The Dow Jones Industrial Average briefly fell more than 200 points Monday, while tech stocks jumped as Apple stock and Tesla surged to record highs. Dow Jones leader Microsoft hit a new buy point, while FANG stocks Alphabet and Netflix are in or near new buy zones.
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Among the Dow Jones leaders, Apple (AAPL) surged more than 4%, while Microsoft (MSFT) rallied almost 1% in today’s stock market. Merck (MRK) tumbled nearly 1% after the company ended development of two coronavirus vaccine candidates.
Tesla (TSLA) looked to rise for a second-straight day Monday, rallying 5% in morning trade. Shares hit all-time highs.
Stocks in or near buy zones in the current stock market rally are IPO Leader DocuSign (DOCU) and FANG stocks Alphabet (GOOGL) and Netflix (NFLX).
Apple, Microsoft, and Tesla are IBD Leaderboard stocks. Netflix was Wednesday’s IBD Stock Of The Day, while DocuSign was featured in last week’s Stocks Near A Buy Zone column.
Dow Jones Today
On Monday, the Dow Jones Industrial Average traded down 0.3%, while the S&P 500 moved up 0.3%. The tech-heavy Nasdaq composite advanced 1.2% in morning trade.
Among exchange traded funds, Innovator IBD 50 (FFTY) traded 1.7% higher Monday. The Nasdaq 100-linked Invesco QQQ Trust ETF (QQQ) moved up 1.4%. Meanwhile, the SPDR S&P 500 ETF (SPY) rose 0.4%.
Coronavirus Updates
According to the Worldometer data tracker, the cumulative number of confirmed coronavirus cases in the U.S. topped 25.7 million on Monday. Total virus-related deaths rose past 429,000.
The cumulative total of worldwide Covid-19 cases confirmed since the start of the outbreak topped 99.8 million Monday, with more than 2.1 million virus-related deaths.
Stock Market Rally Too Extended?
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. 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.
Stocks To Watch: IBD Long-Term Leaders
Stocks to watch include IBD Long-Term Leaders, companies with stable earnings growth and price performance. Veeva Systems (VEEV) is the latest addition to the list, as it moves closer to an early entry at 292.90, while the conventional buy point remains at 314.09.
Elsewhere in the IBD Long-Term Leaders, Thermo Fisher Scientific (TMO) is trying to break out above a 519.10 buy point in a cup with handle.
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Dow Jones Stocks: Merck
Dow Jones stock Merck declined almost 1% after the company ended the development of two coronavirus vaccine candidates due to “inferior immune responses.”
Shares tried to break out above a 85.27 entry in a cup with handle, according to IBD MarketSmith chart analysis, but the stock is is nearly 7% below the buy point. Investors should cut their losses when a stock falls 7%-8% below the entry.
Stocks In Or Near Buy Zones: DocuSign
DocuSign is trading just below a 256.10 buy point in a choppy cup with handle, according to IBD MarketSmith chart analysis. Shares reversed lower Monday after briefly retaking the entry.
According to IBD Stock Checkup, DocuSign stock shows a strong 98 out of a perfect 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
DocuSign stock was featured in last week’s IPO Leaders column.
Google-parent Alphabet is in the 5% buy zone past a 1,843.93 buy point of a flat base following last week’s breakout. Shares rose 1% Monday morning, on pace to extend a win streak to five sessions.
Wednesday’s IBD Stock Of The Day, Netflix, is trading just below its 575.47 buy point in a consolidation base following Friday’s 2.5% fall. Shares slipped 0.3% Monday morning and are just below the new entry.
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Tesla Stock In Climax Top?
IBD Leaderboard stock Tesla looked to add to Friday’s 0.2% rise, surging more than 5% in morning trade Monday.
The Jan. 8 IBD Stock Of The Day 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, as it hits record highs Monday.
On Monday, Tesla stock hit a record high at 896.50. Shares are about 90% from a 466 buy point in a cup with handle.
Dow Jones Leaders: Apple, Microsoft
Among the top Dow Jones stocks, Apple stock surged 4% Monday morning after Raymond James upped its price target from 140 to 150. Shares are in the 5% buy zone above a new buy point at 138.89, according to IBD MarketSmith chart analysis.
Apple earnings are due Wednesday after the close.
Microsoft rallied almost 1% Monday as it again breaks out above a 228.22 buy point. An early entry exists at 227.28. Early Monday, Wedbush raised its price target from 260 to 270.
The software giant will report earnings Tuesday after the close.
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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