Dow Jones futures will begin trading Sunday evening, along with S&P 500 futures and Nasdaq futures. The Pfizer (PFE) and BioNTech (BNTX) coronavirus vaccine distribution in getting underway after the FDA granted emergency approval Friday night. Advanced Micro Devices, Shopify and Tesla (TSLA) also are in focus.
Last week the stock market rally got a small dose of reality. The Nasdaq tumbled Wednesday, led by growth names. But they rebounded Thursday. For the week, the major indexes ended with only modest losses. Most leading stocks held up well.
AMD stock, Shopify (SHOP), PayPal (PYPL), Intuitive Surgical (ISRG) and 10X Genomics (TXG) are all forming handles of various sorts. Shopify stock, 10X Genomics and Intuitive Surgical stock have formed traditional handles. Advanced Micro Devices (AMD) and PayPal stock have formed “high handles” right at the top of buy zones.
Meanwhile, Tesla CEO Elon Musk said in the now-common end-of-quarter “leaked” email to staff that the electric car maker has a “high-class problem” of too much demand. However, Tesla reportedly will shut down some Fremont, California, production for a few weeks.
Finally, AstraZeneca (AZN) agreed to buy Alexion Pharmaceuticals (ALXN) for $39 billion in cash and stock, adding a rare-disease specialist to the drug giant’s portfolio. The deal values ALXN stock at $175 a share, a 45% premium to Friday’s close.
Now can the stock market rally hold above some key short-term levels?
Late Friday, the FDA granted emergency use approval for the Pfizer and BioNTech coronavirus vaccine. That followed an advisory panel backed the Pfizer vaccine Thursday evening.
The first vaccine shipments will leave Pfizer within 24 hours, Gen. Gus Perna said Saturday morning at an Operation Warp Speed briefing. They will arrive at destinations on Monday-Wednesday for vaccinations.
The CDC has recommended giving priority to health-care workers and nursing homes, but states can distribute the coronavirus vaccine as they see fit.
Pfizer coronavirus vaccine distribution and storage are complicated by the fact that the doses must be kept at extremely cold temperatures. Pfizer plans to ship 50 million vaccine doses this year, enough to inoculate 25 million people with two doses each, three weeks apart. Pfizer and BioNTech expect to produce more than one billion doses in 2021.
Meanwhile, an FDA panel will review the Moderna coronavirus vaccine on Dec. 17. Like the Pfizer/BioNTech treatment, the Moderna vaccine uses messenger RNA (MRNA) technology and is roughly 95% effective. On the upside, the Moderna vaccine doesn’t have to be kept so cold.
Late Friday, Moderna said the U.S. agreed to buy another 100 million vaccine doses, enough for 50 million people. That pushed Moderna stock up 3% late Friday.
Moderna stock climbed 2.9% last week, not including the late Friday bump. BioNTech stock advanced 6.1%. Pfizer stock was up 1.9%.
The Pfizer coronavirus vaccine and presumably the Moderna vaccine come at a critical time.
Coronavirus cases worldwide reached 72.22 million. Covid-19 deaths topped 1.61 million.
Coronavirus cases in the U.S. have hit 16.54 million, with deaths above 305,000. New coronavirus cases topped a record 246,000 on Friday, with deaths once again more than 3,000.
Dow Jones Futures Today
Dow Jones futures will open for trading on Sunday at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Stock Market Rally Last Week
The stock market rally closed the week with slim losses.
The Dow Jones Industrial Average retreated 0.6% in last week’s stock market trading. The S&P 500 index lost almost 1%. The Nasdaq composite sank 0.7%.
Growth stocks led declines on Wednesday and Thursday morning, but overall did OK.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) was flat last week. The Innovator IBD Breakout Opportunities ETF (BOUT) leapt 4.6%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 0.5%.
Tesla Demand Strong, Musk Says
Tesla demand is strong in the fourth quarter, but the company must boost production to take advantage, Elon Musk said in an email to employees.
“We are fortunate to have a high-class problem of demand being quite a bit higher than production this quarter,” Musk said in the email, obtained by pro-Tesla site Electrek. Citing customers and investors, Musk added we need to increase production for the remainder of this quarter as much as possible.”
However, Tesla will shut down Model S and Model X production at the Fremont, California, plant from Dec. 24-Jan. 11, according to a company email Friday obtained by CNBC. Employees working on those lines will get one week of pay, plus the usual holidays, but will have to take unpaid days unless they are able to find other work at the factory.
Model S and X production has fallen for the past few years as demand wanes, even with several Model S price cuts. Tesla’s growth areas are the Model Y in the U.S. and the Model 3 in China.
Musk has set a Tesla delivery goal of 500,000 vehicles in 2020. That will require 181,000 deliveries in Q4, more than 40,000 above Q3’s record level. A huge jump in China sales last month makes that more likely.
Still Tesla reportedly is offering one free year of Supercharging to spur Model 3 and Y sales in the U.S.
Tesla stock was up and down last week, like many growth stocks. But ultimately shares rose 1.8% to 609.99, even with a $5 billion Tesla stock sale. Tesla stock has surged nearly 50% since the announcement that it will join the S&P 500 index before the open on Dec. 21. That will require massive buying by S&P 500 tracking funds.
PayPal stock broke past a 215.93 buy point on Dec. 1, but then consolidated just above or below that level for the next few days. Shares fell 1.7% last week to 214.06, back below the 215.93 buy point, but it found support at its 21-day line and came off lows somewhat. The digital payments leader could easily back above the 215.93, but the mini-consolidation or high handle might offer a better resistance point around 219-220.
Intuitive Surgical Stock
Intuitive Surgical, maker of the da Vinci robotic-surgical system, could be a winner from the coronavirus vaccine. During the pandemic, many surgeries have been put on hold with hospitals dealing with coronavirus patients. By late spring or summer 2021, the pandemic likely will be receding, allowing a return of normal hospital operations a revival in Intuitive Surgical’s business.
Intuitive Surgical stock last week fell 2.6% to 760. It now has a handle in its short consolidation right next to a cup-with-handle base. The new entry for ISRG stock is 782.
Shopify stock had been consolidating in a handle-like way in early December, but it suffered from being upward-wedging. Then came Wednesday’s 5.8% drop, finally providing a shakeout for weak holders. On Thursday, SHOP stock rebounded from its 50-day line. For the week, Shopify stock rose 0.4% to 1,057.87.
The now-proper handle has a 1,112.51 buy point. There also is a 1,130 resistance point for SHOP stock.
The relative strength line for Shopify stock has drifted lower since early July, signaling underperformance vs. the S&P 500 index. A strong breakout could quickly revive Shopify stock’s leadership, but it is a question mark today.
10X Genomics Stock
10X Genomics stock fell back to its 50-day line on Wednesday, but rebounded to finish with slim declines for a second straight week. TXG stock dipped 0.7% to 147.95, still within the handle in the cup base. The buy point is 157.58. The handle started with a strong, high-volume gains.
AMD stock broke out past an 88.92 double-bottom buy point on Nov. 30, running up to 96.37 a few days later. The chipmaker then began building a high handle right next to the old high. Last week, AMD stock fell back, but found support just above the buy point and its 21-day line. By Friday’s close, AMD stock finished down 2.5% at 91.65.
That’s easily in buy range, but investors might use 96.47 as buy point from the high handle, with an early entry just below 95.
Stock Market Rally Analysis
It would be nice if the stock market went up every day, but obviously that can’t happen. The Nasdaq closed 4.6% above its 10-week moving average after the prior week’s 6.5%. Some highfliers pulled back to their 10-day or 21-day lines. Perhaps bullish sentiment — the highest since early 2018 — can come down a peg.
But last week’s turbulence was more like a jump scare in a PG-13 move rather than a hard-R slasher film. Investors were startled, but not scarred.
In the short run, it would be a good sign for the stock market rally if the major indexes, especially the Nasdaq, can stay above or at least close above their 21-day exponential moving averages. The 21-day line is the green line in the chart provided.
During the April-September stock market rally, the Nasdaq had several instances of one- or two-day pullbacks to around the 21-day line, but quickly rebound. If the Nasdaq does close below the 21-day line, it’s not the end of the world. But it would suggest some weakness, with risks that the selling could go deeper.
Follow The Rules
Check out your current holdings. Did some of your stocks suffer serious damage, or get close to doing so? Consider taking full or partial profits. Make a game plan. What will you do if Stock X does this?
Follow those rules. They won’t always work. Sometimes a stock will break key support, trigger a sell, and then race higher. But if you have sound rules and follow them, you’re going to be much better off over time.
Coronavirus Vaccine Era For Stock Market Rally
Make sure you have diversity in your portfolio and watchlists.
One aspect about the five stocks highlighted here, from AMD to Shopify, is that they hail from different sectors. They also range from mild coronavirus plays, such as Shopify, to vaccine plays like ISRG stock.
The Pfizer coronavirus vaccine approval signals the beginning of a new era for the stock market rally.
With coronavirus cases and deaths at record levels, the market rally and leading stocks could be in flux for weeks or months. Stay alert and flexible and be decisive.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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