Issue #33 ![]() August 19, 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
SONS seems to have found its bottom as not only the gap down at 5.45 was filled but the stock managed to close the week above the resistance level at 6.00. The only negative is that a gap was left again on this rally between 5.62 and 5.70. such as gap is likely to be filled. On a positive note, filling of the gap could be considered a re-test of the lows as well as support at 5.70. If that level holds, after the gap is closed, a rally up to the 20-day MA at 6.82 would likely occur.
NUAN's drop to the 17.27 level on Friday was about as perfect as it gets. It not only closed the gap the stock had left the day before but also tested both the 20 and 50-day MA's which are converging at that price. In addition, the drop seen on Thursday to 16.70 can be called a test of the 200-day MA which is currently right at 16.63. This means that stop-loss orders in NUAN can now be placed at 16.37 if purchases are made. Resistance is very strong at 18.43-18.48. If able to clear that area on a closing basis the $20 level should be the immediate target. The flag formation is still in effect and a break above 19.04 will have 20.40 as its objective. Chart parameters are now clear.
PMCS finds itself trading below not only the 20 and 50-day MA but also below the 200-day MA. Friday's rally left a lot to be desired as it was not able to even close above its long-term pivot point at 7.50. Support will now be decent and 7.28 and strong at 7.14. Any new weakness below 7.14 will be reason to consider liquidating long positions. Resistance will now be the 200-day MA currently at 7.62 and both the 20 and 50-day MA which are crossing and are currently at 7.80. Based on the chart it seems somewhat urgent that PMCS gets over 7.80 in order to re-generate the confidence of the bulls.
INTV see evaluation among this week's mentions.
ANGO does not have a clearly defined chart and its difficult to make an evaluation of its objectives both for the upside and downside at this moment. It is clear that the $20 is likely to act as a resistance level and therefore I am planning to liquidate my long position after it reaches that area. It is also probable that ANGO will be in a trading range for the next few weeks without any clear direction. What that exact trading range will be is still unclear. After I liquidate my position I am likely to leave this stock alone for several weeks at least.
COGT failed to keep the possible "runaway" gap open and now finds itself back with the outlook of the first gap down at 13.51 still being a magnet. Nonetheless the stock was able to close the week above all the MA's after a week where they were all broken intra-week. The 15.16-15.24 level still looms as decent resistance and its probable I will take profits on my recent purchase at that price. No further chart evaluation is available at this time but generally speaking the chart looks positive.
WOLF was able to close above the 20-week MA as well as the 50-day MA and negate all the recent weakness that it has gone through. In addition the close on Friday could bring some strong buying this week with the potential of generating a strong rally toward new 52-week highs. The 14.00 level should now act as strong support but it is probable the stock might not even test it. The 15.00 level continues to be decent resistance but if able to break above that level the 15.85 would likely be the next objective. Possible range for Monday is 14.40-15.00.
FCEL lost a little of its recent luster this past week but did not create any negative signals. It is likely that FCEL will get back into a calm trading range between 7.57 and 8.40 for the next week or two. I do not see much outside that range at this time.
SNDA right now seems to be the best trading range stock out there. Lots of range and volatility and yet keeping within clearly defined support and resistance levels. The chart seems to point to a rally up to the 27.50-28.00 now in progress. Some resistance will be found at 27.10 but the likelihood of that level being taken out is strong. If the 28.00 level is taken out then a rally up to 30.63 will likely ensue. It seems that at this moment the long side is the place to be. Support is still the 24.00 level and there is some minor support using the 10-minute intra-day charts at 25.00.
Updates on last week's mentions and stock positions
1) PMCS - Averaged long at 7.90. Stop loss order changed to 7.08. Stock closed Friday at 7.43.
2) SNDA - Purchased at 23.32. Stop loss raised to 23.90. Stock closed Friday at 25.81.
3) ANGO - Purchased at 17.92. Stop loss now at 18.50. Stock closed Friday at 19.51.
4) COGT - Purchased at 14.55. No firm stop loss at present. Stock closed Friday at 14.74.
5) SONS - Purchases at 5.79. Now averaged long at 7.15 with 5 mentions. No stop loss at this time. Stock closed Friday at 6.04.
6) INTV - Purchased at 7.33. Stop now at 7.23. Stock closed Friday at 8.05.
7) RMBS - Purchased at 13.52. Stop loss now at 12.51. Stock closed Friday at 13.11.
8) FCEL - Purchased at 8.60 and 8.42. Averaged at 8.51. No stop loss at present. Stock closed Friday at 7.96.
9) WOLF - Purchased at 13.82. No stop loss at present. Stock closed Friday at 14.42.
10) INAP - Shorted at 15.98 and covered at 14.44. Profit on the trade of $154 per 100 shares minues commission.
11) CEGE - Purchased at 3.82. Stop loss now at 3.54. Stock closed Friday at 3.73.
Previous Newsletters
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Chart Analysis DOW finds a bottom?
DOW Friday close at 13079
The DOW had a dramatic week as the collapse it suffered on Thursday was reversed on Friday with a strong fundamental statement by the Fed lowering the discount rate ½% point. The action caught traders by surprise and created a 650 point two-day rally. Nonetheless the reversal was not able to give the week a plus over last week's closing and therefore still leaves questions unanswered.
The fundamental change and strong turn-around rally has relieved the strong pressure that the bears had been able to administer but chart-wise the DOW still has to do more to establish itself toward the upside as well as confirm last week's spike bottom action.
Fundamental changes, when they first occur, are difficult to gauge chart-wise and require at least a few days of further chart action before an evaluation can be made. Nonetheless there are several things that can now be mentioned. The DOW now shows a very evident spike bottom which will likely be viewed not only as a major support area but a successful re-test of the previous breakout level at 12795. This action will strengthen this area as the possible long-term bottom for any future weakness and/or negative fundamental news. In simple words, it will be difficult for the bears to gain much more at this particular time.
Having said that it is probable there will likely be a general move upward over the next coming weeks but some re-tests of the major support level cannot be ruled out. Unfortunately for the technical chart traders this coming week the DOW will be more dependent on how the fundamental change is viewed by the marketplace and not so much on the previous chart points.
In looking at the daily chart I can only mention a few chart points that I believe will come into play. The support on Monday will likely pivot around the 13000-13010 level and should that level hold up (not go below 12970) a rally up to the 20-day MA at 13368 is likely. In fact if the marketplace views the discount rate hike as a major positive then the 50-day MA at 13500 is very likely to be seen. On the downside the 12970-13010 level is important as a near-by support area as well as the 200-day MA. If broken it is likely the DOW will go back down to test the 12767-12795 previous breakout level and in so doing, lose some of the spike-bottom formation bullishness as well as establish a new break of the 200-day MA.
As was the case this past week any closes below 12767 will be viewed as very negative, especially now after a bullish fundamental change.
The weekly chart on the DOW does not give much of a clue yet. Last week's 828 point weekly range will be hard to duplicate and therefore the weekly chart will not offer much in the way of direction. If the DOW simply trades within the 20 and 50 week MA (likely) the trading range could be 12666 on the downside and 13313 on the upside. In order to maintain itself above the 200-day MA the DOW needs to hold itself above 13000 all week.
As I said previously, it has only been one day since the fundamental change occurred and it is still to early to be able to make a good chart evaluation on the effects of that change.
My personal feeling is that there will be some strength early in the week and the DOW may rally all the way up to the 20-week MA at 13313 or to the 50-day MA 13500. Nonetheless the uncertainty of the sub-prime market as well as the possible negatives to inflation that may arise from the discount rate drop should bring pressure to bear once again and before its all said the DOW should be testing this level once again and if broken then the breakout level at 12795 will once again be re-tested.
NASDAQ Friday Close at 2505
The NASDAQ broke below major supports at 2500 this past week, including the 50-week MA as well as the 200-day MA, but ultimately was able to close the week above those same supports and negate the break on the weekly chart. The spike bottom also exists in the NASDAQ chart and looks much stronger than the DOW simply because it was able to close above its previous major support.
Support should now be strong at 2490-2500 and resistance will be found at 2562 (20-day MA), 2570 (previous recent high) and 2600 (50-day MA). Short-term key level is 2490. It is a previous support level but more importantly the 50-week MA and 200-day MA would be getting pierced once again and that would be strongly negative to the index. It also needs to be mentioned that there is no evident strong support until 2400.
Friday's range in the NASDAQ was 60 points and if the 2500 level of support holds Monday morning it would likely mean a mirror-range rally up to the 20-day MA at 2562.
The NASDAQ in recent months seems to be playing the part of being the index that confirms the general direction of the indexes. The leader on the chart has been the SPX and the popular one to follow has been the DOW but the NASDAQ has been the index to follow for confirmation of direction. The chart in the NASDAQ is telling me that 2490-2500 is an important key to what the indexes will do this week.
S&Poors 500 Friday close at 1445
The SPX has been the leader on the charts but the action Friday did not give any type of buy signal other than the fact that it too, like the other indexes, now has a spike bottom.
The drop down to the 1370 level seen this past week was a successful re-test of the 20-month MA as well as a major previous support level. This likely means that the SPX has seen its low for the next couple of months at least. Nonetheless the rally on Friday did not accomplish much else as the SPX still finds itself below the 200-day MA whereas the other two indexes are above theirs. Since the SPX has been considered a leader on the charts this fact may help determine what the indexes will do this week.
Resistance in the SPX is at the 200-day MA at 1455 and the 20-day MA as well as previous resistance is at 1466. This means that if the SPX is able to start trading above the two levels mentioned above the likelihood of follow-through strength from Friday's rally will increase exponentially. If the SPX is able to get above 1466 it is likely to run up to the 1500 level where the 50-week MA is currently at.
The 1433 level now has to be considered strong support and if broken will likely mean that all the indexes will be testing their previous support levels.
It is very difficult for me today to be able to give you a good chart picture for the week as the fundamental evaluation by the traders of last week's Fed move is not yet clear. Hopefully after the first two trading days of this week I will have a better idea of how the market views this change. If I had to be put against the wall using my charts and Friday's action I would say the probabilities are 55-45 higher for a rally than a dip.
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Stocks CHART Outlooks
CHART Outlooks
Due to the uncertainty of the index market this week's mentions are built on shifting sands. They will require patience and general common sense as well as a fast trigger finger.
RMBS (Friday Close at 13.19)
RMBS is a stock that is severely oversold and has come down close to 50% in value over the past 6 months. Much of this drop was due to lower revenues than anticipated as well as a problem filing on time due to options irregularities.
On August of last year, 52 weeks ago, RMBS made a low at 10.26 after having made a high at 46.98 just 4 months prior to that date. It then proceeded to rally for the next 4 months to a high of 23.83.
On Friday, during the major drop in the indexes, RMBS broke below a low made in September 2004 at 12.37 (considered decent support) and had its aim on the 10.26 low that had been in effect since February 2003. With the index rally RMBS reversed itself and was able to close above the lowest weekly close (12.95) since the 10.26 weekly close in August of last year. Friday's close above the 12.95 weekly close must be looked upon as a reversal and should stimulate a rally from here on in.
The previous low (12.61) prior to Thursday's low at 12.07 should now be considered strong support and stops placed below 12.61 should not be hit if the stock is now ready to rally. Resistance is found at 14.25 (20-day MA and a previous high) and then much stronger at 15.44 which was the most recent rally high. Additional resistance will be seen at 16.69 (50-day MA) and 17.29 which was the major support level prior to the breakdown. The 200-day MA is currently at 19.07 and would be a possible objective of this trade.
Purchases of RMBS can be made between 13.11 and 13.19 with a stop loss at 12.55 and an objective of 19.07. Risk/reward ratio on this trade is 10-1.
My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).
INTV (Friday close at 8.05)
INTV is a stock that has now had two successful re-tests of its major support level at 7.25. This last re-test came on Thursday after the indexes broke aggressively. On that day, INTV ended up rallying 12% in value intra-day (90 point rally) and was only one of a few stocks that day that closed in the green. Evidently the 7.25 level has now been confirmed as a level that is unlikely to break.
During Thursday's rally INTV was able to get above and close above both the 20 and 50-day MA's. On Friday INTV showed follow-through action and rallied close to the 8.50 resistance level (previous lows made during one week after the stock reached 9.07).
A re-test of the supports and 20-day MA is now probably in effect and gives an opportunity to buy into this nice looking chart. Support from the 20-day MA will be found at 7.90 and decent prior supports at 7.73 and 7.58 will also offer support as well as strong trader buying.
Resistance will be minor at the 50-day MA at 8.16 as well as 8.50. Resistance will be strong at 9.07 (8-month high) as well as 9.35 (prior congestion area and 200-day MA).
Purchases between 7.73 and 7.90 and using a sensitive stop loss order at 7.44 and an objective of 9.35 will offer a 4-1 risk/reward ratio. If more security is required then the stop loss order can be lowered to 7.19 but the risk/reward ratio will drop down to 3-1.
My rating on the trade is a 8 (on a scale of 1-10 with the strongest probability rating being 10).
CEGE (Friday closing price 3.73)
CEGE has a very attractive chart pattern that is in the midst of getting itself resolved in a decisive way. Almost all of the MA's are coming into play at the present levels. In addition, the recent move down to 3.20 was a perfect re-test of the 2.77 low made in March which was in turn a re-test of the 20-year low made back in 1998 at 2.56. Simply said, CEGE seems to have not only found its low but with the two successful re-tests seems to be ready to begin an upward climb.
Two weeks ago CEGE staged a $1 rally from its lows and was able to break and close above the 20, 50, and 200-day MA's as well as pierce intra-week the 20 and 50-week MA's. Friday's low (3.63) was also a re-test of the 50-day MA and Friday's close was right at the 200-day MA. What this means is that any further movement to the upside this coming week will give an array of buy signals from many different directions.
The action of the last two weeks has shown a possible flag formation that if broken (a move above 4.21) will generate a rally up to at least 4.71 and a re-test of the strongest resistance level in view. A break of that level should generate a fast move to the 200-week MA currently at 6.85.
The chart on CEGE is particularly attractive because of all the base-building chart work that has been done over the past two years. In looking at the chart, a break above 4.71 will not only generate a rally up to 6.85 but will be a strong buy signal for an up-trend to begin. Support will now be strong at 3.48 (last week's low) and should also be strong now at 3.60.
At this time the risk/reward ratios on CEGE are not only very attractive but the probabilities of this becoming a profitable trade are very high.
Purchases of CEGE at Friday's closing price of 3.73 and placing a stop loss at 3.42 and an immediate objective of 4.71 offers a 3-1 risk/reward ratio. The actual objective of this chart formation is a rally up to 6.85 and therefore the risk/reward ratio is actually 10-1.
My rating on the trade is an 8 (on a scale of 1-10 with the strongest probability rating being 10).
SPIL (Friday closing price 9.48)
SPIL had been in a very strong up-trend until a high of 12.16 was reached. A corrective phase, somewhat mirroring the indexes, occurred and a drop down to 8.36 (30% correction) was seen on Friday after breaking major support at 9.16 and setting off a mountain of stop-loss orders. SPIL then reversed and closed above the break-down point thus negating the break.
SPIL is now likely to trade between support at 9.16 and resistance at 11.16 and this trading range gives traders a clearly defined trading area that presently offers at least a 5-1 risk/reward ratio. Because the stock has been in an up-trend and now has had an overdue correction trades should be on the long side rather than the short side.
SPIL, from what I have read, is a very profitable company based out of Taiwan with strong fundamentals. What this likely means is that this recent break of support, hitting of stop-loss orders, and evident reversal is a good opportunity to get on board a company that is likely to remain fundamentally strong.
The chart picture is presently slanted toward being in a trading range for the next few weeks but the up-trend is still intact. After a few weeks of trading
it is more probable that the up-trend will resume rather than any further weakness be seen.
A purchase of SPIL at Friday's closing price of 9.48 and placing a stop loss order at 9.08 and an objective of 11.16 offers a 4-1 risk/reward ratio.
My rating on the trade is an 6.5 (on a scale of 1-10 with the strongest probability rating being 10).
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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.
The Oasis is owned by
Oasis Resolutions Inc.