The Dow Jones futures rose slightly on Thursday evening, along with the S&P 500 futures. Nasdaq futures fell. The stock market rally suffered heavy losses on Thursday as ten-year government bond yields continued to rise. This time the Nasdaq failed to recover from its lows and closed under key support.
Nvidia ((NVDA) and Teladoc health ((TDOC) joined stocks and triggered sizeable gains while Tesla ((TSLA) plummeted below its 10 week line. Investors should primarily defend themselves with technology stocks. For those who want to wait and see how the big winners fared at the end of the week, there are some key selling or holding decisions to make.
Meanwhile, GameStop ((GME) came off its intraday high. GME stock rose 19% to 108.73 after doubling on Wednesday. But it came a long way from its intraday high of 184.68. AMC Entertainment ((AMC) and express ((EXPR), two more squeeze games that jumped Thursday morning have been closed. GME stock fell in active trading overnight.
Key earnings reports
Etsy, Zscaler, Salesforce, Autodesk, and Farfetch topped the profit views. Airbnb and DoorDash reported huge quarterly losses in their first quarterly reports since going public in late 2020, but they surpassed revenue.
Etsy stock rose in late trading, just outperforming Thursday’s 5.5% decline. Zscaler stock rose, making up for most of its 5.8% loss during the regular session. Salesforce stock fell on poor forecasts overnight after CRM closed 3.9%. Farfetch stock also fell in extended trade, down 4.15% on Thursday. ADSK shares fell overnight after falling 5%.
ABNB stock rose overnight after falling 9.1% on Thursday. The DASH share sold after closing with a decline of 5.4%.
DraftKings ((DKNG) reported early Friday.
Investors have been less forgiving of earnings results in the current market climate, even when earnings and forecasts appear strong. Nvidia shares fell 8.2% on Thursday after gaining earnings. Teladoc, Innovative industrial real estate ((IIPR), Progins ((PGNY), NetApp ((NTAP) and Novocure ((NVCR) all suffered double-digit losses.
Dow Jones Futures today
Dow Jones futures were up 0.15% from fair value. The S&P 500 futures were up 0.25%. Nasdaq 100 futures fell 0.1%. The futures were a bit volatile overnight, which is not surprising given the big moves in the market this week.
Coronavirus cases reached 113.54 million worldwide. Covid-19 deaths topped 2.51 million.
Coronavirus cases in the US have hit 29.05 million people, with deaths over 520,000.
Stock market rally
The stock market rally suffered broad-based losses on Thursday, with growth continuing to decline.
The Dow Jones Industrial Average fell 1.75% on Thursday Stock exchange trading, one day after hitting a record high. The S&P 500 index slipped 2.45% but found support on the 50-day line. The Nasdaq Composite fell 3.5%, closing below its 50-day line for the first time since November 3rd. It is still above Tuesday’s intraday low.
The 10-year government bond yield rose 14 basis points to 1.52%. That rising return has put pressure on growth stocks.
Nvidia reported strong gains and forecasts but fell 8.2% to 532.30. That’s more than a 10% gain from the buy point of 560.07 and is now below the 50-day limit. Nvidia rose slightly overnight when CNBC CEO Jen-Hsun “Jensen” Huang Jim Cramer said he was confident the Arm Holdings acquisition would take place.
Teladoc shares fell 14% to 219.55. This wiped out a 30% run from a 236.76 handle entry and is now 7.3% below the purchase point. The TDOC share is also well below its 50-day mark.
Under the best ETFs, the innovator IBD 50 ETF (FFTY) fell 4.4%, while the innovator IBD Breakout Opportunities ETF (STRUGGLE) decreased by 5.5%. The iShares Expanded Tech-Software Sector ETF (IGV) fell by 3.9%. The VanEck Vectors Semiconductor ETF (SMH) slipped 5.6%, with Nvidia stock holding a key position.
The Ark Innovation ETF was down 6.4% and the Ark Genomics ETF was down 5.8%. Its parent company ARK Invest’s largest stake is Tesla stock, which expanded to include the EV maker earlier this week. TDOC stock is another top 5 position. and ARK bought many Teladoc stocks on Thursday.
As ARK Invest is gradually making withdrawals, the publication of daily buys and sells can make it difficult to exit positions, especially with less liquid names.
ARKK and ARKG fell overnight as Tesla and Tech Futures pulled back.
Market rally analysis
Whether we’re in a broad market decline or a heavy sector rotation, growth stocks are volatile. The Nasdaq composite participated in the 21-day exponential moving average and is now under its 50 days. The tech-heavy index is down 5.4% this week after falling 1.6% last week.
Perhaps this is the moment when the stock market rally takes hold again. But the current trend is not your friend. Even if the market is gradually moving up, it doesn’t mean that last year’s speculative growth names will show the way or even move forward. Cyclicals and financials have held up well this week and could continue to lead.
Weekly sell signals
Investors should sell a stock whenever it drops 7 to 8% below its purchase price, and they shouldn’t let a double-digit profit turn into a loss like Nvidia and Teladoc did.
However, selling earnings stocks is both an art and a science. One way to minimize panic selling is to wait for a stock to end the week before a position is sold or closed entirely. If a stock is well below its 10-week line – 2% or more – it can be a sell signal. (Sometimes a stock has support areas a little below the 10-week line, so investors may be waiting for those levels to break too.)
But if a stock is significantly below that support, are you selling? Much of this depends on your cost base. If you see a 30% profit that has dropped below 10%, you may want to exit while you still have a profit. If you’re still 100% ascended, you have more wiggle room. Your belief is also key. If you think a stock has the potential for big gains from current levels, you may want to keep most of that position. If you don’t have that belief, you can cash in your chips.
Tesla stock is 13% below its 10-week mark and is falling sharply in volume this week. That would be a sell signal, but not an automatic one.
If you bought at the 466 buy point in November, you saw a 93% increase to a still hefty 46%. You probably wouldn’t want to see much more of that profit evaporate. If you bought roughly 290 or 174, it would be even easier to hold Tesla stock. But it would also be understandable to sell a large part or all of Tesla stock.
Paying out early pays off
When the Nasdaq was extended in January and February, IBD suggested selling in strength in various pullbacks and reducing exposure. The goal was to make some profits and preserve capital when market conditions and individual stock actions got a little tricky.
In the short term, stocks could have risen further. But on Thursday the Nasdaq closed around January 13th. The FFTY ETF is back on January 14th while ARKK is at pre-Christmas levels. If you took profits from mid-January to early February, you are broadly in a better position today.
Read The big picture every day to stay in sync with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MAY ALSO LIKE: