|
|
|
|
|
|
Issue #20 
May 20, 2007 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
|
Updates |
Stock Indexes Update |
Stock Picks for Next Week | |
| Updates on held stocks
NUAN broke above both the 20 and 50 day MA's this past week and has the recently made 7-year high daily close at 16.76 and the weekly high close at 16.44 in its cross hairs. By closing on the highs on Friday it is likely that there will be follow-through on Tuesday. A close above 16.76 will likely generate a move above the $17 level. A rally up above the $18 would be the likely objective.
MDTL has now had 3 of the last 6 days close in the green. It is evident that the selling has begun to dry up and if and when a low has been determined it is likely that it will generate about a $3 move to the upside. On the negative side, Friday's weekly close was the lowest since 10/8/2004. A print above the most recent high of 12.42 should generate a rally.
COGT has been on the defensive after failing to follow through on the close above 14.74. It has been trading below the 20 day MA but has been able to maintain closes above 13.73 (important weekly and daily close level). As long as it closes above that price it is probable that it will recover and get back into a trading range between this level at 14.74.
UTSI seems to have found a low and is now trading around the 7.00 level. It is probable that for the next couple of weeks this level will be a pivot point. Nonetheless it is also probable the 6.72 recent low will not be seen again. UTSI should be bought and held.
SONS had a positive day on Friday when it rallied and closed above both the 20 and 50 day MA's. It is now likely it will have a rally up to the next resistance level at 8.43. If broken, the 8.77 high will be tested and if that level is broken the $10 level will be the objective. Support now strong at 7.65-7.69.
ANGO accomplished a re-test of the low at 15.72 and seems to be rallying. Nonetheless a close above 17.00 (20-day MA) is required to give the bulls strength. As long as it maintains itself below that price the sellers will continue with the upper hand.
SNDA hit the 28.30 mark which is considered important resistance. Forays down to the $25 level may be seen on the next correction. The $28 resistance is likely to hold strong for a few weeks though ultimately it is likely the stock will go higher.
JDSU continues to look weak and shows no support until the 12.20 level is seen. Rallies should be limited and in short supply until support is found.
INTC finally confirmed its breakout with a close at 22.71 on Friday. Dips should be bought all the way down into the low 22.00's. No resistance to be found until 24.65-24.98 is seen. With INTC being part of the DOW and one of the few stocks in that index that has not aggressively participated in the rally, it is likely to be one of the best purchases at this time.
WIND was finally able to close above the 20 and 50 day MA on Friday and will likely generate a rally up to the 10.56 level within a short period of time. Shorts should be liquidated at 10.10 stop.
TGB had an unexpected rally on Friday and was able to close above the 3.23 resistance. There is no resistance now until the previous high of 3.60 is seen. With the price of copper starting to come down due to China's oversupply it might make sense to liquidate longs at that price or shortly thereafter.
MWA began to show weakness of Friday even though it managed to close in the green. Strong resistance is found at 16.65-16.85 which should truncate any rallies. It is a stock that since its inception a year ago has traded between $13.60 and $16.60. No reason to think that trading range will change.
Updates on last week's mentions and previous stock positions
1) MDTL - Purchased at 12.42 and 11.77. Averaged in now at 12.33. No stop loss at this time. Stock closed Friday at 11.91.
2) ANGO - Averaged long at 16.48 with stop loss at 15.66. Stock closed Friday at 16.52.
3) JDSU - Short JDSU at 13.87 with a stop loss at 14.14 stop close only. Stock closed Friday at 13.00.
4) COGT - Averaged out at 14.14. Stop loss at 13.68 stop close only. Stock closed Friday at 13.77.
5) WIND - Averaged short at 10.03. Stop loss order lowered to 10.10. Stock closed Friday at 10.03.
6) SONS - Averaged long at 7.99. Stop loss order now at 7.62. Stock closed Friday at 8.13.
7) TGB - Averaged long at 3.06. Stop-loss raised to 3.04. Stock closed Friday at 3.37.
8) SNDA - Bought SNDA at 25.68 and covered at 26.92 for a profit of $144 per 100 shares minus commission.
9) COGO - Sold COGO at 18.29 and covered at 17.85 for a profit of $44 per 100 shares minus commission.
10) SNDA - Shorted at 27.97 with a stop loss at 28.60. Stock closed Friday at 27.69.
11) REV - Purchased REV at 1.30 with a stop at 1.22. Stock closed Friday at 1.30.
|
Chart Analysis Runaway Train
DOW Friday close at 13556
The DOW closed 200 points higher than last week's close and has now moved 1600 points higher over a period of 2 months. From July06 to March 07 it moved 2130 points. At the rate the DOW is moving up right now it might do it this year in a third of the time.
There is little to stop the DOW from continuing its rally the first part of the week as there are no major reports due out until Thursday. Certainly no one wants to step up in front of a runaway train without some reason to do so.
On Thursday the durable goods and housing market reports are shown and it's important to remember that negative data on durable goods and the housing market were two major factors behind the sell-off of late February and early March. With the DOW being so overbought it is possible that any negative news will create a profit taking binge that could cause a strong sell-off.
There is little support under the market and profit taking binges could easily cause the DOW to go down 200-300 points at a clip. The nearest support in the DOW is down around 13363-13383 (200 points lower). Moves down to that level would still be considered a "minor" move, so buying the DOW does have its risks. In fact, the risk/reward ratio is not good for a buyer.
Supports under 13363 are seen at the recent low of 13210 and then again at 13060. 13267 is also where the 20-day MA will be in the early part of the week. Psychological support is likely between 12970 and 13030. Major support is down at the breakout level of 12795.
The 20-week MA is presently right around 12700 so a drop to that level is possible while maintaining an uptrend.
At the present time no one is stepping up to sell, as such continued upside movement is likely and could cause the DOW to reach the 14000 level in a few days. Just last week I studied all the stocks in the DOW index and found that using probable objectives on each and every stock it could rally another 500 points to the upside.
NASDAQ Friday Close at 2558
As incredible as it may sound the NASDAQ actually suffered a drop of 4 points from last week's close even though the DOW continued strong. Nonetheless the NASDAQ was able to get above the 20 day MA on Friday and close on its highs. Follow through is expected.
There is decent resistance at 2568 and major at 2580 (6 year high). Support will now be strong at 2525.
If and when the DOW finds a temporary top but "does not sell off", it is likely the NASDAQ would be the beneficiary and catch up in a hurry. There is much support in this chart, contrary to that in the DOW. It is fast becoming the better place for the bulls to invest their money, if and when the economic situation does not deteriorate. There are many bargains in the NASDAQ but very few in the DOW.
Objective of the NASDAQ on this move up is 2600-2610.
S&Poors 500 Friday close at 1522
It is more than likely that all eyes will be on the SPX this coming week as this is the small sister of the DOW and the one index that has a very well defined level of resistance.
The SPX is nearing its all-time high. On a weekly closing basis the all-time high is 1527 and on an intra-day basis it is 1555. With the high and close on Friday being 1522 (only 5 points below its all-time weekly closing high) it means that this coming week that level will be a major pivot point.
Because of that fact "strong" rallies in both the DOW and the SPX during the week should be sold as next Friday, if there are no surprises with Thursday's reports, the indexes are likely to close near this week's price with perhaps just a slight rise. The SPX is likely to be the determining factor this coming week as it is the only index that has a weekly resistance level of great consequence.
The 1500 level in the SPX will act as strong support with the 20-day MA at that price as well as a previous low. Further support will be found at 1490.
Such a level as the all-time high is likely to be difficult to breach without strong fundamental news or without going through a process of backing and filling over a period of weeks. As such it is safe to assume that the SPX will be closely looked at by investors and traders alike and that it may foretell the correction phase.
The indexes are likely to be strong on the First two days of the week. On Wednesday they are likely to consolidate their gains while waiting for the reports coming out on Thursday. If there are no surprises in the reports it is likely that Thursday will show some strength but on Friday some profit taking may occur, especially if the SPX was not able to make new intra-day highs. Without any surprises in the reports I would expect that the indexes will close slightly higher, but not strongly higher, than last week.
|
Stocks CHART Outlooks
Continuation of the strength in the indexes is likely for most of the week. Purchases rather than shorts is likely to continue to be the correct strategy.
LOOP (Friday Close at 19.01)
LOOP is a stock that has only been trading for 11 months but after being in a trading range between $15 and $18 for several months, it broke out about a month ago (probably due to a fundamental piece of news) and established itself in a new trading range between $18 and $19.
On Friday LOOP closed at the highest weekly level since its inception with a close at 19.02. In addition, LOOP is showing a very well defined flag formation that projects the stock to $21 on this rally. Friday's close was a clear breakout.
Major support, as well as the 20-day MA, is at $18 and therefore a stop loss at 17.90 would be perfect but risking $1 to make $2 does not make sense. In addition, if this break to the upside is for real, daily closes below 18.90 should not be seen.
Purchasing LOOP at Friday's closing price of 19.01 and placing a sensitive 18.80 "stop close only" order and using a $21 objective offers a risk/reward ratio of almost 10-1.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
INTC (Friday close at 22.71)
INTC finally managed to confirm a breakout and with DOW stocks showing much strength it is now very likely that INTC will follow suit. There is no visual resistance until $25 is seen and therefore the risk/reward ratio is very good.
The upgrade this past Thursday caused the stock to gap open on Friday and it is likely that gap (between 22.46-22.51) will be filled. Closure of the gap is likely to be a good buying opportunity.
There is no resistance on the chart until 24.65 is seen. That level, on a closing basis, is likely to give INTC some trouble. On an intra-day basis the resistances are 24.99 and 25.47. This means that a run of over $2 is anticipated to be seen before some selling enters.
A purchase of INTC at 22.48, using a 24.81 stop loss placement, and an objective of 24.99 gives a risk/reward ratio of 4-1.
My rating on the trade is a 8 (on a scale of 1-10 with the strongest probability rating being 10).
MWA (Friday close at 16.27)
MWA has been, since its inception in June of last year, an almost perfect trading range stock with consistent rallies and drops of about $2-$3. Four weeks ago I mentioned buying this stock at 13.60 (traded as low as 13.40 thereafter) looking for a rally to the high 15's. Well the rally did occur and the trade would have been successful. Now MWA seems to be ready to go in the opposite direction.
In addition, during the past three weekly rallies, MWA found strong resistance between 16.04-16.31. It looks probable it will find the same resistance this time.
MWA has left a gap between 14.65 and 14.75 which should work as a magnet and the overall trend for the last 11 months has been very slightly bearish. This stock has so far been perfect as a trading range vehicle and has reached the high end of its well-defined trading range. There is no reason to believe that on this occasion it will be different.
Sales of MWA at Friday's closing price of 16.27 should be instituted with a stop loss order at 16.85 and an objective of at least 14.00 with a good possibility of 13.60. Risk/reward ratio is at least 4-1.
My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).
TOA (Friday closing price 4.01)
TOA made waves last week by rallying in the face of a negative earnings report. The belief is that the report was not as negative as anticipated and a rally up to the 20-day MA was the effect. TOA is a stock that has come down from 10.87 to 3.32 over the last 10 weeks and down from 31.29 over the past 2 years. At the 3.32 level TOA seems to have found a bottom and this last drop down to 3.51 can be considered a successful re-test of that low.
On Thursday it was announced that TOA received a commitment from Citigroup Global for financing thus giving TOA the financial backing it needs.
In spite of the good news TOA has been unable to generate a follow-through rally. It is likely that the gap down between 3.74-3.78 is what is holding the rally up. Dips down to 3.75 should be bought looking for a re-test of the recent high at 4.85. Nonetheless if 4.85 is seen that means that the 50 day MA will be broken and there is "no" resistance until a previous major low at 7.00 is seen. Even that resistance is not strong as previous lows are never as strong as previous highs.
Stops should be placed under the 4-year low at 3.23 but if you want to play it more sensitively you could place them under the recent low at 3.55.
This is a trade that is going against the trend but it does seem that TOA has found at least a temporary bottom and a rally up to the 7.00 could easily be seen. Risk/reward ratio on this trade is almost 6-1
My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).
View Mar 18, 2007 Newsletter View Mar 25, 2007 Newsletter View Apr 01, 2007 Newsletter View Apr 08, 2007 Newsletter View Apr 15, 2007 Newsletter View Apr 22, 2007 Newsletter View Apr 29, 2007 Newsletter View May 05, 2007 Newsletter View May 12, 2007 Newsletter |
The opinions and commentaries by Mr. De Vito are not a recommendation to buy or sell, but rather
a charting guideline, based on his own knowledge and experience, regarding the stocks he is following or
that are brought to him by others. Mr. De Vito does not presently offer a track record of his trading experiences.
No inference of success and/or failure should be assumed. The
information enclosed above, regarding his background, length of trading, and experience, is correct
but is not meant to suggest, state, or infer any future success in trading, based on his opinions. The information herewith included should only be used by investors who are aware of the risk inherent in securities trading. Mr. De Vito accepts no liability whatsoever for any loss arising from any use of the information and/or comments he supplies. |
|
|
|