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Issue #22 
June 3, 2007 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
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Updates |
Stock Indexes Update |
Stock Picks for Next Week | |
| Monthly Recap of Portfolio
Status of account as of 4/30
Profit of $682 using 100 shares per mention (after commissions)
Closed out profitable trades for May per 100 shares of each mention (including commission)
COGT (long) $74
Closed out losing trades for May per 100 shares of each mention (including commission)
WIND (short) $27
TGB (long) $38
ANGO (long) $146
Profit of $2370
Status of account/portfolio as of 5/31
Profit of $3052 using 100 shares traded per mention (after commissions)
Updates on last week's mentions and stock positions
1) MDTL - Liquidated long at 15.43. Profit of $881 per 100 shares bought on every mention (after commissions).
2) ANGO - Averaged long at 16.48 with stop loss at 15.66. Stock closed Friday at 16.28.
3) JDSU - Averaged short at 13.54 with a stop loss at 13.40. Stock closed Friday at 13.10.
4) COGT - Averaged long at 14.14. Stop loss raised to 14.55. Stock closed Friday at 15.50.
5) MDTL - Shorted at 15.90 with a stop loss at 16.23. Stock closed Friday at 14.59.
6) SONS - Averaged long at 7.99. Stop loss order raised to 8.16. Stock closed Friday at 8.75.
7) TGB - Long at 3.18. Stop loss raised to 3.44. Stock closed Friday at 3.71
8) INTC - Liquidated longs averaged at 22.29 at 22.30. Profit of $2 minus commissions.
9) CRYP - Shorted at 24.83 with a stop loss at 25.82. Stock closed Friday at 24.91
10) REV - Long at 1.30. Stop loss raised to 1.32. Stock closed Friday at 1.43.
11) LOOP - Liquidated long purchased at 18.85 at 21.50. Profit of $251 per 100 shares (commission included).
12) MWA - Short at 16.30 with a stop loss at 16.85. Stock closed Friday at 16.14.
13) UTSI - Averaged long at 7.00. Stop loss at 6.54. Stock closed Friday at 7.31.
14) LOOP - Purchased at 20.09 with a stop loss at 19.90. Stock close Friday at 20.56
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Chart Analysis Up, Up, and Away?
DOW Friday close at 13668
The DOW shook off whatever small signs of a top were shown last week and staged anew a continuation of the up-trend. The DOW has no resistance and only measured guesses can be made as to how high this rally will go. Support levels are the only thing I can provide with any degree of certainty.
Support in the DOW will now be strong at 13441-13457. The 20-day MA, a previous daily low close at 13441, and another low at 13457 all converge at the same level. Drops to that price will likely be aggressively bought.
Using the 60-minute chart a flag formation was formed over the past two days that projects a move in the DOW up to 13800. Due to the strength of the DOW this projection could easily happen on Monday.
Using the same chart I can see that near-by support will be found at 13628.
A good portion of the strong stocks associated with the DOW are showing topping out patterns. With the exception of UTX and AA 3 of the DOW stocks (BA, CAT, and VZ) made new highs on Friday but reversed and closed lower than their previous high. This happened in spite of the DOW closing near the highs of the day.
Taking an overall look at all the charts of DOW stocks I would have to say we are close to a top. 7 of the charts (JPM, GM, C, MO, MRK, MSFT, and DIS) show bearish patterns.
It is possible that Monday will be a volatile day with a strong rally early in the day and a sell-off toward the end. It could be a blow off day where a strong temporary top will be made.
NASDAQ Friday Close at 2604
Using the same 60-minute chart I see the same kind of flag formation on the NASDAQ and the SPX as on the DOW. The objective of the flag on the NASDAQ chart is 2640.
It is important to note that the NASDAQ has been averaging rallies of approximately 20 points above the previous weekly peak highs. If that were to happen this time it would give an objective around 2620 as a possible temporary top.
Those are the two possible upside objectives using previous chart formations and events. NASDAQ has strong support down at 2551 and major at 2537. Flag formation low, using the 60-minute chart, is 2594 so that can also be considered a short-term support.
Weekly rallies upward have averaged between 4-5 weeks before a correction occurs and this next week will be the 5th week of the latest weekly rally.
There is not much more that can be said about the NASDAQ. Other than mentioning possible projected high objectives there are no previous resistance levels to be found.
S&Poors 500 Friday close at 1530
Eyes continue to be focused on the SPX as it is the one index that still has a previous high in its crosshairs. The intra-day high in the SPX was 1555 back in the year 2000 and with the intra-day high on Friday being 1535 it means we are within 15 points to testing that level.
The SPX has already given a new daily and weekly closing high. It is possible that a rally up to 1555 will occur this week, perhaps on Monday, and a drop from that level back down to the previous closing high at 1527, as a re-test, will occur.
The SPX has been very successful at holding the 20-day MA during the last two months. The 20-day MA is currently right around 1515. Keeping an eye on that line is important as any break of it will likely signify that the indexes have found a temporary top and are going into a correction……..perhaps a major one.
The same intra-day flag formation that exists in the DOW and the NASDAQ is seen on the SPX. The objective of that flag formation is 1550-1555.
Support is now seen at the 20-day MA at 1515, then again at 1510 and major at 1505. Below that, support is found at 1490 and major, once again, at 1476 (where the 50 day MA is currently at).
The indexes are likely to be strong on Monday due to the strong close on Friday as well as the "freight train" nature of the rally.
If a very strong rally occurs on Monday morning but the weak-looking DOW stocks not able to turn their charts around, selling and profit taking may start coming in late in the day signaling the beginning of a corrective phase.
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Stocks CHART Outlooks
With the indexes continuing to run but the individual stocks trading on their own set of fundamentals and charts this is a week to choose stocks at pivotal levels
CRYP (Friday Close at 24.91)
CRYP, four weeks ago, took a fall due to an earnings report that fell short of expectations. After the initial drop from a high of 31.20 to a low of 23.05 CRYP rallied back up to 24.96. This past week the 23.05 support was successfully tested with a drop down to 23.10 and a rally occurred back up to the previous high at 24.96 on Friday.
There is a strong area of previous consolidation between 24.92 and 25.76 that is unlikely to be broken. The 20-day MA is currently around 25.30 and coming down fast. With the bearish nature of the chart as well as negative earnings report it is highly unlikely that CRYP will be able to get above the top of the consolidation range at 25.76. It is likely, as well, that rallies into the consolidation range will be met with strong selling.
In addition CRYP shows an inverted flag formation on the weekly chart that, if broken (a break of 23.00), would have an objective of $18-$20. There is strong support at 23.05 but if that level is seen again it will have a triple bottom which is likely to be broken. Support under 23.05 will be found at 21.50. Below that next support would be 18.21.
Rallies above 25.00 and up to 25.25 should be sold and a stop placed at 25.82. With a minimum objective of 21.50 it offers a risk/reward ratio of 5-1.
Breaks below 23.00 should also be sold or used to add short positions.
My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).
CEGE (Friday close at 4.31)
CEGE had been in a strong weekly downtrend since April06 to March07 with a drop from 8.10 all the way down to 2.77. In March some piece of news likely happened that generated a rally back up to 7.30 over a period of 4 weeks.
Since that time CEGE has been going down and last week it fell below the 20-week MA and down to the 50-week MA. CEGE then reversed the short-term downtrend and not only managed to successfully re-test the 50-week MA but close the week above the 20-week MA on Friday.
On Friday CEGE gapped up above the 50-day MA and went above the 20 day MA intra-day but failed to close above it. With the gap being a magnet it is likely that CEGE will drop back down to fill the gap between 4.22-4.11 and re-test the breakout above the 50-day MA. It is also possible that this gap will be considered a "runaway" gap as the stock has a previous gap on the way up to the 7.30 high at 3.54-3.86 which might be a "breakaway" gap.
Purchases of CEGE should be made between Friday's closing price of 4.31 and the gap area at 4.12. A stop should be placed 6 ticks below the major support down at 3.80. A close above the 20-day MA at 4.44 is likely to generate a rally up to fill a gap left on the way down at 5.84 and the resistance level at 6.06.
There is a strong resistance level and consolidation area between 6.00 and 6.75 that is a main objective. It is possible, though, that due to the recent rally up to 7.30 as well as the successful re-tests of the support levels, that rallies back up to 8.01 will occur.
CEGE offers, with a purchase at 4.31 down to 4.12 and a stop down at 3.74 a risk/reward ratio of at least 4-1 with a possibility of more.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
PMCS (Friday close at 7.79)
PMCS suffered a strong collapse last year with a drop from 13.77 down to a low of 4.78 made last August. Since that time PMCS has been trying to build a support base from which to rally from and 7 weeks ago was finally able to close above both the 20 and 50-week MA's. Two weeks ago and again last week PMCS tested the break out level at 7.40 successfully. On Friday it was able to get above the 20-day MA and close above a previous high at 7.78 and above the most recent high close at 7.66.
PMCS seems to have built a nice support base around the 7.40 level and is now on its way back to test the double top at 8.25. If 8.25 is seen again it will become a triple top. Triple tops normally get taken out, and above 8.25 there is no resistance of consequence until 10.00 is seen. Support will now be strong at 7.61-7.66.
A purchase of PMCS at Friday's closing price of 7.79 and using a stop loss order at 7.25 and an objective of $10 will offer a risk/reward ratio of 7-1.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
TOA (Friday closing price 4.07)
During the past few weeks TOA has been acting as if it has found a bottom by holding previous lows and staging rallies. Just last week TOA rallied back up to the initial short-covering high made at 4.84 while breaking above the 20 and 50-day MA's.
It is normal for a stock that is bottoming out to trade sideways for a few weeks before establishing a new trend. This week's rally up to the previous high of 4.84 was met with strong selling and TOA went down to the 20 and 50-day MA's at 4.02. Trading over and below the MA's is a common occurrence when a stock is trading sideways. It is possible that TOA will even break below the MA's at 4.02 and trade down as low as 3.74 to fill a gap it has left there.
The previous low at 3.23 and 3.55 should not be broken if TOA has bottomed out and is, in effect, building a base from which to rally from. Dips down to the 3.75 should be met with strong buying. If this does happen the likelihood of TOA going back up and breaking above the 4.84 level will increase strongly. Such a break would likely generate a rally up to the 6.70-7.00 thus making this an attractive trade.
Dips down to 3.75 should be bought looking for a re-test of the recent high at 4.85 and a possible rally up to 6.70-7.00. Purchases close to 4.02 can also be considered as it is possible that TOA will stay above the MA's and leave the 3.74 gap as a breakaway gap. Stops should be placed under the 4-year low at 3.23. 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 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 View May 20, 2007 Newsletter View May 27, 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. |
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