Dow Jones Futures: How To Handle This Market; Tesla, Netflix near buy point with due income
Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures.
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The share rise was modest in the last week, with some significant gains and reversals. Fears of recession are rising, even as inflation slows.
There weren̵[ads1]7;t that many buying opportunities. Some stocks flashed buy signals, then quickly fell back. Investors should be cautious about adding exposure in the current environment. Amid market volatility, apple (AAPL), Lululemon Athletica (LULU) and Regeneron Pharmaceuticals (REGN) has forged bullish tight patterns.
Earnings season is heating up. Tesla (TSLA), ASML (ASML), Netflix ( NFLX ) and DHI shares are all near buy points with earnings on losses. ASML and DR Horton (DHI) provided insight into their respective groups.
Meanwhile, Western Alliance Bank (WAL) is among the many banks and finance reports this week. How is this Phoenix-based bank holding up? The WAL stock has been among the most contested in recent weeks.
LULU stock is on the IBD Leaderboard Watch List and the IBD 50.
Dow Jones Futures today
Dow Jones futures open at 6 PM ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock rally had modest gains for the week, despite erratic action from day to day.
The Dow Jones Industrial Average fell 1.2% in last week’s trading. The S&P 500 index rose 0.8 percent. The Nasdaq composite rose 0.3 percent. The small-cap Russell 2000 rose 1.5% in an intraweek.
The 10-year government yield rose 14 basis points to 3.52%.
US crude oil futures rose 2.3% to $82.52 a barrel last week.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 2.65% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 1.9%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 0.5%. VanEck Vectors Semiconductor ETF ( SMH ) fell 0.1% after falling 4.1% last week. The ASML share is a large SMH holding.
Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) rose 0.6% last week and the ARK Genomics ETF ( ARKG ) gained 2%. Tesla stock is the top holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) gained 2% last week. The Global X US Infrastructure Development ETF ( PAVE ) climbed 2.7%. The US Global Jets ETF (JETS) fell 1.1 percent. The SPDR S&P Homebuilders ETF (XHB) rose 4.1%. The Energy Select SPDR ETF (XLE) rose 2.65%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.8%.
The Financial Select SPDR ETF (XLF) rose 2.8 percent. But the SPDR S&P Regional Banking ETF (KRE) fell 0.75%. The WAL share is among the many KRE holdings.
Top five Chinese stocks to watch now
Apple stock, Lululemon
Eplefond, Lululemon and Regeneron have all forged tight patterns, but under different circumstances.
Apple shares rose 0.3% to 165.21 last week, retreating from the 21-day line on Thursday. Shares fell 0.15 percent last week. With two weekly closes of 1%-1.5% over the past week, that qualifies as a three-week tight. The AAPL stock buy point is 166.94. It would be slightly expanded from a flat base that was removed a month ago, but could provide a place for existing owners to add a few shares.
LULU shares climbed 1.1% to 368.25, also creating a three-week tight with a buy point at 371.36. The yoga clothing retailer has held on after a revenue gap. Lululemon’s 3-week tight is within a cup base. In fact, on a daily chart, the tight pattern acts as a handle. So investors can use a breakout as a place to initiate a position. Ideally, LULU stock would offer more of a shakeout first.
REGN stock moved up 0.1% to 829.33, and is now in a four-week tight pattern with an entry at 837.65. The biotech giant remains in buy territory for a flat base breakout from 800.58. Investors can use a move past the tight entry as a place to start or add to a Regeneron stock position.
Tesla revenues
Tesla’s earnings for the first quarter will arrive on Wednesday evening. The electric car giant reported record first-quarter deliveries earlier this month, thanks to big price cuts and new US EV credits. Nevertheless, deliveries were worse, and production once again significantly exceeded sales.
Now investors want to see how much that affected Tesla’s prized profit margins, which had already begun to slip last year.
On Friday, Tesla cut prices in Europe, Singapore and Israel, although the European cuts largely absorbed discounts in early March. A week earlier, Tesla cut US prices on all its vehicles. This indicates further margin pressure in the second quarter.
Tesla shares fell 6 cents to 185 in the past week after falling 10.8% the previous week. Shares hit resistance at the 21-day and 50-day lines. TSLA stock has a cup-with-handle base that formed below its 200-day moving average, which is not good. So while Tesla has a buy point at 207.89, investors can wait for a decisive move above the 200-day, which is now below 213.
Another possibility is if Tesla stock breaks above the 50-day mark on earnings, offering an early entry with some room to the 200-day.
Tesla vs. BID: EV Giants Vie For Crown, But Which Is The Better Buy?
Netflix revenue
Netflix earnings are due Tuesday night. After a tough 2022, profits are expected to return. Subscription gains are often more important than revenue for Netflix. The results will also be important for streaming rivals such as e.g Disney (DIS), as well as Year (YEAR).
After more than doubling from July to early February, Netflix stock forged a new cup-with-handle base with a buy point at 349.90. The handle has formed in low volume and with support at the 50-day line. NFLX stock was down 0.2% for the week at 338.63.
ASML Earnings
The ASML share will report early Wednesday morning, with peers Lamb Research (LRCX) due after closing. ASML earnings are also back in 2023 after a difficult 2022. After nearly doubling from October to early February, ASML stock has created a cup-with-handle base, according to MarketSmith analysis. Shares rose 1.4% to 666.20 in the past week, back from the 50-day line. The buy point is 683.28.
DR Horton Earnings
DR Horton earnings are due early Thursday, kicking off results for homebuilders, several of which are in or near shopping zones. The homebuilding giant is expected to report a big EPS decline, like other rivals. Guidance will be key. DHI shares rose 2.7% to 98.25. On Tuesday, the stock retook a buy point at the 99.50 cup handle, but then fell back.
Western Alliance Bancorp earnings
The Western Alliance reports this early on Wednesday. The California-based bank has already provided some key figures for the first quarter, including deposits and unrealized losses. But investors will like to hear about ongoing conditions. WAL stock rose 2.9% to 31.66 last week, but remains sharply down in 2023. As Warren Buffett said Wednesday, bank deposits are probably safe, but it’s not clear bank stocks will be.
Charles Schwab (BLACK), Bank of America (BAC), Goldman Sachs (GS) and several super regional banks report this coming week.
Together, they will give a good picture of deposit and lending trends.
Market rally analysis
The stock market rally did not have large weekly movements, but there were large daily and intraday fluctuations. The major indexes staged big rallies on Thursday, bracketed by downside reversals on Wednesday and Friday.
In fact, the Nasdaq composite fell every day except Thursday, still posting a weekly gain. The S&P 500 and Dow Jones hit two-month highs on Friday before pulling back, with the Dow up for a fourth straight week.
The major indexes are not far from the 2023 highs, but they are not too far from below the 50-day lines either.
Meanwhile, the Invesco S&P 500 Equal Weight ETF (RSP), which doesn’t give more weight to megacaps like Apple or Tesla shares, rose from the 200-day line but hit resistance several times on the 50-day.
Over the past week, markets became more concerned about recession risks, particularly Wednesday’s news that Fed staff predicted a “mild recession” back at the March policy meeting. But despite these concerns, and generally better inflation data, the odds of a rate hike in May increased to 80% on Friday.
Recession and Fed rate hikes are not a good combination for stocks. So the market rally showed resilience in the last week. And despite the volatility, the Nasdaq and S&P 500 have created de facto 3-week tight patterns, with their recent ranges, much like LULU stock.
Market breadth has improved somewhat in the last couple of weeks. But there were not many shares that flashed buy signals. And the market’s downsides meant that some stocks that looked actionable quickly faded or reversed.
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What to do now
How exposed should investors be? It depends on which shares you own. Some stocks that have flashed buy signals in recent weeks have fared well, while others have been mixed or reversed lower.
The volatile market swings have made it difficult to add stocks lately. So maybe it’s a good thing that buying opportunities were relatively scarce on Thursday’s big rally.
The macroeconomic picture remains in flux, while the earnings season will pick up over the next few weeks. So more volatility is likely on the cards.
If the market is showing some strength, and stocks are flashing buy signals, add exposure gradually. Be ready to take partial profits and exit losers. Remember: If you’re quick to add exposure, be ready to scale out just as quickly.
Finding early listings and buying near those buy points is still a smart strategy. So use the weekend to run monitors and build your watchlists.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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