Dow Jones futures fell early Tuesday, along with S&P 500 futures and Nasdaq futures. On Monday, the Dow Jones, S&P 500 index and Nasdaq composite erased early losses to close higher. On the flip side, Tesla stock looked strong before and just after the opening bell on Tesla (TSLA) Model 3 production, but reversed to close lower. Facebook stock fell modestly late as it confirmed that more federal agencies are probing the social giant’s data sharing practices. Meanwhile, recent hot IPOs Pivotal Software (PVTL) and Chinese livestreaming stocks iQiyi (IQ) and Huya (HUYA) are trying to find support after sharp pullbacks.
Dow Jones Futures Today
Dow Jones futures sank nearly 0.2% vs. fair value. S&P 500 futures and Nasdaq 100 futures fell 0.1%.
Facebook (FB) fell 1.2% in late trading The FBI and SEC are joining the Justice Department and FTC in investigating Facebook’s data-sharing policies. The focus is on the Cambridge Analytica scandal, and whether public Facebook statements have been truthful.
Facebook stock rose 1.6% to 197.36 in Monday’s stock market trading. That’s at the edge of a 5% chase zone from a 188.42 buy point.
Tesla Stock Investing Lessons
Tesla stock action Monday offered a trio of key investing lessons.
Be wary of overnight trading: Trading after the close and before the open often doesn’t translate into how a stock will close in the next session. Tesla rose more 6% than in premarket trade and shortly after the opening bell. That came on news that Tesla Model 3 production topped 5,000 in the last week of June, the first time the electric vehicle maker hit that weekly milestone. But Tesla stock quickly pared gains, and by the close fell 2.3% to 335.07. Some analysts wondered if Tesla Model 3 output was sustainable.
Likewise, Dow Jones futures, S&P 500 futures and Nasdaq futures all pointed lower before Monday open, but the actual indexes rallied for slim-to-solid gains.
Good news sometimes spurs selling: “Buy the rumor, sell the news” is an old stock market saying that doesn’t always hold up. But the stock market does a good job of pricing in good news, especially if that news is expected. Tesla stock had rallied strongly in late May to June 18 as CEO Elon Musk predicted Model 3 output would hit 5,000 in the last week of June.
Given that Musk’s promises often don’t hold up, it wasn’t surprising to see Tesla stock rally early Monday. But ultimately the “sell the news” trend took hold.
Wait for a proper buy point: Even at the Tesla stock intraday peak of 364.78, it was still well below a 373.83 handle buy point. When a stock clears a buy point, the odds are high that it will rise, and rise strongly. That’s no guarantee, but you make big money bets when the odds are in your favor.
Tesla stock also reflects a fourth investing lesson over the long run.
Focus on the very best stocks: Tesla has a Composite Rating of just 38 out of a possible 99. All-time stock winners often have a Composite Rating of at least 95 near the start of big runs. That reflects Tesla’s significant losses and recent poor, sluggish share price performance. Tesla’s relative strength line, which tracks a stock’s performance vs. the S&P 500 index, has been lagging for nearly a year. The RS line really hasn’t made headway for more than four years.
Obviously, Tesla stock has been a big winner, from its April 2013 breakout to the end of February 2014. Perhaps the company is turning the corner in terms of production and cash burn. If so, the stock may be a big winner. But investors generally should focus on the best of the best of the best.
Pivotal, Huya, iQiyi Stock
Pivotal Software is a Dell spinoff. Its cloud-based service helps companies streamline software development and manage apps. Huya, a spinoff of YY (YY), is the leading Chinese streaming site for video games. IQiyi, a Baidu (BIDU) spinoff, is called the “Netflix of China.”
Pivotal stock is finding support right at its 20-day line after the April IPO blasted higher in early June but then pulled back.
The Chinese livestreaming IPOs have been consolidating for a few days before their 20-day lines, after significant pullbacks. Huya stock and iQiyi stock had skyrocketed in June, becoming sharply extended from their 10-day moving lines. That made a near-term retreat likely.
On Monday, Pivotal stock rose 1.8% to 24.70. iQiyi stock rose 1.55% to 32.80. Huya stock sank 2.4% to 32.10, but held above a recent near-term low and closed near session highs.
But it’s early days for these stocks. Just because a stock has stopped falling for a few days, or even begun to move higher, doesn’t mean it’s a buy. Wait for a stock to consolidate and blast out of a new buy point.
Just look at Brazilian IPO PagSeguro (PAGS). The payments stock rocketed from early February to late March. Then shares pulled back to the 50-day line and tried to bounce back. But within a few days PagSeguro stock broke down sharply. In late May, shares reclaimed their 50-day moving average, but not for long. PagSeguro stock has continued to trend lower, wiping out its big initial run.
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