Dow Jones futures rose Monday morning, along with S&P 500 futures and Nasdaq futures, signaling a solid start for the market rally in 2022. Tesla deliveries blew out Q4 forecasts Sunday following strong deliveries from Chinese EV rivals. TSLA stock signaled a breakout, with Nio, Xpeng and Li Auto stock also rising.
The stock market rally rose slightly last week, capping a solid if choppy 2021. The S&P 500 and Dow Jones hit record highs while the Nasdaq is close.
Tesla stock revved up around Christmas, then traded tightly near a trendline. That has turned into a handle buy point.
China EV giant BYD (BYDDF) released record December sales early Monday.
Meanwhile, DDOG stock also has a weekly handle like Tesla, while Advanced Micro Devices (AMD) is working on a handle-like pause in its short consolidation. All are finding support near their 50-day lines.
The video embedded in this article took a look at the market action for the past week and for 2021, while also analyzing Tesla, AMD and Datadog.
Dow Jones Futures Today
Dow Jones futures rose 0.6% vs. fair value. S&P 500 futures climbed 0.7% and Nasdaq 100 futures 0.8%.
Crude oil futures climbed more than 1% overnight.
Coronavirus cases worldwide reached 290.7 million. Covid-19 deaths topped 5.46 million.
Coronavirus cases in the U.S. have hit 56.14 million, with deaths above 847,000.
Covid cases are surging worldwide thanks to the more-infectious omicron variant, but it’s also seemingly less dangerous. Hospitalizations have increased, but not nearly as much as new cases, with deaths still declining.
Stock Market Rally
The stock market rally crept higher last week in light end-of-year volume.
The Dow Jones Industrial Average rose 1.1% in last week’s stock market trading. The S&P 500 index climbed 0.9%. The Nasdaq composite, which started the week strong, closed down less than 0.1%. The small-cap Russell 2000 edged up 0.2%
The 10-year Treasury yield rose two basis points to 1.51%. Crude oil prices rose 1.9% to $75.21 a barrel, but ended a seven-day win streak with Friday’s 2.3% decline.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 2% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 1.7%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 0.7%, with DDOG stock an IGV component. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.2%, but remained near weekly lows. AMD stock is a major SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slumped 4.5% last week and ARK Genomics ETF (ARKG) 4.9%, despite big gains on Thursday. Tesla is still the No. 1 holding across ARK Invest’s ETFs. ARK also owns some BYD and XPEV stock.
Non-tech sectors generally fared better.
SPDR S&P Metals & Mining ETF (XME) climbed 0.9%, its fourth straight weekly gain. The Global X U.S. Infrastructure Development ETF (PAVE) advanced 1.7%. U.S. Global Jets ETF (JETS) slid 1.4% last week. SPDR S&P Homebuilders ETF (XHB) popped 2.9%. The Energy Select SPDR ETF (XLE) advanced 1.1% and the Financial Select SPDR ETF (XLF) 0.6%. The Health Care Select Sector SPDR Fund (XLV) climbed 1.1%.
Tesla EV Deliveries
Tesla’s 308,600 deliveries in the fourth quarter included 296,850 Model 3 and Y vehicles and 11,750 Model S and X luxury EVs. For the full year, Tesla delivered 936,172 vehicles.
Analysts officially expected Tesla to report Q4 deliveries of 276,900, according to detailed FactSet consensus figures. That included 261,400 Model 3 and Y vehicles and 15,500 Model S and X vehicles. Some Wall Street analysts and private forecasts saw deliveries coming in far north of 280,000, with a few seeing 300,000 as possible.
In Q3, Tesla delivered 241,300 vehicles.
Q4 production totaled 305,400, with 292,731 Model 3 and Model Y vehicles and 13,109 Model S and Model X units.
Late Thursday, Tesla announced sizable price increases for the base-model Model 3 and Model Y in China. The base Model Y no longer qualifies for China subsidies, which are 30% lower in 2022.
Tesla stock leapt nearly 7% early Monday to 1,127, signaling a breakout a new handle with a 1,119.10 buy point with a double-bottom base.
Tesla surged from its Dec. 21 low to its Dec. 27 peak, running up to a trendline. Then shares pulled back modestly in tight fashion, ending the week just below the 50-day line. On a weekly chart, it now has handle.
China EV Deliveries
Nio, Xpeng and Li Auto reported December deliveries on Saturday.
Nio delivered 10,489 vehicles, up 49.7% vs. a year earlier, but down slightly from November’s 10,878. The EV maker delivered 25,034 in Q4, near the high end of of its 23,500-25,500 target.
Xpeng deliveries shot up 181% to 16,000 vehicles, a new monthly record after November’s 15,613. For the quarter, Xpeng delivered 41,751 vehicles, easily beating its Q4 target of 34,500-36,500.
Li Auto delivered 14,087 Li One hybrid SUVs in December, up 130% vs. a year earlier. Q4 deliveries hit 35,221, well above its 30,000-32,000 target.
XPEV stock, Nio and Li Auto rose about 2% early Monday.
Xpeng stock rallied 9% last week, with Li stock up 5.5%, both reclaiming their 50-day lines. Thursday’s spikes could have been seen as early entries in emerging consolidations next to prior failed breakouts. But buying an aggressive entry in a Chinese stock right at year-end and with December deliveries imminent seems like piling risk upon risk.
Nio stock shot up 15% Thursday in its heaviest volume in nine months, advancing 3.8% for the week after sinking to a 14-month low on Wednesday. Nio remains well below its 50-day and 200-day lines.
Meanwhile, BYD, which makes its own batteries and chips, sold 93,945 new energy vehicles in December, up 218% vs. a year earlier. That was up from 91,129 NEVs in November, but snapped a six month streak of EV/hybrid sales rising by roughly 10,000.
China’s strict lockdown of Xi’an province affected some BYD production last month, though the company reportedly is close to normal operations again.
Of the 93,945 vehicles sold, 92,833 were personal vehicles, up 232% vs. a year earlier. EV sales reached 48,317, up 155%, while plug-in hybrid sales leapt 477% to 44,506.
BYD stock, which trades over the counter in the U.S., was not yet active.
BYD stock rebounded on Thursday, but still fell 1.6% for the week. It’s hitting resistance at its 21-day line, with the 50-day line above that.
China is cutting EV subsidies by 30% in 2022, with that falling to zero after that. That might have helped fuel demand at the end of 2021 for BYD, Nio, Xpeng, Li Auto and Tesla, but it could weigh on sales in early 2022. Tesla has raised its starting prices for the made-in-China Model 3 and Model Y, with the latter no longer eligible for subsidies.
AMD stock fell 1.5% to 143.90 last week after rising as high as 156.73 intraday Tuesday. The chip giant is working on a handle, though the consolidation is too short to be proper yet. Still, investors could use 156.83 as an early entry. However, AMD stock has been tricky, trending higher over the past few weeks but with huge gyrations. Buying closer to the 50-day/10-week line might be safer.
Datadog stock retreated 1.25% last week to 178.11. DDOG stock now has a handle on a weekly chart. That creates a lower official buy point of 186.38 — 10 cents above Tuesday’s high. On a daily chart, Datadog will likely have a handle after Monday.
Datadog stock began working on that handle after hitting resistance at some short-term levels. But shares held above a recent trendline break and found support at their 50-day line. DDOG stock is still above its 50-day line, which has converged with its 21-day line and is almost in sync with the 10-day.
Market Rally Analysis
The stock market rally closed 2021 with another quiet session after bullish gains before and just after Christmas. The major indexes trading tightly near record highs, drifting slightly lower, is healthy action. This is letting leading stocks such as Tesla and Datadog forge handles.
Big institutions will return in force in 2022, while many investors that delayed selling stock before year-end for tax reasons may pull the trigger. Early January can deliver nice gains but also some sharp losses. So it’s better that stocks get in position at year-end rather than send a flurry of buy signals that might not survive the new year.
Overall, the major indexes are looking healthy. Market leadership, or at least potential leadership, is relatively broad.
However, the Russell 2000 continues to hit resistance at its 200-day line. Market breadth, though improving at the end of 2021, remains tepid. Breadth was poor for most of 2021, though that didn’t stop the megacap tech-led rally in the major indexes. Still, as long as breadth is narrow, it’ll be harder to find winning stocks and outperform the indexes.
Looking back on 2021, the market delivered solid gains, but the choppy action and sector rotation — along with narrow leadership — made it difficult to navigate. The S&P 500 led the Nasdaq, with megacaps fueling both indexes.
There wasn’t necessarily a “right” way to trade in 2021. Among notable IBD Live guests, Mark Minervini focused on short-term trades. David Ryan played sector moves, often targeting non-tech companies. Charles Harris largely stuck to a core position, Tesla, that he had huge gains on and deep conviction in. The key is finding good stocks and following sound trading rules that work for you.
What To Do Now
Whether you are 100% in cash or significantly invested, start the new year off with a clean slate. Yes, you want to learn lessons from your winning and losing trades, but don’t bask in the glories of big gains from 2021 or obsess over painful mistakes. Be mentally fresh and open for the new year and the new opportunities that will certainly arise.
Develop your watchlists, looking for stocks in bases with strong relative strength and impressive fundamentals. Pay close attention to the “N” in CAN SLIM. Seek out the new products, services and ideas that can generate tremendous long-term growth.
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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