Now is the time to take positions in the main coronavirus market titles. Although the coronavirus crisis and an uncertain recovery are major concerns, being too cautious in this positive stock market trend also involves serious risks.
Amazon and Netflix stocks are extended from the buy zones, with Netflix profits on Tuesday evening. But Microsoft action is still within reach. Shopify and AMD stocks are close to purchase points after clearing the aggressive entries. Alibaba shares are considering their own advance purchase point. The Cadence Design stock almost reached a point of purchase on Friday, with profits expected on Monday. Apple’s stock could form a handle after taking over a key support level.
AMZN, NFLX, MSFT and AMD are all part of the IBD ranking. Microsoft and BABA shares are on SwingTrader. Netflix, Microsoft and AMD stocks are all on the IBD 50 list.
Microsoft, Alibaba and Cadence Design stocks are all long-term IBD leaders.
All of these names, including Apple stocks, all display strong lines of force relative to or near the peaks. This reflects their outperformance compared to the S&P 500 index.
Dow Jones Futures Today
Dow Jones futures fell 0.75% from fair value. The S&P 500 futures fell by 0.65% and those of the Nasdaq 100 by 0.9%. As the recovery in the coronavirus stock market has strengthened, the extreme volatility of futures contracts on Dow Jones has subsided. Big day-to-day gains or losses on Dow futures always happen. Volatility could easily return to the current market environment, with the profit season likely to topple futures contracts on Dow Jones and in particular individual stocks.
Keep in mind that overnight action on Dow and elsewhere does not necessarily translate into actual transactions during the next regular trading session.
Join the IBD experts as they analyze the actionable actions of the coronavirus market rally on IBD Live.
Coronavirus cases worldwide exceed 2.40 million. The deaths of Covid-19 killed 164,000 people.
In the United States, coronavirus cases are at least 763,000, with deaths greater than 40,000. After a three-day drop about a week ago, new cases of coronavirus in the United States appear to have resumed a tray for two weeks. This raises doubts about whether states can quickly ease closings and restrictions on coronaviruses, even as protests against business closings begin.
Florida has reopened some beaches, while New York, New Jersey and Connecticut have reopened marinas and shipyards, all with social distancing rules.
Germany is opening its economy in stages starting Monday, with other European countries also taking early action.
But it is still unclear whether a country can successfully relax. Coronavirus cases in Singapore have increased in recent weeks despite what appeared to be a first success with an extensive testing, tracking and traceability program. The United States needs more testing and put in place tracking and localization programs to identify emerging clusters in order to have a decent chance of re-opening the economy successfully.
President Trump said on Sunday that he would use the Defense Production Act to increase the production of swabs for coronavirus testing. Many basic materials for testing are rare.
In the meantime, Congress appears to be nearing agreement on additional emergency relief for coronaviruses. Republicans have agreed to add aid to hospitals as part of the legislation to replenish funds for small business loans, but Democrats also want aid to the states.
All Walmart Employees (WMT), even in corporate offices, must wear masks starting Monday.
Coronavirus stock market rally
The coronavirus market rally had a solid week. The Dow Jones Industrial Average climbed 2.2%, the S&P 500 rose 3% and the Nasdaq composite jumped 6.1%. The Nasdaq composite has exceeded its 50 and 200 day moving averages as growth stocks take control of the recovery in the coronavirus market. The S&P 500 has returned above its 50-day line, while the Dow Jones is lagging behind.
The Microsoft title jumped 8.15%, the Apple title 5.5%. Both are components from Dow Jones, S&P 500 and Nasdaq. Shares of Amazon, the third trillion dollar company in the United States, climbed 16%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) jumped 5.9% last week. The iShares Expanded Tech-Software Sector (IGV) ETF rose 6.8%. The VanEck Vectors Semiconductor (SMH) ETF jumped 6.65%.
Read The Big Picture every day to stay on top of market trends and major stocks and sectors.
Avoid the inaction of stock market rallies against coronaviruses
Caution was advised when the coronavirus market collapsed. And although the bear market bottomed out on March 20, there was no reason to trust the new coronavirus market rally
Investors must wait until a follow-up day to confirm a new uptrend. On April 2, the S&P 500 had a follow-up day, but it was not particularly impressive. On April 6, the Nasdaq organized a much more powerful FTD, although there were not many stocks in position. But last week, many growth stocks erupted, including Dow Jones giant Microsoft and FANG stocks Amazon and Netflix.
There are reasons to be careful. After a bear market, the initial confirmed uptrend often fails. Information on coronaviruses remains patchy. The coronavirus market rally seems to be banking on the reopening of the American and European economies. But it could take a long time and might not succeed. In addition, the profit season is approaching, most companies like to publish dismal results and little advice.
From, the stock markets are going up on a wall of worry. If everyone was optimistic, who would be left to buy?
Excessive caution can be risky. The first few weeks of a bullish trend in a stock market versus a bearish one are the main gains. Previous breakouts are often the big winners of the stock market rally. Investors may be able to build a cushion in certain quality names. When the coronavirus stock market rally has receded, you can resist that and expect bigger gains. Or in some cases, take partial profits or cash out.
If you wait for the stock market rally to reach unmatched heights, it’s expensive. After the initial burst, the market recovery could have a slower advance with more jerky action.
Scott O’Neil: How to buy this market rally
2019 stock market rally
Why not wait for stocks to reach unprecedented heights? Take the 2019 stock market rally. After the 2018 bear market, the Nasdaq surged in early 2019. But it did not resume its former high until April 23, 2019. On April 29, the Nasdaq hit a new high and s ‘is reversed downward. The S&P 500 Index finally set an all-time record on April 29, then started to decline after May 1.
Inventories were down until the beginning of June. A new uptrend set in until the end of July, but the market was then volatile until mid-late October.
During this period from May to October, there were opportunities for investors. But the gains were lower and the more likely failures.
Investors who did not take advantage of the gains of early 2019 may also have felt the need to push harder and hang on longer to catch up to the market.
Invest prudently in the market rally
Of course, investors shouldn’t buy anything. The stocks of many battered sectors remain far from any buying point. Others, like Amazon and Netflix stocks – which jumped 14% last week – are now extended from the buy zones. But others like Nvidia (NVDA) and Microsoft stock are now usable.
Meanwhile, several other prominent stocks are approaching points of purchase.
The Alibaba share has a consolidation buy point of 231.24. But investors could buy BABA shares because it crosses a downward trend line. On Friday, Alibaba stock hit this trend line, but reversed down. Despite this, the Alibaba share rose 6.7% last week.
AMD shares have a purchase point of 59.37 cups, according to MarketSmith analysis. The chipmaker’s actions have already cleared an early resistance zone just above 50 last week. AMD shares rose 17% to 56.60. A handful would give AMD stocks a chance to rest before a breakout. But it may not happen.
Shopify stock exploded 41% last week to 590.39. Technically, the SHOP stock has a buy point of 593.99, but it seems likely to have extended resistance considerably to 470.67. After such a huge move, the risk of withdrawal from Shopify inventory is very high. Even more than the AMD stock, the Shopify stock should ideally form a handful before reaching new heights. If it doesn’t stop, investors may want to wait for SHOP action to recover.
Cadence Design Stock
Cadence Design’s stock rose 9.8% last week to 78.65. The CDNS title hit a record 80.46 on Friday, but never hit the 80.50 cup mark before backing down.
Cadence Design earnings are due late Monday. Analysts expect Cadence Design to make a fixed profit of 54 cents a share, with sales up 7% to $ 614.5 million. But growth in the design software maker’s EPS is expected to accelerate over the next three quarters.
Apple’s stock builds the right side of a cup base, with a purchase point of 327.95. The AAPL share recovered and then maintained support on its 50-day line. The iPhone maker could form a handle, although it needs a little more time.
Apple’s second fiscal quarter earnings are expected on April 30. Analysts are seeing Apple profits and sales fall back in the coming quarters, with the coronavirus crisis wreaking havoc on non-core consumer spending.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MIGHT ALSO LIKE:
Today’s IBD title explodes after three rivals eliminate buy points
Stock market update: Bull Running
Five actions near the shopping areas
The best growth stocks to buy and watch
IBD Digital: Unlock IBD action lists, tools and analytics today