Market rally shows bullish action; Broadcom is a buy

Dow Jones futures fell slightly overnight, along with S&P 500 and Nasdaq futures. The new stock market rally posted solid gains on Wednesday amid several bullish factors. Fed Chief Jerome Powell said policymakers needed to see “clear and convincing evidence” of slowing inflation before slowing the pace of Fed rate hikes, but he said a “soft landing” of the US economy was plausible.


Broadcom (AVGO) launched an aggressive entry on Tuesday, while Eli Lily (LLY) remains subject to prosecution. On the decline, dollar tree (DLTR) retreated slightly below its 50-day line as walmart (WMT) plunged 11% on weaker-than-expected first-quarter earnings as inflationary pressures hit the discount giant on multiple fronts.

Meanwhile, Elon Musk Twitter (TWTR) continued, with the You’re here (TSLA) The CEO said the deal “cannot go forward” without more clarity on bot accounts, even calling on the Securities and Exchange Commission to intervene. The social site said it was committed to the original terms. Tesla stock rebounded on Tuesday. TWTR stock rose 2.5% after plunging in recent days, falling well below the proposed repurchase price of $54.20.

Fed Chief Powell

Fed Chief Jerome Powell said he remains focused on reducing inflation. He noted that financial conditions have already tightened quite a bit, but said he wanted to see “clear and convincing evidence” that inflationary pressures are easing before reducing the pace of Fed rate hikes. He said now was not the time for “nuanced” inflation readings. Powell said there might be some “pain” in bringing inflation down. But he expects labor markets to remain strong and says a “soft landing” is still possible. Last week, Powell said the recession could be inevitable.

In the end, Fed Chief Powell largely reiterated earlier statements and themes, and did not signal a new change or pace in monetary policy.

Key wins

Early Wednesday, Target (TGT) and ZIM Integrated Shipping (ZIM) will report the income.

Target stock fell 1.4% to 215.28 on Tuesday, in sympathy with Walmart stock. The target stock is in a handle cup basis with a buy point of 254.97. But TGT stock is below its 50 and 200 day lines.

ZIM revenue comes after other container carriers play danaos (DAC) crushed views Monday night. Shares of ZIM reversed lower to fall 1.7% to 65.04 on Tuesday, working a buy point of 79.05 from a cup base. ZIM stock, trading above its 50-day line and just around near-term resistance, arguably could have been an aggressive entry had it not been for the spade of profits.

AVGO and Eli Lilly stocks are on IBD Leaderboard and SwingTrader. LLY stock is on the IBD 50. Broadcom was the IBD stock of the day.

The video embedded in the article discussed Tuesday’s market action and analyzed shares of Broadcom, Eli Lilly and DLTR.

Dow Jones Futures Today

Dow Jones futures fell 0.1% from fair value. S&P 500 futures fell 0.2% and Nasdaq 100 futures fell 0.3%.

US crude oil prices rose 1%.

Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.

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

Stock market rally

The stock market rally started strong on Tuesday, pulling back a few times and then strengthening again, especially on comments from Fed chief Powell.

There were several bull market drivers on Tuesday. Chinese stocks rallied on easing lockdowns and strong (JD) earnings results. U.S. retail sales were strong, with Home deposit (HD) results are also positive, although Walmart’s big profits are missing due to inflationary pressures, which has dampened enthusiasm. United Airlines (UAL) raised its key revenue targets, signaling strong demand for the travel industry.

The Dow Jones Industrial Average rose 1.3% in trading on Tuesday. The S&P 500 index jumped 2%. The Nasdaq composite jumped 2.8%. The small-cap Russell 2000 jumped 3.1%

U.S. crude oil prices fell 1.6% to $112.40 a barrel. Gasoline futures also fell.

The 10-year Treasury yield jumped 9 basis points to 2.97%, but was little budged on Fed chief Powell.


Among the top ETFs, the Innovator IBD 50 ETF (FFTY) climbed 2.45%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 1 cent. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.75%. The VanEck Vectors Semiconductor (SMH) ETF jumped 4.8%, with AVGO stock a notable stake in SMH.

The SPDR S&P Metals & Mining ETF (XME) rebounded 4.25% and the Global X US Infrastructure Development ETF (PAVE) gained 2.7%. The US Global Jets ETF (JETS) climbed 5.7%. The SPDR S&P Homebuilders ETF (XHB) climbed 2.7%. ETF Energy Select SPDR (XLE) gained 1.2% and ETF Financial Select SPDR (XLF) 2.7%. The SPDR healthcare sector fund (XLV) rose 1.4%, with shares of LLY holding a large position.

Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) jumped 5% and ARK Genomics ETF (ARKG) 4.7%. Tesla stock is the top position among Ark Invest’s ETFs.

Five best Chinese stocks to watch now

AVGO Stock

Broadcom stock rose 4.4% to 608.15, breaking above the 50-day line and breaking a trendline, offering early entry. The chip giant is working on an official buy point of 645.41 from a cup-with-handle buy point, according to MarketSmith analysis. The relative strength line of AVGO shares is already at a new high. The RS line, the blue line in the charts provided, tracks a stock’s performance against the S&P 500 Index.

LLY Stock

Eli Lilly stock edged up 0.7% to 301.48 after finding support at its 21-day and 10-week lines. On Monday, LLY stock jumped from those levels as the FDA approved a diabetes drug considered a blockbuster obesity fighter. Shares closed session highs, but Lilly was still up 2.7% on Monday. The drugmaker has a buy point of 314.10 from a flat base under a base-to-base model.

Dollar tree stock

DLTR stock fell 3.2% to 156.35, breaking below the 50-day line to hit a six-week low. Dollar Tree stock could see action if it breaks above its 50 and 21 day lines, which would coincide with the break of a trendline. The actions work on a possible new basis. Dollar Tree earnings are expected on May 26. Walmart blamed its first-quarter revenue shortfall on rising commodity prices, supply chain costs and labor costs.

Elon Musk – Twitter Saga

Musk said the Twitter takeover cannot go forward unless management provides more clarity on how many users are fake accounts. Twitter says it provided its estimates in good faith and stands by Musk’s $54.20 purchase price. Musk appears to want to back out of the deal, or at least negotiate a much lower price. He even called on the SEC to investigate Twitter, after years of mocking the watchdog agency.

Meanwhile, Twitter released documents showing Musk discussed a buyout with his board before belatedly disclosing a 9.1% “passive” stake in TWTR. Late Tuesday, Twitter’s board said it intended to “enforce” Musk’s takeover.

Experts say Musk may find it difficult to pull out of the Twitter deal, but any legal fight could, theoretically, last for years. Twitter may want to settle down and move on. But the Twitter saga has also been a headwind for TSLA stocks, a blow to Musk’s massive wealth and to the wallets of many of his staunchest supporters.

Tesla stock rose 5.1% on Tuesday to 761.61, rebounding from the worst close since late August. Twitter stock soared 2.4% to 38.28, ending a seven-day selloff

Tesla vs. BYD: Which rising EV giant is the best buy?

Market rally analysis

The major indexes rose with an explosion in volume on Tuesday morning. The major indexes pulled back significantly mid-morning and modestly during Powell’s mid-afternoon speech, but both times rebounded to the day’s best levels.

The major indices all posted strong price gains, particularly the Nasdaq and S&P 500. NYSE and Nasdaq volume rose slightly from the previous session.

It’s an important day to read The Big Picture to stay in tune with market direction.

Energy stocks continue to lead the market. Fertilizer games are trying to regain a leadership role. Some drug manufacturers like LLY stock are in a good position.

Chipmakers had a good session, but AVGO stocks stand out as exploitable. Tech stocks usually need a lot of repair work.

A number of sectors could show promise with further market gains.

Time the Market with IBD’s ETF Market Strategy

What to do now

The market’s attempted rally showed strength in Tuesday’s session. But the major indices only picked up the 10-day moving average. There is still some distance to go to reach the 21-day exponential moving average, with a long way to go to reach the 50- and 200-day lines, not to mention all-time levels.

Investors could add some exposure, either through blue chip stocks or a broad-market ETF. But don’t rush and be prepared to retreat. The current market could quickly run out of steam or run for a few weeks to the 50-day line before pulling back, as the major indices did in late March.

Investors should work on their watchlists. Look for stocks with strong relative strength, especially those close to potential entries.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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