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Dow Jones futures rose on Wednesday night, as did S&P 500 and Nasdaq futures. The stock rally ended in a mixed way after a weak employment report and a continued decline in crude oil prices weighed on sectors of the real economy, although the names of the tech edged up slightly. Year (ROKU) and Etsy stocks were big overnight losers.
Advanced micro-systems (AMD) and Robin Hood (HOOD) has risen again, as investors at Reddit talk about these names. Coming as stocks of ‘traditional’ memes such as GameStop (GME) and AMC Entertainment (AMC) continue to fall, the rise in AMD and HOOD shares suggests a key change.
Year of action, Etsy (ETSY), Turn (RVLV), DXC Technology (DXC), Innovative industrial properties (IIPR) and Apple (AAPL) and 5G chip maker Qorvo (QRVO) reported profit after the close.
All six stocks beat earnings outlook. But Roku, Etsy, and RVLV stocks were big losers, along with DXC. IIPR and QRVO shares declined slightly.
DXC stock is on the IBD ranking. Roku action and IIPR are on the IBD 50.
Dow Jones Futures Today
Futures contracts on Dow Jones increased approximately 0.1% from fair value. S&P 500 and Nasdaq 100 futures rose slightly.
Keep in mind that overnight action on futures contracts on Dow and elsewhere doesn’t necessarily translate into actual trades in the next regular trading session.
Join the IBD experts as they analyze the exploitable stocks in the stock market rally on IBD Live
Stock exchange rally
The stock market recovery has been difficult due to falling crude oil prices, a weak ADP employment report, and declining profits in General Motors (GM). Crude oil prices fell 3.4% to $ 68.15 a barrel, continuing a steep decline this week. US crude inventories rose last week, the Energy Information Administration said on Wednesday morning. Copper prices also fell. The 10-year Treasury yield rebounded to close 1 basis point higher at 1.19%.
The Dow Jones Industrial Average fell 0.9% in stock trading on Wednesday. The S&P 500 Index fell 0.5%. The Nasdaq composite posted a gain of 0.1%. The small cap Russell 2000 slipped 1.25%.
Best ETFs
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.5%. The iShares Expanded Tech-Software Sector (IGV) ETF rose 1.15%. The VanEck Vectors Semiconductor ETF (SMH) rose 1.1%.
The SPDR S&P Metals & Mining ETF (XME) fell 4% and the Global X US Infrastructure Development ETF (PAVE) fell 1.7%. The US Global Jets ETF (JETS) fell 2.2%. SPDR S&P Homebuilders ETF (XHB) slipped 1.1%. The Energy Select SPDR ETF (XLE) fell 2.7% and the Financial Select SPDR ETF (XLF) fell 0.8%.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) jumped 2.55%, breaking above its 200-day line. ETF ARK Genomics (ARKG) rose 0.6%, but remains below its 200 and 50 day lines. Roku shares are a major asset of ARK Invest.
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Roku Earnings
Roku earnings crushed EPS views, but user growth was insufficient. The hours broadcast on Roku devices also disappointed investors.
Roku stock fell 8% on extended trading. Stocks edged up 0.6% on Wednesday to 420.32, close to their 10-week moving average again. Roku action rolled off a 463.09-cup buy point with handle on July 23, but it quickly failed. A bullish rebound from the 10 week line or a break above a new high handle entry of 490.86 are possible buying opportunities.
But for now, Roku action looks set to cut an early entry of 397.79.
Etsy Earnings
Etsy’s profits exceeded, but revenue forecasts were weak for the arts and crafts e-commerce giant.
Etsy stock plunged 14% overnight, signaling a gap below its 50 and 200 day lines. Shares jumped 6.1% on Wednesday to 202.10. Etsy stock has an early entry at 211.92, with the official buy point at 251.96.
DXC earnings
DXC earnings exceeded views, jumping 300% and ending a long string of year-over-year declines. But it guided slightly down on second quarter earnings.
DXC stock fell 6% on long action. Shares fell 2.9% to 42.18 on Wednesday. DXC stock closed in a range from a fixed base buy point of 41.85.
IIRP income
The profits of the IIRP have exceeded the forecasts of the cannabis-focused REIT.
The IIPR stock lost a fraction overnight. Shares edged up 0.2% to 213.89 on Wednesday. The IIPR stock is working on a 222.18 cup base going back to late February.
Revival of earnings
Revolve’s profits also exceeded expectations. However, Revolve stock fell 8% in extended trading.
RVLV stock slipped 2.9% to 71.34 on Wednesday, from a record 74.82. Stocks broke through a short consolidation on Thursday, but it’s unclear what would be a good entry after a strong rally. There is a possibility that RVLV’s stock will drop to its 50-day or 10-week line.
Qorvo Gains
Qorvo’s profits beat expectations for the first fiscal quarter, while chipmaker Apple has guided profits higher for the current quarter.
Qorvo stock edged down overnight. Shares fell 0.7% to 193.88 on Wednesday. QRVO stock has a buy point of 199.05 cups with handle, according to MarketSmith analysis.
Apple’s stock has changed little late in the day. Shares edged down 0.3% to 146.95 on Wednesday. Apple’s stock is stretched slightly from a base of 137.17 cups with a handle, but it’s still in range to buy a longer cup model dating back to January with an entry of 145.19 . AAPL’s stock has been consolidating for a few weeks, creating a shelf that could turn into a short base.
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Meme Stock Shift?
AMD stock rose 5.5% to 118.77, the largest volume in over a year. Shares are up 30.5% in six sessions after the results. AMD’s stock is now significantly expanded from a point of purchase of 95.54 cups with handle.
Robinhood stock jumped 50% to 70.39, reaching 85 intraday. Stocks fell somewhat overnight in still active trade.
HOOD stock more than doubled from its July 30 low of 33.25, the day after its debut with an IPO price of 38. The no-charge brokerage, in addition to the Reddit buzz, has been applauded by Jim Cramer of CNBC while Cathie Wood of ARK Invest has made big purchases of HOOD stocks in its short history.
Meanwhile, stocks of original memes, GME and AMC stocks, continued to plummet. GameStop stock fell 3.9% to 146.80, the lowest since early May and 70% from its late January peak of 483. AMC stock fell 11% to 29.84, a higher two-month low and 59% from its June 2 peak of 72.62.
Meme investors embracing like AMD and HOOD stocks versus GME and AMC stocks suggest a fundamental shift.
GameStop and AMC Entertainment, despite an increase in activity in 2021 compared to pandemic shutdowns last year, are in rapid decline. While investors make various statements about how these companies could be big winners, they are highly speculative at best, especially given current market valuations.
Meanwhile, AMD is very profitable, with a bright future. Robinhood is growing rapidly and is expected to be profitable again in 2022. While he could or could be a big winner in the long run, it is clear that Robinhood has a real and growing business with a more than plausible bright future.
In other words, meme investing can turn into a bloated version of old-school social media that drives growth stocks up. This could be much more attractive to IBD-type growth investors.
Market rally analysis
The stock rally had a mixed session, but all major indices continue to look healthy, not very close to all-time levels. The Dow Jones fell to its 21-day exponential moving average. The S&P 500 barely moved just below record highs. The Nasdaq composite tilted higher.
Growth stocks had a strong session. Paycom software (PAYC), Therapeutic horizon (HZNP) and Push Social (SPT) dug or rose powerfully beyond buy points on earnings. ZoomInfo Technologies (ZI), which saw its gap on Tuesday close, rebounded x% on Wednesday, climbing back to the top of the base.
Meanwhile, AMD’s stock continued to operate as its rival Nvidia (NVDA) and software leaders CrowdStrike (CRWD) and Shopify (SHOP) posted solid gains.
The names of the real economy have had a tougher time, with low energy prices and some concerns about the economic outlook.
The Russell 2000 hit resistance again at its 21 day line, and is now 3% below its 50 day line. This is not a good sign for the size of the market.
However, several large steelmakers are consolidating well in or near buying areas, while housing-related games also perform well. HR (RH), Wednesday’s IBD share of the day, made an early entry on Wednesday.
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What to do now
After-hours sales of Roku shares, as well as those of Etsy and Revolve, show why it’s so important to make tough decisions before making money. While it is
As the profit season turns from a tsunami of profits to a mere flood, the multitude of big winners and losers may subside. But with the larger market moving sideways and sector rotation still a factor, it’s still a tricky market, especially for new purchases.
Try to buy stocks as close to the buy point as possible, whether it’s an early entry or a traditional breakout. This will reduce the chances of being shaken by choppy action and inversions. Catching inventory fast means doing your homework – building your watchlists and setting up alerts. So be prepared to act when these stocks give signals to buy. Also, be prepared to act if your holdings trigger your sell signals.
Read The Big Picture every day to stay in tune with the 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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