Dow Jones futures soared Tuesday morning, along with S&P 500 futures and Nasdaq futures. The Dow Jones and S&P 500 index undercut their October lows in Monday's stock market, but the Nasdaq composite did not. The Nasdaq led an upside reversal, with the Dow Jones and S&P 500 index closing slightly higher. Tesla stock signaled a moved back above a handle buy point Tuesday as China reportedly moves on cutting tariffs on U.S.-made autos. Splunk stock finished a valid handle Monday. Cisco stock, ServiceNow stock and Atlassian stock are close to finishing proper handles.
XTesla (TSLA), Splunk (SPLK), Cisco Systems (CSCO), ServiceNow (NOW) and Atlassian (TEAM) all are trading above their 50-day moving averages. Atlassian stock, Monday's IBD Stock of the Day, boasts a best-possible 99 IBD Composite Rating. ServiceNow stock has a 98 Composite Rating, Splunk a 96. Cisco stock has a 89 Composite Rating and Tesla stock an 84, but both have been trending higher.
A handle — whether in a cup base, saucer or double bottom — is an opportunity to shake out weak holders soon before a breakout. To be valid, a handle must be flat to downward-sloping and be at least five days long. The midpoint of the handle should be above the midpoint of the base.
Dow Jones Futures Today
Dow Jones futures climbed 1.3% vs. fair value. S&P 500 futures rose 1.3% and Nasdaq 100 futures 1.7%, with China trade optimism adding to morning gains. Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular session.
Stock Market Rally: What Now?
After Monday's intraday plunge, the S&P 500 and Dow Jones have now set a lower high and a lower low. Those key market indexes didn't do that after the early-2018 stock market correction.
But the stock market rally is still valid because the Nasdaq did not undercut its recent lows. It's the tech-heavy Nasdaq that staged a follow-through day last month. Still, the market uptrend is under heavy pressure.
Tesla Stock
Tesla stock rose 2% to 365.15 in Monday's stock market trading, approaching its 366.85 buy point, albeit in below-average volume.
Shares rose 2% early Tuesday to 372.47, which would be back above that entry. Sparking Tesla's premarket move, and adding to stock market futures' advance, is a Bloomberg News report that China is moving on cutting U.S. auto tariffs, which President Trump tweeted about following his Dec. 1 meeting with Chinese President Xi Jinping.
China recently raised its tariff on U.S.-made autos to 40%, while cutting the tariff on other foreign vehicles to 15%. That's especially painful to Tesla, which makes all its vehicles in the U.S. The Bloomberg report said the tariff cut is not yet final. Still, General Motors (GM), Ford (F) and other auto stocks rallied before the open.
CEO Elon Musk also tweeted Tuesday that Tesla will open "a lot of Tesla service centers next year" across the country, including Knoxville, Tennessee. He said Tesla will post a map of city locations this week.
The IBD Leaderboard stock first cleared the entry buy point on Friday, rising as high as 379.49. But Tesla stock reversed lower to close down amid the fierce stock-market sell-off.
Tesla's relative strength line, which tracks the stock's performance vs. the S&P 500 index, actually rose on Friday and kept climbing Monday, hitting fresh 13-month highs. The RS line hitting new highs with or ahead of a stock breakout is particularly bullish.
Splunk Stock
Splunk stock rose 2.6% to 108.40, capping the fifth day of a now-proper handle with a 114.35 buy point. The handle's midpoint is not far above the midpoint of Splunk stock's base. Splunk climbed 1.9% in Tuesday's premarket.
A data analytics software firm, Splunk has expanded into cybersecurity.
Cisco Stock
Cisco stock rose 0.9% to 46.86, rebounding to hold its 50-day line after undercutting that key support intraday. It was the fourth day of a proto-handle for Cisco stock, so it's not yet valid. Cisco advanced 1.5% early Tuesday.
Cisco stock already has a handle buy point of 48.54, but it's deep and awkward-looking. The Dow Jones component already tried breaking out past that entry last week, setting the stage for a possible new handle with a 49.24 entry.
Cisco's earnings and sales growth is slowing accelerating as the networking giant shifts from hardware to services and software, including cybersecurity.
ServiceNow Stock
ServiceNow stock advanced 1.4% to 184.90, rebounding from its 50-day and 200-day lines. It's in a double-bottom base with a current buy point of 194.14, a dime above the middle of the W pattern. However, ServiceNow stock is in the fourth day of a handle attempt that would give it a 192.26 entry. Assuming ServiceNow stock completes that handle and clears the 192.26 entry, investors would want to see it also move past the middle of the W.
Even with shares well below the left side of the base, ServiceNow stock's RS line is at new highs. ServiceNow is an IBD 50 stock.
Atlassian Stock
Atlassian stock popped 3.2% to 83.06, rebounding from its 50-day. It's in a consolidation with a 98.31 buy point. But Atlassian stock is four days into a handle that would give it a much-lower entry of 89.98.
The collaboration software maker competes with ServiceNow and Microsoft (MSFT). Atlassian stock is also in the IBD 50.
Set aside Tuesday's Dow Jones futures gain, this is not a great time to be buying stocks. Ideally, you'd like to see more market momentum before making significant purchases. But stay engaged. As Tesla stock and these other techs show, buying opportunities could appear quickly if the stock market regains momentum.
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