Dow Jones – Dow Jones Futures: Stock Market Rally Lessons For 2021; Tesla, Nio Await Key News; 25 Stocks In Buy Range

Dow Jones futures will open Sunday morning, along with S&P 500 futures and Nasdaq futures. The stock market rally had modest gains last week, capping a strong year, especially for tech and growth stocks.

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Tesla ((TSLA)) and Nio (NIO) are due to report key sales figures in the next few days, along with Xpeng (XPEV), Li Auto (LI) and BYD Co. (BYDDF). Tesla and Nio stock were two of 2020’s biggest winners, with Xpeng, Li Auto and BYD also delivering triple-digit gains.

After such a surprising and often-powerful stock market rally in 2020, what are the lessons for 2021? There are several, but investors should always remember this: The stock market is going to do what the stock market is going to do.

25 Stocks In Buy Range Now

The following stocks are quality stocks that are flashing buy zones, either from traditional breakouts, early entries, or bullish rebounds from key levels. So have better-looking charts and fundamentals than others. But they offer an ideas at the breadth of stocks and sectors that are actionable heading into 2021. Several of these sectors have numerous other stocks that are setting up for possible buying opportunities.

Chips: Taiwan Semiconductor (TSM), Monolithic Power (MPWR), Micron Technology (MU) and Advanced Micro Devices (AMD).

Investment Banks: Jefferies (JEF), T. Rowe price (TROW).

Cyclical: Freeport McMoRan (FCX), Deere (DE)

Payments: Visa (V), Mastercard (MA)

Discounters: Five Below (FIVE), Ross Stores (ROST)

Medical Products: Intuitive Surgical (ISRG), Idexx Labs (IDXX),

EV Stocks: Nio stock and BYD.

Internet: Google parent Alphabet (GOOGL), Twitter (TWTR),  JD.com (JD),

Chipotle Mexican Grill (CMG), Pool Corp. (POOL), Chegg (CHGG), MSCI (MSCI), Epam Systems (EPAM) and Logitech (LOGI).

The 100 Best Stocks Of 2020

Tesla stock is on IBD Leaderboard, along with Taiwan Semiconductor, AMD and Chipotle. Chipotle stock, Five Below and Freeport McMoRan are on SwingTrader. Idexx Labs, Epam Systems, Pool Corp., MSCI and Mastercard are on IBD Long-Term Leaders, while MPWR stock and Chegg are on the watchlist. AMD stock, Monolithic Power, Chegg, Taiwan Semi and Pool are on the IBD 50.

Dow Jones Futures Today

Dow Jones futures will open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.

Coronavirus News

Coronavirus cases worldwide reached 84.07 million. Covid-19 deaths topped 1.83 million.

Coronavirus cases in the U.S. have hit 20.46 million, with deaths above 354,000.

Stock Market Rally

The stock market rally continued to advance last week, though some growth names struggled.

The Dow Jones Industrial Average rose 1.35% in last week’s stock market trading. The S&P 500 index climbed 1.4%. The Nasdaq composite advanced 0.65%.

For the year, the Dow Jones rose 7.2% and the S&P 500 index 16.3%. The Nasdaq surged 43.6%, its best annual gain since 2009.

Meanwhile, IBD Leaderboard surged 58.4% in 2020, while SwingTrader surged 86.4%.

Software stocks and many IPOs were big winners in 2020, but several suffered significant losses last week. That’s not entirely bad. Bullish sentiment is at high levels, according to several psychological indicators. Reducing some of the frothy segments in the stock market rally could be healthy.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.3% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) slid 1.5%.  The iShares Expanded Tech-Software Sector ETF (IGV) retreated 1.7%. The VanEck Vectors Semiconductor ETF (SMH) rallied 1.65%.

Tesla Deliveries Due

Tesla deliveries for the fourth quarter are due in the coming week. Some forecasters with a good track record are predicting Tesla deliveries were around 182,000-183,000, fueled by big growth in China. A tally of 181,000 or more would mean Tesla deliveries for the full year reached the 500,000 mark.

Tesla reports quarterly deliveries and production figures within three business days of the following quarter. That could mean anytime from now to Wednesday, Jan. 6.

On Jan. 1, Tesla said it would start delivering the made-in-China Model Y this month, setting a base price of 339,900 yuan ($52,074). The Model Y crossover will compete with the relatively new Nio EC6 as well as the soon-to-debut Volkswagen (VWAGY) ID.4. The VW ID.4 launched in Europe last month and will reach the U.S. in March.

Tesla stock rose 1.6% on Thursday, hitting a record high and closing out a mammoth 743% surge in 2020. (TSLA) stock is well extended from any conceivable buy point.

China EV Sales

Nio, Li Auto, Xpeng Motors and BYD Co. are due to report December deliveries and production figures over the coming days.

All four Chinese EV makers, along with Tesla, saw big November sales gains. One factor is Shanghai, which has a free license plate policy for new energy vehicles, including EVs, hybrids and fuel-cell vehicles. Many Chinese cities limit the number of license plates, providing the right to own a car, and they are quite expensive. The NEV free license policy was due to end in 2020, but on Wednesday Shanghai extended that through February.

China EV Stocks

Nio stock raced past Tesla stock in 2020, skyrocketing 1,112%. XPEV stock, a late August IPO, leapt 185% last year. Li Auto stock, late July IPO, surged 151% in 2020. BYD stock spiked 432%.

Last week, Nio stock fell to its 10-week line again, then rallied for a 6.5% gain. It’s now 9.2% above a 10-week line, still just within range. Intraday Thursday, Nio stock crossed a downward-sloping trend line and short-term resistance. Getting back above those levels would offer new early entries. Nio will soon have a new consolidation.

In addition to December sales figures, the EV maker will holds its annual Nio Day Jan. 9, where it will unveil new models, battery technology and more.

BYD stock popped 2.8% on Thursday to 26.43, part of a 7.8% weekly gain. That pushed the big Chinese EV and battery maker above a 26.30 handle-like entry in a short consolidation. BYD stock trades over the counter in the U.S. but is listed in Hong Kong. So in the U.S., volume is somewhat low and the stock tends to have mini-gaps, but its global liquidity is quite substantial.

XPEV stock rose 2.3% last week, rebounding from steep initial losses to close near the top of its range. Xpeng has found support at its 50-day line but is still below its 10-week line. It’s the first-ever test of either of those moving averages, but XPEV stock fell very hard and sharply to those levels. Aggressive investors looking to buy an Xpeng stock rebound might wait until it at least retakes its 21-day moving average.

Li Auto stock fell 1.7% last week, though it did close fairly high in its range. Li stock did hit resistance at the 50-day and is below its 10-week line. As with XPEV stock, investors looking to get into Li Auto stock on a bullish rebound from the 50-day/10-week line might wait until it crosses its 21-day line.

2020 Stock Market Rally Lessons For 2021

First and foremost, the big 2020 takeaway is that the market is going to do what the market is going to do. No would could have predicted the news events of 2020 — pandemic, shutdowns and an economy in freefall — let alone how that this would lead to a powerful stock market rally?

Don’t try to predict what the market will do in 2021 — or even next week. Listen to the market.

History suggests that the stock market is unlikely to repeat such big 2020 gains. But, you never know. If the major indexes only deliver modest full-year gains, investors who play the uptrends and sidestep corrections could see sizeable gains.

Right now, the stock market rally is still looking healthy. That could change quickly, but for now the major indexes and leading stocks are sending positive signals.

When the market goes into a correction, move significantly or entirely to cash. When a follow-through day confirms a new stock market rally, get in early.

Stock Market Forecast For 2021 May Be Different Than You Expect

Buy The Leaders

Getting into leading stocks from top sectors as they flash buy signals is the way to outperform the broad market. The Nasdaq, which nearly doubled from its March lows,  sprinted past the S&P 500 index and Dow Jones for the full year. Investors who focused on the true leaders could have generated far-larger returns.

Don’t Assume Which Stocks Will Be Big Winners

Don’t assume that the big 2020 winners will keep running – or that they’re doomed for a big reversal.

There’s likely to be some rotation, especially given the outsized gains of many winners and the shift from pandemic to post-pandemic environment. But some 2020 winners may continue to do well.

The 25 stocks in buy zones listed above offer a sense of the diversity of leadership.

Be Prepared For 2021

If you want to beat the major indexes consistently, you’ll need to be prepared. Run screens over the weekend, looking for top stocks from leading groups. Build up watchlists and do some research on those names.

You want to pounce on breakouts in a stock market rally, but you also want to be selective.

Don’t focus only on chips, or software, or payment stocks. Leadership can shift, and it’s good to have a diversity of elite stocks.

Mining and metal groups are among the highest rated right now. Housing stocks, which are slumping now, can go on enormous runs.

After you buy your stocks, holding winners is challenging. Do you try to hold for big gains or take profits at 10%, 20%. It can depend on your conviction in the stock and the state of the market rally. Taking partial profits when stocks get very extended or start to break short-term moving averages is at least as much an art as a science.

The key is to develop your sell rules and follow them.

Again, don’t predict the market. Listen to the market. Be prepared, decisive and flexible.

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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