Dow Jones Futures: Market Rally Shows Broad Strength, Affirm Surges On Amazon Deal; Shopify, Palantir Near Buys
Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. AFRM stock surged Friday night on the payment firm’s new alliance with Amazon.com (AMZN), as the “buy now, pay later” option booms online. Tesla rival Li Auto reports early Monday.
The stock market rally had a strong week, hitting record highs even as Fed chief Jerome Powell said a bond taper is likely to start soon.
Amazon is teaming 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 shot up 28% Friday night in active trade on the news after rising 50% or more at one point. AMZN stock was little changed.
AFRM stock, which came public in January, has plunged from its February peak. But it was already up 20% so far this month, largely on the news that Square (SQ) would buy Australian “buy now, pay later” fintech AfterPay for $29 billion. SQ stock shot up in early August to record highs on the AfterPay deal and strong earnings, but pulled back to its 10-week line. Square stock could flash an aggressive entry with a decent gain next week, rebounding from the 10-week line further and clearing a downtrend.
Li Auto Earnings Due
Tesla (TSLA) rival Li Auto (LI) reports earnings before Monday’s open. Expect August sales next week from Li Auto and China EV rivals Nio (NIO), Xpeng (XPEV), BYD Co. (BYDDF). Li stock and Xpeng aren’t far from early entries in short consolidations, while BYD stock has an alternate handle in a long consolidation. Nio stock is trending lower.
Tesla China sales and exports for August will follow a little later. Tesla stock rose 4.65% to 711.92 last week, closing in on an aggressive buy point of 730.
DOCU stock, Tesla, Square and Snap are on IBD Leaderboard. DocuSign and SHOP stock are on SwingTrader. Snap stock is on the IBD 50. IDXX stock is on IBD Long-Term Leaders. Idexx Labs also was Friday’s IBD Stock Of The Day.
The video embedded is this article analyzes Shopify stock, Idexx Labs and CrowdStrike (CRWD), as well as reviewing the past week’s strong market rally.
Dow Jones Futures Today
Dow Jones futures will open at 6 p.m. ET on Sunday. So will S&P 500 futures and Nasdaq 100 futures.
Coronavirus cases worldwide reached 216.10 million. Covid-19 deaths topped 4.49 million.
Coronavirus cases in the U.S. have hit 39.50 million, with deaths above 653,000.
Stock Market Rally
The stock market rally had a solid week, ending on a high note with the S&P 500 and Nasdaq at record highs.
The Dow Jones Industrial Average climbed nearly 1% in last week’s stock market trading. The S&P 500 index rose 1.5%. The Nasdaq composite popped 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 best ETFs, the Innovator IBD 50 ETF (FFTY) leapt 6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) jumped 4.1%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 3.6%, with Snap stock and DocuSign notable components. The VanEck Vectors Semiconductor ETF (SMH) rose 6.1%.
SPDR S&P Metals & Mining ETF (XME) leapt 7.7% and Global X U.S. Infrastructure Development ETF (PAVE) advanced 3.45%. U.S. Global Jets ETF (JETS) rebounded 7.8%. SPDR S&P Homebuilders ETF (XHB) rose 3.2%. The Energy Select SPDR ETF (XLE) rallied 7.45% and the Financial Select SPDR ETF (XLF) finished 3% higher.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) ran up 5.3%, just getting above its 50-day Friday but still below its 200-day average. ARK Genomics ETF (ARKG) popped 6.5%, below both key levels.
Shopify stock — after weeks of choppy action — has found support at its 50-day line, rising 5.6% to 1,531.42 last week. A strong rebound would offer a buying opportunity above last week’s high of 1,562. SHOP stock now has a new flat base with a 1,650.10 buy point, according to MarketSmith analysis on a weekly chart.
Idexx stock has drifted down to its 50-day/10-week line, slipping 2% last week to 668.27. As a Long-Term Leader, a rebound from 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 popped 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 offer an early entry. Snap stock also has a flat base with a 79.28 buy point. That won’t show up on MarketSmith pattern recognition on the Aug. 10 reversal day.
PLTR stock has a bottoming base, a cup-with-handle pattern with a 26.04 buy point. Shares rose 7.1% to 25.71 last week, briefly touching 26.09. Palantir stock’s handle has formed right on top of the 200-day and 50-day moving averages.
DOCU stock jumped 5.2% last week to 300.76, rebounding from the 50-day and 10-week lines and reclaiming a 290.33 buy point. At 3% above its 10-week line and in buy range, DOCU stock is still actionable. DocuSign stock also has a flat base with a 310.61. As with Snap stock, just ignore the Aug. 10 reversal day on the DOCU stock chart.
However, investors likely should hold off on buying DOCU stock until after earnings Tuesday night.
Market Rally Analysis
The market rally had a strong week, continuing the rebound from the end of the prior week. The Nasdaq and S&P 500 hit record highs. The Russell 2000 reclaimed its 50-day and got above short-term levels, a positive sign for market breadth.
Volume wasn’t great, but trading often is meh in late summer.
Fed chief Jerome Powell backed tapering bond buys starting this year, with several other Fed officials backing an official decision at the September Fed meeting. Powell has been very careful in slowly walking toward a taper, providing a lot of early warning to avoid a “taper tantrum” by financial markets. So far that’s working, with stocks and bonds rallying Friday.
A number of leading stocks broke out or flashed buy signals over the last several days. The recent modest pullback and the broader sideways action over the past couple of months helped top stocks form bases and finding bullish support. While security software and a few retail earnings winners were big gainers last week, steel, financial, industrial and housing plays look strong.
The Nasdaq is not yet close to looking extended, suggesting more room to run.
What To Do Now
The last several days should have delivered solid gains for investors, from existing positions and newer buys. While a lot of stocks extended gains or rebounded Friday, there weren’t many buying opportunities today. That’s OK. Most of the money is made in the sitting.
It’s definitely a time to work on your watch lists and look for stocks that are setting up, including Shopify, Snap and Palantir. Try to identify early entries. It’s a good way to at least start a position.
You could have added exposure over the last several sessions. Do you keep adding exposure? This is a confirmed stock market rally, but it’s not a roaring, unstoppable force. Ultimately, your exposure depends on your current level and your risk tolerance. While being fully invested or on margin can deliver big gains, the losses can be fast and furious. If you are going to “step on the gas,” be ready to put on the brakes quickly as well.
One way to free up capital for new buys is to take partial profits or cut some laggards. If a stock has spiked higher over the past few week or two or three, you might consider locking in a portion of those gains. Cutting laggards, as opposed to outright losers, is tricky with so much sector rotation. A stock that’s been moving sideways for a couple of weeks could suddenly start to move if the sector goes back in favor.
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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