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Issue #238 
August 14, 2011 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Indexes Reached Extreme Downside Levels Before Recovering! Fear of a Recession Remains!
DOW Friday closing price - 11269
The DOW kept the recent downtrend intact by generating another red weekly close on Friday. Nonetheless, after a week of strong selling pressure, threats of a total breakdown, and wild almost uncontrollable swings in price did manage to rally 742 points from the low and close in the upper half of the week's trading range suggesting that a temporary bottom to this correction may have been found.
The DOW has dropped a total of 18% from the highs in just a matter of 15 weeks but 17% of that has happened in the last 4 weeks and the momentum gained from the such a precipitous drop threatened to take the index down to the 10300 level which would have been a 20% drop in price and a strong signal that a Double Dip recession has begun. A 20% correction has been historically known to be a signal of a trend change. Nonetheless, the bulls managed to find enough buying to prevent that from happening, though no help was found from other markets as the Chinese market did give a recession signal (dropped and closed 23% lower from its highs), and rally at the end of the week suggesting the traders are not yet ready to give the "recession" tag to the U.S. market.
On a weekly closing basis, resistance is minor at 11734 and minor to decent between 11820 and 11858. On a daily closing basis, resistance is minor to perhaps decent at 11444, minor at 11613, and minor to decent between 11898 and 12000. On a weekly closing basis, support is minor between 11092 and 11100, minor to decent at 11750 and then nothing until decent support is found at 10000. On a daily closing basis, support is minor between 10978 and 11009 (11000 demilitarized zone), minor again at 11809, and minor to decent at 10716, and then nothing until the 10,000 level is reached.
On an intra-week basis, the DOW raised havoc this past week breaking below both the 100-week MA, currently at 11060, and the 200-week MA, currently at 10750 (low this week was 10604). Nonetheless, on a weekly "closing" basis, neither of those lines was broken when the index managed to rally and close at 11269. Such a close still leaves clear potential for further lower weekly closes because on a weekly closing basis the index has not fulfilled its downside objectives even if the index has found an intra-week bottom. In fact, with no previous support in the 11269 area, the probabilities are high that even if the index rallies intra-week this coming week, as expected based on the close near the highs of the week, that the index will close lower next Friday, probably down near the weekly close support at 11100.
The bulls were able to generate a strong rally on Thursday and follow through on Friday, as well as close in the upper half of the week's trading range suggesting that further upside will be seen this coming week, probably above last week's high at 11434. The DOW does show minor resistance at 11451, on an intra-week basis, but if broken the index could rally all the way up to the 50-week MA, currently 11825, where some minor to decent resistance from previous highs seen in Aug08 are found at 11867. It should be mentioned that resistance will also be found at the previous intra-week low of consequence seen in February at 11550, but intra-week lows are not often considered important resistance so if the bulls gain some momentum to the upside breaking above 11451, rallies up to the 11867 level could be seen. Certainly the 500 to 600 point daily trading ranges, as well as the 930 point weekly trading range seen this past week would suggest that getting up to those levels this coming week or the next is a definite possibility.
The dramatic drop in price seen this past week in the DOW came on the heels of negative economic reports showing a strong slow down in the economy, a downgrade in the credit rating of the U.S., as well as from increasing probabilities of a financial default in several countries in Europe. In addition, the drop was exacerbated with panic liquidations due to support levels being broken. Nonetheless, the panic liquidations are now over, the U.S. credit downgrade has now been factored into the price of the indexes, the negative economic reports will need to be confirmed next month with another round of bad economic reports, and the default situation in Europe is presently being discussed and is on hold. From a fundamental point of view, these events suggest that the market will trade sideways (but with wide trading ranges) for the next couple of weeks until further economic or world news of consequence comes out.
On an overall chart basis, the outside parameters of the possible trading range for the next couple of weeks could be as low as 10700 and as high as 11867. Nonetheless for this coming week the trading range and probable highs and lows for the week are likely to be less than the possible outside parameters for the next "couple of weeks". To the downside, the DOW does show some minor intra-week support at 11917 that will likely hold up this coming week and to the upside it is likely that the index will either stop at 11451 or at 11550. Such a scenario would give the index a trading range of anywhere from 500-600 points, which would fit in well with last week's trading range.
The first course of action for Monday is likely to be higher as the DOW was able to get above the 50 60-minute MA, currently at 11180, and stay above that line for the last 5 hours of trading on Friday, suggesting that the buying is there at this time and will likely continue to be there on Monday if no new negative news comes out. Rallies up to the 11451 level are likely to be seen on Monday and a trading range between 11180 and 11451 is possible. Nonetheless, it should be noted that news over technicals will continue to color what the index does.
NASDAQ Friday closing price - 2532
The NASDAQ confirmed the sell signal given the previous week on the weekly closing chart with another close below the previous important weekly close support level at 2616, as well as below 2 previous weekly high closes of consequence at 2528 and 2530, suggesting that the index is now in a sideways to short-term downtrend. Nonetheless, the 2500 level is a decent to strong psychological support and even though the index traded most of the week below that level, in the end it was able to rally to close above that level on Friday, keeping the possibility alive that this move down is simply the seasonal correction that is often seen in July and August of most every year.
The NASDAQ has been the index where the most buying has been seen over the past 3 years and once again the index is likely to be the key to the upside this week as the index shows very decent intra-week resistance between 2530 and 2551 that is not likely to get broken if the index is heading lower and into a Double Dip recession, but broken if there are still doubts in the minds of the traders about the mid-term future. With the index having closed on Friday only 43 points away from that resistance level, the probabilities are high that the NASDAQ will be the index the traders look to for clues this week.
On a weekly closing basis, resistance is now minor to decent between 2528 and 2530, decent at and minor at 2654. On a daily closing basis, resistance is minor at 2543 and minor to decent resistance at 2580. Above that level, there is minor resistance at 2616 and then nothing until the 2700 level is reached. On a weekly closing basis, support is very minor at 2444 and then nothing until decent support is found between 2212 and 2239. On a daily closing basis, minor support is minor at 2469, minor again at 2381 and decent at 2357.
The NASDAQ closed only 17 points from the high of the week suggesting that last week's high will likely be taken out this week and perhaps as early as Monday. The index will begin encountering resistance almost immediately, though, as previous intra-week high resistance is found at 2530 and a bit stronger at 2551. Those 2 levels, though, are not recent as those highs were made in Apr10 and May08, respectively, leaving doubts as to whether the traders will pay much attention to them. If they do hold up, though, that would definitely be a bearish sign. If those resistance levels are broken, the probabilities will be high that the index will get up to the 2592 to 2616 level where more recent resistance is found from a minor to decent intra-week high at 2592 and the very decent intra-week low at 2600 and the strong weekly close support (now resistance) at 2616. Nonetheless, all of these levels do offer clues as to what the break this past week likely means.
If those level mentioned above do break, a rally up to the 50-week MA, currently at 2650 will likely occur. Nonetheless, "at this time" it is highly unlikely that the NASDAQ will have any success in closing above 2616, even if this was simply a seasonal correction.
The reality is that the market is under selling pressure at this time and it is largely based on fundamentals and not technicals meaning that the NASDAQ will likely have more problems trading up than down. The probabilities, though, favor the index pivoting around the 2500 level for the next 2-3 weeks, with possible excursions up to 2620 or down to 2380 depending on the news that comes out.
For this coming week, the 2551 level seems to be the area where the bears will take a stand. Decent intra-week support should be found at the November 16th low at 2459. As such, the probabilities favor the NASDAQ trading in a 100-point trading range this week between 2551 and 2459.
SPX Friday closing price - 1178
The SPX continued to be the weak sister this past week and is causing mixed signals to be given overall in the indexes. Simply stated, if the market evaluation was based on the SPX alone, the probabilities would favor further downside over the short-term, rather than a sideways trend for a couple of weeks, as is seen in the other indexes. Nonetheless, the index was able to rally off of its lows to close in the upper half of the week's trading range suggesting that some upside will be seen this week and that the worst may have been averted, at least for now.
Nonetheless, the SPX did a lot of negative things this week starting with the fact that with the drop down to 1101 a 20% correction from the highs has been seen, which is normally a sign that a recession has started. The index was able to rally and at least did not give that signal on a weekly or even a daily closing basis, but the fact it dropped that much has to be considered a negative. In addition, the SPX, like the DOW, broke below the 100-week MA, currently at 1185, as well as below the 200-week MA, currently at 1155. Nonetheless, unlike the DOW, the index was unable to close out the week above the 100-week MA and did close within shouting distance of the 200-week MA, suggesting that with a small amount of additional weakness this week, that a another sell signal could be given if the 200-week MA is broken on a weekly closing basis.
On a weekly closing basis, resistance is minor to decent between 1217 and 1225 and minor between 1256 and 1264. Above that level, minor resistance is found at 1298, decent to strong resistance is found at 1343/1345, and strong resistance is found at 1363. On a daily closing basis, minor resistance is found at Friday's closing price at 1278, minor to perhaps decent resistance is found at 1200, and decent resistance is found at 1225. On a weekly closing basis, support is minor at the 200-week MA, currently at 1152, but below that there is no support until the 1066 level is reached. On a daily closing basis, support is very minor at 1124 and minor to decent at 1119/1120. Below that level there is no support of consequence until the 1050 level is reached.
Though it is no surprise that because of the financial problems seen in Greece, Spain, Italy, and now perhaps France the SPX is showing the most weakness of the indexes, the fact remains that if a strong additional sell signal is given in the SPX it will drag the entire market down. As such, the bulls will have to key on defending the index this week from breaking and closing below last week's low.
The probabilities do favor a rally this week in the SPX as it did close near the highs of the week and "only" slightly below the 100-week MA, suggesting that a green close next Friday would give the technical traders reason to buy as the line will show up as having been successfully tested. By the same token another red close next week, especially below 1150/1152 would likely be disastrous to the index and to the market overall.
The SPX does show decent resistance at 1225, which is 47 points higher than the close on Friday, giving the index plenty of room to the upside to rally before encountering strong selling. The 1200 level has to be considered decent psychological resistance, but with no recent highs or lows at that level, it is unlikely to put up much resistance if the other indexes are rallying up to their upside objectives. By the same token, the reality is that the index broke aggressively this past week and the recovery was feeble at best, at least from a chart point of view, and therefore the traders are likely to be watching this index for clues as to the downside.
To the downside, the SPX shows some minor to decent intra-week support at 1173, which unfortunately is too close to Friday's closing price to give much confidence to the bulls that it will hold up, as general two-way trading can easily cause the index to fall below that level intra-day. The 1150 level has to be considered a pivot point this week as that is where the 200-week MA is located, nonetheless since it is only important on Fridays, no buying might be seen if the index drops down to that level. Nonetheless, if that happens, the bulls will start to worry and that could bring on additional volatility, which would favor the downside. As such, this is the index to follow regarding whether the indexes will resume last week's aggressive down move or not.
Mixed signals are being given in the indexes with the SPX still looking weak but the other 2 indexes looking short-term (1-2 days) strong. Nonetheless, all 3 indexes closed in the upper half of the week's trading range and unless there is any negative news over the weekend from Asia or Europe, further upside should be seen on Monday across the board. The economic reports this week are all considered to be "B" class reports and therefore should not have a major impact on the market, nonetheless, with the fragility and volatility that is being presently seen, that statement does not hold as much water as it would under normal circumstances, suggesting that if the economic news continues to be negative, that resumption of the strong selling seen at the beginning of last week could be seen again.
The week does start with some economic reports in the form of Housing information as well as Empire Manufacturing. Empire Manufacturing was down strongly last month and did cause some selling to occur in spite of the fact it is not considered a major report. The index is due to show improvement over last month, but if that does not occur the same effect as last month could be seen. The number comes out before the market opens on Monday and could impact the opening price. The most important numbers this week are likely to be the inflation numbers that come out Wednesday and Thursday as that is a concern that is being voiced more and more as the price of gold rises and the dollar falls. Nonetheless, if all of these economic reports do not show much of a change from what is being expected, the market is likely to trade off of chart points rather than anything else.
Probabilities strongly favor a sideways trading range this coming week but with wide trading ranges as support/resistance levels are pretty far apart, giving traders a lot of room to trade. The previous week's lows are likely to hold up this week suggesting that all indexes are likely to move above last week's highs. That should calm the market additionally as it would be a sign that the aggressive selling has ebbed. Nonetheless, if last week's highs are not taken out by Tuesday, the probabilities strongly favor the aggressive selling coming back in and driving the indexes to test last week's lows, with a definite possibility of them being broken. As such, the first couple of days of the week should give clear indication of how the trading will be this coming week.
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Stock Analysis/Evaluation
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CHART Outlooks
This coming week likely offers some very good opportunities for short-term profit due to the fact that volatility is high and big trading ranges in all stocks and indexes are being seen. In addition, there is a high probability that the aggressive selling seen at the beginning of the week has ebbed and that the indexes will trade sideways in a well defined trading range where buying support and selling resistance will be the likely trading strategy for the big traders, this to happen for the next 2-4 weeks.
There are 2 buy mentions and 2 sell mentions, trying to take advantage of individual stock chart patterns that offer decent probability ratings as well as risk/reward ratios. Many more mentions could have been given in the newsletter, mostly on the sell side, based on the probability that the indexes will trade in clearly defined chart levels. These mentions will be given in the message board as more defined entry points are seen.
The buy mentions will likely not reach the desired entry points until late in the week, whereas the sell mentions could reach desired entry points as soon as Monday.
PURCHASES
STP - Friday closing price - 6.28
STP has been on a downtrend since Jul09 from a high of 21.38 and on a strong downtrend this year from a high of 10.83 seen in February. Nonetheless, the stock got close to the all-time low at 5.09 this past week with a drop down to 5.44 and generated a reversal signal on Friday closing in the green, suggesting that the stock is unlikely to make new all-time lows at this time.
It should also be mentioned that the largest and most important company in the industry (FSLR) also reached a major level of support, both psychologically and technically, at $100 and bounced off of that level as well, suggesting that the possibilities are decent that the "industry" may have found a level from which some rallying power will be seen. It is also important to mention that the lows seen in both of these companies this week are about the same lows seen during the 2008 collapse and recession, suggesting that even if the indexes head lower at this time the probabilities are not high these stocks will go lower as well.
On a weekly closing basis, resistance is minor at 7.50 and minor to decent between 7.98 and 8.11. Above that level, there is minor resistance at 8.97 and at 9.36, and strong resistance at 10.71. On a daily closing basis, resistance is minor at 6.47 and minor to decent resistance between 7.11 and 7.36. Above that level, resistance is decent to perhaps strong between 7.98 and 8.11. On a weekly closing basis, support is decent at 6.05/6.09 and strong at 5.34. On a daily closing basis, support is decent at 5.45.
STP finds itself at a price level where general buying interest should be found, not only because the $5 level is the all-time low as well as psychological support, but also because the main problem the Solar companies have been experiencing is a lack of strong support from the government towards the industry and at this price that lack of support has been factored in totally. Simply stated, these companies are now at price levels that have to be attractive to purchase. It should also be mentioned that even though the Solar Industry has shown some kinship with the market in general, there have been many occasions over the past few years that Solar companies bucked the indexes and rallied on their own, suggesting that the possible drop in the market, if it happens, may not affect this industry all that much.
STP saw some definite buying this week, even when the indexes were trading on their lows, suggesting that the recent lows are likely to hold. Nonetheless, from a purely technical chart perspective, the stock has been on a strong downtrend and there has been no fundamental news to change the trend and therefore retesting of the 29-month low seen this past week should occur. The stock did close in the red on Friday, based on a daily closing basis, and on the lows of the day suggesting that the first course of action this week is likely to be lower. Other than the 5.44 low seen this past week, which should not be broken because of the reversal on the weekly chart, the only other support found is at 5.88 which is considered decent support on the 60-minute chart. Friday's low was 6.21 and that should be broken on Monday causing the stock to go below a previous day's low generating a possible retest of the lows.
To the upside, STP has no resistance of consequence until the 7.32-7.50 level is reached. That level will be very important as many previous daily lows are found as well as the 50-day MA. Not getting above that level will be considered a negative opening up the door again for aggressive selling to be seen. Nonetheless, on the weekly chart there is no resistance until the 8.50 level is reached where a previous high of consequence is found as well as the 50-week MA. Considering that last week's low was a successful retest of the all-time lows and that the reversal seen on the weekly chart means something, the objective of the trade will be the 8.50 level.
Purchases of STP between 5.88 and 5.92 and using a stop loss at 5.34 and having an 8.50 objective will offer a 4-1 risk/reward ratio.
My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
EPIQ - Friday closing price - 11.23
EPIQ is a company that is a great contra-indicator when a recession is being faced as the company provides integrated technical solutions for the legal profession that helps in bankruptcies, litigation, financial transactions and regulatory compliance matters. Simply stated, the company seems to do well when there are financial and economic problems in the world. This was clearly shown during the last recession as the stock reached a major low in Sep08, just prior to the recession starting, and then proceeded to rally over 80% in value (from 10.52 to 18.71) when the DOW was falling precipitously to 6470.
EPIQ is showing the same kind of pattern seen prior to the last recession and this past week got down just below the low seen in Sep08 at 10.52 with an intra-day drop to 10.43. Nonetheless, the stock was able to rally sufficiently at the end of the week to close above the previous low weekly close at 10.66, suggesting that buying was seen at that level, rather than follow through selling.
On a weekly closing basis, resistance is minor between 11.45 and 11.79, minor to decent at 13.21, decent at 14.24. Above that level, resistance is strong at 14.99. On a daily closing basis, resistance is minor between 11.31 and 11.43, minor again at 11.59, and then nothing of consequence until minor to decent resistance is found between 12.51 and 12.72. Above that level, there are minor resistances at 13.51 and at 13.62 and decent resistance at 13.98. On a weekly closing basis, support is strong at 10.66. On a daily closing basis, support is decent to strong at 10.70.
Purchasing EPIQ is based on 2 things 1) on the fact that the stock is at 6-year lows and therefore clearly defined support is found close by and 2) the possibility that the economy is in a recession and the services of the company will see a spike up in demand. It can't be mentioned enough that during the last recession and during the period the indexes were collapsing, the stock was rallying strongly. As such, purchase of this stock should also be used as a protection against the indexes falling apart, as well as the fact the stock offers a good risk/reward ratio and decent probability rating because of the low price.
To the upside, EPIQ shows no resistance of consequence until the 12.89 level is reached and therefore if a bottom was found this past week rallies up to that level should be seen shortly. Nonetheless, the stock broke below the 200-day MA, currently at 13.60, 2 weeks ago and a rally back up to that level would not be unexpected even if the stock will not rally during "this" possible recession. The weekly chart is even more explicit in the fact that no resistance is found until the 13.50 level is reached. As such, the 13.50/13.60 level will be the objective of this mention.
To the downside, EPIQ should not break this past week's low at 10.43 and therefore that level will be used as the support level putting the stop loss just below it. Nonetheless, it should also be mentioned that even if that level breaks, the $10 level will always work as strong psychological support. This means that the stop loss can be mental.
Purchases of EPIQ between 10.79 and 10.84 and using a stop loss at 10.34 and having a 13.50 objective will offer a 5-1 risk/reward ratio.
My rating on the trade is 3.25 (on a scale of 1-5 with 5 being the highest).
SALES
LVS - Friday closing price - 43.59
LVS has been trading in a sideways fashion, straddling the 200-week MA, currently at 37.25, since the stock first broke above the line the first week of November of last year. The stock, during this period of time, has had an extended high of 55.47 and an extended low of 36.04 and the median level, based on a weekly closing basis, has been the 44.45 level. With the economic situation so uncertain, it seems highly probable the stock will continue trading sideways for the near future.
LVS this past week successfully tested the extended low at 36.04 with a drop down to 36.08 and at the same time tested the 200-week MA. With the help from the mid-week rally in the indexes, the bulls managed to generate a significant rally to close over $6 from its lows and with a target of testing the recent high seen 2 weeks ago at 48.75. Nonetheless, there is no reason to believe that under these present conditions that the stock will be successful in breaking above that level, presenting an opportunity to short the stock with promising downside objectives, good probability rating, as well a excellent risk/reward ratios if the desired entry point is reached.
On a weekly closing basis, resistance is minor at 46.01 and decent between 47.01 and 47.18. Above that level, decent resistance is also found at 49.89 and strong resistance is found at 51.98. On a daily closing basis, minor resistance is found at 44.70, minor to decent resistance at 46.01 and again at 48.25, and decent to strong resistance is found at 48.75. On a weekly closing basis, support is minor at 41.87, minor to decent at 38.20, and decent to strong at 36.34. On a daily closing basis, minor support is found at 42.27, decent between 37.33 and 37.82, and strong at 36.34.
LVS generated a strong bounce last week off of the successful retest of the year's low. The bounce did not come as a surprise once those lows held, especially with the stock receiving help from the indexes rallying. Nonetheless, the stock failed to get up to the 200-day MA, currently at 44.75 and on that alone it can't be said the bounce is bullish. Nonetheless, the stock did close near the highs of the week and further upside is expected to be seen, at least on an intra-day intra-week basis.
The most recent high in LVS at 48.75, seen August 1st of last week, was a mini breakout above the previous high seen the 2nd of May at 48.25. As such, it can be said the mini breakout also has the tag of a failure-to-follow-through event, likely making the entire area between 48.25 and 48.75 into a strong resistance level that is unlikely to be broken without positive "fundamental" news. Simply stated, it is unlikely technical buying will cause that level to break. In addition, the stock shows copious daily closes over the past 10 months between a low of 44.90 and a high of 47.51 with the most closes being concentrated, as well as being a clearly defined median, between 46.04 and 46.74, suggesting that under the present economic circumstances it is not likely the stock will close above that general level, though intra-day moves above could be seen.
To the downside, there isn't a lot of support in LVS until the high $37's are reached. There is one daily close that does stand out at 42.27, but it is relatively old as it was built back in December of last year and it's probable that the traders will not give it much importance, especially with the volatility being experienced as of late. That likely means that if the stock fizzles out this week up around the $46-$47 level, that a drop back down to $38 could be seen relatively fast and without much problem.
One additional factor that makes this trade attractive is the fact that the market is "walking on egg shells" and there are many possible catalysts that could cause the indexes, and therefore the stock, to break down strongly, even below the decent to strong $36 support. Below that level there is not one shred of support until the 100-week MA, currently at 31.50 is reached. Even then, that support is only from a MA, and therefore not considered strong. On the opposite side of the coin, with the earnings report already behind (next one is October 25th) there is no scheduled fundamental news that could help the stock go up, other than the indexes rallying strongly (unlikely). As such, the probabilities are very high that the technical traders will pounce on the stock once it reaches the resistance levels mentioned above.
Sales of LVS above the $46 level and using a stop loss at 48.85 and having an objective of 37.90 will offer a 3-1 risk/reward ratio. Nonetheless, the probability rating is high and the probabilities of lowering the stop loss this week to a more attractive area are also high.
My rating on the trade is a 3.75 (on a scale of 1-5 with 5 being the highest).
MMC Friday closing price - 28.02
MMC is a relatively calm trading stock that has shown a habit over the years of trading for relatively long periods of time in a well-defined trading range. Simply stated, this is not a stock that ever shows much of a trend, either up or down. The stock has spent the last 6 months trading in a very narrow trading range between a low of 28.71 and a high of 31.54 but 2 weeks ago the stock broke below the bottom of the trading range and gave a sell signal that was confirmed with another red close on Friday, suggesting the stock will likely drop down to the major pivot point support over the past 7 years at the $25 level.
MMC did get down this past week near the 100-week MA, currently at 25.65 with a drop down to 25.89 from which a rally in conjunction with the indexes occurred, taking the stock up to close in the upper half of the week's trading range, suggesting that the breakdown point on the weekly closing chart at 29.19 will be tested.
On a weekly closing basis, resistance is decent between 29.19 and 29.28. Above that level, resistance is minor at 30.00, minor to decent at 30.83 and decent to strong at 31.54. On a daily closing basis, resistance is decent between 28.72 and 28.84, decent again at 29.45, and the nothing of consequence until the 30.83 level is reached. On a weekly closing basis, support is minor at Friday's close at 28.02, minor again at 26.14, and then minor to perhaps decent at 25.10 where the 200-week MA is located. Below that level there is decent to strong support between 24.06 and 24.30. On a daily closing basis, there is minor support at 26.83, minor to perhaps decent at the low daily close this week at 25.92 and then nothing until minor to decent support is found between 24.54 and 24.77.
It is hugely evident on the chart that MMC has broken the 6 month trading range it has been in since February and that lower levels are being sought. There is really no support of consequence until the 24.50-25.00 level is reached and unless some miracle occurs this week in the market that erases the negative break seen this past week, the probabilities will be very high of the stock trading down to the level and establishing a new trading range for the next few months, probably between 24.50 and 28.50.
Nonetheless, MMC did close in the upper half of the week's trading range and a retest of the breakdown point around the $29 level is highly likely to be seen. The 200-day MA is currently at 28.75 and already strong selling is being seen there as the stock got up to that price on Thursday, and again on Friday, but was unable to get above that level closing on Friday in the red, contrary to what most stocks did that day. This type of action suggests that no matter what the indexes do this coming week that the stock will be seeing a fair amount of selling. It is also evident by the daily trading ranges seen this week ($2-$2.50) that a change of trend or status has occurred.
With the indexes likely to see some upside at the beginning of the week, there is a fair chance that the stock will be able to get above the 200-day MA briefly and perhaps only on an intra-day basis. Rallies up to what was previously a very strong intra-week support level between 29.00 and 29.50 could be seen. Nonetheless, such a rally is a good opportunity to short the stock with a good risk/reward ratio as well as a decent probability rating.
Sales of MMC between 29.10 and 29.33 and using a stop loss at 29.88 and having an objective of 24.77 will offer almost a 6-1 risk/reward ratio. Stops at this time and in this stock should be mental, especially since the resistance at 29.78 is minor as well as in the general $30 demilitarized zone.
My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest).
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Updates
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| DCTH gave a weekly reversal signal making new 2-year lows but closing in the green. The stock closed near the highs of the week suggesting that further upside will be seen this coming week. If that occurs, the probabilities of the runaway gap between 4.24 and 4.45 being closed will be high. Closure of the gap will relieve much of the selling pressure that has been seen as of late and will likely cause the stock to move up to the next resistance level between 4.75 and 5.00. The 200-week MA is currently at 4.75 and it is unlikely that on a weekly closing basis that the stock is ready to close above that level as there has been not yet been compelling good news with which that could be accomplished. Nonetheless, a rally up to that level would suggest the bottom to this downtrend has been found and that drops below 3.80 would not likely occur again. The gap is definitely a key to this week's trading and the spike type rally on Friday to 4.21 has strongly increased the chances of it being closed. Nonetheless, if by any chance the gap is not closed, then drops back down to at least the 3.50 would likely be seen, in an effort to test the lows successfully. There is a slight possibility the stock will gap up on Monday, above the 4.45 level. If that occurs, the stock would show a rare but powerful island formation that is normally seen only at major tops or major bottoms. If that happens, it is unlikely the stock would drop below 4.45 thereafter. Either way, last week's action has strongly increased the probabilities that the stock has seen its lows. FCEL made a new all-time daily closing low on Monday, closing below the previous all-time daily closing low at 1.05 (closed at .98 on Monday). Nonetheless, on an intra-week basis, the previous low was .98 as well, seen last year on August 24th and that sets up the possibility of a major double bottom to this stock that has traded as high as 54.38 in the year 2000. The new all-time daily closing low was not able to generate any follow through as the stock promptly closed above the previous low at 1.05 the very next day giving a failure to follow through signal and suggesting that perhaps the worst is over. Nonetheless, on a negative note, the stock failed to generate a green weekly close, closing 1 point below last week's close and keeping the stock under weekly selling pressure for now. The stock does show decent daily close resistance at 1.24 and will need to close above that level to generate any new buying. Nonetheless, the bulls averted what could have been a strong technical negative and at least now have a fighting chance that the stock will recover more this coming week. A green close next Friday would be considered a decent positive. ELON tested successfully last week's lows at 7.74 with a drop down to 7.79 this past week and a strong rally thereafter to close near the highs of the week at the 100-week MA, currently at 9.40 and above the always important 50-week MA, currently at 9.15. The retest of the lows was particularly important because the previous week's low at 7.74 had the stock on the brink of a break of consequence below an important support at 7.67 as well as below the 6-point trendline that has held up for 3 years. The company did receive a positive earnings report this week with very good guidance for the next quarter and with the recovery in the indexes seems to be ready to move higher. A green close next week above the 100-week MA would be a strong signal that further upside will be seen and a close next Friday above 9.97 would be a new buy signal. Probabilities now favor the stock getting back above the $10 level and up to the triple top up between 10.66 and 10.71. Triple tops always have a high probability of being broken. The stock did hold well this week when the indexes were on their lows and with the pressure off the indexes for now, further upside is likely. On the daily chart, the stock is showing a bullish flag formation that if broken (a rally above 9.40) would give a 10.51 objective. A drop below 8.50 would be a negative. LVLT generated a bounce toward the latter part of the week from the 200-week MA, currently at 1.75, to close in the upper half of the week's trading range, suggesting some follow through to the upside will be seen this week. Nonetheless, the stock still closed in the red on the weekly closing chart suggesting that the selling pressure might not yet be over. On a weekly closing basis, decent to perhaps strong support is found at 1.80. With the close on Friday being 1.91, there is a decent possibility that the stock will close in the red next Friday at that level. The 100-day MA is currently at 1.99 and there is a previous intra-week high of some consequence at 2.01 that is likely to hold up this week and prevent the stock from moving higher. In addition, the $2 level has to be considered decent psychological resistance. The stock is still showing what could end up being a bearish inverted flag formation that if broken (a drop below 1.68) would give an objective of at least 1.50 and a retest of the 200-week MA, currently at 1.56. A break and close above 2.01 would be a positive that would take away some of the bearish connotations associated with the chart right now. Nonetheless, a weekly close above 2.11 is needed to generate the possibility of new buying coming in. Probabilities favor another week of choppy trading, likely between 1.75 and 2.01. NTGR confirmed last week's break of the weekly close support at 31.13 with a second red close in a row below that level on Friday. Nonetheless, the stock was able to close above the 100-week MA, currently at 28.00, as well as rally and close in the upper half of the week's trading range, suggesting that further upside will be seen this coming week, above last week's high at 31.01, with a potential objective of reaching the 50-week MA, currently at 34.00. The previous intra-week support level of some consequence at the 30.00 demilitarized zone will be a pivot point this week and if the stock is able to stay above that level, rallies up to the bottom of the runaway gap between 35.77 and 33.90 will be expected. The 200-day MA is currently at 34.45 and that level is considered decent resistance. Nonetheless, if the runaway gap is closed with a rally up to 35.76, the short-term downtrend would likely lose strength and new buying would appear. Drops down to the 28.00 level are likely to be seen at some point this week, but based on last week's trading range, it would not be surprising to see a 28.00 to 34.00 trading range this coming week. The probabilities favor the downside at this point but the stock is trading at a support level ($28) that is likely to hold up unless the indexes are heading lower.
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1) ELON - Averaged long at 9.19 (4 mentions). No stop loss at present. Stock closed on Friday at 9.32.
2) RECN - Liquidated at 11.02. Purchased at 11.51. Loss on the trade of $49 per 100 shares plus commissions.
3) FCEL - Averaged long at 1.7625 (4 mentions). No stop loss at present. Stock closed on Friday at 1.13.
4) AMZN - Shorted at 202.82. Covered shorts at 201.82. Profit on the trade of $100 per 100 shares minus commissions.
5) AMZN - Purchased at 192.30. Liquidated at 200.26. Profit on the trade of $796 per 100 shares plus commissions.
6) AMZN - Purchased at 194.30. Liquidated at 193.12. Loss on the trade of $118 per 100 shares plus commissions.
7) LVLT - Purchased at 1.74. Averaged long at 2.12 (2 mentions. Mental stop loss at 1.62. Stock closed on Friday at 1.91.
8) UTX - Purchased at 68.01 and at 67.30. Liquidated at 71.80. Profit on the trade of $829 per 100 shares (2 mentions) minus commissions.
9) DCTH - Averaged long at 5.21 (2 mentions). No stop loss at present. Stock closed on Friday at 4.13.
10) NTGR - Purchased at 28.50. Stop loss at 27.69. Stock closed on Friday at 30.04.
12) NTGR - Purchased at 29.48. Liquidated at 28.02. Loss on the trade of $146 per 100 shares plus commissions.
13) VHC - Purchased at 18.01. Liquidated at 17.14. Loss on the trade of $87 per 100 shares plus commissions.
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The opinions and commentaries by Mr. De Vito are not a recommendation to buy or sell, but rather
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