Wednesday, January 26, 2022

Santa Claus rally comes early, buy these 5 stocks

Dow Jones futures will open on Sunday evening along with S&P 500 futures and Nasdaq futures. The stock market rally resumed last week, with the S&P 500 nearly hitting a new high, while a diverse list of leaders flashed buy signals, including AMD stock and the Google parent. Alphabet (Google).


While it may not be everything investors wanted from Santa to go over the Christmas break, it’s a lot better than the lump of coal they were hoping for after Monday, Dec. 19.

Tesla (TSLA) was a big winner last week, coming back powerfully from the top of a former base to clear their 50-day line. But Tesla’s stock isn’t in a buy line right now. During this tradeweb markets (TW), arkbest (ARCB), Advanced Micro Devices (AMD), West Pharmaceutical Services (WST) and Google Stock are all actionable now.

Tesla, Google, AMD and TW stocks are on the IBD leaderboard. Google Stock is on Swing Trader. Google and WST stocks are on the IBD long-term leaders. Google, West Pharma, Tradeweb and AMD stocks are at IBD 50. Tradeweb is also the IBD stock of the day.

Video embedded in this article covers the market rebound and analysis of Tradeweb, AMD and ARCB stocks.

dow jones futures today

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

The US stock market and many exchanges around the world are closed on Christmas Eve.

Remember that overnight action in Dow futures and elsewhere does not necessarily entail actual trading in the next regular stock market session.

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

coronavirus news

Worldwide coronavirus cases reached 278.52 million. Covid-19 deaths topped 5.4 million.

With over 834,000 deaths, coronavirus cases in the US have risen to 52.78 million.

New Covid cases are at their highest in months, as the super-infectious Omron variant turbocharged case counts are already on the rise in much of the world. However, the cases of Omicron appear to be much milder on average than the earlier COVID forms.

stock market rally

The stock market’s rally started off poorly last week, but then strengthened with three solid gains and session highs. Technically, it’s a little early for Santa Claus to rally, but investors didn’t mind opening the gifts a little early.

The Dow Jones Industrial Average rose 1.65% in last week’s stock market trading. The S&P 500 index rose 2.3%. The Nasdaq Composite and the small-cap Russell 2000, which looked the worst on Monday, both gained 3.2% weekly.

The 10-year Treasury yield jumped 9 basis points to 1.49% last week. Crude oil prices rose 4% to $73.79 a barrel.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rebounded by 4.75% last week. The Innovator IBD Breakout Opportunities ETF (BOUT) climbed 3.5%, near record highs. The iShares Extended Tech-Software Sector ETF (IGV) advanced 2.4%. The VanEck Vector Semiconductor ETF (SMH) rose 4.4%, with AMD stock being a major component.

The SPDR S&P Metals & Mining ETF (XME) gained 3.1% last week. The Global X US Infrastructure Development ETF (PAVE) was up 1.7%. The US Global Jets ETF (JETS) rose 6.7%. The SPDR S&P Homebuilders ETF (XHB) climbed 2.7%. The Energy Select SPDR ETF (XLE) gained 0.9% and the Financial Select SPDR ETF (XLF) 0.6%, both of which erased heavy losses earlier in the week. Health Care Select Sector SPDR Fund (XLV) climbed 1% to new highs.

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rose 1.9% last week and the ARK Genomics ETF (ARKG) rose 0.6%. Tesla stock remains the No. 1 holding in ARK Invest’s ETF.

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tradeweb stock

TradeWeb stock jumped 3.8% to 98.89 on Thursday, a 4.2% weekly gain. TW rebounded sharply from its 50-day line and broke a trend line showing an early buy signal on Thursday. But it continued to rise, briefly hitting a record high and topping out of a four-week tight pattern at 99.35 buy points, a nearly flat base. The relative strength line for TW stock is near record high.

In another positive sign, other financial markets or exchange stocks, including NYSE-owned Intercontinental Exchange (Ice), Nasdaq (NDAQ), CME Group (CME) and others are doing good work.

arkbest stock

ArcBest stock rose 5.45% to a high of 111.65, clearing a trend line and a short-term peak, extending a 50-day line rebound. This offered an early entry for ARCB stock, which has an official buy point of 116.89.

Several other trucking firms, including jb hunt (JBHT) and skirt (SAIA), are also taking shape.

amd stock

AMD stock rose 1.6% to 146.14 on Thursday, breaking a trend line and halting a strong weekly bounce off the 50-day line. It is actionable here, another significant hurdle with a high of 147.93 on 16 December.

Several other chipmakers, including AMD rival NVIDIA (NVDA), at or near point of purchase.

West Pharma Stock

West Pharmaceutical stock broke out of a cup-with-handle basis buy point of 458.09 on Thursday, according to MarketSmith analysis. It continued a strong bounce off the 21-day and 10-week lines. WST stock rose 2.2% to 459.84 for the week. As a medical supplier, WST stock is another “picks and shovels” game, generating steady growth.

A variety of medical stocks have been showing strength in recent weeks.

google stock

Google stock, after hitting a two-month low on Monday, was up 3.7% weekly at 2,938.33. It is above the 50-day line, a minor trend line, and an old buy point at 2,925.17. GOOGL stock now has a fresh flat base with 3,019.43 buy point.

Tesla Stock

Tesla stock hit a low of 886.12 on Tuesday morning, more than a round-tripping of a 38% rally from the 900.50 cup-base buy point at the end of October. But shares rose after that, rising more than 14% for the week to 1,067 and reclaiming its 50-day moving average. Tesla stock was the biggest winner of the S&P 500 on Wednesday and Thursday.

Amid some confusion, CEO Elon Musk indicated that he has almost ended selling TSLA stock to cover tax payments.

While a rebound from the prior base and a move beyond the 50-day line are bullish moves, Tesla stock isn’t actionable just yet. There is a consolidation in the EV giant which can be viewed as a double-bottom base with 1,202.05 buying point. A downward sloping trend line from the early November peak provides an initial entry around 1,115.

Musk said Friday evening that Tesla is releasing FSD beta 10.8, the latest version of its driver-assistance system that is being used by several thousand fully self-driving owners.

In early January, probably before the opening of the first 2022 business session on January 3, Tesla will release fourth-quarter production and delivery figures. Analysts expect another record quarter for delivery, with plants near Berlin and Austin set to begin production soon.

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market rally analysis

The stock market rally again looks promising. On Monday, the Nasdaq closed lower in early December, ending its rallying effort. But that didn’t happen in the S&P 500, so the market overall continued to rally. It was not looking good at that time. But the major indices bounced back strongly over the next three sessions, reclaiming their 50-day moving average.

The S&P 500 hit a high on Thursday, while the Nasdaq broke a trend line and cleared its high on December 16, when the market declined sharply. This action provides greater confidence in the health of the market rally.

The Russell 2000 bounced back from Monday’s nine-month low, but is still below its 200-day and 50-day lines. It is a good proxy for the breadth of the overall market, which has improved over the past few sessions, but is disappointing. New highs easily surpassed new lows on the NYSE on Thursday, but still lags on the Nasdaq.

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market leadership

On the plus side, market leadership continues to expand.

Travel stocks were big winners, and a clear sign that the markets, for now, are once again feeling more confident about the Omicron COVID version. Medical quietly has been very strong. Networking stocks have been the clear leaders in recent weeks. While TW stock and other exchanges are doing well, many financials are not far from looking interesting.

Several chips are flashing buy signals, including several chip-equipment makers including AMD stock. Trucking plays are looking solid, with ARCB stock probably leading a convoy in the coming weeks. Housing stocks have remained higher despite some hurdles.

Software remains a weak area, but there are a few kernels of strength.

What do we do now

The stock market rally is showing real momentum. If you haven’t already, you can start adding to your exposure. But don’t rush into stocks all of a sudden. See how some beginners shop. If your stocks and the market continue to perform well, you may be slowly diverging.

To get ready, work on your watchlist. Look for stocks with strong relative strength that are holding or retesting key support. Be sure to include stocks from different groups and sectors. Then focus on stocks that are actionable, or nearly so.

Historically, investors can expect more gifts this coming week. The traditional Santa Claus rally covers the last five trading days of the year, as well as the first two trading sessions of the new year.

But it’s not a guarantee. While the market reacted favorably to the latest Omicron Covid headlines, the market may be rocked amidst light volumes on coronavirus or other headlines.

Read The Big Picture every day to learn the direction of the market and keep up with key stocks and sectors.

Please follow Ed Carson on Twitter @ibd_ecarson For stock market updates and much more.

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