The stock market rally showed strong action last week as banking fears eased. Major indices have recovered to key levels and many leading stocks are showing buy signals or setting up.
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tesla (TSLA) and electric vehicle rivals from China BYD (BYDDF), child (CHILD), XPeng (XPEV) and li car (LI) are in focus over the weekend.
Li Auto reported record sales in March and in the first quarter on Friday night or Saturday morning local time. Startups Nio and XPeng will also report on Saturday, and battery and electric vehicle giant BYD will also report this weekend.
Tesla will release first-quarter production and delivery figures, likely on Sunday. Analysts are expecting another record quarter for deliveries, thanks to sharp price cuts.
Tesla shares broke above a buy point on Friday but are just below the 200-day moving average. LI shares are just below a buy point. BYD shares have rallied to almost an aggressive entry. XPeng and Nio shares are also trending higher, but they have work to do.
Meanwhile, general motors (GM), Chrysler parent stellantis (STLA) and several other automakers will release first-quarter sales in the United States on Monday. ford engine (F) will be out on Tuesday. STLA shares are settling near a buy point, while GM and most other traditional automakers are in need of repair jobs.
Investors should put cash to work by gradually increasing exposure. But don’t buy extended stocks or focus too much on one particular sector.
The video embedded in this article reviewed the market action in depth and analyzed Aehr test systems (AEHR), service now (NOW) and TSLA shares.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with futures for the S&P 500 and Nasdaq 100.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading at the next regular stock market session.
Join IBD experts as they discuss actionable actions in the stock market rally on IBD Live
stock rally
The stock market rally started slowly last week but took a decidedly bullish turn starting Wednesday, closing near weekly highs.
The Dow Jones Industrial Average rose 3.2% in trading last week. The S&P 500 Index jumped 3.5%. The Nasdaq Composite jumped 3.4%. The small-cap Russell 2000 rose 3.85%.
The 10-year Treasury yield rose 11 basis points to 3.47%, but fell back on Friday.
US crude oil futures rose 9.25% to $76.67 a barrel last week, but still fell 5.7% for the quarter.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (ffty) rose 3.4% last week. The iShares Expanded Technology Software Sector ETF (IGV) collected 4.7%. The VanEck Vector Semiconductor ETF (HMS) gained 3.4%.
SPDR S&P Metals and Mining ETF (XME) recovered 5.75% last week. The Global X US Infrastructure Development ETF (TO PAVE) rose by 4.9%. US Global Jets ETF (JETS) rose 7.75%. SPDR S&P Home Builders ETF (XHB) gained 3.9%. The Energy Select SPDR ETF (XLE) appeared 6.3% and the SPDR Fund of the Select Health Care Sector (XLV) rose 1.7%.
The SPDR Financial Select ETF (XLF) rebounded 3.8%. The SPDR S&P Regional Banking ETF (KRE) rose 0.8%.
Mirroring more speculative historical stocks, the ARK Innovation ETF (ARKK) rebounded 6.9% last week and ARK Genomics ETF (ARKG) 5%. TSLA stocks are an important component in Ark Invest ETFs. Cathie Wood’s Ark Invest also owns some BYD shares.
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Tesla Deliveries
Tesla’s first-quarter deliveries should be around 432,000, surpassing the fourth-quarter record of 405,278 and up 39% from a year earlier. Tesla’s big price cuts around the world and new US tax credits boosted demand.
On Friday, the IRS set out some guidelines on supplying battery components and minerals to qualify for the full $7,500 EV credit. It is not yet clear which vehicles may be affected. The entry-level Model 3, which has used Chinese-made LFP batteries, will likely see a reduced credit. But for the next few weeks, buyers can still get full credit.
After first-quarter deliveries, investors will turn to Tesla’s earnings to see how the price cuts affected EPS and profit margins. Will the EV giant need more price cuts to keep demand high?
Tesla shares rose nearly 9% to 207.46 last week, including a 6.2% gain on Friday. That pushed TSLA shares above a buy point of 200.76 mugs with a handle, according to MarketSmith analysis. However, stocks are now nearing their 200-day moving average, which could serve as resistance.
Tesla vs. BYD: EV giants are vying for the crown, but which is the best buy?
Electric vehicle deliveries in China
Early Saturday, Li Auto reported March deliveries of 20,823 hybrid SUVs, up 89% from the previous year. That follows 16,620 in February and 15,141 in January. First-quarter sales totaled 52,584, at the low end of its end-February forecast of 52,000-55,000. March sales include the new L7, a five-seat electric SUV.
BYD and most other Chinese EV makers should also report improved sales in March compared to February. A price war sparked by Tesla and slower growth in demand for EVs amid increased production capacity is a challenge for automakers.
BYD, in particular, is increasing exports, providing a release valve from a brutal domestic market. On March 28, BYD reported tremendous profit growth in 2022, with Q4 net profit of more than 1,100%.
BYD shares rose 9.8% in the past week to 29.40, building the right hand side of a new base with a buy point of 34.04. Stocks recaptured their 50-day line and ended just below their 200-day line. A decisive move above 200 days could offer early entry.
LI shares are on a double bottom basis with a buy point of 25.46 which is just above the 200 day line. The shares rose 6.7% to 24.95 last week, but fell 1.5% on Friday as Li Auto hit resistance at the buy point and at 200 days.
XPEV shares rose 15.5% last week and Nio shares nearly 16%. Both are above their 50-day lines but below their 200-day lines.
China’s electric vehicle manufacturers are set to introduce or launch a host of new models at the Shanghai Auto Show starting on April 18. BYD and its premium Denza lineup in particular will showcase a number of new electric vehicles. The new models could spur new sales, but they could also put more pressure on existing electric vehicles.
Market recovery analysis
After showing resilience the week before, the major indices posted strong gains last week. The Nasdaq and S&P 500 staged tracking days on Wednesday, confirming the stock market’s rally.
The Nasdaq surpassed 12,000 and is close to the high of February 2. The Nasdaq 100 has jumped to its best levels since late August.
The S&P 500, which recaptured its 50-day line on Wednesday’s FTD, continued to advance through Friday. The Dow recovered its 200-day line during the week and broke above its 50-day line on Friday. The Russell 2000, which as recently as March 24 was hitting five-month lows, has retraced the 21-day line as bank stocks have at least stabilized.
The banking crisis appears to be abating. Fed rates are likely to peak well below what markets thought a month ago. That’s a bullish combination, especially for growth stocks.
While megacaps like Apple (AAPL), Microsoft (MSFT), metaplatforms (GOAL), nvidia (NVDA) and Tesla shares accounted for a massive chunk of first-quarter gains for the Nasdaq and S&P 500, the breadth of the market improved a bit last week. So has market leadership.
Chip stocks continue to shine, with leaders extending breakouts and other names setting or removing buy points, with AEHR shares an unfortunate exception on Friday.
But software is also emerging, with cybersecurity and a variety of trading software giving off intermittent buy signals, including NOW stocks.
Some actions and payment networks are also impressive, such as Shift4 (FOUR) and juniper nets (JNPR). houses of merit (MONTH) and various other builders are performing well, along with some related works.
Various shoe stocks are increasing, such as when holding (ONON) and crocodiles (CROX), as well as select retailers of ultimate beauty (LAST) to walmart (WMT). Some Internet and China EV plays are around buy points, including Baidu (BIDU), NetEase (BEFORE), BYD and LI shares.
Many other stocks and sectors are positioning themselves.
Time the Market with IBD’s ETF Market Strategy
What to do now
The stock market rally is in a confirmed uptrend. A growing number of stocks are showing buy signals. One major risk factor, banks, appears to be receding.
Investors should take advantage of the current environment. But gradually increase exposure, letting the market draw you in. It is not yet clear if this is the start of a prolonged market rally or just a short-lived rally. It is also possible that the major indices may stop or retrace briefly.
Don’t buy extended stock. And while investors might fill their portfolios with, say, only quality chip stocks, it’s not wise to focus too much on particular sectors.
Rebuild your watch lists. Focus on stocks in or near buy zones, but keep an eye out for other names taking shape. If this rally has legs, a lot of them will be actionable soon.
Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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