Daily stock price (January 26): Forecast and Updates
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The stock market plunged midday Monday, only to spend the rest of the session recovering amid a sharp increase of volatility. At the stock market open, the tech-heavy Nasdaq composite advanced as much as 1.4% to record highs. Then, the composite quickly erased its gains and sold off 1.3% before eventually closing with a 0.7% gain. The Dow Jones Industrial Average edged just 0.1% lower, or 36 points, while the S&P 500 rallied 0.4%, according to Investor’s business daily.
Among the Dow Jones leaders, Apple (AAPL) rallied nearly 3%, while Microsoft (MSFT) rose 1.6%. Apple stock is in a new buy zone, while Microsoft broke out above a new buy point. Microsoft earnings are due late Tuesday.
Tesla (TSLA) set more all-time highs Monday, racing more than 4% higher.
Stocks in or near buy zones in the current stock market rally are Datadog (DDOG), Palantir Technologies (PLTR) and Pinduoduo (PDD).
Apple, Microsoft, Pinduoduo and Tesla are IBD Leaderboard stocks. Palantir was Friday's IBD Stock Of The Day, while Microsoft and Datadog were featured in this week's Stocks Near A Buy Zone. Datadog was also Monday's IBD Stock Of The Day.
Dow Jones Futures Today
Early Tuesday, Dow Jones futures fell 0.6% vs. fair value, while S&P 500 futures lost 0.6%. Nasdaq 100 futures traded down 0.65% vs. fair value. Remember that trading in Dow Jones futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Among exchange traded funds, Innovator IBD 50 (FFTY) fell 0.4% Monday. The Nasdaq 100-linked Invesco QQQ Trust ETF (QQQ) traded up 0.8%. Meanwhile, the SPDR S&P 500 ETF (SPY) rallied 0.4%.
Coronavirus Stock Market Rally
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, more than halfway through January, the Dow Jones Industrial Average, Nasdaq and S&P 500 made record highs.
Friday's Big Picture warned of extreme bullish sentiment, "When it comes to overall market health, major stock indexes aren't under meaningful distribution. That's a good thing, but bullish sentiment remains at extreme levels and more, and more people seem to be talking about how easy it is to make money in the stock market. Extreme bullishness is reason to trade cautiously."
Investors should continue to use the stock market's strength to buy breakouts. However, be more flexible in today's stock market environment. As illustrated Monday, the stock market can fall quickly for no reason.
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.
Dow Jones Earnings: Microsoft
Dow Jones leader Microsoft will report earnings after the stock market close Tuesday. Analysts expect the company to earn $1.64 a share on revenue of $40.2 billion.
Shares of the software giant broke out past a 228.22 buy point and are in buy range. The stock ended just above the entry amid a 1.6% rise.
Dow Jones Leaders: Apple In Buy Range
Among the top Dow Jones stocks, Apple rallied 2.8% Monday and is in buy range above a new buy point at 138.89, according to IBD MarketSmith chart analysis. The 5% buy zone goes up to 145.83.
In recent weeks, Apple shares have moved above aggressive entries at 125.49 and 122.09.
Apple could soar 25% on 'eye-popping' iPhone sales and strong demand from China in 2021
Apple's share price could surge as much as 25% on "eye-popping" iPhone sales and strong demand from China, Wedbush analyst Dan Ives said in a note Monday, said Businessinsider
Ives raised his 12-month price target on Apple to $175 from a prior estimate of $160, representing a potential upside of 25% from its current level of $139 per share.
The iPhone maker is scheduled to disclose first quarter results on Wednesday, January 27 after the closing bell. Robust earnings should confirm the iPhone 12 "supercycle hype" as the company is expected to handily beat Wall Street estimates this week, Ives wrote.
Wedbush anticipates that Apple will see its iPhone unit deliveries ticking up by 5% in the 60 million to 70 million range for the March quarter, and in the low 40 million range for the June quarter with some upward bias.
Ives expects about 20% of iPhone upgrade demand coming from China, affirming the region's key role in Apple's success. "To this point, we are seeing considerable strength from the China region thus far with positive trends heading into 2021," he said.
While the analyst maintained an Outperform rating on Apple stock, he said the company could hit a market cap of over $3 trillion this year if it continues to execute deliveries at the current pace.
Apple's stock traded 2% higher at $143 per share in pre-market trading on Monday.
Tesla Stock Sets Record High
IBD Leaderboard stock Tesla surged to record highs Monday, rallying as much as 6.35% before closing with a 4% gain.
The Jan. 8 IBD Stock Of The Day column signaled that Tesla was flashing several signs of a climax top amid a sharply vertical run over the past few weeks. But so far the stock is showing tremendous resilience, and it hit record highs Monday.
On Monday, Tesla stock hit a record high at 900.40. Shares are about 89% above a 466 buy point in a cup with handle.
GameStop Sees Another Surge Well Above $100 Per Share
Shares of GameStop Corp. (NYSE:GME) rallied once again on Jan. 25, peaking over $150 per share during morning trading despite a double downgrade by Telsey Advisory Group. The stock has seen a massive rise in January thanks to high levels of purchases from short sellers, said Finance.yahoo.com.
GameStop is a U.S. multichannel video game, consumer electronics and services retailer. The company operates across Europe, Canada, Australia and the United States. GameStop sells new and second-hand video game hardware, physical and digital video game software and video game accessories, mainly through GameStop, EB Games and Micromania stores and international e-commerce sites. The company has two main business segments: video game brands and technology brands.
|Photo: Investor’s business daily|
The gaming retailer initially saw a jump in share price on Jan. 11 after information was released that Chewy (NYSE:CHWY) co-founder and activist investor Ryan Cohen would be joining GameStop's board of directors. Shortly after the news was released the stock began to rise in price as investors hoped that Cohen would influence a new strategy for the retailer.
As the stock price rose almost 50% over a three day period, hedge funds jumped to buy back shares to cut losses. To a lesser extent, retail investors have also shown interest in the company based upon forecasts for the new gaming cycle according to Telsey Advisory Group analyst Joseph Feldman.
As both parties have continually made purchases, the price has been driven up significantly over a short period of time. With trades coming in at such a high volume and price changes occurring simultaneously, trades have been halted multiple times due to volatility.
As of Jan. 25, the stock settled at $79.89 per share with a market cap of $5.52 billion. The GF Value Line shows the stock trading, unsurprisingly, at significantly overvalued levels.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 1 out of 10. There are currently two severe warning signs issued for declining gross margin percentage and declining revenue per share. The company is expected to report losses for 2020, as reflected by a weighted average cost of capital that far exceeds the negative return on invested capital.
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