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Dow Jones futures rose slightly on Thursday night, as did S&P 500 and Nasdaq futures. Year (YEAR), Commercial office (TTD) and Materials applied (AMAT) presented the main results reports on Thursday evening.
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The equity rally again suffered heavy losses for growth stocks, but ended in lows. The market looks volatile, investors should test their portfolios.
Roku’s earnings came as a surprise, while Trade Desk and Applied Materials also beat views. Roku stock was little changed and Trade Desk fell slightly while AMAT stock surged overnight, near record highs.
GameStop Stock Frenzy Audition
A congressional hearing on the GameStop stock market frenzy was held on Thursday. Aside from the spectacle of watching aging politicians asking questions about the social media-fueled shorting mania, the GameStop audience seemed like old news.
GME stock fell 11% to 40.69. It’s now 92% below its January 28 high of 383. Trading volume has plunged, particularly the daily dollar volume, as traders on Reddit look to the next stock meme. The rise of the GME title has been incredible while its downfall was inevitable.
Stock of the day in the buy zone at the end of the Fed sanction
Fight against recent eruptions
While the stock rally resists a significant pullback for now, investors may want to be more defensive. One reason is that a lot of recent buying opportunities aren’t working, including Apple (AAPL), Nio (NIO), Datadog (DDOG) and Palantir Technologies (PLTR).
Apple stock has fallen more than 7% to 8% from its buy point of 138.89, while still falling below its 50-day and 10-week lines. Datadog stock also triggered sell signals, despite Thursday’s gain. Nio stock is down more than 7% to 8% from a base buy point or subsequent entry after breaking a downtrend. Palantir stock, which has rebounded significantly twice from a consolidation buy point, has plunged 34% in the past six sessions.
Some recent eruptions have been successful, including Microsoft (MSFT), parent of Google Alphabet (GOOGL), Nvidia (NVDA), ZoomInfo Technologies (ZI) and Wells fargo (WFC), but they usually resist rather than climb higher. The risk-reward for new purchases has been rather poor overall.
Apple, Microsoft, Nvidia, ZoomInfo, and Wells Fargo stocks are listed on the IBD rankings. Microsoft’s stock is on IBD Long-Term Leaders. Nvidia and Google stock are on SwingTrader. Google, Nvidia, Trade Desk and AMAT are on the IBD 50.
Screen of the day: these mining stocks reach new heights
Dow Jones Futures today
Dow Jones futures contracts increased 0.1% from fair value. S&P 500 and Nasdaq 100 futures edged up 0.1%.
Treasury Secretary Janet Yellen again argued Thursday night for Biden’s stimulus package.
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 110.79 million. Covid-19 deaths have exceeded 2.45 million.
Coronavirus cases in the United States have reached 28.51 million, with deaths exceeding 504,000. Coronavirus cases, hospitalizations and deaths in the United States are declining rapidly.
Novavax (NVAX) has agreed to sell 1.1 billion doses of the coronavirus vaccine to COVAX, an initiative to distribute vaccines around the world. COVAX is led by the Coalition for Epidemic Preparedness Innovations, the World Health Organization and Gavi, the Vaccine Alliance. Novavax’s vaccine scored high in interim data from a UK trial. But the FDA wants data from an advanced US trial before considering US approval. Novavax shares jumped at the end of the session.
Stock exchange rally
The stock rally suffered heavy morning losses for growth stocks. The major indexes closed many intraday lows although many speculative and richly priced stocks suffered significant damage.
The Dow Jones Industrial Average fell 0.4% in Thursday’s stock trading. The S&P 500 index lost 0.4%. The Nasdaq composite fell 0.7% after falling 1.8% intraday.
Apple stock fell 0.9%, falling further below its 50-day and 10-week lines as its weekly loss climbs to 4.2%. Microsoft stock was down 0.2%, still in the buy range. Google’s stock slid 0.8%, near records.
Nvidia stock fell 0.5% to 593.16, above an official buy point of 587.76. It sits comfortably above the more operable entry of 660.07.
Nio stock lost 5% to 54.43, triggering sell signals for recent buy points. Stocks have found support at the 50 day line and may offer a new entry again.
DDOG stock rose 3.2% on Thursday, but is still down 5.7% for the week. Datadog issued sell signals on Wednesday. The PLTR stock sank 7%. Palantir looks badly damaged.
Among the top 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 stock being the largest holding. The VanEck Vectors Semiconductor ETF (SMH) fell 1.1%, with NVDA shares being a notable component.
Read The Big Picture every day to stay in tune with market direction and major stocks and sectors.
Analysis of market rallies
The stock rally is in a slightly weak trend, showing elements of widespread pullback as well as a sector rotation out of growth.
The Nasdaq fell intraday Thursday just above its 21-day exponential moving average, where it began to trim losses. The 21-day line has been a key area of support for the Nasdaq during the April-November stock rally as well as the current uptrend. Perhaps the Nasdaq will rebound quickly to record highs or trade sideways within its current range for some time. But at some point, the composite will decisively cross its 21 days and test or break its 50 day line.
While the Nasdaq posted relatively modest losses this week, many executives are down sharply. The Nio stock is down 9.4%, Palantir 21%. Yalla (YALA), a Middle East-focused social media IPO that nearly tripled in 2021 to its Feb.12 high, plunged 31% this week.
Test your portfolio
Investors should develop an action plan for their individual holdings, developing an exit strategy for reducing positions. But they should also predict a general market pullback. What is happening to your overall portfolio? While most of your stocks can hold up individually, if they are all down 2%, 5%, or more, it will affect your portfolio, especially if you are on the margin.
So test your wallet. When do you reduce your portfolio just because your portfolio is hit 5%, 10% or more as the market weakens?
Identify your main holdings and short-term games. If the market goes down, cut your non-core positions first, assuming your core holdings are doing well.
One of the arguments for taking profits when the market is large, especially in non-core holdings, is that it makes it easier to make tough decisions about selling when a downturn occurs. It’s hard to sell just to watch the market return. But if you don’t sell when the Nasdaq goes down, say 5%, and the market continues to go down, capital losses can increase.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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