Weekly Stock Price Forecast (Feb 22 - 28): Ignored Selling Pressure, Eye on Interest Rates
Weekly Stock Price Forecast (Feb 22 - 28): Ignored Selling Pressure, Eye on Interest Rates

U.S Stock Price Today with Selling Pressure

Stock Price Today: Early buying pressure faded during Friday’s expiration session, dropping major indices into the red. WTI crude oil reversed, dropping below 60 as temperatures lifted above the freezing mark in Texas and southern states. The 30-year bond posted another monthly low, continuing the relentless rise in yields across short- and long-dated instruments. Gamestop Inc. (GME) hit a monthly low, forcing another batch of Reddit traders to look for a less stressful hobby, Fxempire report.

Russell-2000 index ignored blue chip selling pressure, lifting into the midpoint of the weekly trading range. This instrument has rallied 55% since September, carving one of the strongest small cap buying waves since the 1990s. Speculative fervor in the Reddit crowd is driving the upside, with SPACs acting as petri dishes for hundreds of start-up operations. Unfortunately, most small caps won’t succeed down the road due to roadblocks set up by trillion dollar mega-techs.

U.S Stock Market Rally Last Week

The stock market rally had a mixed week, with a mini-rotation from growth stocks into cyclicals and financials.

The Dow Jones Industrial Average edged up 0.1% in last week's stock market trading. The S&P 500 index dipped 0.7%. The Nasdaq composite retreated 1.6%, but bounced somewhat from its 21-day exponential moving average.

Growth stocks were roughed up in the middle of the week, but Friday gains helped limit losses overall.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.6% last week, thanks to a 2.15% pop on Friday. The Innovator IBD Breakout Opportunities ETF (BOUT) edged down 0.2% last week. The iShares Expanded Tech-Software Sector ETF (IGV) fell 1.4%. Microsoft stock is the top IGV holding. The VanEck Vectors Semiconductor ETF (SMH) lost 0.3%, with QRVO stock a component.

Losses were heavier in more-speculative names. ARK Innovation ETF (ARKK), which owns Tesla stock and many others, slid 2.5%, even with a 2.3% bounce Friday. ARK Genomics Revolution ETF (ARKG) retreated 4.1% last week, with several key holdings taking big hits.

'Earnings release' and Weekly Stock Price Forecast (February 22 - 28)

Stock Price Today: Consumer confidence and durable goods head next week’s economic calendar, along with new home sales. Millennials have entered their nesting stages, scooping up the limited supply of existing homes and driving prices to all-time highs. The supply crunch is forcing many nest builders to take advantage of remote work opportunities and build homes far away from west coast and northeast urban centers, in a phenomenon that will alter US demographics for decades, according to Fxempire's lates forecast.

Stock Market Analysis

Stock Price Today: Last week the Nasdaq had a tame pullback, finding support where you'd expect at the 21-day line. Is the pullback or rotation out of speculative growth over? Friday's lackluster action, with the Nasdaq closing near session lows, wasn't inspiring.

If the stock market rally rebounds quickly, how much is there to run? The Nasdaq closed Friday 5.1% above its 50-day line. That's not extended, but not far from being so once again.

Meanwhile, other indicators continue flash warning signs. Margin debt surged 42% in January vs. a year earlier. That's the most since late 2007, though still below the 55% annual gain associated with major market tops. However, the rise of leveraged ETFs and skyrocketing use of call options suggest that investor leverage is significantly higher than margin debt alone. Also, margin debt year-over-year comparisons will get easier in February and March, as investors exited during the coronavirus crash, according to Investors latest reports.

investor leverage, fueled by Fed policy, stimulus checks and millions of Americans stuck at home in a zero-fee trading era, have helped drive the enormous stock market rally. But if the market has a significant correction, that can spur an big drop in leverage, spurring further selling.

Stocks set new highs again last week with a myriad of factors grabbing a piece of the spotlight, But what caught our, and the market's, eye was the upward move in interest rates. A 10-year Treasury yield of 1.3% may feel like a nonstory, but the recent move higher in longer-term rates is unlikely to proceed unnoticed, both for the reasons behind the increase as well as the implications higher rates pose to the market's path ahead, Edwardjones report.

"We don't think interest rates will be the fly in the recovery ointment this year, but we do think higher rates could represent a catalyst that could temporarily clip at the wings of what has been a steady flight higher for stocks", forecast from Edwardjones.

Stock market rally still looks strong

Right now, the stock market rally still looks strong. And over the past 10 months, pullbacks have generally been shallow and short lived. Even the two-month correction last fall was relatively modest for a correction. But at some point the stock market rally will turn into a major correction or bear market.

Enjoy this stock market rally, but stay disciplined and prepared for a change in character.

Weekly Stock Market and What to do?

Investors should focus on leading stocks but it's a good idea to have a diversity of leadership. Many mining, agricultural and bank stocks have been strong performers in recent months. Having some of those names can help avoid major drawdowns in your portfolio. Having even pilot positions in a variety of top groups will help you stay aware of strength in those areas. That could lead to further buys in those fields, especially if frothy areas of the market face more trouble, forecast from Investors.com's experts.

All of this means being prudent and cautiously bullish, not bearish. It is still a strong stock market rally. There are good reasons to be significantly invested.

Price Stock Today - The Week Ahead: Economic data being released include the January leading indicator index, durable goods orders, and personal income and spending.

Selling pressure

Some of the selling pressure was stoked by inflation concerns (evidenced by this week’s robust PPI) and subsequent rise in interest rates. However, as you can see in the chart below there is still evidence of the “dip buyers” stepping in on those pullbacks:

Source: Schwab StreetSmart Edge®

Corporate Earnings

According to Schwab, with 419 (~84%) of the S&P 500 companies having reported earnings so far, 71% have beat estimates on the top line while 79% have beat on the bottom line. This compares to the respective 74% and 84% seen in the prior quarter. Here are some of the higher-profile names that reported this week:

Ticker Symbol

Reported EPS

Consensus EPS Estimate

Difference

CVS

$1.30

$1.24

+$0.06

ZTS

$0.91

$0.87

+$0.04

A

$1.06

$0.90

+$0.16

RNG

$0.29

$0.27

+$0.02

SEDG

$0.98

$0.88

+$0.10

SHOP

$1.58

$1.21

+$0.37

WIX

($0.03)

($0.11)

+$0.08

BIDU

$20.08

$16.73

+$3.35

TWLO

$0.04

($0.07)

+$0.11

WMT

$1.39

$1.51

($0.12)

WM

$1.13

$1.09

+$0.04

MAR

$0.12

$0.10

+$0.02

AMAT

$1.39

$1.28

+$0.11

ROKU

$0.49

($0.03)

+$0.52

TTD

$3.71

$1.88

+$1.83

ANET

$2.49

$2.39

+$0.10

DE

$3.87

$2.17

+$1.70

Although we are wrapping up Q4 earnings reports we’ve still got several high-profile names that are set to report earnings next week. I’ve identified some higher-profile reports I’ll be keeping my eye on in bold below.

Monday (22nd): RCL (before market open); PANW, OXY (after market close)

Tuesday (23rd): HD, MDT (before market open); SQ (after market close)

Wednesday (24th): LOW, TJX(before market open); NVDA, BKNG, TDOC (after market close)

Thursday (25th): AMT, BBY (before market open); CRM, ABNB, ADSK, WDAY, DASH (after market close)

Friday (26th): DKNG, FL (before market open)

The trajectory of interest rates will likely direct the action next week (Feb 22-28)

S&P 500 Index ($SPX – 0.33 to 3,913): As mentioned in the Review section above, equities did some consolidation this week but it was relatively muted in the SPX (the COMPX and the RUT were hit harder relative to the other majors). From a near-term perspective the SPX is essentially in “no-man's land”, so the trajectory of interest rates will likely direct the action next week.

Source: Schwab StreetSmart Edge®

Past performance is no guarantee of future results.

Nasdaq Composite Index ($COMPX + 37 to 13,902): Last Friday I used the Bollinger Bands to highlight that the COMPX was a bit near-term stretched and a drop to the middle band wouldn’t be surprising and it came within two points of touching that band this week. This week, the technical on this index have a more benign (bullish) near-term set-up, with the one caveat that I expect tech stocks to get hit more on a relative basis if the recent break-out in interest rates continues next week.

Source: Schwab StreetSmart Edge®

Dow Jones Transportation Index ($DJT + 264 to 13,313): The DJT had some healthy consolidation the first three days of this week and is following through with a nice break-out to a fresh all-time high this morning (translation = bullish).

Source: Schwab StreetSmart Edge®

Dow Jones Futures, S&P 500 futures and Nasdaq futures

Dow Jones futures will reopen Sunday evening, along with S&P 500 futures and Nasdaq futures, after the stock market rally showed resilience last week.

According to Investors, Solar IPO Shoals Technologies (SHLS), 5G chipmakers Qorvo and MaxLinear (MXL), Dow Jones giant Microsoft (MSFT) are all near buy points, with SHLS stock and Microsoft already actionable and Apple supplier Qorvo (QRVO) arguably so. We'll also take a look at Tesla (TSLA), which continues to test key levels.

The Dow Jones actually edged higher last week while the S&P 500 and S&P 500 fell modestly, rallying off short-term support. Growth stocks, especially more speculative names, suffered significant to sharp losses, though they generally rebounded on Friday. Metals, miners and financial stocks were strong performers.

Still, the recent action highlights the need for proper entries and sound sell rules. The problem with such a strong stock market rally is that it's a bad teacher. Just like an easy A, everyone enjoys easy money. But if you learn the wrong lessons from the past 10 months, then that easy money will go away quickly.

While the Nasdaq is no longer extended, margin debt and investor exposure overall is a growing concern.

Best Stocks

The stock market rally held up well last week but margin debt is a growing concern. Tesla, Microsoft and Bitcoin are in focus.

Microsoft Stock

Microsoft stock fell 1.6% to 240.97. That was just a little too much of a drop to form a three-weeks-tight, though investors could use 246.23 as an add-on entry. MSFT stock is still in range from a 232.96 buy point.

The Dow Jones tech giant has been booming thanks to cloud computing. Microsoft earnings growth has accelerated for the past two quarters. The 17% revenue gain in the last quarter was the best in years.

Tesla Stock

Tesla stock fell 4.3% last week to 781.30. Shares rebounded from the 50-day line on Wednesday — as Ark Funds' Cathie Wood expressed growing "confidence" in Tesla stock, saying she was buying more shares. But TSLA stock finished the week slightly below the 10-week line.

Qorvo Stock

Qorvo stock jumped 4.8% on Friday to 179.39, turning a weekly loss into a 1.9% gain. Friday's rebound from the 50-day/10-week line also pushed QRVO stock over its 21-day line and up to the edge of a downward-sloping trend line. Investors could buy the Apple iPhone chip supplier here or wait for a little more strength to clear the downtrend.

SHLS Stock

Shoals stock jumped 5.9% last week to 40.17, with nearly all of the gain coming Friday. SHLS stock is now actionable, above an early entry just before 40. The official buy point is 41.86, according to MarketSmith analysis.

The IPO base has a lot of positive qualities. After a brief run-up from the late January IPO debut, SHLS stock corrected just 16%. On Friday, the relative strength line hit a new high with the stock still in the base. That's especially bullish, giving Shoals stock a blue dot at the end of its RS line on a MarketSmith chart.

Shoals Technologies makes a variety of gear for solar energy systems and components to carry electricity from solar panels to inverters. It's already profitable, with decent sales growth.

MaxLinear Stock

MaxLinear stock rose 3.3% to 38.33 last week, including a 5.8% jump Friday. That's just below a 38.81 buy point from a seven-week consolidation. Over the past couple of weeks, up days have come on higher volume than down sessions.

The RS line for MXL stock is near a record high.

The 5G chipmaker delivered huge growth in the latest quarter: Earnings surged 144% on 178% sales growth.

IPO and Biggest Stock Market Winners

The biggest stock market winners typically make their major price moves within a few months or years of their IPO. So it pays to identify and track companies that are getting ready to go — or have recently gone — public, helping you to find the proper buy point.

IBD provides plenty of tools to help investors make smart choices. These tools include the home-study program IPO Trading Strategies, as well as the IPO stocks to watch feature. Further, IBD can keep you updated with IPO news and analysis and help you learn how to trade IPO stocks.

No matter how much hype there might be surrounding a new company getting ready to go public, resist the temptation to buy a stock right when it has its IPO.

You can greatly reduce your risk and still reap big rewards by waiting for the stock to prove itself before you invest. As a rule, look for companies that have the CAN SLIM traits of winning stocks and let it form an IPO base and break out first.

According to Investors.com, stock investors studying IPO bases are partly blinded because new issues don't have enough trading history to generate tools like the Relative Price Strength Rating, as compiled in IBD's proprietary research tool, Stock Checkup. Volume comparisons are difficult, too.

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