Dow Jones futures will open Sunday evening along with S&P 500 futures and Nasdaq futures. The stock market rally pulled back last week, but the major indexes ultimately closed with slim losses despite growth-led retreats midweek.
Tesla stock action is worth reviewing, with the chart suggesting possible support for bulls after last week’s sharp sell-off amid CEO Elon Musk’s online share sales. But safety regulators are reviewing a possible Tesla FSD Beta crash. Nvidia earnings are due Wednesday night, with shares starting to pause after a huge run.
Meanwhile, ASML, Xpeng and SHOP stock are all arguably in buy areas. And they all have peers that are faring well.
ASML stock is just below an official buy point, while Applied Materials (AMAT) and several other chip-gear makers have already broken out in the past few weeks.
Xpeng peers Li Auto (LI) and Nio (NIO) are near early entries. Meanwhile, Tesla stock has been hot, despite the past week, while Rivian Automotive (RIVN) is rolling after a huge IPO. Ford Motor (F), General Motors (GM) and now Toyota (TM) have all broken out as production ramps back up as chip supplies slowly improve.
The Rivian IPO, in particular is off to a great start, and is worth keeping an eye on for a possible IPO base down the line. In the very short run, Lucid Motors (LCID) earnings on Monday night could be key for Rivian stock, given that both LCID stock and RIVN are richly valued EV makers that have just started deliveries.
The video embedded in this article reviewed the market’s weekly action and analyzed ASML, Xpeng and Shopify stock.
Dow Jones Futures Today
Dow Jones futures will begin trading at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Coronavirus cases worldwide reached 254 million. Covid-19 deaths topped 5.11 million.
Coronavirus cases in the U.S. have hit 47.91 million, with deaths above 783,000.
U.S. Covid cases are starting to pick up, as temperatures drop and people spend more time indoors. Cases have been picking up worldwide, with record infections in Germany. But with vaccinations widespread, deaths continue to slide.
Stock Market Rally
The stock market rally suffered some notable losses by Wednesday but finished the past week well off lows.
The Dow Jones Industrial Average lost 0.6% in last week’s stock market trading. The S&P 500 index dipped 0.3%. The Nasdaq composite retreated 0.7%. The small-cap Russell 2000 gave up about 1%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) sank 0.9% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.3%. The iShares Expanded Tech-Software Sector ETF (IGV) popped nearly 1%. The VanEck Vectors Semiconductor ETF (SMH) rallied 1.5%. Nvidia stock and ASML are major SMH components.
SPDR S&P Metals & Mining ETF (XME) jumped 4.3% and Global X U.S. Infrastructure Development ETF (PAVE) 1%, with the infrastructure bill’s passage helping U.S. Meanwhile, Global Jets ETF (JETS) tumbled nearly 5%. SPDR S&P Homebuilders ETF (XHB) advanced 3%. The Energy Select SPDR ETF (XLE) sank 1.2% and the Financial Select SPDR ETF (XLF) edged up 0.3%.
In a week of whipsaw or negative action in many highflying stocks, Shopify stock made a powerful move Friday, clearing a trend line break in huge volume, offering an early entry in the morning and ultimately clearing the 1,650.10 buy point.
SHOP stock also showed tremendous volume in late October following weaker-than-expected earnings, as it flashed an even-earlier buy signal.
There are questions about future growth for e-commerce companies such as Shopify and Etsy, but the market is making its own bet.
While technically in a buy zone, investors might wait to see if Shopify stock forms some sort of handle after such a big move.
ASML Setting Up
ASML stock is working on a cup base with an 896.03 buy point. But it could have a handle on a daily chart after Monday, giving it an 857.05 entry. Arguably the chip-equipment giant came right to an earlier entry from a down-sloping trend line from the top of the consolidation. ASML sold off hard in late September to early October in heavy volume. Volume hasn’t been great on the way back.
The relative strength line is off its September peak, but that’s after going on a strong run for the prior three years. Meanwhile, the RS line is at a short-term high while ASML stock remains just below a buy point. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
ASML peer Applied Materials will report earnings next Thursday.
Xpeng jumped out of a bottoming base on Friday, paring gains but holding above a 48.08 buy point. Investors might want to see a little more strength before buying XPEV stock, given the retreat from intraday highs. Resistance just above 49 also is relevant.
But, on a weekly chart, Xpeng stock staged an upside reversal and closed near the top of its range.
On Friday, Xpeng said it would unveil a new SUV at a China auto show on Nov. 19. The SUV may replace its G3 small SUV.
Other Chinese EV stocks are acting reasonably well, though Li Auto and Nio stock backed off possible early entries on Friday.
Tesla stock tumbled 15% last week to 1,032.72, just below its 21-day line. The catalyst for the sell-off was CEO Elon Musk signaling that he would sell 10% of his mammoth Tesla stock holdings — 170 million shares — and then selling more than 5 million shares as of Thursday. He sold about 1.2 million more shares on Friday. But Musk still has a long way to go before selling 17 million shares.
Tesla stock arguably was due for a pullback following 11 straight weekly gains. On Nov. 4, when TSLA hit a record high, shares closed 46.5% above their 50-day moving average. At Friday’s close, TSLA stock was a more-reasonable 16.9% above the 50-day line.
Even better, the 50-day line has risen to 884.12 as of Friday’s close, with the 10-week line at 895.31. Those are closing in fast on Tesla’s 900.50 cup-base buy point, according to MarketSmith chart analysis. As the 50-day line coincides and rises above that breakout point, it’ll serve as potential support. That could ultimately help Tesla stock forge new buying opportunities.
NHTSA Probes Possible Tesla FSD Beta Crash
However, the National Highway Traffic Safety Administration said Friday night that it is looking into a complaint from a Tesla driver that FSD Beta caused his Model Y to crash into another vehicle. The NHTSA did not say if it had confirmed the crash or if FSD Beta was being used. It said it had asked Tesla for information.
Tesla is set to vastly expand production capacity in 2022, while investors are betting on its customers being eligible for revamped EV tax credits. But rivals will massively expand EV production and models in the coming year, with the U.S. becoming a truly competitive market in electric vehicles. An overall auto production revival should, ultimately, reduce the industry’s immense pricing power.
Rivian stock soared 67% last week to 129.95 after the company priced its RIVN IPO at $78 a share late Tuesday.
The Rivian IPO may both help and hurt Tesla. With a valuation above $100 billion, Rivian stock provides justification for the much-more established Tesla stock, which has a market cap above $1 trillion. But Rivian — and Lucid — provide at least indirect EV competition and chip away at Tesla’s brand halo.
Nvidia earnings are due Wednesday night, with investors counting on stellar results and guidance once again. NVDA stock is the clear leader in the chip sector. With a market cap above $750 billion, it’s a major weight in the Nasdaq overall. So Nvidia stock’s reaction to earnings will be important for the market rally. It could also have an impact on rivals such as Advanced Micro Devices (AMD) and a variety of semiconductor players.
Market Rally Analysis
The stock market rally had a down week amid hot inflation data and as some extended stocks such as Tesla pulled back. This was healthy and constructive. The Nasdaq composite and especially the Nasdaq 100 had been getting a little extended themselves, with the S&P 500 and Russell 2000 getting close to some warning areas.
The growth-led retreat, especially on Wednesday, started being noticeable. But the market bounced back, a positive sign. Ultimately, the weekly losses were very small. The Nasdaq only falling a fraction despite inflation fears, high-profile IPO losers and a big Tesla drop reflects the market rally’s resilience.
After Friday’s bounce, the Nasdaq is 5% above its 50-day line with the Nasdaq 100 5.2%. It wouldn’t take much to see those indexes back above the 6% level that suggests another pullback is growing likely.
Ideally, the major indexes could continue to move sideways, letting leading stocks form handles, carve bases or find support at their key moving averages.
What To Do Now
The stock market rally was due for a pullback and ultimately just nudged lower for the week. Investors who took some partial profits near the top and who weren’t overly exposed didn’t need to slash their positions.
Still, you should evaluate your stock holdings. Which are your A stocks and which are back of the class. You might trim some of the latter and look for safe ways to add to the former.
Depending on your exposure, you can look to add to your portfolio, assuming market conditions are healthy. Don’t get too concentrated in a particular group or sector. EV and auto stocks are looking strong, for instance, but don’t load up half your holdings with Tesla, Xpeng, GM, Ford and so on.
Market leadership is robust and diverse, with different groups or sectors taking pole position on any given day or week. So take advantage of that as you work on your watchlists and adjust your portfolio.
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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