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Dow Jones futures fell slightly Thursday night, as did S&P 500 and Nasdaq futures. The stock rally suffered heavy losses on Thursday as 10-year Treasury yields continued to soar. This time, the Nasdaq failed to rebound, closing below key support.
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Nvidia (NVDA) and Teladoc Health (TDOC) joined the equities making massive gains, while You’re here (TSLA) dived again below its 10 week line. Investors should play the defense, especially with technology stocks. For those who are waiting to see how far the big winners have held up at the end of the week, some key sell or hold decisions are ahead.
In the meantime, GameStop (GME) came off its intraday high well. GME stock rose 19% to 108.73 after doubling on Wednesday. But it did come out of its intraday high of 184.68. AMC Entertainment (AMC) and Express (EXPR), two other squeeze games that skipped Thursday morning, have been shut down. The GME stock fell overnight in active trading.
Key Revenue Reports
Zscaler (HP), Etsy (ETSY), Salesforce.com (CRM), Autodesk (ADSK), Farfetch (FTCH), Airbnb (ABNB) and Doordash (DASH) has headlined a large number of after-close income reports.
Etsy, Zscaler, Salesforce, Autodesk, and Farfetch topped revenue views. Airbnb and DoorDash have reported huge quarterly losses in their first quarterly reports since their IPO in late 2020, but have beaten their earnings.
Etsy stock surged late in the session, recouping Thursday’s 5.5% drop. Zscaler’s stock rallied, recouping most of its 5.8% loss in the regular session. Salesforce stock fell overnight on weak guidance after CRM shut down 3.9%. Farfetch shares also fell in extended trade, extending a 4.15% drop on Thursday. ADSK stock edged down after falling 5%.
ABNB stock edged higher overnight after falling 9.1% on Thursday. DASH stock sold after the close with a decline of 5.4%.
DraftKings (DKNG) reports early Friday.
Investors have been less forgiving of earnings results in the current market climate, even when earnings and forecasts look strong. Nvidia stock fell 8.2% on Thursday after its results. Teladoc, Innovative industrial properties (IIPR), Progins (PGNY), NetApp (NTAP) and Novocure (NVCR) all suffered double-digit losses.
Tesla stock and Nvidia are on the IBD rankings. The CRM stock is on IBD Long-Term Leaders. Tesla and Etsy shares are on the IBD 50.
Dow Jones Futures today
Futures contracts on Dow Jones fell 0.2% from fair value. Futures contracts on S&P 500 lost 0.2%. Nasdaq 100 futures fell 0.3%.
Keep in mind that overnight action on Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular trading session.
Join the IBD experts as they analyze the exploitable stocks during the stock market rally on IBD Live.
Coronavirus news
Coronavirus cases around the world have reached 113.50 million. Covid-19 deaths have exceeded 2.51 million.
Coronavirus cases in the United States have reached 29.04 million, with deaths exceeding 520,000.
Stock exchange rally
The stock rally suffered widespread losses on Thursday as growth continued to lead the downside.
The Dow Jones Industrial Average fell 1.75% in Thursday’s stock trading, a day after hitting a record high. The S&P 500 Index slipped 2.45%, but found support at the 50-day line. The Nasdaq composite dipped 3.5%, closing below its 50-day line for the first time since November 3. It is still above Tuesday’s intraday low.
The 10-year Treasury yield jumped 14 basis points to 1.52%. This rise in yields put pressure on growth stocks.
Nvidia posted strong results and forecasts, but plunged 8.2% to 532.30. This is more than a 10% gain from the buy point of 560.07 of 560.07 and is now below the 50 day line. Teladoc stock plunged 14% to 219.55. This erased a 30% run from a handle entry of 236.76 and is now 7.3% below the buy point. TDOC stock is also well below its 50-day limit.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 4.4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 5.5%. The iShares Expanded Tech-Software Sector (IGV) ETF fell 3.9%. The VanEck Vectors Semiconductor ETF (SMH) slipped 5.6%, with Nvidia stock a key stake.
Reflecting more speculative stocks, Ark Innovation ETF lost 6.4% and Ark Genomics ETF 5.8%. ARK Invest’s biggest holdings are Tesla stock, which rose on the electric vehicle maker earlier in the week. Another of the top five titles is the TDOC title.
With ARK Invest starting to see withdrawals, its daily posting of buys and sells can make it difficult to exit positions, especially in less liquid names.
Analysis of market rallies
Whether we are in a general market downturn or in a strong sector rotation, growth stocks are in shock. The Nasdaq composite has reached resistance at the 21-day exponential moving average and is now below its 50-day mark. The high-tech index is down 5.4% this week after slipping 1.6% last week.
This may be the time when the stock rally regains its balance. But the current trend is not your friend. Moreover, even if the market starts to rise, it does not mean that the speculative growth names of the past year will lead the way or even advance. Cyclicals and Financials held up well this week and could continue to lead.
The Dow Jones is only 0.3% for the week and is only down because of the tech titans Apple (AAPL) and Microsoft (MSFT).
Weekly sell signals
Investors should always sell a stock if it falls 7% to 8% below the buy price, and they should not let a double-digit gain turn into a loss, as with Nvidia and Teladoc.
But selling winning stocks is both an art and a science. One way to try and minimize panic selling is to wait and see how a stock ends the week before selling or completely closing a position. If a stock is significantly below its 10 week line – 2% or more – this may be a signal to sell. (Sometimes a stock will have support areas slightly below the 10 week line, so investors can wait for these levels to break out as well.)
But if a stock is significantly below that support, are you selling? Much of it depends on your cost base. If you see a 30% payout reduced to less than 10%, you might want to exit while you still have a payout. If you are still at 100%, you have more leeway. Your conviction is also essential. If you believe that a stock has the potential to make big gains from current levels, you may want to hold onto the bulk of that position. If you don’t have this conviction, you could cash in your chips.
Tesla stock is 13% below its 10 week line, falling sharply this week in high volume. It would be a sell signal, but not automatic.
If you bought at buy point 466 in November, you saw a 93% gain halved to 46% still heavy. You probably wouldn’t want to see much more of that gain evaporate. If you bought around 290 or 174, owning Tesla shares would be even easier to justify. But selling a large part or all of your Tesla shares would also be understandable.
Selling early pays off
As the Nasdaq expanded in January and February, IBD suggested to sell in force and reduce exposure during various pullbacks. The aim was to lock in some profits and preserve capital when market conditions and the action of individual stocks got a bit risky.
In the very short term, stocks may have continued to rise. But on Thursday, the Nasdaq closed roughly where it was on January 13. ETF FFTY is back to where it was on January 14, while ARKK is at pre-Christmas levels. Generally speaking, if you took profits from mid-January to early February, you’re in a better position today.
Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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