The Dow Jones Industrial Average surged 400 points Tuesday morning, as global markets rebounded from Monday’s steep losses. Nike stock jumped on strong earnings results. Apple, Nvidia and Tesla stock rebounded, while Micron Technology eyed a breakout after strong earnings guidance.
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Among the Dow Jones leaders, Apple (AAPL) bounced 1% Tuesday. Microsoft (MSFT) also added 1% in today’s stock market. Both stocks are looking to stem three-day declines. Home Depot (HD) rose to extend a rebound from support. Nike (NKE) gained following its fiscal second-quarter report late Monday.
Electric-vehicle leader Tesla (TSLA) traded up nearly 2% Tuesday. Its rival, Rivian (RIVN), rose around 4%. Lucid Group (LCID) gained around 2%. And Chinese EV leaders Li Auto (LI) and Xpeng Motors (XPEV) also posted solid gains after Tuesday’s open.
Among Tuesday’s top stocks to buy and watch, Arista Networks (ANET), Ryan Specialty (RYAN), Advanced Micro Devices (AMD) and Nvidia (NVDA) are in or near new buy zones. Keep in mind that investors should be cautious with new purchases amid the recent stock market volatility.
Microsoft and Tesla are IBD Leaderboard stocks. Arista was featured in this week’s Stocks Near A Buy Zone column, while Ryan Specialty was last week’s featured IPO Leader.
Dow Jones Today
After the stock market open Tuesday, the Dow Jones Industrial Average rose 1.1%, while the S&P 500 gained 1%. The tech-heavy Nasdaq composite climbed 1.05% in morning trade.
Among exchange traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) rallied 1.2% Tuesday, while the SPDR S&P 500 ETF (SPY) rose 1%.
Overseas, the Stoxx Europe 600 climbed 1.2%, while Asian indexes finished with solid gains. Japan’s Nikkei 225 added 2.1% and China’s Shanghai Composite gained 0.9%.
Elsewhere, the 10-year Treasury yield traded up to 1.45% Tuesday, following its close at just below 1.42% Friday.
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Stock Market Rally
The stock market posted heavy losses Monday, as the major stock indexes compounded Friday’s weakness. The Nasdaq undercut its Dec. 3 low, while the S&P 500 cut below its 50-day moving average. The Dow 30 gave up the 35,000 level, holding just above its long-term 200-day moving average.
During extended periods of volatility and weakness, it’s best to avoid new purchases — even on breakouts, unless it’s a perfect setup and breakout. The increased selling pressure in the general market should give you pause. If you do decide to buy, be extra demanding and focus only on stocks showing exceptional fundamental and technical strength.
The risk level is very elevated at this point and there’s no need to rush back into the market. It’s perfectly acceptable to watch from the sidelines and wait for the market to prove itself amid the recent losses. It’s extremely challenging to navigate a whipsaw market and typically just leads to more losses in your portfolio.
But don’t tune out. Keep track of the leading growth stocks by using the relative strength line. The RS line measures a stock’s price performance vs. the S&P 500. If the stock is outperforming the broader market, then the RS line angles upward. If a stock is performing worse than the broad market, then the line will point lower.
After Monday’s session, the Big Picture commented: “The Nasdaq endured a brutal opening Monday and stepped off its session lows to avoid another steep sell-off. But the index also waved a big red flag about the chances that the latest confirmed uptrend will hold.”
Amid the recent weakness, it’s an important day to read IBD’s The Big Picture.
Dow Jones Earnings: Nike
Dow Jones retail leader Nike is tracing a new flat base that has a buy point at 179.20, according to IBD MarketSmith chart analysis. Shares are below their 50-day line following last week’s losses. Nike shares dropped 2.7% Monday.
Late Monday, Nike reported its quarterly results, beating Wall Street’s estimates. The company earned 83 cents a share and sales of $11.4 billion. Shares climbed nearly 8% Tuesday, aiming to end a six-day slide.
Stock Market Earnings: Micron
Micron Technology (MU) also reported fiscal first-quarter earnings results after the close Monday, earning an adjusted $2.04 a share on sales of $7.69 billion, below analyst estimates. But for the current fiscal second quarter, Micron expects to earn an adjusted $1.95 a share on sales of $7.5 billion. Wall Street had predicted per-share earnings of $1.84 on sales of $7.29 billion for the second quarter.
Micron stock is tracing a cup with handle that shows a 89.15 buy point. MU stock surged nearly 8% in morning trade.
Dow Jones Stocks To Watch: Home Depot
Home Depot stock rose 0.4% amid Monday’s broad market declines, recovering from a dive to test support at its 50-day moving average. That put shares in a buy zone on a rebound from support. Despite recent losses, Home Depot remains the top Dow Jones performer in 2021, up 46.5% year-to-date through Monday’s close. HD shares gained 0.9% Tuesday.
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Stocks To Buy And Watch: Arista, Ryan, AMD, Nvidia
Arista Networks is trying to break out past a flat base‘s 134.24 buy point, closing just above the entry after Monday’s 0.5% loss. ANET stock shows a strong 97 out of a perfect 99 IBD Composite Rating, according to the IBD Stock Checkup. Shares moved up 1.4% Tuesday.
Arista pulled back on Friday, bouncing firmly off support at its short-term 10-day moving average, then reversing sharply higher. The stock’s RS line is just off new highs, indicating significant stock market outperformance during the recent weakness in the major stock indexes.
IPO Leader Ryan Specialty is testing support at its 50-day moving average for a third time this month. A strong volume bounce placed shares in a new buy area, but the stock closed down 3.3% Monday and back to its 50-day line. The consolidation could also form a new base. On the downside, if the stock turns and breaches the 50-day support level, it would trigger a defensive sell signal and would likely signal a longer correction. Shares were up nearly 1% Tuesday.
Chip giants Advanced Micro Devices and Nvidia closed below their respective 50-day moving averages following Monday’s losses. Strong rebounds from this support level would place the stock market leaders in new buy areas.
AMD stock moved up more than 1.5% Tuesday, recovering from Monday’s 1.4% decline. Meanwhile, graphics-chip maker Nvidia was up 2%, snapping back after Monday’s 0.3% loss.
Join IBD experts as they analyze leading stocks in the current stock market rally on IBD Live
EV Stocks: Li Auto, Xpeng, Lucid Motors, Rivian
Li Auto continues to work on a new base following the 7%-8% loss-cutting sell rule below a cup-with-handle base’s 34.93 buy point. Shares are below their 50-day line and are again testing support around the long-term 200-day moving average. Shares moved up about 4% Tuesday.
Xpeng Motors triggered the round-trip sell signal from a 48.08 buy point during early December’s sharp sell-off. XPEV shares fell further below their 50-day line during Monday’s 5.6% sell-off and are right at their 200-day line. Wait for the stock to form a new base, which would offer a new entry. Shares rebounded 7% Tuesday morning.
Lucid Motors shares was on pace to snap a four-day losing streak Tuesday, rising about 2.5%. LCID stock remains extended past a 28.49 buy point in a cup-with-handle base, but huge gains have dwindled. Shares are trying to find support at their 50-day line, but are now below that level.
Recent initial public offering Rivian rose 3.9% Tuesday, on pace to recover a small part of Monday’s nearly 8% dive. RIVN shares closed Monday about 50% off their post-IPO highs, hitting a new low. Continue to wait for an IPO base to form before considering a purchase. Recent sharp losses are a significant setback in the stock’s basing process.
Five Best Dow Jones Stocks To Watch Now
Tesla Stock
Tesla stock rallied nearly 2% Tuesday, looking to rebound from Monday’s 3.5% decline. On Monday, the stock closed at its lowest level since Oct. 21. Last week, the stock broke down through its key 50-day support level.
Shares traded as high as 1,243.49 on Nov. 4, but the stock ended Monday about 28% off its 52-week high.
TSLA shares remain sharply above a 764.55 buy point in a cup with handle. The EV giant is working on a new base, but with the stock at recent lows, the current formation needs more time develop before a correct buy point emerges.
Dow Jones Leaders: Apple, Microsoft
Among Dow Jones stocks, Apple stock extended a losing streak to three sessions Monday, falling 0.8%. The stock remained about 11% above a 153.27 buy point out of a cup-with-handle base, according to IBD MarketSmith chart analysis. Shares climbed 1% Tuesday.
Software giant Microsoft moved down 1.2% Monday, as the stock battles for support around the 50-day line but fell further below that key level Monday. MSFT shares rallied 1% Tuesday, on pace to snap three-day losing streak.
On Oct. 18, Microsoft stock broke out past a flat base‘s 305.94 buy point and remains about 5% past the entry amid recent losses.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
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