8%. Tesla’s shares are the largest stake in Ark Invest’s ETFs.
Nio, expand earnings with a touch
Chinese EV maker Nio and video conferencing leader Zoom Video reported earnings on Monday. Nio’s earnings and delivery forecasts will be closely watched as competition heats up in China’s EV market. Zoom Video is expected to experience yet another quarter of tremendous growth, with investors eager for insights into the company’s prospects as we move into a post-pandemic world later this year.
Zoom’s shares plunged 10.5% last week, to 45.78, below its 10-week line. The stock found support in its 200-day moving average on Friday. Investors who took advantage of the huge gains in 2020 and still hold shares in ZM may choose to remain strong, but otherwise there is no strong reason to take a position now.
Nio’s shares plunged 17% last week to 373.61, now 16% below its 10-week line. This is a decisive break and a strong sell signal, especially with available earnings. Long-time holders with huge profits could choose to keep some shares in the earnings report.
As for Tesla’s shares, the EV leader slid 13.5% to 675.50. It is now 14% below its 10-week line. He gave up almost half the earnings from his powerful November high. As with Nio, TSLA stock investors should probably have made at least partial profits by now.
Actions to watch
TSM’s shares fell 7.8% to 125.94 last week, but found support in the 50-day and 10-week moving average, rising on Friday. In a strong market recovery, investors may be looking for a recovery as a buying opportunity. But for now, investors should probably wait for TSM’s shares to finish a new base while the market recovers.
General Motors sank just 2.4% last week to 51.33, but also found 10-week line support, jumping slightly higher on Friday. It may soon have a new base, after reaching a historic record in early February.
The HR stock fell 2.9% to 490.37 last week, testing its 50-day and 10-week lines. It has a flat base with a 542.11 point of purchase.
Target stock fell 2.9% last week to 183.40, below its 50-day and 10-week lines. But it is still inside a flat base with a 200.06 point of purchase. The desired gains expire on Tuesday morning.
InMode’s shares fell 0.2% to 68.96 and rose 2.7% on Friday. The shares have been trading steadily in recent weeks, after reaching record highs. INMD’s actions found support on the 21st a few times in the past few weeks. The relative strength line is at record highs. INMD’s stock needs to form a base, but the action has been very strong.
Bullish stock market analysis
The main indices fell last week, especially the Nasdaq compound. The high-tech index tried to recover its 50-day moving average on Friday, but failed to close above it amid strong sales at the close. In addition, the volume was much lighter on high days than the negative side.
For much of the week, the stock market recovery looked like it could be a violent turn from the speculative growth sector to cyclical names in the real economy. The Dow Jones breaking a record on Wednesday provided further evidence.
However, the Dow Jones and S&P 500 fell sharply from Thursday to Friday, barely closing above their 50-day lines.
All major indices are below their 21-day exponential moving average. The 21-day line served as support for Nasdaq during the April-September stock market hike and the post-election market hike. But in the past few days, it served as a resistance.
On the downside, Tuesday’s intraday low for the Nasdaq looks large. This minimum is essentially at the level of 13,000 and the minimum of January 29. A close below that area would likely mark the end of the current stock market rise. But we are not there yet.
What you should do now
Investors should be cautious about making new purchases until Nasdaq is again above its 21-day line. You must have reduced your exposure substantially in the past few weeks. If the Nasdaq declines and closes below Tuesday’s low, that would be a signal to move further into cash.
Analyze your possessions. Are there any stocks that you should have sold partially or fully in the past week? What are your long-term bets in which you want to maintain a central position?
Even if you are totally in cash, it is important to stay involved. Work on your watch lists, focusing on bullish RS stocks like Taiwan Semiconductor and Target.
Check out the Relative Strength list on new highs on the IBD Stock Screener. Also use the RS Line At New High and RS Line Blue Dot stock lists on MarketSmith.
Make sure you are looking at moves, finances and other cyclical aspects related to commodities.
Review your negotiations for the past few months. Look at your big winners and losers. Look for stocks that you owned and sold too early, losing big winners. Identify the chart’s patterns and the strengths and weaknesses of your trading movements.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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