Dow Jones Reverses As Stock Market Hits Critical Support Level

The Dow Jones Industrial Average reversed lower Tuesday morning, threatening to add to recent losses heading the final two sessions of August. The stock market faces an important test, as the major stock indexes retreat to key levels.

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Key earnings movers Tuesday included China search engine giant Baidu (BIDU) and Best Buy (BBY). Defense and aerospace leader Heico (HEI) also reported.

BIDU shares rose 1% after better-than-expected results, while Best Buy stock climbed 4%. Heico shares were up nearly 1% in early morning trade.

Electric-vehicle leader Tesla stock rallied 1% Tuesday. Among the Dow Jones industrials, tech titans Apple (AAPL) and Microsoft (MSFT) rose 0.5% apiece, after today’s stock market open.

In the stock market’s current volatility, Arista Networks (ANET), Costco (COST), GlobalFoundries (GFS) and Ulta Beauty (ULTA) — as well as Dow Jones stocks Chevron (CVX) and McDonald’s (MCD) — are among the top stocks to buy and watch. Keep in mind the market’s increased volatility is a good reason for investors to be more defensive.

Costco is an IBD Leaderboard stock in the wake of a recent breakout, while Chevron and Ulta Beauty were featured in this week’s Stocks Near A Buy Zone column.  Arista was the IBD Stock Of The Day on Friday.

Dow Jones Today: Treasury Yields, Oil Prices

Early Tuesday, the Dow Jones Industrial Average fell less than 0.1%, while the S&P 500 traded down 0.1%. The tech-heavy Nasdaq composite erased early gains in morning trade.

Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) moved up 0.1%, and the SPDR S&P 500 ETF (SPY) was down 0.1% in early trade.

The 10-year Treasury yield ticked lower to 3.1% early Tuesday. On Monday, the 10-year Treasury yield closed at its highest level since June 28.

U.S. oil prices retreated following a sharp gain to their highest level of August, above $97 a barrel, on Monday. West Texas Intermediate futures declined nearly 3% to trade just above $94 a barrel.

Stock Market Tests Key Level

On Monday, the Nasdaq closed 1% lower, ending right at the 50-day moving average. This offers the index a chance either to rebound, or to head farther south.  The Dow Jones Industrial Average is also testing 50-day support.

Monday’s The Big Picture column commented, “A 6% cushion above (the 50-day line) vanished in the Nasdaq’s past two sessions. A break below the line would bring another — perhaps worse — bearish sign. Thus, how the indexes behave around the 50-day line this week has keen importance.”

If you’re new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns is one key to the investment guidelines. IBD offers a broad range of growth stock lists, such as Leaderboard and SwingTrader.

Investors also can create watchlists, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.

Five Dow Jones Stocks To Watch Now

Dow Jones Stocks To Watch: Chevron, McDonald’s

Dow Jones stock Chevron is up more than 24% from a mid-July low. It is methodically building a cup base with a 182.50 buy point, amid a strong performance by energy stocks so far this year. An early entry at 164.76 is also in play. The stock dropped 1.4% as oil prices slipped early Tuesday.

CVX stock shows a strong 97 out of a perfect 99 IBD Composite Rating, per the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.

McDonald’s shares are now about 3% below a 265.56 cup-with-handle entry following Monday’s 2.1% drop, according to IBD MarketSmith chart analysis. MCD shares traded up 0.2% Tuesday morning, hinting at a possible rebound from 50-day support.

4 Top Growth Stocks To Buy And Watch In The Current Stock Market Rally

Top Stocks To Watch: Arista, Costco, GlobalFoundries, Ulta

Arista Networks added a handle to a double-bottom base, placing the correct entry at 132.97, according to IBD MarketSmith chart analysis. Arista’s relative strength line is holding near recent highs despite the recent market weakness, a bullish sign. ANET shares were up 1.2% early Tuesday.

IBD Leaderboard stock Costco fell further below its 552.81 buy point from a cup with handle, as shares declined 3.4% Monday. Wait for a bullish retake of the entry before buying shares. Shares traded up 0.6% early Tuesday.

GlobalFoundries fell back below a double bottom’s 61.98 buy point Monday, skidding 6%. An alternative entry, from a handle, is in play at 66.06. GFS stock gained 1.2% Tuesday.

Cosmetics leader Ulta Beauty is right above a double bottom’s 417.08 buy point following Monday’s 1.5% gain. Shares are in a buy zone, but the current market weakness should give pause. ULTA shares rose 0.4% Tuesday morning.

Join IBD experts as they analyze leading stocks in the current stock market rally on IBD Live

Tesla Stock

Tesla stock declined 1.1% Monday, extending a losing streak to three sessions. Shares of the electric-vehicle giant rebounded 1% Tuesday morning.

Tesla stock continues to grapple with resistance around its 200-day line. Tesla is about 31% off its 52-week high.

Dow Jones Leaders: Apple, Microsoft

Among Dow Jones stocks, Apple shares dropped another 1.4% Monday, as they trade about 10% away from a cup with handle with a buy point at 176.25. Bullishly, the stock’s relative strength line is holding near new highs, indicating steady stock market outperformance. Shares rose 0.5% Tuesday morning.

Microsoft declined 1.1% Monday, closing further below its 50-day line. Shares remain sharply below their long-term 200-day line and about 24% off their 52-week high. The stock gained 0.5% early Tuesday.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.

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