Introduction
As the new stock market rally faced challenges throughout the week, it rebounded impressively on Friday. The major indexes orchestrated an unexpected upside reversal, accompanied by numerous stocks signaling buy opportunities.
Stocks on the Rise
Nvidia, Meta Platforms, Arista Networks, Qualys, Eli Lilly, CME Group, Vertiv Holdings, CrowdStrike Holdings, Cadence Design Systems, and Palo Alto Networks all cleared buy points or early entries. Notably, they all boast relative strength lines that either sit at or near record highs, indicating strong performance compared to the S&P 500.
Tesla’s Resilience
Tesla, despite facing a flurry of unfavorable news, rebounded from crucial support levels and ended the week on a positive note.
Investor Strategy
As the market demonstrates promising signs, investors should prepare their watchlists for potential opportunities. Gradual exposure additions may be considered if market conditions remain favorable.
Stocks in Focus
Prominent stocks like Nvidia, Meta Platforms, Arista Networks, Vertiv, and Tesla are featured on IBD Leaderboard, with Tesla also on the Leaderboard watchlist. PANW stock and Meta Platforms are part of SwingTrader. CDNS stock holds a place in IBD Long-Term Leaders. Meta stock, Nvidia, Qualys, Arista Networks, Cadence Design, Palo Alto Networks, Tesla, and Eli Lilly are highlighted on the IBD 50. Nvidia, Tesla, Palo Alto, and ANET stock are featured in the IBD Big Cap 20.
Stock of the Day
Eli Lilly earned the title of Friday’s IBD Stock of The Day, with CrowdStrike, Arista Networks, and PANW stock also being notable selections during the week.
Dow Jones Futures
Dow Jones futures are scheduled to open on Sunday evening, alongside S&P 500 futures and Nasdaq futures.
Market Rally Recap
While the stock market encountered challenges earlier in the week, both the Dow Jones and S&P 500 experienced lows below recent levels, temporarily interrupting their rally attempts. In contrast, the Nasdaq continued its rally momentum. On Friday, the major indexes mounted an impressive upside reversal, accompanied by notable gains in leading stocks.
Market Performance
The Dow Jones Industrial Average recorded a slight decline of 0.3% in last week’s stock market trading. Despite a dip below recent lows on Friday morning, the Dow managed to stage a robust recovery, finishing with a 0.9% gain. The S&P 500 index increased by 0.5%, rebounding from the 40-week line. Meanwhile, the Nasdaq composite surged by 1.6% on Friday and maintained its position above the 21-day line. Conversely, the small-cap Russell 2000 struggled, declining by 2.1% and hitting five-month lows earlier in the week.
Market Breadth
While market breadth exhibited positivity on Friday, the broader trend has been characterized by weakness over an extended period.
Treasury Yields
The 10-year Treasury yield witnessed a surge of 21 basis points, reaching 4.78%, albeit falling from its peak earlier in the day at 4.89%. Despite minor increases in the 10-year bond yield on Friday, the dollar experienced a third consecutive session of decline.
Commodity Markets
U.S. crude oil futures encountered an 8.8% drop, closing at $82.79 per barrel during the past week. Gasoline futures exhibited a similar trend, tumbling 8.6% in one week and over 19% in three weeks, with a low point in 2023 reached.
ETF Performance
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) recorded a 0.5% advance in the past week. The iShares Expanded Tech-Software Sector ETF (IGV) demonstrated strength, rising by 2.2% and reclaiming the 50-day line. Noteworthy cybersecurity plays, such as CRWD stock, Qualys, and Palo Alto, are members of IGV. The VanEck Vectors Semiconductor ETF (SMH) registered a 2.3% increase, with Nvidia stock holding the top position. CDNS stock is included in both SMH and IGV.
Speculative Stocks
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) faced a 1.2% decrease last week, while ARK Genomics ETF (ARKG) plummeted by 5.7%. Tesla stock continues to hold the top position across Ark Invest’s ETFs.
Industry-Specific ETFs
Several industry-specific ETFs experienced varied performance, with SPDR S&P Metals & Mining ETF (XME) dropping by 3.2%, Global X U.S. Infrastructure Development ETF (PAVE) dipping by 0.4%, U.S. Global Jets ETF (JETS) descending by 1.5%, SPDR S&P Homebuilders ETF (XHB) declining by 2.1%, Energy Select SPDR ETF (XLE) decreasing by 5.2%, and Health Care Select Sector SPDR Fund (XLV) increasing by 1%, with LLY stock being a notable constituent. The Industrial Select Sector SPDR Fund (XLI) slipped by 0.6%, and the Financial Select SPDR ETF (XLF) experienced a 0.4% dip, with CME stock included.
Stocks in Buy Zones
Several stocks displayed impressive performance, including Nvidia stock, which rose by 2.4% to reach 457.62 on Friday and increased by 5.2% for the week, thereby surpassing the 50-day line and offering an early entry point. As of the last closing price, NVDA stock established a new base with a buy point at 502.66. Meta stock jumped by 3.5% to 315.43 on Friday, clearing a 310.64 cup-with-handle buy point as well as a 312.87 entry.
Arista stock experienced a 3.2% surge on Friday and a remarkable 45.5% increase for the week, reaching 194.02. This resulted in the clearance of a 189.90 early entry point. ANET stock now possesses a flat base with a buy point at 198.70. Eli Lilly stock bounced back from its 50-day line on Friday, soaring by 4.4% to 565.22 and surpassing the 21-day moving average, presenting a new buying opportunity.
Qualys stock exhibited a 4% increase on Friday, reaching 160.97, effectively surpassing short-term resistance around 155 and a recent 52-week high of 157.88. This recent area could be interpreted as a de facto flat base or as a handle to a base dating back to September 2022. CrowdStrike stock, on the other hand, recorded a substantial 6.9% gain on Friday, reaching 176.69 in significant volume, surmounting several months of convoluted consolidation. While CRWD stock finished 11.4% above its 50-day line, it exhibited a strong performance.
Palo Alto stock leapt by 4.2% on Friday, reaching 246.69, making a substantial leap from the vicinity of the 50-day line and surpassing some very short-term levels. PANW stock now boasts a 258.88 consolidation buy point, although investors may consider 254.23 or a trendline around 250 as additional early entry points.
CME stock underwent a notable 4.85% increase, reaching 211.93 during a week marked by significant momentum, encompassing the past two months of trade. On Thursday, the stock rebounded from the 50-day line and subsequently exceeded the flat-base buy point of 209.31, according to MarketSmith analysis.
Vertiv stock witnessed a 6.9% increase, reaching 39.77 for the week, including a 4.2% gain on Friday. Shares rallied from the 21-day and 10-week lines while clearing short-term levels, thus providing an early entry point. VRT stock, a notable winner in 2023, has now established a new flat base with a 40.41 buy point. Cadence Design stock registered a 3.9% increase on Friday, reaching 243.95, rebounding from the 50-day line and breaking the downtrend of a handle, offering an early entry point. CDNS stock is currently developing a 247.50 cup-with-handle buy point.
Tesla’s Remarkable Performance
Tesla stock displayed resilience by recording a 4.1% increase, reaching 260.53 for the week. On Wednesday, the stock experienced a notable 5.9% jump, surging above the 50-day line and providing an early entry opportunity. While shares retraced slightly on Friday morning to reach the 50-day line, they quickly rebounded to secure a minor gain. A move beyond Thursday’s intraday high of 263.20 could present a fresh early entry point, indicating a break in the downtrend within the handle. Tesla stock is currently working with a 278.98 cup-with-handle base.
Despite a series of seemingly negative developments, Tesla exhibited unexpected strength. Notably, Tesla reported third-quarter deliveries that were significantly below expectations early Monday. On Monday night, the company unveiled a new, lower-priced Model Y variant, priced $3,750 lower than the previous base model. Late Thursday, Tesla reduced prices for Model 3 and Model Y in the U.S., along with price reductions for Model Y in Norway. Optimistic investors are eagerly anticipating an updated Model 3, set to begin deliveries in China and Europe shortly, as well as upcoming releases like the Cybertruck and longer-term investments in self-driving technology, artificial intelligence, and robotics.
Investment Approach
The recent developments in the stock market rally have demonstrated promising signals. Investors who capitalized on opportunities on Friday might consider further gradual exposure increases. It’s essential to keep in mind that the surge in market rates persists, and if the 10-year Treasury bond yield approaches 5%, it could potentially affect the major indexes negatively. Therefore, remain vigilant and be prepared to adjust your positions accordingly if market conditions or your holdings show signs of weakness.
Preparation for the Week Ahead
This weekend provides an ideal opportunity for investors to prepare for the coming week. Ensure that your watchlists are up-to-date and pay close attention to stocks that are currently actionable or near such points.
Upcoming Events
In the upcoming week, investors should be aware of the forthcoming CPI and PPI inflation reports. Earnings season will also commence, with JPMorgan Chase, UnitedHealth, and Delta Air Lines among the noteworthy companies reporting.
Remember, the financial markets are dynamic, and it’s essential to stay informed and adaptable in your investment approach.