The Dow Jones Industrial Average briefly lost more than 50 points early Tuesday before reversing higher, as Tesla stock snapped back from Monday’s plunge. Apple rallied, while Nio reversed higher in morning trade. Zoom Video also reversed from early losses sparked by a share offering.
Tesla (TSLA) rallied more than 6% following Monday’s 7.8% dive. Chinese EV rival Nio (NIO) slid as much as 3.4% after the company announced it will sell $1.3 billion of convertible senior notes. Nio stock was also downgraded at Citigroup. Zoom Video (ZM) reversed 1% higher despite plans to sell $1.5 billion of stock.
Dow Jones Today
On Tuesday, the Dow Jones Industrial Average moved up 0.2%, while the S&P 500 also rose 0.2%. The tech-heavy Nasdaq composite defended a 0.3% gain in morning trade.
According to the Worldometer data tracker, the cumulative number of confirmed coronavirus cases in the U.S. topped 23.1 million on Tuesday. Total virus-related deaths rose past 385,000.
The cumulative total of worldwide Covid-19 cases confirmed since the start of the outbreak topped 91.4 million Tuesday, with more than 1.95 million virus-related deaths.
Stock Market Rally Extended?
Looking back at the current uptrend, November was a key month for the stock market. IBD’s The Big Picture flagged the new uptrend following the market’s bullish follow-through day on Nov. 4. Meanwhile, the second week of January 2021 shows major stock indexes just off record highs.
Monday’s Big Picture commented, “Investors rotated away from growth stocks Monday as the stock market fell, but leading stocks — including many growth companies — actually outperformed.”
Investors should continue to use the stock market’s strength to buy breakouts. Be patient and wait for powerful breakouts instead of chasing extended stocks. If the new breakouts work, then add more exposure. But if breakouts start to fail, then you can back away.
In particular, focus on stocks with strong relative strength. Find them 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.
Stocks To Watch: IBD Long-Term Leaders
Stocks to watch include IBD Long-Term Leaders, companies with stable earnings growth and price performance. Veeva Systems (VEEV) is the latest addition to the list, as it regains its 10-week line. Shares edged higher Tuesday, and are approaching an early entry at 292.90, while the conventional buy point remains at 314.09.
Dow Jones Stocks To Watch: Merck Breaks Out
Dow Jones stock Merck is trying to break out past an 85.27 buy point in a cup with handle. The stock fell nearly 1% in morning trade.
Merck shares are about 8% off their 52-week high.
A key flaw is the stock’s lagging relative strength line. It remains far from its old highs, signifying sharp underperformance vs. the S&P 500.
Stocks In Or Near Buy Zones: Chipotle
According to IBD Stock Checkup, Chipotle stock shows an 81 out of a perfect 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
Lululemon moved down 1.5%, as it forms a cup with handle with a 387.47 buy point. Shares are trying to find support near their 50-day line.
A real flaw is the stock’s weak RS line. The relative strength line measures a stock’s price performance vs. the broad market.
Tractor Supply is within striking distance of a 150.79 buy point in a cup with handle. Shares briefly topped the entry Monday before closing below the buy point. The stock edged higher Tuesday morning.
Stocks On The Move: Zoom Video
Early Tuesday, Zoom Video said it seeking to raise $1.5 billion through a stock sale. Zoom stock reversed from early losses to rise more than 1% in morning trade.
Shares ended Monday more than 40% off their 52-week high and are approaching their long-term 200-day moving average line.
Chinese Tesla rival Nio fell as much as 3.4% Tuesday morning before turning higher following the company’s plans to sell $1.3 billion of convertible senior notes. In addition, Citigroup downgraded Nio stock from buy to neutral.
Shares are extended past a 57.30 buy point in a short cup base.
Tesla Stock In Climax Top?
IBD Leaderboard stock Tesla looked to rebound from Monday’s near-8% dive with a 6% rally Tuesday morning.
Friday’s IBD Stock Of The Day signaled that Tesla was flashing several signs of a climax top amid a sharply vertical run over the last few weeks.
On Friday, Tesla stock hit a record high at 884.49. Shares climbed as much as 88% from a 466 buy point in a cup with handle.
Dow Jones Leaders: Apple, Microsoft
In recent weeks, Apple shares have moved above aggressive entries at 125.49 and 122.09.
Software giant Microsoft moved down 0.8% Tuesday, as it fights to hold above its 50-day line last. Shares continue to trace a new base with a 228.22 buy point.
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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