The future will arise; Five stocks in buy zones

Dow Jones futures rose slightly on Sunday night, along with S&P 500 futures and Nasdaq futures. The stock market rallied last week, but the major indexes pared losses late Friday, with the Nasdaq once again facing major setbacks.

 

Part of the Dow Jones United Health ( UNH ) rose into buy zone on Friday on strong earnings, including other health insurers that pushed past buy points. Centenary (CNC) and Humana (HUM) Alternative care health (OPCH) and Shockwave therapy ( SWAV ) also jumped into buying positions.

It’s a big week for the EV giants. Tesla (TSLA) and China Baidi (BYDDF) Tesla earnings are due Wednesday night, with investors looking to see how the automaker weathered the Covid shutdown and other headwinds last quarter. Ford, which reported first-half revenue growth last week, will begin sales of its Model 3 rival, the Cell sedan, on Monday. Both Tesla stock and BYD fell sharply last week, and they need time to recover.

There is no place where chip shares can be implemented. But they are showing some signs of strength amid a long and painful downtrend. This is a positive sign for further market rally.

UNH stock is on IBD’s leaderboard. UnitedHealth and CNC stock are on the IBD 50. HUM stock is in the IBD Big Cap 20. Alternative Care Health was Friday’s IBD Stock of the Day. The video embedded in the article discusses the market action and analyzes the stock of UnitedHealth, Option Health Care and SWAV.

Dow Jones Futures Today

Dow Jones futures added less than 0.1% in equity. S&P 500 futures gained 0.1% and Nasdaq 100 futures gained 0.3%.

Crude oil prices fell 1 percent.

Remember that overnight action in Dow futures and elsewhere does not translate into actual trading during the next regular stock market session.


Join IBD’s experts as they analyze potential stocks in the stock market rally on IBD Live


Stock market rally

The stock market’s rally was down for most of the week, but it eventually recouped most of its losses.

The Dow Jones Industrial Average was down 0.2 percent in stock market trading last week. The S&P 500 index fell 0.9 percent. The Nasdaq composite retreated 1.7 percent. The small-cap Russell 2000 fell 1.4%

The 10-year Treasury yield fell 17 basis points to 2.93 percent. The two-year Treasury yield rose 5 basis points to 3.12 percent. The inverted two-year to 10-year Treasury yield curve is a recession warning, but it’s a little lower than midweek. The 1-year yield, which has been higher than the two-year yield for several weeks, closed at 3.1%.

Last week, U.S. crude oil futures fell 6.9 percent to $95.78 a barrel after rising slightly from Thursday’s lows.

ETFs

Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 0.9 percent last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.6 percent. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 4.4%, at Now service A warning that is (now) causing serious damage to the sector. The VanEck Vectors Semiconductor ETF ( SMH ) popped nearly 3 percent.

The SPDR S&P Metals & Mining ETF ( XME ) fell 0.1 percent last week. The Global X US Infrastructure Development ETF (PAVE) gained 1 cent. The US Global Jets ETF ( JETS ) rose 1.4 percent. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.5 percent. The Energy Select SPDR ETF ( XLE ) fell 3 percent and the Financials SPDR ETF ( XLF ) fell 0.9 percent. The Healthcare Select Sector SPDR Fund ( XLV ) was down 0.4%, rebounding to end the week. UNH stock is a major holding of XLV stock.

Reflecting more speculative historical stocks, the ARK Innovation ETF ( ARKK ) fell 5.9% last week and the ARK Genomics ETF ( ARKG ) lost 2.9%, with software and high-value growth struggling. Tesla stock is the primary holding for Arc Invest’s ETFs. Kathy Wood Ark owns limited shares of BYD.


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Stocks in buy zones

UnitedHealth’s earnings easily beat second-quarter views early Friday. UNH stock rose 5.4% to 529.75 on Friday, rising above a 518.80 buy point with a cup-to-handle or double-bottom base in hand. For most of the week, UnitedHealth stock fell, testing its 50-day line on Thursday before rebounding on punitive gains. The relative strength line, the blue line in the charts provided, is at a high level, reflecting the strong performance of UNH stock.

UnitedHealth’s earnings beat its rivals. Centene stock rose 4.55% to 89.66, above the 87.44 double-bottom buy point, according to MarketSmith analysis. Humana shares rose 3.2% to 487.54, after opening at 475.54. Both Centene and HUM stock reported earnings late this month.

Alternative Care stock rose 7.7 percent to 31.58 on Friday. That cleared a 31.18 cup-base buy point. But the best entry was 30.41, more than an easy handle. OPCH stock’s RS line has risen to new highs. Alternative Care Health returns close on July 27.

Shares of Shockwave rose 5.2% to 209.90 on Friday, clearing the tepid handle of an earlier entry of 208.28. That entry for SWAV stock coincides with a longer trend since the November peak. The RS line is already at a new high despite the good highs by Shockwave. However, Friday’s low vote was not ideal.

Tesla Earnings Loom

Tesla’s earnings are on Wednesday night. The second quarter was marred by a lengthy Shanghai plant shutdown due to the city’s Covid lockdown, followed by a lengthy recovery to full production. The Berlin and Austin factories also had slow progress. Still, analysts expect Tesla’s revenue to rise 26% from a year earlier, though that would end a string of five quarters of triple-digit growth. Sales growth should slow to 42% annual profit. Both EPS and earnings are expected to fall sharply from Q1.

Investors will be waiting for guidance for the rest of the year, as well as any hint of future production. CEO Elon Musk said on Friday that Tesla’s vehicle prices, which rose last year, could come down if commodity prices fall.

Tesla stock fell 4.3% last week to 720.20, slipping below the 50-day line but holding above the 21-day line. Arguably, TSLA stock has formed a bottom base, but not much of a prior change from May’s lows.

BYD seal of approval?

The BYD stamp will officially go on sale on July 18. A Model 3 rival, similar in size and scope but $10,000 cheaper, will begin shipping in a few days.

Pre-orders for the seal, which began at the end of May, are said to be very high.

Although Tesla and BYD can both lay claim to the EV crown, this is the first clear situation facing automakers. It will not be the last. BID is expected to launch a crossover rival to the Sea Lion Model Y later this year.

BYD stock fell 8.6% to 37.74 last week. Stocks fell on Warren Buffett rumors Berkshire Hathaway ( BRKB ) has been selling some or all of its long-standing BYD stake. There is no confirmation yet.

BYD stock bounced back from a weekly low of 32.91 after the EV and battery giant reported first-half earnings that beat expectations. Analysts expect stronger profits and margins in the second half as production accelerates and BID shifts to higher-priced, higher-margin vehicles.

Still, BYD’s stock chart needs some time to repair and form a new base.


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Market Rally Analysis

In the end, the major indexes ended with small-to-moderate losses, but it was not a quiet week.

The stock market’s rally got off to a bad start, with the Nasdaq falling back from its 10-week line on Monday and hitting multiple resistance levels. The major indexes continued to slide, but rebounded nicely from lows on Wednesday and Thursday, even as white-hot inflation reports raised the prospect of a bigger Fed rate hike than before. On Friday, stocks rallied strongly, with the Nasdaq, Dow Jones and S&P 500 retracing their 21-day lines.

Despite some big swings, the Nasdaq has had a really solid week and is continuing to hit recent highs, even as the other indexes briefly cut off last week’s lows.

The Nasdaq is again close to its 50-day and 10-week moving averages. Will the tech-heavy mix turn into a tailspin of these levels again? A critical move above 10-weeks – which would likely mean clearing the late June/early July highs – would be a positive sign. But there may still be several other key levels of resistance along the way.

For now, the market rally is under pressure, out of range and highly volatile. It’s a tough time to invest.

The macroeconomic climate remains difficult. Wednesday’s CPI report was dismal, with alarming headlines and details pointing to the end of inflation despite falling oil prices. Friday’s economic data was more positive. June retail sales and July’s New York Fed Empire State manufacturing index were stronger than expected. Crucially, import prices, price measures in the Empire Factory Survey and inflation all boded well for future inflation. Markets expect another Fed rate cut of 75 basis points on July 27 and Wednesday with a roughly 80% chance of a full point move below 30%.

The medical sector remains a key area of ​​market strength. While some names faltered midweek, UNH’s earnings beat rivals and others on Friday as many bounced back from key levels Thursday.

Discount retailers are looking healthy.

Broadly, there are some glimmers of hope and encouraging green shoots. Weaker earnings and guidance helped lower stocks earlier in the week after strong results from UnitedHealth; Taiwan Semiconductor (TSM) and Citigroup (c), help encourage profits later.


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Chips ahoy?

Chip stocks rallied for a second straight week, helped by strong Taiwanese semi earnings and guidance. That’s a positive sign, because it’s hard to make a broad market rally without chips playing a significant role. The semiconductor sector has a large market cap, especially for the Nasdaq, so Heath alone is valuable. In addition, chips are found in everything from computers to telephones to automobiles. So if the chips are doing well, most of the market is likely to be prosperous.

Still, the SMH ETF remains below the 50-day line, with few individual names above that key level.

Congress looks set to pass legislation in the coming days that would introduce semiconductors in the US.


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What to do now

Earnings season kicks off this week, with Tesla, Netflix (NFLX) and Johnson and Johnson (JNJ) Among popular reports.

Over the past week, investors may have pulled out of the stock as it fell sharply. In many cases, those names were eventually reversed. no matter. Not to be right all the time, but to be right most of the time – and follow the rules to avoid huge losses. If a stock shakes you up and a new buy signal like UnitedHealth is flashing, don’t be afraid to buy back, even at a higher price.

It’s still time for exposure light. The market rally is once again close to key resistance, so a reversal would not be out of character. Until there is clear evidence of continued improvement, cash should still be your No. 1 priority.

But there are some glimmers of hope. Stay engaged and build your follow-up lists so they’re ready to use.

Read The Big Picture daily to stay in tune with market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.

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