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Dow Jones futures, S&P 500 futures and Nasdaq futures won’t reopen until Sunday evening, but it’s a good time to research and plan. The coronavirus stock market rally had some wild intraday swings last week, but ultimately finished with solid gains. The Dow Jones and S&P 500 index led, but the Nasdaq reasserted leadership on Friday. The wild action showed the importance of having a market rally game plan ahead of time.
Meanwhile, Tesla (TSLA), Microsoft (MSFT), UnitedHealth (UNH) as well as Apple (AAPL) and Domino’s Pizza (DPZ), are all in the “friend zone.”
What does that mean? Tesla stock, Microsoft stock, UnitedHealth stock and Domino’s stock are all above some buy points but also slightly below other entries. Apple stock has made several moves above a new buy point, but keeps closing just below it. So while these stocks are arguably in buy range, they have clear resistance levels just above them.
Microsoft stock, Apple stock and UnitedHealth are Dow Jones components.
All three, along with Domino’s stock, are on IBD Leaderboard. Tesla stock is on the Leaderboard watchlist. MSFT stock and DPZ stock are on SwingTrader. Microsoft stock, Domino’s stock and UnitedHealth stock are all on the IBD Long-Term Leaders list.
Dow Jones Futures Today
Dow Jones futures will not begin trading until 6 p.m. ET, along with S&P 500 futures and Nasdaq futures. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide have cleared 6.09 million. Covid-19 deaths are at 368,000.
Coronavirus cases in the U.S. have reached 1.80 million, with deaths above 105,000.
Brazil has become the coronavirus hot spot, with Covid-19 cases closing in on 500,000. Despite minimal testing, Brazil is starting to outpace the U.S. for daily new cases and deaths. Many other Latin American countries, Russia, India and the Middle East are seeing big increases.
Coronavirus Stock Market Rally
The coronavirus stock market rally had some big swings, with growth stocks plunging from a Tuesday peak to Wednesday morning, then rebounding strongly. Real economy stocks came to fore those days, then all stocks reversed lower Thursday afternoon on rising U.S. tensions. But the stock market rally finished strong, especially growth names, after President Trump’s China speech Friday afternoon.
The Dow Jones Industrial Average jumped 3.75% last week and the S&P 500 index 3%. The Nasdaq composite climbed 1.8%, but popped 1.3% on Friday.
Tesla stock tested its 21-day moving average intraday Wednesday, providing a mini-shakeout. TSLA stock then jumped 3.6% on Friday to 835. That’s just above an 834.82 early entry. But Tesla also has an 843.39 entry and a conventional 869.92 buy point.
As with the other stocks on this list, if Tesla stock is going to be a real winner, it should be able to power through these other levels. An investor could try to start a position in Tesla stock, building up as it crosses further buy entries.
The relative strength line for TSLA stock is just below record highs. The RS line, the blue line in the charts provided, track a stock’s performance vs. the S&P 500 index.
The normally volatile Tesla stock has been trading unusually tight in the past few weeks — though not as tight as Microsoft stock. That’s a bullish sign.
In contrast to the other companies on this list, Tesla has the cloudiest outlook. There’s also so much that a UnitedHealth or Domino’s Pizza is going to surprise investors. The uncertainty regarding earnings and profit in the near and longer term is part of what drives the extreme divergence between TSLA stock bulls and bears.
Tesla sister company SpaceX plans to launch two astronauts to the International Space Station on Saturday, though weather conditions could delay the flight until Sunday or Tuesday.. The success or failure of the SpaceX mission, a historic step for private space flight, shouldn’t have any bearing on Tesla stock. But it might.
Microsoft stock rose 1% to 183.25 on Friday, but edged down 0.1% for the week. On Wednesday, MSFT stock fell as low as 176.60, undercutting a 180.10 handle buy point and its 21-day moving average, but rebounded to close slightly higher. Shares have found support at their 21-day line for quite some time, not closing below it for two months.
So Microsoft stock is clearly in buy range. But it’s been hitting resistance, with a 187.61 entry. This handle-like formation is actually a four-weeks-tight, a longer version of the three-weeks-tight pattern. Typically, tight patterns are places for existing holders to add a few more shares. But in this case, the four-weeks-tight is simply another resistance area within the base.
The RS line has fallen somewhat as MSFT consolidated, but that follows a long uptrend over several months and years.
UnitedHealth stock shot up to a record high of 309.66 last week, one of only three Dow Jones components to reach their pre-coronavirus peaks. UNH stock closed with a 5.1% week gain to 304.85. That pushed shares above a 300.10 early entry and a 304.10 handle buy point. So it’s in a buy zone.
But while UnitedHealth stock topped its old high on Thursday and Friday, it never closed above it. Closing above a 306.81 entry would provide more confidence.
The RS line for UNH stock is not far from highs.
Domino’s stock rose 3.7% last week to 385.84, with all of that and more coming from Friday’s 5.55% spike. DPZ stock has a new flat base, next to a volatile consolidation, with a 387.95 buy point, according to MarketSmith analysis. Intraday Friday, DPZ stock did get above a 386.05, which could be seen as an early entry. Friday’s move could be seen as actionable from a swing trading perspective, which is why Domino’s stock was added to SwingTrader.
The RS line has retreated as DPZ stock consolidated for several weeks, but that follows a strong uptrend.
Apple stock dipped 0.3% to 317.94 last week. AAPL stock has a 319.79 buy point. It’s an alternate entry on a daily chart or an official cup-with-handle buy point on a weekly chart. Three times last week Apple stock cleared that 319.79 intraday, but never closed above it. Shares were in buy range with about 30 minutes left in Friday’s trade, but then gave up gains even as the coronavirus stock market rally continued to climb.
The RS line for AAPL stock has fallen slightly recently but is near record highs after a solid uptrend.
Game Plan The Stock Market Rally
During last week’s volatile action in the coronavirus stock market rally, there was a strong argument for buying, selling or holding.
In hindsight, investors should have been buying growth stocks as they rebounded off key support levels Wednesday morning. But to do so, you would need to be exceptionally nimble, ready to cut losses if the market rally and those stocks undercut losses.
If you were heavily invested and seeing huge declines across your stocks from Tuesday’s intraday high to Wednesday’s low, paring some holdings was a sensible strategy. Sure, the major indexes rallied and growth stocks rebounded from support levels, but in the moment that wasn’t clear.
With growth stocks retreating but generally not breaking — or closing below — key support, investors could have simply decided to hold onto current positions await further developments. Looking at weekly charts and waiting until the end of the week to make major portfolio decisions can help avoid trading off of whipsaw intraday moves.
Finally, it’s important to review your stocks and portfolio frequently, updating your game plan and your lines in the sand ahead of time. That doesn’t you’ll always be right. You may sell a stock that breaches a key level, only for it to rebound. But you set up your rules — informed by your past trading hits and misses — to maximize gains and minimize losses over time.
Bringing Balance To Your Portfolio
One portfolio strategy is to not just have high-powered growth stocks, but include some quality names from other fields.
Tesla stock is certainly a volatile name, but Apple stock, Microsoft stock are big-cap tech titans that aren’t as prone to massive intraday swings. UnitedHealth stock and Domino’s stock are outside of tech. While growth names had a wild week, UNH stock and DPZ stock had strong gains.