Dow Jones futures will open Sunday, along with S&P 500 futures and Nasdaq futures. Nvidia (NVDA), Walt Disney (DIS), DocuSign (DOCU), Robinhood (HOOD) and Under Armour (UAA) are worth watching in the coming days.
The stock market rally was mixed last week, with small caps and high-value growth retreating overall. But the Dow Jones and S&P 500 hit record highs. Not only did steel, materials, financials, discount retail and housing-related stocks have a strong week, but Apple (AAPL), Microsoft (MSFT), Tesla (TSLA) and Google parent Alphabet (GOOGL) all had nice gains. Apple stock and Tesla flashed buy signals late last week.
But after a flurry of real economy breakouts early in the week, the number of actionable stocks faded late in the week. Nvidia, Disney, DocuSign, Under Armour and HOOD stock could offer buying opportunities in the coming days, with DOCU stock technically in buy range now. But investors need to be able to resist the temptation to buy a stock just to be active.
Apple, Microsoft and Tesla stock are all on IBD Leaderboard, as well as Nvidia and DOCU stock. Apple stock and Tesla are also on SwingTrader. Microsoft stock and Google are on IBD Long-Term Leaders. DocuSign and Google stock are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures will begin trading at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Coronavirus cases worldwide reached 207.52 million. Covid-19 deaths topped 4.36 million.
Coronavirus cases in the U.S. have hit 37.43 million, with deaths above 637,000.
Stock Market Rally
The stock market rally had a mixed week, but the Dow Jones and S&P 500 did hit fresh highs.
The Dow Jones Industrial Average rose 0.9% in last week’s stock market trading. The S&P 500 index climbed 0.7%. The Nasdaq composite dipped 0.1%, though the big-cap Nasdaq 100 advanced 0.2%. The small-cap Russell 2000 lost 1%, nearly all on Friday with a large number of hefty losers.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.8% last week while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.3%. The iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.2%. The VanEck Vectors Semiconductor ETF (SMH) slumped 2.3% as Micron Technology (MU) and other memory-focused chip names sold off on DRAM pricing concerns.
SPDR S&P Metals & Mining ETF (XME) popped 5.4% and Global X U.S. Infrastructure Development ETF (PAVE) 3.6%, fueled by the Senate passing a $1.2 trillion infrastructure bill. U.S. Global Jets ETF (JETS) slid 1.4%. SPDR S&P Homebuilders ETF (XHB) gained 2.3%. The Energy Select SPDR ETF (XLE) edged down 0.3% and the Financial Select SPDR ETF (XLF) rose 1.9%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) sank 2.4% and ARK Genomics ETF (ARKG) 5.5%. Both are below their 50-day and 200-day lines, especially ARKG. That came despite solid gains for Tesla stock, the biggest holding across ARK Invest’s ETFs.
Disney stock hit 187.58 just after Friday’s open, following strong earnings the night before. But shares faded to close up 1%, at 181.04. At the highs, DIS stock triggered buy signals as it rallied from its 50-day line and moved above a 186.39 short-term high. Disney’s intraday action shows the wisdom of waiting at least a few minutes after the open before making buys.
If DIS stock gets above a short-term high or Friday’s intraday peak it would be actionable.
Robinhood stock shot up after its late July IPO, hitting a record 85 intraday on Aug. 2. But by Aug. 12, HOOD stock closed at 48.10. Shares rallied somewhat on Friday, closing up 5.3% to 50.63.
Robinhood stock now has consolidated long enough to have an IPO base, which means investors can start paying attention. The buy point is officially 85.10, but investors should look for some sort of early entry to at least start a position. There doesn’t appear to be any such aggressive buy point yet. Keep in mind, HOOD stock is still trending lower, and it may continue to do so for several days, weeks or even months before flashing a buy signal.
Nvidia stock is setting up in a flat base with a 208.75 buy point. NVDA dipped 0.9% to 201.88 last week, but found support at its 21-day line or 10-week line. The chip giant would be buyable here from those support areas, but Nvidia earnings are due next Wednesday. Investors probably should wait for earnings results before buying NVDA stock — or try an earnings options strategy. Nvidia stock has been one of the big-cap stars of the current market rally. With many chip names struggling on memory woes, semis need strong NVDA results.
DocuSign stock is like a lot of leading software names. It cleared aggressive entries in early June on strong earnings, then ran up to new highs and an official 290.33 buy point. Since then, DOCU stock has been up and down, but for the past few weeks has generally stayed in the buy zone. On Tuesday, DocuSign stock looked like it would break out of a mini consolidation, but reversed lower and kept sliding Wednesday.
DOCU stock closed the week down 2.2% to 295.97, not trending higher or lower but still in buy range. That’s in contrast to Shopify (SHOP), which is just below its buy point, and CrowdStrike (CRWD), which has undercut its 50-day/10-week line.
Can DocuSign stock and peers break out of their choppy ranges? More importantly, can they hold and extend those gains?
Under Armour Stock
Under Armour stock has surged in August, fueled by a strong earnings report. UAA stock ran up from its July 19 low to 26.02 on Wednesday, just below the 26.55 cup-base buy point. Stocks breaking out of cup bases after running straight up from the bottom run the risk of a pullback.
However, the volume has been impressive on the UAA stock run, suggesting real institutional buying. Also, it’s possible that Under Armour is just starting to pause and start working on a handle. But, Friday’s dip was the first decline since July 28.
Market Rally Analysis
The market rally had an OK week. The Dow Jones and S&P 500 hit new high. The Nasdaq found support at its 21-day line during the week and remains close to all-time highs. The Nasdaq 100 edged higher, helped by $2 trillion Apple and Microsoft stock, near-$2 trillion Google stock and $710 billion Tesla stock. Many recent IPOs had big earnings gains.
Some growth names came under pressure, including certain chip stocks and highly valued ARK-type growth names, but by no means all.
There were a number of breakouts and buying opportunities early in the week, notably among steelmakers and financials. But steel stocks are now extended while many financials have run up to the top of buy zones or beyond. Housing-related plays are around buy points. Some industrials and materials firms also are around buy points.
With the Nasdaq moving sideways in a choppy fashion for the past few weeks, a lot of leading techs haven’t made progress, but also aren’t forming bullish short consolidations either. Several top software names have been trading above and below highs for the past few weeks. When they’ve flashed buy signals, it’s often not long before a reversal.
For future buys, the stock market rally may need extended sideways action, preferably with less chop and a slight downward bias. That would let new bases and handles form, as well as some bullish pullbacks.
But the market rally also could use improved breadth. The Russell 2000 fell back from its 50-day line and ended the week back below its 21-day line.
What To Do Now
After a flurry of strong moves early last week, good buying opportunities dwindled in the past couple of days, with not many great setups either. There have been a few pullbacks, as well as some stocks breaking out in low volume. Some of these will work, especially if the market trends higher.
If you see a top-tier stock flashing a strong buy signal, take advantage. But don’t feel compelled to buy mediocre names or set-ups.
Many leading stocks are acting well. Some good money is made by buying right and sitting. If you have a decent cushion, day-to-day volatility is easy to handle.
Having a diversified portfolio of leaders also helps mitigate volatility in individual stocks.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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