|
|
|
|
|
|
Issue #27 
July 8, 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
COGT looks decent on the weekly charts as previous low closes continue to be higher than previous ones. Nonetheless COGT seems to have stalled between the most recent low weekly close at 14.36 and 15.10. On Friday COGT did break above the 20-day MA and if follow-through is seen on Monday then the up-trend might resume. Stops should definitely be placed at 14.10.
SONS has a bullish pennant formation on the weekly charts but continues to close, on a weekly closing basis, below the 8.77 breakout level. A gap continues to exist between 8.20 and 8.32 that is worrisome but it looks like SONS is poised to make some type of statement within the next few trading days and it does look tilted toward upside breakout. I would not like to see the 8.36 support level broken on the downside.
ANGO seems poised to continue its recent up-trend but the stock has run up against the 20-week MA and has held that line for the last two weeks. A break above 18.85 will likely vault to stock up to the $20 level. A break below 17.63 would look negative. Stops should be raised to 17.53.
JDSU broke above the 50-day MA and closed above the breakdown point of 14.01. Any follow-through to the upside this week will be considered a reason to get out of the shorts. Support should now be the 14.00 level so if it is able to break below that level the breakout might be false. This is a stock you need to keep a close eye on because above 14.00 there is little resistance.
TGB was able to close on an all-time weekly closing high on Friday. The only resistance left in the chart is an intra-week resistance at 4.25. Stops should be raised to 3.64 as the 3.70 level now needs to be considered as strong support. There is no reason to consider taking profits at this time.
CRYP tested the 20-day MA on Thursday and Friday and failed to get above it. The stock continues to be under pressure. A break below the recent 23.70 low is likely to thrust the stock down to the double bottom at 23.10. A break of that level would offer an immediate objective of 21.50. Stops should now be lowered to 24.76 as a break above the 20-day MA at 24.70, after what would be a successful re-test of the lows, would likely give CRYP a strong boost upward
REV had a spike low on Thursday down to 1.30. Such spikes usually help spring a stock strongly in the opposite direction. Stops should be placed at 1.27.
PMCS broke above a 10 month weekly closing high on Friday. Very minor resistance to the upside. Stops should be raised to 7.44 intra-day or 7.88 stop close only.
NUAN is in a non-even trading range between 16.43 and 17.27. a breakout of either of those levels will likely give generate a $1 move. In this trading range there is no direction.
GIGM rallied back up to the breakdown point of 13.71-13.91 and failed to rally any further. 20-day MA is coming down and is currently right below 14.00. 14.24 continues to be major resistance. Unless the stock rallies above the MA and above the 14.24 level it continues to be a strong sell. Stops should be at 14.30.
AOB broke below the 50-week MA and rallied back up to test it this week. Stops should either be placed at 9.62 or above major resistance at 10.14.
WOLF is on a major breakout and has no resistance above until the $20 level is seen. Stops should be placed at 14.92 stop close only.
CLDN is trading sideways but with a slight downward bias. Stops should be placed 6 ticks above the most recent high of 16.67.
Updates on last week's mentions and stock positions
1) PMCS - Averaged long at 7.90. Stop loss order at 7.44. Stock closed Friday at 8.11.
2) ANGO - Averaged long at 16.72. Stop loss now at 17.54. Stock closed Friday at 18.45.
3) JDSU - Averaged short at 13.54. No stop loss but getting out if stock continues above 14.00. Stock closed Friday at 14.12.
4) COGT - Averaged long now at 14.38. Stop loss now at 14.07. Stock closed Friday at 14.30.
5) CLDN - Short at 16.37. Stop loss at 16.77. Stock closed Friday at 16.32.
6) SONS - Averaged long at 7.99. Stop loss order changed to 8.30. Stock closed Friday at 8.67.
7) TGB - Long at 3.18. Stop loss raised to 3.76. Stock closed Friday at 4.05.
8) AOB - Averaged short at 9.23. Stop loss now at 10.20. Stock closed Friday at 9.39.
9) CRYP - Shorted at 24.83. Stop loss changed to 24.76.Stock closed Friday at 24.23.
10) REV - Averaged long at 1.34. Stop loss at 1.27. Stock closed Friday at 1.37.
11) LOOP - Shorted at 24.13. Stop loss at 24.63. Stock closed Friday at 24.47.
12) GIGM - Shorted at 13.71. Stop loss at 14.30. Stock closed Friday at 13.48.
13) COGO - Long at 16.16. Stop loss at 15.87. Stock closed Friday at 16.94.
14) NTES - Short at 17.05 and covered at 17.60 for a $55 loss per 100 shares plus commission.
15) ZOLT - Short at 42.20 and covered at 43.29 for a $109 loss per 100 shares plus commission.
16) WOLF - Long at 14.38. Stop loss at 14.92 stop close only. Stock closed Friday at 15.76.
|
Chart Analysis Decision Week
DOW Friday close at 13611
The DOW this past week was able to rally above the 20-day MA and has now set itself for another attempt at a re-test of the double top and previous high at 13691. Intra-day movement above 13674 will strengthen the chart and a print of 13691 will probably generate enough buying to clear the resistance and make new highs.
Nonetheless this area is quite important as any failure here would mean a third failed re-test of the highs and would give the sellers the upper hand. The rally this past holiday week was on low volume and did not accomplish anything more than trading within a range where movement was considered a non-event.
Monday starts the second quarter round of earnings reports and it's likely the market will react to those reports in a very decisive way. With the rally, though, the DOW is now committed to making a new high and any failure at this point would likely be considered longer term negative. With a double bottom at 13250 and the previous highs so close the "non-event" trading range has shrunk. It now seems that within a few days or couple of weeks at most the DOW will give a clearly defined statement as to the direction for the next couple of months.
Resistance will be strong from Friday's high at 13634 all the way up to the all-time high at 13691. A trend-line can be drawn using the double top at 13691 and the previous retest of that high at 13674 that connects with Fridays intra-day high at 13634. Using this trend-line one can assume that any further movement upward will likely generate new highs. On a daily closing basis 13679 and 13639 are major levels of resistance.
On the downside 13478 and 13433 need to be considered important as those two levels are the 20 and 50 day MA's. A close below 13408 (most recent low close) will mean the re-test of the highs failed and a strong sell signal would be given. Using an intra-day 10-minute chart the pivot point is likely to be 13574. Movement below that level will weaken the recent intra-day up-trend.
Though it is not clear how the earnings reports will come out or how they will impact the market, it does seem to be clear that the chart is ready for a decisive statement within the next week or two.
NASDAQ Friday Close at 2666
The NASDAQ has been the strongest index during the past few weeks and this past week was able to make new 6-year highs. The most recent high at 2635 was surpassed with a move up to 2667.
In several ways this action by the NASDAQ can be considered somewhat bearish overall to the stock market as the DOW and the SPX had been the leaders for the past year's rally. Money now seems to be shifting back into the general market and away from the blue-chip stocks, which may be a sign that those indexes are now considered overbought.
It is also interesting to note that the NASDAQ since May has been moving up with a very consistent chart pattern of rallies between 80-100 points followed by fall-backs of 70-90 points. With Friday's high of 2667 that makes this last rally 107 points which likely means, if the pattern holds true, that a good fall-back is now due.
There is no evident resistance in the NASDAQ until the 2770 level is reached but the supports can be found at 2626 and 2603. Major support is at 2560. Using the intra-day charts the 2650 area seems to be an important pivot point.
S&Poors 500 Friday close at 1530
The SPX and the DOW have almost identical chart formations so the same evaluation applies. The only difference in the chart is that in the SPX chart both the 20 and 50 day MA's are together and therefore a break of one will mean a break of both.
On a closing basis, the SPX has strong resistance and 1533 and major at 1536. Intra-day resistances are at 1540 and 1538. Supports are at 1517-1518 and then again at 1512 where both the 20 and 50 day MA's are at. A close below 1506 would be considered quite bearish and a break below 1484 would be a strong sell signal.
As with the DOW any further up movement above Friday's high will begin to change to chart again toward a continuation of the up-trend.
Key to the indexes this week is the second quarter earnings reports that start to come out and how the marketplace reacts to them. On Monday the first one coming out is Alcoa and that should begin to set the tone for the indexes.
As I mentioned last week, this is the first time in a couple of years that the charts in the indexes have actually built a topping out formation. Failure to make a new high will be viewed quite negatively by investors and a strong round of profit taking by the bulls would likely ensue. In addition, dips would not be as aggressively bought as before and therefore a longer-term downtrend would likely happen.
|
Stocks CHART Outlooks
This week I am keying more on lower priced stocks that should not be affected as much by what the indexes do.
AOB (Friday Close at 9.39)
AOB is a stock that generated a break above a long term trading range between $5 and $7.50 in October of last year and rallied all the way up to $15. Since that high was reached the stock has been in a very evident downtrend.
Since February the stock has been trading in a range between 8.50 and 11.85 but last week AOB broke below the 50-week MA and had the lowest weekly close (8.89) since November of last year.
On a weekly closing basis the 9.30-9.39 level should act as strong resistance and on a daily closing basis there is major congestion starting at 9.30 and all the way up to 9.82. The 20-week MA is starting to come down fast and if it gets below the 50 week MA a strong sell signal will be given.
The rally on Thursday and Friday of this past week took the stock back up to the 20-day MA currently at 9.40. In addition the 50-day MA is also right around 10.14. What this all means is that the stock has a mountain to climb between 9.30 and 10.00 to get back into a sideways trend.
Downside objective is the 7.50 breakout level that had been in effect for several years prior to the run up to the $15 level. There is no weekly closing support between 9.30 and 7.50. There is some daily support at the previous daily closing low of 8.52 and at the intra-day low at 8.13.
It is possible that if the stock market rallies into new highs that AOB might try to get up close to the 10.00 level but the resistance there is major and looks close to impossible to break without a fundamental change.
Sales of AOB at Friday's closing price of 9.39 and using a stop loss of 10.14 will offer a risk/reward ratio of 3-1. In reality, though, if the stock market does not rally and fails to go any further it is likely that AOB will not even get above Wednesday's high of 9.55 so a stop loss at 9.61 would likely be a good one. That stop-loss placing would offer a risk/reward ratio 9-1
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
TOA (Friday close at 3.76)
During the past couple of months, after dropping from 10.87 down to 3.32 from February to March, TOA has acted as if it has found a bottom. After the first successful re-test of the low (a drop down to 3.55) it gapped up from 3.74 to 3.78 and rallied back up to the 4.84 high seen just after the low was made.
This type of a gap is generally not left unclosed and this past week TOA dropped down to 3.63 and closed the gap. It was successful, though, in leaving the previous low of 3.55 unchallenged. This will likely be considered a second re-test of the lows if confirmation occurs with a rally above 4.10. This would become a strong signal that the bottom has been built and a concerted rally would likely follow.
It is normal for a stock that is bottoming out to trade sideways for a few weeks before establishing a new trend. TOA has now been in a 3-month sideways trend and if able to get above both the 20 and 50 day MA's (now trading together at 4.10) without dropping further, a strong buy signal would be given.
The previous lows at 3.23, 3.55, and now 3.63 should act as strong support. Resistance is now at the MA's presently around 4.10. There is also decent resistance at 4.37-4.45 and major at the double top at 4.84. A break above the 4.84 level should give a 6.70-7.00 objective.
A purchase at Friday's closing price of 3.76 and placing a stop below the 4-year low at 3.26 and an objective of 6.70-7.00 will give a 6-1 risk/reward ratio.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
PMCS (Friday closing price 8.11)
PMCS, after a drop from 13.77 on April 2006 to 4.78 on August 2006 has been in a consistent up-trend and on Friday made a 52-week weekly closing high at 8.11 (previous high was 8.01).
There is some minor resistance at 8.69 and then again at 9.08 but no strong resistance until the 10.77 level is reached.
PMCS two weeks ago tested the 20-week MA at 7.33 and now seems poised to continue the up-trend which has been in place for the last 10 months. The 8.00 level has been a strong resistance level for the last few months but now that a close above that level has been seen PMCS could accelerate to the upside and the 10.00 level could be seen in just a few weeks from now.
Purchases at Friday's closing price of 8.11 and placing a stop-close-only loss order at 7.88 and looking at an objective of 10.77 will offer a risk/reward ratio of approximately 13-1. PMCS should no longer close below the 7.96-8.01 area as that must now be considered a breakout price. Nonetheless if an intra-day stop is desired it should be placed at 7.44 as that would mean that the 20 and 50 day MA as well as the most recent low would need to be broken. This scenario is highly unlikely to happen at this time.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
BITS (Friday closing price 6.80)
BITS is a stock that is on the verge of a strong break of support. The 20-day MA crossed below the 50-day MA two weeks ago creating a strong drop from 7.92 down to 6.62 and this past week the 20-week MA has begun to cross the 50-week MA thus giving a second strong sell signal.
BITS does have a potential double bottom down at 6.62 and therefore sales should only occur if the support level breaks or on a rally back up to the 7.44 level as the resistance there should prove to be very strong.
A short can be initiated if BITS breaks below its daily and weekly support at 6.62 (a print of 6.50 seen) and if filled a stop loss order should be placed at 6.72 stop-close-only. Such a break of support should not generate a reversal and therefore the stop-close-only order should work well.
If BITS is able to rally up to the 7.25 to 7.44 area first then a short can also be initiated and a stop loss placed at 7.60. Either way the objective of this trade is the $5 level.
It is important to note that a rally up to 7.44 is possible if the 6.62 level of support does not break. The range between 6.62 and 7.44 is what I call "no-man's land" and should not be indicative of the longer-term prospects for the stock. Above 7.44 the chart outlook would change.
My rating on the trade is a 6.5 (on a scale of 1-10 with the strongest probability rating being 10).
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 View Jun 03, 2007 Newsletter View Jun 10, 2007 Newsletter View Jun 17, 2007 Newsletter View Jul 01, 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. |
|
|
|