The stock rally had a strong week, reaching record highs even as Fed chief Jerome Powell said a cut in bonds is likely to start soon.
Shopify (STORE), Idexx Laboratories (IDXX), DocuSign (DOCU), Break (SNAP) et Palantir Technologies (PLTR) are close to the points of purchase.
Amazon teams up with Affirm holdings (AFRM) to offer an installment payment option at checkout. Affirm already has a relationship with Walmart (WMT) and many other websites. Still, AFRM stock climbed 36% on Friday night in active news trading after rising 50% or more at one point. AMZN’s stock has changed little.
AFRM stock, which went public in January, has plunged since its February high. But it was already up 20% so far this month, largely because of the announcement that Square (SQ) would buy Australian fintech “buy now, pay later” AfterPay for $ 29 billion. SQ stock jumped in early August to peak on the AfterPay deal and solid earnings, but fell back to its 10 week line. Square stock could make an aggressive entry with a decent gain next week, bouncing more off the 10 week line and erasing a downtrend.
Li Auto Benefits owed
Tesla (TSLA) rival Li Auto (LI) reports profits ahead of Monday’s opening. Expect August sales next week from rivals Li Auto and China EV Nio (NIO), Xpeng (XPEV), BYD Co. (BYDDF). Li and Xpeng shares are not far from the first entries in short consolidations, while BYD shares have an alternate handful in a long consolidation. The Nio share tends to fall.
Tesla’s China sales and exports for August will follow a little later. Tesla stock rose 4.65% to 711.92 last week, approaching an aggressive buy point of 730.
DOCU, Tesla, Square and Snap stocks are listed on the IBD rankings. Stocks from DocuSign and SHOP are on SwingTrader. The Snap action is on the IBD 50. The IDXX action is on the Long-Term Leaders IBD. Idexx Labs was also the IBD title of the day Friday.
The video embedded in this article analyzes the stock of Shopify, Idexx Labs and CrowdStrike (CRWD), as well as reviewing the strong market rally over the past week.
Dow Jones Futures Today
Dow Jones Futures will open Sunday at 6 p.m. ET. The same will be true for the S&P 500 and Nasdaq 100 futures contracts.
Keep in mind that overnight action on futures contracts on Dow and elsewhere doesn’t necessarily translate into actual trades during the next regular trading session.
Join the IBD experts as they analyze the exploitable stocks in the stock market rally on IBD Live
Coronavirus cases around the world have reached 216.20 million. Covid-19 deaths have exceeded 4.49 million.
Coronavirus cases in the United States have reached 39.54 million, with deaths exceeding 653,000.
Stock exchange rally
The stock rally had a strong week, ending on a positive note with the S&P 500 and Nasdaq at record highs.
The Dow Jones Industrial Average climbed nearly 1% in stock trading last week. The S&P 500 Index rose 1.5%. The Nasdaq composite jumped 2.8%. The Russell 2000 jumped 5%.
The 10-year Treasury yield rose 5 basis points to 1.31% last week, but fell 3 basis points on Friday.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) jumped 6% last week, while the Innovator IBD Breakout Opportunities (BOUT) ETF jumped 4.1%. The iShares Expanded Tech-Software Sector (IGV) ETF gained 3.6%, with notable components of Snap shares and DocuSign. The VanEck Vectors Semiconductor ETF (SMH) rose 6.1%.
The SPDR S&P Metals & Mining ETF (XME) jumped 7.7% and the Global X US Infrastructure Development ETF (PAVE) rose 3.45%. The US Global Jets ETF (JETS) rebounded 7.8%. The SPDR S&P Homebuilders ETF (XHB) rose 3.2%. The Energy Select SPDR ETF (XLE) rose 7.45% and the Financial Select SPDR ETF (XLF) closed up 3%.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) climbed 5.3%, just beating its 50-day Friday but still below its 200-day average. The ARK Genomics ETF (ARKG) jumped 6.5%, below the two key levels.
Five best Chinese stocks to watch
Shopify stock – after weeks of choppy action – found support for its 50-day line, rising 5.6% to 1,531.42 last week. A strong rebound would provide a buying opportunity above last week’s high of 1,562. SHOP stock now has a new flat base with a buy point of 1,650.10, according to analysis by MarketSmith on a weekly chart.
Idexx stock fell to its 50 day / 10 week line, slipping 2% last week to 668.27. As a long term leader, a bounce off the 10 week line would be a good place to start a position. Use Friday’s high of 681.25 as a buy point. Meanwhile, Idexx Labs now has a flat base with a 707.05 entry.
Snap stock jumped 3.8% last Monday, but rose 0.6% to 73.18 for the week. It’s just 3% above its 10 week line. A move above Thursday’s high of 74.95 would provide early entry. Snap stock also has a flat base with a buy point of 79.28. This will not appear on MarketSmith’s pattern recognition on the August 10 reversal day.
The PLTR stock has a lower base, a handle cup model with a buy point of 26.04. Shares rose 7.1% to 25.71 last week, briefly touching 26.09. The handle of Palantir stock formed just above the 200 and 50 day moving averages.
Time the market with IBD’s ETF market strategy
DOCU stock jumped 5.2% last week to 300.76, bouncing off the 50-day and 10-week lines and recovering a buy point of 290.33. At 3% above its 10 week line and within the buy range, the DOCU stock is still exploitable. The DocuSign stock also has a flat base with a 310.61. As with Snap stocks, just ignore the August 10 reversal day on the DOCU stock chart.
However, investors are likely to suspend buying DOCU shares until earnings close on Tuesday night.
Market rally analysis
The market rally had a strong week, continuing the rebound from the end of the previous week. The Nasdaq and the S&P 500 hit records. The Russell 2000 has recovered its 50 days and has broken above near-term levels, a positive sign for market size.
Volume wasn’t great, but trading is often meh at the end of summer.
Fed chief Jerome Powell supported cutting bond purchases from this year, with several other Fed officials supporting a formal move at the September Fed meeting. Powell has been very careful in moving slowly downward, providing many early warnings to avoid a “tantrum” in the financial markets. So far it’s working, with stocks and bonds rallying on Friday.
A number of prominent stocks have erupted or issued buy signals over the past few days. The recent modest pullback and wider side action over the past two months have helped major stocks form bases and find bullish support. While security software and a few winners in retail earnings were big winners last week, the steel, finance, industrial and housing games look strong.
The Nasdaq is not yet about to appear extended, suggesting more room to operate.
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What to do now
The past few days should have generated solid gains for investors, from existing positions and new buys. While many stocks extended their gains or rebounded on Friday, there weren’t many buying opportunities today. Its good. Most of the money is made in session.
Now is definitely a time to work on your watchlists and research what actions are taking place, including Shopify, Snap, and Palantir. Try to identify the first entries. It’s a good way to start at least one position.
You could have added exposure in the last few sessions. Do you keep adding exposure? This is a confirmed stock rally, but it is not a roaring, unstoppable force. Ultimately, your exposure depends on your current level and your tolerance for risk. While being fully invested or on margin can generate big gains, losses can be quick and furious. If you are going to “step on the accelerator,” also be prepared to brake quickly.
One way to free up capital for new purchases is to take partial profits or cut back on some laggards. If a stock has risen in the past week or two or three weeks, you may want to consider locking in some of those gains. Cutting off the laggards, as opposed to outright losers, is tricky with such sector rotation. A stock that has been moving sideways for a few weeks could suddenly start to move if the sector becomes favorable again.
Read The Big Picture every day to stay in tune with the market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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