The Dow Jones Industrial Average rallied 100 points early Wednesday, as Pfizer provided an update on the effectiveness of its vaccine vs. the omicron Covid-19 variant. Apple hit new highs, while Tesla stock dropped after reports of strong electric-vehicle sales in China.
Among the Dow Jones leaders, Apple (AAPL) gained 0.5% Wednesday, while Microsoft (MSFT) fell 0.3% in today’s stock market. Nike (NKE) also ticked 0.3% lower, still below a buy point despite Tuesday’s strong gain.
EV leader Tesla (TSLA) shed early gains and dropped 1% Wednesday. EV peer Rivian (RIVN) was down 1%, while Lucid Group (LCID) moved down around 4%. Chinese EV leaders Li Auto (LI) and Xpeng Motors (XPEV) were mixed after Wednesday’s open.
Among the top stocks to buy and watch, Endeavor Group (EDR), Louisiana-Pacific (LPX), NXP Semiconductors (NXPI) and Zim Integrated Shipping (ZIM) are in or near new buy zones. Despite the recent stock market strength, investors should still be developing watchlists, and avoid making new purchases until the market’s current rally attempt stages a follow-through day.
Microsoft and Tesla are IBD Leaderboard stocks. Louisiana-Pacific was Tuesday’s IBD 50 Stocks To Watch pick. NXP was spotlighted in this week’s Stocks Near A Buy Zone story. Endeavor was featured in last week’s IPO Leaders story. Zim is an IBD SwingTrader stock.
Dow Jones Today: Pfizer Vaccine News
After the stock market open Wednesday, the Dow Jones Industrial Average pared gains to 0.1%, as Honeywell International (HON) dragged on the index following a Bank of America downgrade. The S&P 500 rose 0.1%, while the tech-heavy Nasdaq composite reversed higher after early losses.
Elsewhere, the 10-year Treasury yield traded down to around 1.46% Wednesday morning, following its close at 1.48% Tuesday after two straight days of strong gains. Crude oil prices were lower, with West Texas Intermediate down about 0.5% and on pace to snap a two-day advance.
Early Wednesday, Pfizer (PFE) and vaccine partner BioNTech (BNTX) said a third dose of their Covid-19 vaccine neutralized the omicron variant in lab tests. They also reported that the two-dose regimen was significantly less effective vs. the new variant than prior strains of the virus. Pfizer shares and BNTX shares both traded higher after the open.
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Stock Market Rally Attempt
The stock market posted strong gains Tuesday, as the major stock indexes continued their rebounds from last week’s weakness. Tuesday marked Day 2 of a new rally attempt on the Nasdaq. That is a positive sign, but means the market correction isn’t over yet — one or two days doesn’t make a trend. Starting at Day 4, you are looking for the index to rise sharply in higher volume than the prior day. That would indicate a follow-through day, and signal the start of a potential uptrend.
Now, while the market is still correcting, is a good time to search for stocks that could become the next uptrend’s leaders. One tool helpful in such a search is 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 Tuesday’s session, The Big Picture commented: “With two solid gains this week, much of the stock market’s damage from the previous couple of weeks is patched up. The Nasdaq sank almost 8% from its Nov. 22 peak and is now 3.2% from new highs.”
The stock market outlook was downgraded on Friday, so it’s an important time to read IBD’s The Big Picture.
Five Best Dow Jones Stocks To Watch Now
Dow Jones Stocks To Watch: Apple, Nike
Apple shares hit new highs Tuesday, rallying more than 3.5%. The stock is getting further extended past a 153.27 buy point out of a cup-with-handle base, according to IBD MarketSmith chart analysis. The 5% buy zone topped out at 160.93. Apple shares moved up 0.5% Wednesday, setting another all-time high.
Retail leader Nike remains about 2% below a cup base’s 174.48 buy point after Tuesday’s 1.4% gain. Shares fell 0.3% Wednesday.
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Toll Brothers (TOL) reported better-than-expected fiscal fourth-quarter earnings and sales late Tuesday. Shares dropped more than 2% Wednesday. TOL stock closed Tuesday in buy range past a 68.98 buy point, but is already extended above a 67.43 handle entry. That 5% buy area topped out at 70.80.
Elsewhere, Stitch Fix (SFIX) dived 27% Wednesday after cutting its revenue outlook for the fiscal year due to ongoing supply chain pressures. Shares closed Tuesday about 78% off their 52-week high.
Stocks To Buy And Watch: Endeavor, Louisiana-Pacific, NXP, Zim
IPO Leader and Ultimate Fighting Championship owner Endeavor Group is trying to break out past a cup-with-handle base with a 31.80 buy point, according to IBD MarketSmith chart analysis. Shares are about 3% below the new entry after Tuesday’s breakout attempt. The stock was down about 4% Wednesday.
The stock’s relative strength line is making strong upward progress and is at its highest level since early October. The RS line measures a stock’s price performance vs. the broad market. A strengthening RS line during periods of market weakness indicates leadership potential.
Louisiana-Pacific — Tuesday’s IBD Stocks To Watch pick — is breaking out past a 73.76 buy point in a cup with handle amid Tuesday’s 3.9% rise. Shares are in the 5% buy range that tops out at 77.45. LPX stock moved up 1% Wednesday.
Chip leader NXP Semiconductors is testing a 227.60 buy point in a cup-with-handle base following Tuesday’s 6.5% advance. The buy area goes up to 238.98. Shares were down over 6% Wednesday after UBS started coverage with a sell rating and a 170 price target.
IBD SwingTrader stock Zim Integrated Shipping is rapidly approaching a cup with handle’s 60.19 buy point following Tuesday’s 4.9% climb. Shares rallied 2% Wednesday.
EV Stocks: Li Auto, Xpeng, Lucid Motors, Rivian
Li Auto triggered the 7%-8% loss-cutting sell rule below a cup-with-handle base’s 34.93 buy point after Friday’s sharp loss. Shares are fighting to regain their 50-day line after finding support around the long-term 200-day moving average. Shares tacked on 0.7% Wednesday.
Xpeng Motors triggered the round-trip sell signal from a 48.08 buy point during last week’s decline. Investors should sell the growth stock if it falls back near the buy point after it has made a gain of more than 10%. Try to sell before all gains are wiped away. XPEV shares ended Tuesday above their 50-day support level. Wait for the stock to form a new base, which would offer a new entry. The stock moved up 0.7% Wednesday.
Lucid Motors shares threatened to extend a five-day losing streak Wednesday, falling 4%. LCID stock remains extended past a 28.49 buy point in a cup-with-handle base, but huge gains have dwindled.
Hot initial public offering Rivian extended Tuesday’s 0.5% fall, dropping nearly 1% early Wednesday.
RIVN shares closed Tuesday about 35% off their post-IPO highs. The decline is a potential positive for investors remaining disciplined and waiting for an IPO base to form before considering a purchase. The recent weakness is the start of Rivian’s first base formation, and Monday’s strong gain was a step in the right direction.
Tesla stock turned down 1% Wednesday, after Tuesday’s 4.2% gain as it rebounds from a key support level. Early Wednesday, the China Passenger Car Association reported that Tesla Shanghai sold 52,859 made-in-China Model 3 sedans and Model Y crossover SUVs in November, including 21,127 that were exported.
Shares traded as high as 1,243.49 on Nov. 4, but the stock ended Tuesday about 15% off its 52-week high.
TSLA shares remain sharply above a 764.55 buy point in a cup with handle, as well as earlier entries at 700.10 and 730. The chart also showed an alternate entry at 900.50. Tesla shares are likely forming a new base, but there is no new buy point yet.
Dow Jones Leaders: Microsoft
Among Dow Jones stocks, software giant Microsoft moved down 0.3% Wednesday, as it fights to continue its rebound from the 50-day line.
On Oct. 18, Microsoft stock broke out past a flat base’s 305.94 buy point. The 5% buy zone topped out at 321.24, so the stock is extended.
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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