The Dow Jones futures rose slightly on Thursday night, along with the S&P 500 and Nasdaq futures. Roku (ROKU), Commercial counter (TTD) and Applied Materials (AMAT) presented the main earnings reports on Thursday.
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The stock market recovery again suffered sharp losses for growth stocks, but fell. With the market looking unstable, investors should stress test their portfolios.
Roku’s earnings were a surprise, while Trade Desk and Applied Materials also outperformed views. Roku’s shares have changed little and the Trade Desk has fallen slightly while AMAT’s shares burst overnight, close to record highs.
GameStop Stock frantic hearing
A congressional hearing on the GameStop stock frenzy took place Thursday. In addition to the spectacle of seeing aging politicians ask questions about the fast-food craze driven by social media, the GameStop audience seemed like old news.
GME’s shares fell 11% to 40.69. That is 92% below the January 28, 383 peak. Turnover has plummeted, especially daily dollar volume, as Reddit traders look at the next meme stock. The rise of GME’s stock was incredible, while its decline was inevitable.
Daily stock in the buying zone as an end to the Fed’s sanction
Recent breakout fight
While the stock market recovery is resisting a significant pullback for now, investors may want to be more defensive. One reason is that many recent purchase opportunities are not working, including Apple (AAPL), Nio (NIO), Datadog (DDOG) and Palantir Technologies (PLTR).
Apple’s stock fell more than 7% -8% from its 138.89 point of purchase, while also falling below its 50-day and 10-week lines. Datadog’s shares also triggered sell signals, despite Thursday’s gain. Nio’s shares fell more than 7% -8% from a basic buying point or a subsequent entry to break a bearish trend. Palantir shares, which twice rose significantly after a consolidation buy point, have plummeted 34% in the last six sessions.
Some recent escapes have been successful, including Microsoft (MSFT), parent of Google Alphabet (GOOGL), Nvidia (NVDA), ZoomInfo Technologies (ZI) and Wells Fargo (WFC), but they are generally holding instead of increasing power. The risk-reward for new purchases has been quite low overall.
The shares of Apple, Microsoft, Nvidia, ZoomInfo and Wells Fargo are on the IBD Leaderboard. Microsoft’s shares are in the IBD Long-Term Leaders. The shares of Nvidia and Google are on SwingTrader. The shares of Google, Nvidia, Trade Desk and AMAT are in the IBD 50.
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Dow Jones Futures Today
Dow Jones futures were up 0.1% against fair value. The S&P 500 futures were up and the Nasdaq 100 futures were up 0.1%.
Treasury Secretary Janet Yellen on Thursday again defended Biden’s stimulus plan.
Keep in mind that overnight action on Dow futures and elsewhere does not necessarily translate into real trading in the next regular stock market session.
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Coronavirus News
Coronavirus cases worldwide reached 110.79 million. Deaths from Covid-19 reached 2.45 million.
Coronavirus cases in the USA reached 28.51 million, with deaths above 504,000. Coronavirus cases, hospitalizations and deaths in the US are falling rapidly.
Novavax (NVAX) has agreed to sell 1.1 billion doses of coronavirus vaccine to COVAX, an initiative that aims to distribute vaccines worldwide. COVAX is led by the Coalition for Epidemic Preparedness Innovations, the World Health Organization and Gavi, the Vaccine Alliance. The Novavax vaccine scored high on provisional data from a UK trial. But the FDA wants data from a test in the United States in its final stage before considering approval from the United States. Novavax shares jumped at the end of the session.
Stock market rally
The stock market recovery suffered heavy morning losses for growth stocks. The main indices closed well with intraday lows, although many speculative and highly valued stocks have suffered significant damage.
The Dow Jones Industrial Average fell 0.4% in Thursday’s stock market trading. The S&P 500 index lost 0.4%. The Nasdaq compound dropped 0.7%, after dropping 1.8% during the day.
Apple’s stock fell 0.9%, falling further below its 50-day and 10-week lines, with the weekly loss growing to 4.2%. Microsoft shares fell 0.2%, still in the buying range. Google shares fell 0.8%, almost a record high.
Nvidia’s shares plunged 0.5% to 593.16, up from an official buying point of 587.76. It sits comfortably above the most actionable entry of 660.07.
Nio’s shares lost 5% to 54.43, triggering sell signals for recent buying points. The shares found support on the 50-day line and could offer a new entry again.
DDOG’s shares rose 3.2% on Thursday, but still fell 5.7% for the week. The Datadog issued sell signals on Wednesday. The PLTR stock plunged 7%. Palantir looks badly damaged.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 1.7%. The iShares Expanded Tech-Software Sector (IGV) ETF fell 0.3%, with MSFT’s shares the largest share. VanEck Vectors Semiconductor ETF (SMH) plunged 1.1%, with NVDA’s shares as a notable component.
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Market Rally Analysis
The stock market recovery is on a modestly weak trend, showing elements of a broad retraction as well as a sector rotation out of growth.
Nasdaq fell on Thursday to just above its 21-day exponential moving average, where it began to reduce losses. The 21-day line was a key support area for Nasdaq during the April-November stock market recovery, as well as the current upward trend. Perhaps Nasdaq will recover quickly to record highs or trade sideways in its current range for a while. But at some point the compound will break through its 21 days decisively and test or break its 50-day line.
While Nasdaq had relatively modest losses this week, many leaders have fallen sharply. Nio’s shares are off 9.4%, Palantir 21%. Yalla (YALA), a Middle East-focused social media IPO that almost tripled in 2021 at its peak on February 12, fell 31% this week.
Stress testing on your portfolio
Investors must make a game plan for their individual holdings, developing an exit strategy to scale positions. But they must also plan for a general market downturn. What about your overall portfolio. While most of your stocks can stand on their own, if they all fall by 2%, 5% or more, it will affect your portfolio, especially if you are on the margin.
So test your portfolio stress. At what points do you decrease just because your portfolio is being hit 5%, 10% or more as the market is weakening?
Identify your major stakes and short-term moves. In a market downturn, cut your non-core positions first, assuming your major holdings are doing well.
An argument for making some profits when the market is extended, especially in non-essential stakes, is because it facilitates difficult sales decisions in a setback. It is difficult to sell just to watch the market back. But if you don’t make any sales until the Nasdaq falls, say, 5%, and the market continues to fall, capital losses may increase.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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