While the runaway stock market was good news overall for investors, it was a double-edged sword for growth stock aficionados.
Big gains in favored stocks were reasons for cheer, but those looking to put their capital to action were hampered by an unusually high number of extended stocks on the IBD 50 list.
XBut the emergence of the new Omicron Covid strain, dubbed a "variant of concern" by the World Health Organization, could fuel a market pullback into next week, according to Oanda senior market analyst Craig Erlam.
"We're seeing a typical flight to safety in the markets with equities, commodity currencies and oil getting whacked and traditional safe havens like bonds, gold, the yen and swissy [Swiss franc] getting plenty of love," he said.
With the Nasdaq and S&P 500 suffering their worst Black Fridays on record, and the Dow Jones Industrial Average also having its worst day of 2021, investors should look at pullbacks to the 10-week moving average as potential new buying opportunities. In addition, this week's weakness could be the beginning of new base formations.
These Market Leaders Test Key Benchmark
A number of strong IBD performers continued to pull back during this week's market weakness. InMode (INMD), which sits at the summit of the IBD 50, is testing its 10-week line. It closed the week just beneath that key benchmark.
Ideally, the Israeli medical device stock will build a proper base from here. It has repeatedly bounced off the 10-week moving average since breaking out of a cup-with-handle base in June. The stock is up a whopping 260% so far in 2021.
Datadog (DDOG) came mighty close to touching its 10-week line, but held just above it before rebounding. The enterprise software play hit its 20% profit goal from its most recent rebound. It has been moving bullishly since topping earnings views Nov. 5.
Database software play MondoDB (MDB) and tech services play Endava (DAVA) could be possible upside movers after touching their 10-week lines in the past week. Endava shines in terms of earnings out of these two stocks, with its EPS Rating a perfect 99.
Investment banking stock Freedom Holding (FRHC) is just below a 68.90 entry after finding support at its 10-week line. Weakness among financials on Friday — due to the sharp decline in the 10-year Treasury yield — could be a reason for caution.
Tesla Leads Stocks Consolidating
In addition, these IBD 50 stocks are now three or more weeks into possible bases.
Retail investing favorite Tesla (TSLA) consolidated for its third week on a weekly chart. While the exact nature of its current base isn't yet evident, the left side high would mean a potential entry point of 1,243.59.
Investment giant KKR (KKR), formerly known as Kohlberg Kravis Roberts, has also been consolidating for three weeks. It is too early for a proper consolidation, but the left side high would offer an 84 entry.
Steel stock Cleveland-Cliffs (CLF) is in the fourth week of its own consolidation. It has been looking for support around its 10-week line in recent weeks following a failed breakout past a 26.61 buy point. If it can find some upside momentum, a buy point of 26.61 could be in the offering.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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