The coronavirus stock market rally retreated last week, with the Nasdaq suffering back-to-back weekly losses. But several top stocks, including Microsoft (MSFT), Shopify (SHOP), Snap (SNAP), Datadog (DDOG) and CrowdStrike (CRWD), rebounded from key support, offering a new buying opportunity for these leaders.
After leading stocks break out and go on a run, eventually they’ll take a breather and fall back to their 50-day or 10-week moving average. This is often a place where mutual funds and other big institutions will add shares. As long as the current stock market rally is intact and the 50-day line is above the prior buy point, investors can consider it a possible buying opportunity. Watch a stock closely to make sure it finds support. Leading stocks often do. Ideally, you’ll see a bit of a bounce before you pull the trigger.
In Friday’s stock market action, as the Nasdaq composite fell hard early on, Microsoft stock, Shopify stock, Snap stock, Datadog stock and CrowdStrike stock all fell to their 50-day or 10-week lines — or within a whisker of them. SHOP stock and Snap stock rallied to close higher Friday, but all of these names are actionable. For several of them, it’s the first clear buying opportunity since their breakouts earlier in the coronavirus stock market rally.
Be aware that there’s a good chance this rebound won’t work if the stock market weakens further. If the uptrend comes under pressure, these stocks may fall through their 50-day lines decisively. At that point, you’ll have to cut them loose.
Some highfliers like Amazon.com (AMZN) and Tesla (TSLA) have pulled back to their 21-day moving average. In those cases, there isn’t clear guidance for when you can buy on weakness. But for Snap stock, Datadog stock and the like, the 50-day line on a daily chart and the 10-week line on a weekly chart have a good track record of providing support to leading stocks amid favorable market conditions.
Microsoft Stock, Shopify Stock Nearly Hit 10-Week Line
Microsoft stock took a bit of a spill Thursday after its fiscal Q4 earnings report revealed slower Azure cloud growth and it gave somewhat cautious guidance for the current quarter. MSFT stock continued lower early Friday, falling as low as 197.52. That’s was within 1% of the 10-week line, close enough to offering a buying opportunity. By the close, the Dow Jones giant pared losses to just 0.6%, at 201.30.
Microsoft stock is an IBD Leaderboard stock and a member of IBD’s Long-Term Leaders list. The latter features companies with stable earnings growth and price performance, which is conducive to buying on pullbacks.
Shopify stock, also an IBD Leaderboard, got within about 1% of its 10-week average near 876. Early Friday, SHOP stock fell as low as 883.18. But the e-commerce software leader bounded for a 0.15% gain at 929.81.
Snap, Datadog, CrowdStrike Stock Test Key Support
Datadog stock also got a lift after falling to 81.54, hitting its 10-week average around 82.26. Shares of the maker of cloud-based tools to monitor software applications and computer infrastructure recovered to 84.84, down just 0.45%.
Snapchat operator Snap fell as low as 21.53 early Friday. Snap stock gapped down on Wednesday following an earnings beat late Tuesday that revealed slower-than-expected user growth. That carried Snap stock to a whisker above its 50-day line and just below its 10-week line. Snap stock closed Friday at 22.15, up 0.8%.
Cybersecurity firm CrowdStrike fell as low as 97.06 early Friday, essentially at its 50-day line and just below its 10-week level. CrowdStrike stock closed down 1.4% to 100.03.
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