Market Rally Holds Key Levels, But This Has Been Difficult; Tesla Woes Continue

Dow Jones futures open Sunday night along with S&P 500 futures and Nasdaq futures.




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Stock market gains have broadly pared back over the past week, but the major indexes have found support at key levels. However, many promising stocks pulled back shortly after breaking out of buy points. Investors should follow some rules of the current trading environment, from keeping the risk low to taking some profits.

Vertex Pharmaceuticals (VRTX), Charles Schwab (Shi Wei), exert energy (EE) and CALX stocks are operational, while Celsius (CELH) Setting up.

Vertex and CELH stocks are on the IBD 50 list. VRTX stock is also in the IBD Big Cap 20. cup (CALX) was the IBD stock to pick on Friday, having picked Excelerate Energy and SCHW stocks earlier in the week.

One underperforming stock is tesla (Tesla). Tesla shares slumped last week, hitting fresh bear market lows on Friday.

Dow Jones Futures Today

Dow futures open at 6 p.m. ET Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Keep in mind that overnight moves in Dow futures and elsewhere don’t necessarily translate into actual trading during the next regular stock market session.


Join IBD experts as they analyze actionable stocks in a stock market rally on IBD Live


stock market rebound

Outside of the Dow Jones Industrial Average, stocks were down slightly after sharp gains in the previous week, although the pullback from Tuesday’s highs to Thursday’s lows was not insignificant.

The Dow Jones Industrial Average edged higher in last week’s stock market trading. The S&P 500 fell 0.7%. The Nasdaq Composite fell 1.5%. The mini-Russell 2000 fell 1.7 percent.

The 10-year U.S. Treasury yield rose 1 basis point to 3.82% after falling to 3.69% on Wednesday.

U.S. crude futures tumbled 10 percent to $80.08 a barrel last week. China’s zero Covid signal and Fed’s hawkish comments sparked demand concerns. Natural gas prices rose 7.2%.

ETF

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) lost 1.1% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged down 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 3.55%, with cloud software names taking a big hit. The VanEck Vectors Semiconductor ETF (SMH) fell 0.65%, hitting resistance at its 200-day line.

Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) tumbled 9.5% last week and the ARK Genomics ETF (ARKG) tumbled 11.1%. TSLA stock is the primary holding of the Ark Investments ETF.

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The SPDR S&P Metals & Mining ETF (XME) lost 1.9% last week. The Global X US Infrastructure Development ETF (PAVE) fell 0.1%. The U.S. Global Jets ETF (JETS) fell 2.9%. The SPDR S&P Homebuilders ETF (XHB) fell 3%. The Energy Select SPDR ETF (XLE) fell 1.6 percent, while the Financials Select SPDR ETF (XLF) lost 1.4 percent. The Healthcare Select Sector SPDR Fund (XLV) gained 0.9%. VRTX is part of the XLV Fund.


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Stocks Near Buying Points

VRTX stock rose 3.75% last week to 314.63, reclaiming a 306.05 buy point from a flat bottom as part of a bottom-to-bottom structure. Biotech stocks tumbled intraday on Nov. 11 as medical stocks came under pressure, but stopped falling. The relative strength line is off recent highs, but has been rising steadily throughout the year. Vertex earnings growth remains strong.

SCHW shares rose 2.45% to 79.81 on Friday, breaking the handle’s downtrend, providing an early entry. The official buy point is 81.18, which is a 9-month cup bottom with handle. However, a handle is also forming above the bottom entry at 77.51.

EE stock rose 2.7 percent to 27.17 on Friday, also breaking a downtrend handle. The April IPO has an official cup handle buy point of 28.49, according to MarketSmith analysis.

CALX stock rose 6.6% to 69.82 on Friday, rebounding strongly from a pullback to its 21-day moving average. After weeks of tight trading, earnings gapped, followed by a pullback. Calix’s revenue is still declining, but government funding for rural broadband is expected to drive future growth.

Celsius stock rose 3.9 percent last week to 96.99, but reversed lower on Friday. This could be good news. The energy drink maker has a consolidated buy point of 118.29. Suspension here allows for a lower entry, though it’s too low to be a proper handlebar. CELH stock’s 50-day line is still falling, but the 10- and 21-day lines are breaking above that key level.

Tesla stock

Tesla shares fell just over 8% last week to 180.19, having fallen to a new bear market low of 176.55 on Friday. It fell 5.5% and 9.2% in the previous two weeks, extending a steep decline since late September.

It’s a tough environment for aggressive growth stocks, especially electric car makers. Tesla has some concerns about demand as production surges and competition intensifies. It cut prices in China and may see further price cuts as subsidies end on December 31. Meanwhile, the “Twitter circus” remains a concern. CEO Elon Musk’s chaotic reign in just three weeks could damage the Tesla brand.

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Tesla is still growing at a strong rate, and new U.S. subsidies should boost domestic demand in 2023.

But TSLA stock has traded sideways or down for years. So, while the EV giant could head higher again, investors should wait for the charts to reestablish themselves. This can take a long time.


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Market rebound analysis

Stocks rallied for a week of losses. The index initially rose after a sharp surge in CPI in the previous week, but then retreated from Tuesday’s highs and tested key levels on Thursday. But stocks rebounded modestly from Thursday’s lows.

Given the recent sharp gains and the fact that the S&P 500 is close to its 200-day line, the market pause is not surprising. Holding the support area is a positive, and the Nasdaq’s 21-day line is about to break above the 50-day line. Assuming the indices hold these levels and eventually move higher, it will be a constructive week for the major indices.

But it’s been a dismal week for leading stocks. Quite a few stocks broke or gave buy signals earlier in the week. But many of those names quickly fell back below the entry as the index retreated. Some may rebound quickly or build quickly, but that may depend on the market.

Energy stocks had a tough week as crude oil prices slumped, but LNG play EE stock was an exception.

Healthcare stocks, under pressure from defensive growth stocks, rallied this week. This includes VRTX stock as well as many biotech and health insurance companies.

Dot-coms like Calix, some financials like Charles Schwab and building materials and a lot of industries still look interesting.

A week of positive growth was underwhelming. This includes names like Tesla stock, cloud software, and ARK. CELH stock is an exception.


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Investing Rules for This Market Rally

Investors should always have sound trading rules. But the current tricky market rally means investors should emphasize light, nimble deals. Here are seven guidelines.

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Hold Exposure Light: This is not a crazy bull market. Investors should participate in this rally, but now is not the time to margin.

Gradually increase exposure: Don’t increase exposure quickly. Buying a large amount of stock on Tuesday, for example, can result in quick losses due to the resulting market pullback. Let the market gradually attract you.

Look for earlier entries: A breakout into 2022 has been tough, partly due to market volatility and industry rotation. When a stock hits a traditional buy point, especially from a deep bottom, it may pull back. Early entry offers the opportunity to get into promising stocks before the mini-run pauses.

To get part of the profit: Given the up-down nature of the current uptrend, investors should consider taking some profits quickly. This can give you the confidence to ride the rest of the way. Know the nature of your holdings. Some stocks are more prone to large fluctuations, and partial profits are especially important.

Know your route on the beach: You should know where you will exit the deal, either entirely or on a larger scale. If the stock goes up, you can raise your stop loss.

Diversity in Leadership: While it’s a good idea to focus on minority holdings, don’t get too focused on a particular industry or theme. Over the past few days, sector rotation has hit defensives, defensive growth, and growth stocks in turn. Try to acquire leading stocks from different backgrounds.

be ready: If you want to buy the best stocks and get in early, you need to do your homework. Work on screen to build your watchlist. Focus on specific names that are “ready” or close to “ready,” but there are also broad lists of quality stocks that are starting to build.

Read The Big Picture daily to stay abreast of market direction and leading stocks and sectors.

Follow Ed Carson on Twitter @IBD_ECarson Stock market updates and more.

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