Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures, as investors get ready to kick off the new year. The stock market rally had modest gains last week, capping a strong 2020, especially for tech and growth stocks.
On Saturday, Tesla (TSLA) reported fourth-quarter deliveries and production figures, with deliveries nearly hitting the 500,000 full-year target. China EV maker startup Li Auto (LI) announced booming December sales. On Sunday, China EV maker Nio (NIO) reported fast-rising December deliveries. Xpeng (XPEV) and BYD Co. (BYDDF) also should report December figures in the next few days.
Tesla and Nio stock were two of 2020’s biggest winners, with Xpeng, Li Auto and BYD also delivering triple-digit gains.
Meanwhile, Bitcoin prices blasted through milestones on Saturday and Sunday before pulling back somewhat. That’s after Bitcoin skyrocketed in 2020.
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
Here are 25 quality stocks that are flashing buy signals, either from traditional breakouts, early entries, or bullish rebounds from key levels. Some 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.
EV Stocks: Nio stock and BYD.
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, along with S&P 500 futures and Nasdaq 100 futures.
On Saturday, the Bitcoin price spiked above $30,000 and kept racing to above $33,000. On Sunday, Bitcoin soared past $34,000, nearly reaching $35,000 before retreating below $34,000 in volatile action. That continues a massive run for Bitcoin from less than $5,000 during the coronavirus crash. Much of the cryptocurrency’s big gain has come in the last two months.
Coronavirus cases worldwide reached 85.40 million. Covid-19 deaths topped 1.84 million.
Coronavirus cases in the U.S. have hit 21.06 million, with deaths above 359,000.
India gave the AstraZeneca coronavirus vaccine emergency use approval on Saturday, a few days after the U.K. did so. The AstraZeneca (AZN) vaccine is much cheaper and easier to make than the Pfizer/BioNTech and Moderna (MRNA) vaccines, as well as being less complicated to store. That makes it an important tool for rapidly immunizing populations and spurring herd immunity, especially in developing nations such as India. Initial late-stage data showed the AstraZeneca vaccine to be less effective than than Pfizer (PFE) and BioNTech (BNTX) vaccine and Moderna vaccine, but its CEO recently claimed a winning formula that achieved similar effectiveness.
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 leapt 58.4% in 2020, while SwingTrader spiked 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 Soar
Tesla deliveries for the fourth quarter jumped to 180,570, well above the previous best of 139,300 in Q3. That brought full-year Tesla deliveries total to 499,550, essentially in line with the EV maker’s target for 500,000.
Wall Street analysts officially expected Tesla deliveries of around 174,000 in Q4. But forecasters with a better track record predicted Tesla deliveries of roughly 183,000. CEO Elon Musk raised expectations less than a week ago, saying Tesla was on the cusp of the “historic milestone” of 500,000 deliveries.
Tesla produced 179,757 vehicles in the fourth quarter, for a full-year total of 509,737.
Tesla does not break down sales and output by region, but China was clearly a big driver of growth in Q4 and the full year. Industrywide data will provide December China production and sales figures for Tesla in the coming weeks. There are early indications that Tesla’s China sales were roughly 30,000 in December, for about 65,000 in the quarter.
If so, that could suggest weaker-than-expected sales in the U.S.
In Q4, Tesla delivered 161,650 Model 3 and Model Y cars and produced 163,660. It delivered 18,920 Model S and X vehicles and produced 16,097 of them.
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 Nio EC6, which starts at 368,000 yuan ($52,542), though the Nio crossover gets a 2021 subsidy of 18,000 yuan because of its battery-swap capability. The Model Y crossover also will compete with 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.
Meanwhile, Tesla cut prices of its MIC Model 3 vehicles yet again. It trimmed prices on its base SR+ and slashed prices on the higher-end Performance variant, while pulling the mid-level LR from its website. China OK’d the Performance variant for a 10% purchase tax cut.
How will Tesla stock react on Monday to the various headlines? Clearly, investors have been expecting strong Tesla deliveries for 2020 and years to come.
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 sales in December rose to 7,007, up 32.4% vs. November and 121% vs. a year earlier. Full-year sales reached 43,728.
Nio’s top-selling electric vehicle is now the EC6 crossover, which just began deliveries a few months ago. In December, the Model Y rival had sales of 2,505. The ES6 SUV had 2,493 deliveries while the larger ES8 had 2,009. In November, Nio sold 2,386 ES6 vehicles, 1,518 EC6 crossovers and 1,387 ES8 SUVs.
The EV maker will hold its annual Nio Day Jan. 9, where it will unveil at least one sedan, battery technology and more. The sedan is likely to be a rival to the Tesla Model, the Xpeng P7 and BYD Han EV.
Li Auto sales hit 6,126 in December, up 31.9% vs November. That was up 529.6% vs. December 2019, when Li Auto was just starting deliveries of its Li One SUV. For all of 2020, Li Auto sold 32,624 Li One vehicles, which have a tiny gas engine to extend range.
Xpeng Motors and BYD Co. are due to report December deliveries over the coming days. Xpeng has begun making a few deliveries of its G3 small SUV in Norway.
All four Chinese EV makers, along with Tesla, saw big China sales gains in November. 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.
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.
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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