Dow Jones Futures Technical Analysis: Market Rally Stable, Tesla Leads the Pack and Stocks to Watch

Last week saw a resumption of the stock market rally, with benchmark indices breaking through previously established resistance levels.

This is not a total triumph, but an important one. According to leading stocks and other indications, the market rally appears stronger than what the large-cap indices suggest. Investors should gradually increase their exposure in preparation for a deeper dig, even though there are still many hurdles to overcome.

Buying zones have been set up or close by for the following stocks: Arista Networks (ANET), Tesla (TSLA), Enphase Energy (ENPH), Pure Storage (PSTG), and Neurocrine Biosciences (NBIX).

Pure Storage, Tesla (TSLA) and ANET shares came in early Friday. On Friday, ENPH stock fell sharply, although it later recovered after staying above an entry trendline. In addition, the NBIX stock is floating on a trendline.

Shares of NBIX are listed on the IBD Leaderboard. In addition, the PSTG share can now be traded on SwingTrader. The IBD 50 includes Tesla (TSLA), Enphase Energy (ENPH), Arista Networks (ANET), and Pure Storage (PSTG). The IBD Big Cap 20 also includes shares of ENPH and Arista.

Berkshire Hathaway (BRKB), Warren Buffett’s company, said Friday evening it had increased its investment in Occidental Petroleum (OXY) from 20.2% to 26.8%. So on Friday night, OXY stock rose a little bit.

The accompanying video to the article discussed this week’s market rally, including an in-depth analysis of GlobalFoundries (GFS), Tesla and PSTG stocks.

Stock Market Forecasts for Today’s Trading on the Dow

Futures for the three major indices — S&P, the Dow and Nasdaq — will all begin trading at 6 p.m. ET on Sunday.

Keep in mind that activity on the Dow and other market futures does not always reflect actual trading in the next day’s regular trading session.

Speculative buying drives stocks up

On Tuesday, a rise in the stock market exacerbated previous losses before reverting to significant weekly gains.

Last week’s stock market trading resulted in a 2.7% gain for the Dow. The S&P rose 3.65%. An increase of 4.1% was seen in the Nasdaq composite index. Nearly 4 percent of Russell 2000’s small-cap stocks rose in value.

Ten-year government bond yields rose for the sixth consecutive week, rising 13 basis points to 3.32%, close to the 11-year high of 3.48% in June.

Despite falling to their weekly lows, US crude futures recovered to close out the week dropping just 0.1% at $86.79 a barrel, a price not seen since early January. However, futures on the commodity natural gas fell by 9%.

Stocks to watch out for

Last week, Tesla stock rose 10.9 percent to $299.68, back above the 200-day moving average after diving below it the week before.

Despite this, the volume was quite low. Potential buyers of TSLA stock can enter the market at or just above the $300 level, with the price of 314.74 acting as a handle. However, the widespread availability of the electric vehicle pioneer is still a long way off.

Tesla has recovered from the Covid restrictions and has significantly increased output. But competitors are also accelerating, with Chinese electric vehicle manufacturers in particular bringing new models to market en masse and dramatically expanding their global presence.

The coming months will indeed be exciting for anyone dealing with electric vehicles.

On Friday night, Tesla CEO Elon Musk cited a severance payment to whistleblower Peiter “Mudge” Zatko as another reason to pull out of the $44 billion takeover bid for Twitter (TWTR).

Despite little activity, ANET stock rose 6.1% last week, reaching $124.11, restoring the 200- and 21-day moving averages. On a double bottom basis, a buy target of 132.97 is set for Arista Networks’ shares, although early entry around current levels is an option for investors. Growth in both earnings and sales for Arista has accelerated over the past three quarters.

Over the past week, ENPH shares are up 9.5%, reaching a new high of 305.70. On Tuesday, stocks recovered above their 21-day line, signaling the possibility of an early entry into a short-term consolidation following the recent rise in earnings after earnings.

On Wednesday, investors traded Enphase stocks, hitting new all-time highs.

An analyst downgrade sent ENPH shares to an intraday low of $294.20 on Friday, but the company recovered quickly and failed to break below the trendline or dip below the 21-day line. Except last Friday, relative strength has risen to new highs as Enphase outperformed the S&P.

During the short week, NBIX shares were up 3.4% and ended at $106.51. This is a recovery of the 10 week line. On Thursday, the stock price pushed over a critical trendline resistance level and stayed above that level until Friday.

After touching the 200-day and 50-day moving averages, PSTG stock rose 3.9% and closed the week at $30.30. A new handle with a buy point of 31.62 was created after a breakout attempt failed in August. However, on Friday, prices rose above the 21-day moving average, giving traders an early entry.

Stock Market Technical Analysis

On Tuesday, it looked like the market’s run was coming to an end. The Nasdaq Composite Index fell below its low in late July, although it did not close lower.

The main market indices then started to recover.

Early Friday, the S&P and Russell 2000 regained their 50-day MA, with the Nasdaq following in the afternoon. A brief pause above the 50-day mark was followed by a close below it for the Dow Jones.

While the S&P is now trading above the 50-day MA, it may be too early to state that the market rally has successfully overcome this critical hurdle. Because mega-cap stocks have had such a drag on the S&P, Dow and Nasdaq composite, obscuring the positive move going on underlying, this is one of the reasons.

Winners outnumbered losers by a 5 to 2 count on the Nasdaq and a 5 to 1 margin on the NYSE.

On Thursday, the S&P MidCap 400 crossed the 21-day moving average; on Friday it broke above 50 days. It’s true that large cap stocks did relatively well on Friday. For example, Tesla shares rose sharply, while those of Apple and Microsoft Corp. closer to significant price points.

Despite ENPH’s decline on Friday, solar companies, pollution control companies and medical-related stocks are still among the market leaders. However, the tech sector is showing signs of life, with ANET stocks and Pure Storage leading the way.

Steel manufacturers are on the rise and there are isolated growth areas in the retail and hospitality sectors. After a dip early in the week, oil and gas names recovered with underlying commodity prices. The rebound in the market is still “under pressure”, as they say.

The indices could easily fall below the 50-day line and test last week’s lows if market sentiment turns against them. The 200-day moving average is a formidable hurdle to overcome.

Next steps for investors

The stock market rally has progressed significantly over the past three trading sessions. Therefore, investors should probably increase their exposure at this point.

With a long way to go before the indices hit the 200-day MA, investors may become more optimistic if the Nasdaq convincingly breaks above the 50-day MA.

Setting up a monitoring system. Spread your net far and wide, but give your undivided attention to the names that can or should be pursued.

Keep an open mind when looking for openings. Be prepared to take a more defensive stance and portfolio if the current market rally falters again.

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