Dow Jones futures xx xxxx late Wednesday, along with S&P 500 futures and Nasdaq futures. The stock market rally had another mixed session Wednesday, with the Dow Jones and small-cap stocks rising while the S&P 500 and Nasdaq retreated.
Steel, mining, financial and other cyclical stocks powered higher while growth names retreated. Meanwhile, cryptocurrency exchange Coindesk (COIN) surged in its debut while Bitcoin pulled back from a huge run.
On the downside, growth stocks that were big winners in recent days retreated, including Apple (AAPL), Nvidia (NVDA), Square (SQ) and Tesla (TSLA), but most charts look fine. Roblox (RBLX) tumbled well below its official IPO base buy point still up for the week and but holding above alternate entries. Atlassian (TEAM) staged an ugly reversal back below a buy point despite giving bullish guidance late Tuesday.
Dell To Spin Off VMware
Meanwhile, Dell (DELL) announced that it will spin off its 81% stake in virtualization software maker VMware (VMW). As part of the long-speculated transaction, VMware will pay a special cash dividend of $11.5 billion to $12 billion, or roughly $28 a share to VMware stock investors. Dell said it will use its proceeds to pay down debt.
Dell stock jumped 8% overnight, already well extended from any buy point. VMW stock was up 1.5%, trading near the top of a consolidation going back to June.
Key Earnings On Tap
TSM stock is hitting resistance at its 50-day line but a strong move on earnings could give the chip giant a couple of early entries just above that key level. DAL stock could have a flat base after this week, creating a base-on-base formation. UNH stock is in a buy zone but has a high handle entry in its sights. BofA stock is extended. Citigroup stock is technically just within a prior buy zone but is working on a four-weeks-tight entry, according to MarketSmith.
Coindesk IPO Soars In Debut
Coindesk stock popped nearly 32% to 328.88 from a reference price of $250, but closed near the lower end of its range. COIN stock opened at 381 and quickly ran to 429. The largest U.S. cryptocurrency exchange came public via a direct listing vs. a traditional initial public offering. It now has a market cap of $85.8 billion.
While there is a lot of buzz around COIN stock, investors should avoid rushing into any new issue. Wait for an IPO base or other proper entry to form, then buy on the breakout or another reasonable buy area.
The Bitcoin price traded above $62,000 Wednesday night after hitting a record $64,899 early Wednesday. Bitcoin topped $63,000 for the first time on Tuesday in anticipation of the Coindesk IPO and growing mainstream acceptance as a digital asset.
Bitcoin’s modest retreat may have weighed on Nvidia and Tesla stock.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures climbed 0.1% and Nasdaq 100 futures advanced 0.15%.
Coronavirus cases worldwide reached 138.66 million. Covid-19 deaths topped 2.97 million.
Coronavirus cases in the U.S. have hit 32.13 million, with deaths above 577,000.
Stock Market Rally
The stock market rally had another mixed session. But the tone was generally negative. Unlike Tuesday, the major indexes closed near session lows, with growth stocks retreating.
The Dow Jones Industrial Average rose 0.2% in Wednesday’s stock market trading. The S&P 500 index dipped 0.4%. Both the Dow and S&P 500 hit record highs intraday.
The Nasdaq composite fell 1%. The big-cap Nasdaq 100, which hit an all-time best Tuesday, sank 1.2%. The small-cap Russell 2000, home to many regional banks, rose x%, back above its 50-day line.
Growth Stocks Slide
Apple stock fell 1.8% to 132.03. Shares could form a handle on a daily or weekly chart in its new cup base, which currently has a 145.19 buy point.
Nvidia stock sank 2.6% to 611.08, undercutting the 615 buy point. It’s still up x% for the week.
Square stock slid 5.4% to 258.40 after nearing reaching a 283.29 cup-base entry. A handle would be ideal for SQ stock, which snapped a 10-day winning streak.
Tesla stock reversed lower to close down nearly 4%. But it’s still up more than 8% for the week, holding well above its 50-day and 10-week lines after it forms the right side of a deep base. The declining 50-day line and overhead supply raise the risks for TSLA stock.
Roblox stock fell 8.2% to 75.35, knifing below a 79.20 IPO base buy point. But Roblox, which recently had a direct listing like Coinbase, held above early entries of 69-73. RBLX stock is still up nearly 5% for the week.
Atlassian stock reversed lower, falling 4.4% to 231.48, back to its 50-day line. TEAM stock just cleared a buy point on Tuesday, with the software maker giving seemingly upbeat figures Tuesday night.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.6%, while the Innovator IBD Breakout Opportunities ETF (BOUT) dipped 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 1%, but many growth software names reversed solidly lower. The VanEck Vectors Semiconductor ETF (SMH) retreated 1%. TSM stock is the largest SMH holding with Nvidia also a major component.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) sank 2.1% while ARK Genomics ETF (ARKG) eked out a 0.2% gain. Tesla stock is the No. 1 holding across ARK Investments’ ETFs. SQ stock is another big holding.
Stocks In Buy Zones
Goldman Sachs stock rose 2.3% to 335.35 Wednesday, rebounding from its 50-day and 10-week lines on strong earnings, offering an early entry. But shares closed well off session highs of 344.47. At the end of this week, GS stock could have a flat base with a 356.95 buy point. Goldman was Wednesday’s IBD Stock Of The Day.
Wells Fargo stock fell to 39.06 in the morning following earnings, nearly touching the 10-week line, but then surged to gain 5.5% to 41.99, a 52-week high. WFC stock cleared a four-weeks-tight entry of 41.64 and is still in range from the 10-week line.
Freeport McMoRan stock jumped 7.6% to 36.30, rebounding from its 21-day, 50-day and 10-week moving averages. That rebound, plus breaking a downtrend, offers an early entry. Intraday, FCX stock cleared a 36.32 handle buy point that’s just above the midpoint of a double-bottom base. Investors could use 37.71 — just above the middle of the double bottom’s “W” — as an alternate entry for the copper and gold mining giant. Several other mining stocks rallied, as well as steel and other metal-related names. Freeport earnings are due next week, along with several steelmaker earnings.
Star Bulk Carriers stock advanced 6% to 15.30, rebounding from its 50-day and 10-week lines. SBLK stock is only 3.4% above its 10-week line, still in buy range. Shipping lines are booming as cargo rates skyrocket amid stronger demand.
Nutrien stock jumped 4.4% to 56.76, rebounding from its 50-day line and breaking a downtrend, albeit on lower volume. That could be an early entry, though this is the third time NTR stock has found support at its 10-week line. Nutrien stock is on tap to have a flat base and a 59.87 buy point after this week. Fertilizer stocks are bouncing back after consolidating for a few weeks.
Market Rally Analysis
The stock market rally continues to trend higher overall, but with continual mini-rotations along the ways.
After shifting from cyclicals to chips to tech titans and finally to Tesla, software and highly valued growth names, market leadership is rotating back into steel, mining and financial plays such as Goldman stock.
Meanwhile, growth stocks retreated. Some stocks breaking out Wednesday reversed lower — such as 10X Genomics — while others fell back to or below their 50-day lines, such as TEAM stock or Twilio (TWLO). But in most cases, such as with Apple, Square or Tesla stock, they were due for a down day or two or three.
Stepping back, sectors are racking up solid gains, then drifting lower for a time before rebounding again. The Dow Jones, S&P 500 and Nasdaq are all up nicely in April. So are most leading ETFs, from ARKK to XME. The high number of tight patterns despite ongoing sector rotation also is positive.
What You Should Do Now
In this environment, buying pullbacks to key support might be a safer place to buy or at least initiate a position. Breakouts can be tricky, especially when they take place well into a sector rotation.
If you can get a decent gain in a stock before the market shifts away, you can try to take quick profits or hold for a few weeks until that sector comes back into play. Investors who were able to hold to FCX stock or the XME ETF were rewarded Wednesday.
Of course, there was no guarantee that cyclical names would bounce back. And it’s no sure bet that Apple stock, Tesla will break out to new highs or that Nvidia stock will pass its post-breakout test at the buy point. If the stock market rally returns to more-volatile action with a downside bias, investors will struggle.
So make sure you have an exit strategy for your stocks.
Unless you’re exceptionally nimble, it’s hard to jump from sector to sector. More likely, investors will move out of stocks and sectors just before a bounce, and into parts of the market that are due for a pullback.
So you want to diversify your portfolio with a variety of leading stocks. You should be able to weather modest losses in parts of your portfolio over a short span while other holdings advance with the market rally trending higher.
Use a broad-based watchlist to spot potential new buys but also get an early reading on market shifts.
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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