Dow Jones futures will open on Sunday evening, along with S&P 500 futures and Nasdaq futures.
X
The stock market rally in the past week was generally subdued, but major indices took support at key levels. However, many promising stocks made a comeback soon after crossing the buy points. From keeping exposure light to taking partial profits, investors should follow certain rules for the current trading environment.
Vertex Pharmaceuticals (VRTX), charles schwab (schw), accelerate energy (EE) and CALX stocks are actionable, while Celsius (CELH) is setting up.
Vertex and CELH stocks are on the IBD 50 list. VRTX stock is also on IBD Big Cap 20. calyx (CALX) was Friday’s IBD Stock of the Day, with Accelerate Energy and SCHW stocks being the picks earlier in the week.
A stock that isn’t holding up well Tesla (TSLA). Tesla stock fell last week, falling in a fresh bear market on Friday.
dow jones futures today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in Stock Market Rally on IBD Live
stock market rally
Outside the Dow, the stock market rally showed modest losses after last week’s big gains, though there was no significant drawdown from Tuesday’s high to Thursday’s low.
The Dow Jones Industrial Average posted a partial gain in last week’s stock market trading. The S&P 500 index fell 0.7%. The Nasdaq Composite sank 1.5%. The small-cap Russell 2000 returned 1.7%.
The 10-year Treasury yield rose 1 basis point to 3.82% after falling to 3.69% on Wednesday.
US crude oil futures fell 10% last week to $80.08 a barrel. Zero-Covid signals from China and aggressive Fed comments raised demand concerns. Natural gas prices increased by 7.2%.
ETF
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slid 1.1% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) was down 0.2%. The iShares Extended Tech-Software Sector ETF (IGV) fell 3.55%, with cloud software names hitting hard. The VanEck Vectors Semiconductor ETF (SMH) retreated 0.65%, hitting resistance at the 200-day line.
Reflecting more speculative story stocks, the ARK Innovations ETF (ARKK) fell 9.5% last week and the ARK Genomics ETF (ARKG) fell 11.1%. TSLA stock is a major holding in Ark Invest’s ETF.
The SPDR S&P Metals & Mining ETF (XME) slid 1.9% last week. The Global X US Infrastructure Development ETF (PAVE) slipped 0.1%. The US Global Jets ETF (JETS) dropped 2.9%. The SPDR S&P Homebuilders ETF (XHB) retreated 3%. The Energy Select SPDR ETF (XLE) declined 1.6% and the Financials Select SPDR ETF (XLF) declined 1.4%. The Health Care Select Sector SPDR Fund (XLV) rose 0.9%. VRTX is part of the XLV Fund.
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Stocks near Buy Points
VRTX stock rose 3.75% to 314.63 last week, retrieving 306.05 buy point from a flat base, which is part of a base-on-base formation. The biotech fell intraday on Nov 11 as medical stocks came under pressure but pared losses. The relative strength line is down from recent highs but has shown steady progress throughout the year. Vertex earnings growth remains strong.
SCHW stock fell 2.45% to 79.81 on Friday, breaking a handle’s downtrend, offering an early entry. The official buy point is 81.18 from a deep, nine-month cup-with-handle base. However, the handle also formed just above the lower base entry at 77.51.
EE stock rose 2.7% to $27.17 on Friday, also breaking one handle’s downtrend. According to MarketSmith analysis, 28.49 is the official cup-with-handle buy point in the April IPO.
CALX stock jumped 6.6% to 69.82 on Friday, rebounding sharply from the pullback of the 21-day moving average. That pullback followed an earnings gap after several weeks of tight trading. Calyx’s earnings are still declining, but government funding for rural broadband is expected to drive future growth.
Celsius stock rose 3.9% last week to 96.99, but ended lower on Friday. This may be good news. The energy drink maker has a 118.29 consolidation buy point. A stop here may offer a lower entry, although it is too low to be a proper handle. The 50-day line for CELH stock is still slipping but the 10-day and 21-day lines are crossing above that key level.
Tesla stock
Tesla stock fell just 8% last week to 180.19, hitting a fresh bear market low of 176.55 on Friday. This was followed by losses of 5.5% and 9.2% in the last two weeks, continuing the sharp decline since late September.
It’s a tough environment for aggressive growth stocks, especially EV makers. Tesla has some demand concerns as production ramps up and competition intensifies. It has cut prices in China, with more cuts likely as subsidies expire on December 31. Meanwhile, the “Twitter circus” remains a concern. Just three weeks into the chaotic reign of CEO Elon Musk risks damaging the Tesla brand.
Tesla is still growing at a strong clip, while new US subsidies should boost demand at home in 2023.
But TSLA stock has gone on multi-year stretches of going sideways or down. So while the EV giant could be on its way up again, investors should wait for the charts to reset. This may take a long time.
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Market Rally Analysis
The stock market rally capped the week’s decline. After a big CPI-fuelled increase in the first week, the index initially edged up, but then pulled back from Tuesday’s highs, testing key levels on Thursday. But shares recovered marginally from Thursday’s low.
The market pause was not a big surprise given the sharp recent gains and the S&P 500 index’s close approach to its 200-day line. Holding’s support area is positive, while the Nasdaq’s 21-day line is about to cross the 50-day. Assuming that the indices sustain those levels and eventually move higher, it will be a constructive week for the major indices.
But it was a disappointing week for major stocks. A good number of stocks broke or flashed buy signals at the beginning of the week. But with the retreat of the index, many of those names quickly returned to the bottom of the entries. Some may reverse quickly or become established soon, but it will likely depend on the market.
Energy stocks had a tough week as crude prices plummeted, though LNG play EE stock is one exception.
Medical stocks, which came under pressure from defensive growth names, rebounded this week. This includes VRTX stock as well as several biotechs and health insurers.
Networking firms such as Calyx, some financials such as Schwab, as well as construction materials and many other sectors are still looking interesting.
The week of aggressive growth has not been good. This includes Tesla stock, cloud software, and ARK-type names. CELH stock was an exception.
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Investment rules for this market rally
Investors should always have sound trading rules. But the current heady market rally means investors should stick to lightweight, flexible trading. Here are seven guidelines.
Keep Exposure Light: This is not a mad bull market. Investors should take part in this rally, but this is not the time to be on margin.
Add Exposure Gradually: Don’t ramp up exposure too quickly. Buying a bunch of stocks on, say, Tuesday would have created quick losses from the resulting market pullback. Let the market slowly pull you towards it.
Look for early entries: Breakouts have struggled in 2022, partly due to volatile markets and sector rotation. As long as a stock reaches a traditional buy point, especially from a deep base, it could be due for a pullback. Early entries provide an opportunity to get into promising stocks before the mini run pauses.
Take Partial Profits: Given the volatile nature of the current uptrend, investors should consider booking partial profits early. This can give you the confidence to let the rest of the position carry on. Know the character of your holdings. Particularly important with partial profits are large volatile moves in some stocks.
Know your line in the sand: You should enter a trade knowing where you will exit, either outright or scalping out. If the stock moves up, you can move your stops up.
Leadership Diversity: While it’s a good idea to focus on a small number of holdings, don’t focus too heavily on a particular sector or theme. Sector rotation has affected defensive, defensive growth and growth stocks in turn over the past several days. Try to acquire top stocks from diverse backgrounds.
Be prepared: If you want to buy the best stocks, early entries you have to do your homework. Work on the screen to build your watchlist. Focus on specific names that are “ready” or nearly so, but also have a broad list of quality stocks that are starting to establish themselves.
Read The Big Picture every day to keep up with market direction and the leading stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and much more.
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