Market rally gathers momentum; What to do

Futures on the Dow Jones will open Sunday night, along with futures on the S&P 500 and Nasdaq. The attempted stock market rally gained momentum, with major averages rising sharply on Friday and for the week.




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UnitedHealth (A H), medical shock wave (SWAV), Ultimate beauty (ULTA), Enphase Energy (ENPH), Sociedad Quimica y Minera (m²), Quantum Services (REP), Northrop Grumman (NOC) are stocks to watch. All have relative ley lines at or near the vertices.

Shockwave stocks broke out on Friday, with Ulta and PWR stocks arguably offering early entries. UnitedHealth, Northrop, SQM and ENPH stocks are not far from buy points.

Also keep an eye on Google parent Alphabet (GOOGL) and electric vehicle giant You’re here (TSLA). Shares of Google and Tesla are nowhere near past highs, but these megacaps are rallying above key levels after holding above their May lows this month.

The NOC stock is on the IBD ranking, with the PWR stock on the ranking watch list. GOOGL stock is on IBD Long-Term Leaders. UnitedHealth, Ulta Beauty, SQM and ENPH stocks are on the IBD 50. UNH and Ulta stocks are on the IBD Big Cap 20.

UnitedHealth was Thursday’s IBD stock of the day. SQM was Tuesday’s stock of the day.

Dow Jones Futures Today

Dow Jones futures open Sunday at 6 p.m. ET, along with S&P 500 and Nasdaq 100 futures.

Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.


Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live


Stock market rally

The attempted stock market rally generated big weekly gains in a short week, with major indexes closing Friday at their best levels.

The Dow Jones Industrial Average jumped 5.4% in stock trading last week. The S&P 500 index gained 6.5%. The Nasdaq composite jumped 7.5%. Small cap Russell 2000 jumped 6%.

The 10-year Treasury yield fell 11 basis points to 3.12%, rebounding just above 3% at Thursday’s low.

U.S. crude oil futures fell 0.3% to $104.27 a barrel last week, rebounding 3.2% on Friday.

Among the top ETFs, the Innovator IBD 50 (FFTY) ETF fell 1.5% last week, with commodity-related names weighing on the FFTY. The Innovator IBD Breakout Opportunities (BOUT) ETF rose 1.7%. The iShares Expanded Tech-Software Sector ETF (IGV) jumped 10.3%. ETF VanEck Vectors Semiconductor (SMH) jumped 5.1%.

The SPDR S&P Metals & Mining ETF (XME) fell 1% last week, even with a big rebound on Friday. The Global X US Infrastructure Development ETF (PAVE) gained 3.6%. The US Global Jets ETF (JETS) jumped 5%. The SPDR S&P Homebuilders ETF (XHB) jumped 7.6%. ETF Energy Select SPDR (XLE) slid 2.6% and ETF Financial Select SPDR (XLF) climbed 4.6%. SPDR’s healthcare sector fund (XLV) climbed 7.8%, with UNH shares prominent.

Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) jumped 18.25% last week and ARK Genomics ETF (ARKG) 18.1%, both topping their 50-day line. Tesla stock remains one of Ark Invest’s top ETF stocks.


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Stocks close to buy points

Shockwave stock climbed 6.4% on Friday and 25% for the week to 197.69. That cleared a buy point of 194.41 cups with a handle, with Friday’s move coming on above-average volume for SWAV shares. Shockwave Medical has been profitable for the past three quarters, while revenue growth has been triple digits for the past five quarters.

UnitedHealth stock jumped 9.6% for the week to 495.64, but fell back below its 50-day line on Friday. UNH stock has a double bottom base with a buy point of 507.35, slightly above Thursday’s intraday high. Several other health insurance actions are being put in place.

Ulta Beauty stock was up 3.7% on Friday and for the week at 410.70. On Friday, stocks recovered their 50-day line. No doubt, this offered an aggressive entrance. The ULTA stock has a weird handle mug base with an official buy point of 429.58.

ENPH stock rose 7.4% to 198.39 last week. This is above a recent buy point of 193 which is no longer valid, although investors may see early entry here. The Enphase stock is working on a 217.33 handle entry. While solar stocks have been strong for the past few weeks, Enphase and its peers tend to have big daily swings.

SQM stock fell 1.1% for the week to 89.28, but rebounded on Friday to reclaim its 50-day line. The lithium giant, which also has significant exposure to the fertilizer market, recently made a 27% gain. But a strong move above the 50-day line, perhaps crossing the 21-day line, would offer an aggressive entry. SQM’s profit and revenue growth is exploding.

Quanta Services stock jumped 10.65% to 125.98, rebounding from the 200-day line and above the 50-day line. This arguably offers an aggressive entry into a mug base with handle. The official buy point is 138.56 for PWR shares, according to MarketSmith analysis. Quanta provides infrastructure services to electric utilities.

Northrop stock was up 4.45% last week at 463.70, almost all Friday. It’s back above the 50 day line. NOC stock begins further consolidation after a failed breakout of a cup base with handle. A strong move from the 50-day line would offer early entry. The old buy point of 477.36 is no longer valid, but many trades have taken place near it over the past four months.


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Tesla Stock

Tesla stock jumped 13.35% for the week to 735.15, topping its 21-day moving average. The TSLA stock is slightly below its 50-day line and its early June peak, which roughly coincide at this time. The electric vehicle giant still has a long way to go to hit its 200-day line. But, compared to most megacap names, Tesla stock shows some glimmers of hope.

At the end of the coming week, Tesla will likely release second quarter production and delivery numbers.

StockGoogle

Google stock is doing even better, reclaiming its 50-day line on Friday, close to its early June high. Shares were up 10.1% for the week at 2,359.50. Google’s stock has a long way to go to hit its 200-day line. This roughly coincides with a descending trend line from the February 2 peak at 3,030.93. This could offer an early or long-term leader entry.

Market rally analysis

Major indexes rebounded from fierce losses for much of the month. It was the best week for the Nasdaq since mid-March, while the S&P 500 and the Dow had their best week since the last full week of May. Keep in mind that after this late May bounce, the market moved sideways for several sessions before plunging to new lows.

The Nasdaq showed strong action on Thursday, but volume ended up falling slightly. Also, the gain didn’t really stand out amid recent moves in major markets as much of the market struggled.

On Friday, all of the major indexes recorded significant price gains in a broad and powerful advance. Volume soared thanks to Russell’s annual rebalancing at the close.

The Nasdaq composite jumped above its 21-day moving average on Friday, along with the Dow Jones and S&P 500. Above that, the 50-day line and early June highs loom as resistance.

Breaking through these levels decisively would offer stronger evidence that the recent rally is more than a tradable rally.

High inflation, Fed rate hikes and recession fears remain major headwinds for the market.

The medical sector seems the strongest. Health insurers and some product makers like UnitedHealth and Shockwave arrive after several drug plays issued buy signals. Chinese equities have risen in recent weeks, but generally appear to be prolonged or still recovering.

Commodity bets were hit hard, despite Friday’s rebound, reflecting recession fears.

Many of last week’s winners were beaten growth games


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What to do now

With the market rally gaining momentum, investors might choose to add a small exposure, either through individual stocks or through a broad market ETF.

There is nothing wrong with waiting for a follow-up day.

Of course, the market had several confirmed rallies in 2022 that quickly reversed. Even after a day of trailing, investors should still be looking to take partial profits and cut losses quickly.

Work on your watchlists. Focus on stocks that are or nearly exploitable, but have a broader list of names showing relative strength, even if they are out of position.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

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

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