 |
 |
 |
 |
 |
 |
Issue #350 
November 3, 2013 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
|
| Indexes Stall, Traders Await Economic Reports!
DOW Friday closing price - 15615
The DOW kept the recent uptrend moving forward, generating a new all-time intra-week and daily closing high this past week. Nonetheless, the bulls failed to complete the trifecta when they fell short of doing the same on Friday, having closed 43 points below the previous all-time high weekly close at 15658.
The new highs in the DOW were far from impressive, leaving doubts as to whether the bulls would be successful in generating further upside now that the bulk of the earnings reports have come out and the end of the year nears where profit taking and book squaring is likely to be seen.
On a weekly closing basis, decent to perhaps strong resistance is found at 15658. Above that level there is no resistance until psychological resistance is reached at 16000. On a daily closing basis, resistance is decent to perhaps strong between 15658 and 15680. On a weekly closing basis, support is minor at 15072 and decent to perhaps strong at 14799/14810. On a daily closing basis, minor support is found at 15545, minor again between 15409 and 15413. Below that, minor support is found at 15168, decent between 14960 and 14996, and decent again at 14776.
The big story in the DOW this past week was the new all-time high at 15721 (above the previous one at 15709) and the lack of follow through seen thereafter. Other than the general resistance found at 15700 (300 points below a major level such as 16000), the index should have gone up to one of the channel levels above at 15850 on the daily chart or at 16050/16100 on the weekly chart, especially since all economic reports this past week were positive. The fact it didn't does suggest that further upside will require additional positive fundamental news, rather than momentum which seems to be waning.
It should be noted that since May, the DOW has only been able to generate 180 additional points to the upside, and since August only 62 points. With such limited accomplishments with all things being positive, it is likely that further upside will need more than what has been seen in the recent past.
To the upside, the DOW is having difficulty getting above the general resistance at 15700 as the last 2 intra-week highs at 15709 and 15721, followed by corrections of close to 1000 points, have attested. With the index closing below 15658 on Friday, that level should also offer some resistance this coming week. To the downside, the index did generate a bounce on Friday off of Thursday's low at 15544 and that level is likely to offer minor support this coming week. Further support is found at 15405 and then nothing until 15168.
The DOW has been in a sideways trading range since May measuring between 900-1100 points. Since then, there have been 3 rallies and 3 and drops each lasting an average of 4-6 weeks before reversing in the opposite direction. With index having moved up 1002 points in the last 4 weeks, it seems likely a turn-around back down could occur anytime over the next week or two and either from the high seen recently or from a slightly higher level. The fundamental picture has not changed and that means there is no reason to think the sideways trend will end at this time.
With no support built on the way up, if the DOW gets below last week's low at 15533, which would mean a minor support built this past week at 15544 would be broken, the traders might get on the sell side. As such, 15533 seems to be the pivotal point to the downside for this coming week. By the same token, there is still some room to the upside, so if the economic reports due out this week are better than expected, the index could rally a bit higher, above the recent highs, before finding a top to this recent up-trend.
NASDAQ Friday closing price - 3922
The NASDAQ generated a reversal week on Friday, having made a new 13-year high and then closing in the red and near the lows of the week. If the reversal is confirmed with another red close next Friday, it will probably cause a strong round of profit taking to occur as the index and the main stocks in it seem way overdue for some type of correction. The index has appreciated 41% in value over the past 11 months, compared to the DOW having appreciated 26% over the same period of time, meaning that the traders are likely to take some profits at some time soon especially since the index is nearing the important psychological resistance at 4000.
It should be mentioned that when the NASDAQ got up to the 3000 level back in March of last year, the index straddled that area for a period of 11 months before heading higher. The index traded as high as 200 points above and 300 points below on 2 separate occasions before resuming the uptrend. It is probable the same thing will occur at 4000 as the fundamentals do not support much higher numbers at this time.
On a weekly closing basis, minor resistance is found at 4069 and decent to perhaps strong resistance is found between 4234 and 4252. On a daily closing basis, there is very minor resistance at 3929 and minor at 3952. Above that level, there is no resistance for the past 12 months. On a weekly closing basis, support is very minor at 3791 and then nothing until very minor support is found at 3689. Below that, decent support is found at 3589. On a daily closing basis, support is very minor at 3919, minor at 3907, very minor at 3794, minor at 3774 and a bit stronger at 3761.
The NASDAQ has strongly depended on strong rallies in its main stocks (PCLN, AAPL, GOOG, NFLX, and AMZN) but this week 3 of those stocks generated red closes and the 2 that didn't barely generated a green close. These stocks have all had rallies of at least 41% (in the case of NFLX almost 700%) from their lows seen 1-year ago and without a meaningful correction, meaning that common sense would dictate that some profit taking is likely to be seen soon.
To the upside, the NASDAQ shows recent resistance at 3961/3966 and psychological resistance at the 4000 demilitarized zone (3970-4030). Above that level, the index shows resistance from January 2000 at 4192. Further resistance is found at 4259 and at 4303. To the downside, there is minor but indicative support at 3887 and then nothing until the 3750 level is reached. Stronger support is found at 3650.
The NASDAQ is showing a bullish breakaway/runaway gap formation with the runaway gap being between 3863 and 3882 and the breakaway gap between 3702 and 3721. Closure of the runaway gap at 3863 will likely bring about closure of the breakaway gap, meaning that 3863 could be the trigger for a 300 point correction from the highs to occur.
By the same token, in looking at the previous highs seen in the year 2000, the probabilities favor the NASDAQ getting up to the 4100 level before any correction of consequence occurs.
SPX Friday closing price - 1761
The SPX made yet another new all-time weekly closing high on Friday but for the first time in 4 weeks the index did not close on the highs of the week (closed slightly below the mid-point) and that could be a sign that some profit taking is about to occur. By the same token, the index did close near the highs of the day on Friday, suggesting the first course of action for the week is likely to be to the upside and if a new high above 1775 is seen, the weekly chart sign will be meaningless.
The SPX has presently rallied 129 points without any kind of correction or pullback being seen and the previous 2 rallies seen this past year were 102 points and 149 points, meaning the index is now in an area where the traders will be thinking more about taking profits than putting on new long positions.
On a weekly closing basis, there is no resistance above. On a daily closing basis, there is minor resistance at 1771. On a weekly closing basis, there is minor support at 1690 and minor again at 1667. Below that level, minor to decent resistance is found at 1632 and decent at 1592. On a daily closing basis, support is very minor at 156 and at 1746, minor again at 1725, minor to perhaps decent at 1698/1700. Below that, there is decent/copious support between 1676 and 1685.
The last rally in the SPX seen in June is eerily similar to the once being seen now. The index then rallied over a period of 20 days before encountering any new selling and ultimately ended up with a 149 point rally from low to high before any correction was seen. The index has now rallied for 19 days and has seen 129 points so far since the low at 1646 was made. If past history is to be repeated, it would mean the high of the rally will likely be seen this week.
Several analysts have recently stated that the SPX is likely to get up to the 1800 level before any correction occurs and with 1800 also now being a psychological magnet the probabilities do favor it happening. In addition, the index did break out of a 3-point channel line 2 weeks ago that would also suggest a fast run-up to 1800 will occur. By the same token, the 3 point channel line that is now at 1750 is considered a support pivot point that if broken would probably bring in selling.
To the downside, the SPX has no support as the rally from the 1646 low has been mostly straight up. There is very minor support at 1740 that if broken would likely take the index immediately down to the 1700 level, if not down to 1676 where minor intra-week support is found, as well as the 100-day MA.
Having broken above the channel line mentioned above, the bulls are committed to taking the SPX up to the 1800 level. Any deviance from that with a break below 1750 and more importantly below 1740 would be a strong signal that a top to this rally has been found.
The indexes failed to impress to the upside this past week even though the economic reports came out better than expected. Chart-wise the door is now open for a correction to occur to the 5-week bullish uptrend that seems to be running out of steam. Leadership of the Tech Sector has begun to weaken as those stocks are now considered overbought and likely at levels that cannot be maintained, especially since the bulk of the important earnings reports has come and gone.
Traders are waiting for the important reports due out this week with GDP Adv on Wednesday and the Jobs Report on Friday. By the same token with traders now reacting to the Fed much more than to the economic reports and the Fed likely to react opposite to the reports (good economic reports likely means tapering and vice versa), it does set up the week as a pivotal one with probabilities now favoring the bears more than the bulls because economic reports have been coming out better recently.
There are also several reasons mentioned above that suggest that time and chart wise the indexes are either at temporary tops or very near them and that the next big move will be to the downside. The question then becomes "will it be this week and from what price?" Probabilities suggest it will occur after the economic reports come out this week.
|
Stock Analysis/Evaluation
|
CHART Outlooks
After researching about 100 stocks this weekend I could not find any stock that offered a good risk/reward ratio together with a decent probability rating, especially when factoring in the uncertainty regarding the indexes. I did find a handful of stocks that could be considered decent short opportunities but only if they rally. Nonetheless, the overall uncertainty in the market does not suggest that a rally will occur in these individual stocks and they are not worth chasing.
As such, there are no mentions in this week's newsletter. By the same token, there are a couple of economic reports this week that could help define what will happen the rest of the year and if that does happen, mentions will be given in the message board. It is highly likely that next week there will be a full complement of mentions.
|
Updates
|
| Monthly & Yearly Portfolio Results
|
Closed Trades, Open Positions and Stop Loss Changes
|
|
Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted. Status of account for 2013, as of 10/1 Profit of $13379 using 100 shares per mention (after commissions & losses) Closed out profitable trades for October per 100 shares per mention (after commission)
NFLX (long) $116 FSLR (long) $16
Closed positions with increase in equity above last months close minus commissions.
AXP (short) $91 Total Profit for October, per 100 shares and after commissions $1621 Closed out losing trades for October per 100 shares of each mention (including commission)
NFLX (short) $176
VHC (short) $83 NFLX (short) $123 JNJ (short) $24 Closed positions with decrease in equity below last months close plus commissions.
DOW (short) $210 Total Loss for October, per 100 shares, including commissions $871 Open positions in profit per 100 shares per mention as of 10/31
JBL (short) $194 Open positions with increase in equity above last months close. DCTH (long) $0 FCEL (long) $25 KGC (long) $10 FSLR (long) $1046 JBL (short) $82 Total $2858 Open positions in loss per 100 shares per mention as of 10/31
XOM (short) $59
YGE (long) $11 HD (short) $187 ELON (short) $19 FSLR (long) $10 ARNA (long) $26 Open positions with decrease in equity below last months close. ELON (long) $66 Total $378 Status of trades for month of October per 100 shares on each mention after losses and commission subtractions.
Profit of $3312
Status of account/portfolio for 2013, as of 10/31Profit of $16691 using 100 shares traded per mention.
ARNA got some lower than expected sales numbers this past week and broke the recent 18-month low at 4.20 with a drop down to 4.13. Nonetheless, buying interest was seen on the break and the stock ended up having a reversal day when it closed in the green and 1 point above the previous low weekly close at 4.37. The stock did close on the highs of the day and the first course of action is likely to be to the upside with 4.75 as the objective. On a negative note though, the stock did close near the lows of the week, leaving the door open for further downside this coming week and a drop down to the 4.00 level if 4.13 is broken. The probabilities favor the bulls as the area at 4.50 is long-term uptrend support that should not get broken just because the sales figures came out lower than expected this past month. A rally above 4.89 would bring in new buying while a break below 4.13 would bring in new chart negatives.
CAT generated a new but mini sell signal on the weekly closing chart, having closed below the previous low weekly close at 83.80 (closed at 83.59). By the same token, the bulls were able to reverse the break of the intra-week support at 83.05 seen Friday to close in the green and on the highs of the day, which suggests follow through to the upside will be seen the first part of the week. In addition and probably more important, the bulls were able to prevent the most recent low daily close at 82.85 from being broken even though the stock traded as low as 82.80 on Friday. Since April, the stock has been able to close above the previous low daily close on 5 occasions with the 6th being on Friday. Minor resistance will be found at 84.35 and a bit stronger at 85.00. The bulls may have a short-term advantage since the break of 83.05 should have been a catalyst to the downside and wasn't. Consideration to taking profits and re-selling at a higher price should be given on Monday. The 84.35 level is a short-term key. CVX generated a classic negative reversal week (higher high and a close below the previous week's close) after the company reported earnings that were disappointing. The stock closed near the lows of the week and further downside is expected to be seen with 116.02 as the minimum objective. By the same token, the bulls prevented a second sell signal from being given on the weekly closing chart when the previous low weekly close at 117.63 was not broken even though the stock traded below that level for most of the day on Friday. On a strong negative note, the stock gapped down on Friday off of the earnings report and in the process broke convincingly the 200-day MA, currently at 120.50, which is a viable break as it came off of a fundamental report. The 200-day MA will now be a decent to perhaps strong resistance level that should not get broken to the upside without a positive fundamental piece of news. Strong and important support is found between 113.50 and 114.44 that if broken would likely bring about a drop down to the 200-week MA, currently at 100.70. Another gap at this point would be considered a runaway gap. Such a gap, especially if it happens on the weekly chart (Monday's), would be a strong signal that further downside of consequence will occur. ELON broke the recent daily close support at 2.21 with a drop down to 2.12, which is near the decent and important intra-week support at 2.10/2.11. Nonetheless, for the past 4 weeks the stock has only moved a total of 3 points on the weekly closing chart, suggesting that the traders are not trading the stock at this time and are waiting for the earnings report that comes out on Thursday November 7th. Resistance is the 200-day MA and the 50-week MA, currently at 2.33 and 2.36 respectively. On a positive note, the stock recently broke above the 200-day MA convincingly for the first time in 2 years and that was without news, meaning that it is now likely the stock has found a low and the natural progression is likely to be a slight uptrend. Important support is found at 2.10/2.11. FCEL was not able to follow through on last week's slight close above the 200-week MA, currently at 1.42. Nonetheless, without news, breaks of a major trendline usually take several attempts before getting established. The stock did close on the lows of the week and further downside is expected to be seen with 1.24 as the downside objective. On the daily closing chart, support is decent at 1.27. A weekly close below 1.24 would now be considered a slight negative. The stock needs a weekly close above 1.52 in order to generate a clear and unlikely-to-be-negated breakout. A break of the 19-month intra-week high resistance at 1.64 is the first step in the process. A break of 1.64 should generate a fast rally to the 2.00 level. Probabilities favor some further backing and filling this week with 1.27 as the downside support and 1.48 as the upside resistance. Ultimately though, this stock should head higher as a bottom of consequence has now been built and tested successfully on several occasions. FSLR received a much better than expected earnings report and made a new 2-year intra-week and weekly closing high. The stock did close near the highs of the week and further upside should be seen this coming week. Minor resistance is found at 60.99 as well as psychological resistance at the $60 demilitarized zone. Nonetheless, the resistance is minor and if 60.99 is broken, further upside up to the 200-week MA, currently at 76.00, could be seen. On a longer term basis though there is no resistance whatsoever, other than the 200-week MA, until minor weekly close resistance is found at 85.21. The stronger resistance is not found until the $100 level is reached. Support is now decent at this past week's low at 48.63. By the same token, the stock generated what could be considered a breakaway gap between 51.82 and 54.77 and that means 54.77 should now be decent support. Previous 2-year high weekly close at 54.39 should also work as decent support. HD got up close to the previous intra-week high at 78.81 with a rally up to 78.59. Nonetheless, the stock backed off to close just 2 points below the previous high weekly close at 77.00 (closed at 76.98), meaning that no buy signal was given and that the short-term negative outlook remains. The stock shows a double top on the weekly closing chart at 80.54/80.23 and if the stock closes in the red next Friday, it will generate another double high at 77.00/76.98. The stock did close in the lower half of the week's trading range and on the lows of the day on Friday, suggesting that further downside will be seen. A break below last week's low at 75.80 will be taken as a negative and if the recent low at 73.73 is broken another sell signal will be given. Nonetheless, the level that needs to be broken for the bears to gain a strong edge is the double low at 72.41/72.20. A break of that level will likely bring about a drop down to the 100-week MA, currently at 62.00. The probabilities favor the stock doing the same as the DOW, which is trade sideways for the next couple of months, likely between 74.00 and 77.00. The 200-day MA is currently at 74.25 and that is a pivotal support area. INAP tested successfully the 200-week MA 2 weeks ago with a drop down to 6.50. The stock got a positive earnings report and generated a key reversal the previous week that saw follow through on a weekly closing basis this past week. The stock closed near the highs of the week and further upside is likely to be seen with the 50-week MA, currently at 7.75, as the first objective. On a weekly closing basis, decent resistance is found at 7.77-7.87 that even though is likely to be reached will be difficult to break. Further weekly close resistance is found at 8.56, 8.82 and the strongest one at 9.35. Nonetheless, since the stock broke above the 200-week MA back in January 2011, the trend has been up and higher highs have been consistently seen, suggesting the 9.35 level will ultimately get broken and the $10 level seen. Weekly close support is now decent to perhaps strong at 6.89. On a daily closing basis, the stock shows decent support between 7.00 and 7.05. Probabilities favor further upside at this time. JBL generated a strong drop this past week off of a disappointing earnings report. The stock fell 10% in value and closed on the lows of the week, suggesting further downside will be seen with either the 100-week MA, currently at 20.30, or the 200-week MA, currently at 19.00, as the objectives. On Thursday the stock got down to the 200-day MA, currently at 20.60, with a drop down to the low of the week at 20.53. The stock did generate a minor bounce on Friday having gone above Thursday's high at 20.94 with a rally up to 20.98. Nonetheless, the stock closed on the lows of the day on Friday and further downside is expected to be seen this week. Minor to perhaps decent support is found at 20.60 that if it holds could generate a rally up to 21.42. Nonetheless, probabilities do favor the $20 demilitarized zone being seen with a decent possibility of a drop down to the 200-week MA at 19.00. KGC had a negative reversal week, having made a new 5-week high and then closing below the previous week's low at 4.86. The stock closed on the lows of the week and further downside is expected to be seen with no support found until 4.57 is reached. Resistance is once again found at 5.25. It is evident there is no long-term interest in buying Gold at this time so the question is whether there is interest in keeping the stock below the long term support at $5 or simply straddle the area for the next few months. More information as to the answer to the question is likely to be seen after this week's economic reports come out. LEN continued to trade between the 50-week MA, currently at 38.00, and the 100-week MA, currently at 33.25. The stock has been trading within those two parameters for the past 20 weeks and there doesn't seem to be any reason right now for that pattern to change. The stock did close on the lows of the week and further downside is expected to be seen below last week's low at 34.36. Nonetheless, the probabilities favor the 100-week MA once again acting as support. The stock is showing a triple high between 37.77 and 37.84 that does suggest that ultimately the bulls will generate an upward break. As such, I will look to take profits on the short positions on a drop this week below 34.00. XOM got a slightly better than expected earnings report this past week and generated a rally up to a minor resistance level at 90.98 with a rally this past week to 90.96. The stock did back off to close below a minor weekly close resistance level at 90.11 but did close in the upper half of the week's trading range, suggesting further upside above 90.98 will be seen this coming week. The stock did give a mini buy signal on the weekly closing chart, having closed above a previous high weekly close at 88.66. The stock closed on the highs of the day on Friday after having seen a drop down to 88.27 which will likely be considered a successful retest of the minor to perhaps decent intra-week support at 88.02. On a possible negative note, the stock generated the 4th green weekly close in a row and for the last 2 years the stock has not generated 5 green weekly closes in a row, suggesting that the probabilities are high that a red close will be seen next Friday. Nonetheless, the probabilities favor the stock going above last week's high at 90.96 and getting up to the next resistance level at 91.93, before any new selling is seen. Support will now be found at 88.02 and at 86.58. Probabilities favor further sideways trading of the stock between 88.00 and 92.00 for the next few weeks. As such, consideration should be given to covering the short positions on a dip and looking to use the money to trade elsewhere. YGE generated the third red weekly close in a row and on this occasion the stock closed below the 200-week MA, currently at 6.65, that got broken to the upside 5 weeks ago. Nonetheless, the stock did close near the highs of the week and further upside is likely to be seen this week with a possible objective of 7.33. The stock did generate a green daily close on Friday, meaning that Thursday's close at 6.00 was a successful retest of that now important support level. A daily close above 6.45 any day this week will take away some of the recent negative action. A weekly close next Friday above 6.65 would negate the break of the 200-week MA seen this week. With FSLR having received a strongly positive earnings report and the Solar Power Industry now coming back into "vogue", the probabilities favor the stock resuming the uptrend and having the $10 level as the next important objective. Support is now found at 5.70 and a bit stronger at 5.33.
|
1) ELON - Averaged long at 6.593 (3 mentions). No stop loss at present. Stock closed on Friday at 2.19.
2) ARNA - Averaged long at 4.36 (2 mentions). Stock closed on Friday at 4.39.
3) FCEL - Averaged long at 1.34 (5 mentions). No stop loss at present. Stock closed on Friday at 1.33.
4) CAT - Averaged short at 87.873 (3 mentions). Stop loss now at 86.05. Stock closed on Friday at 83.59.
5) KGC - Averaged long at 5.232 (5 mentions). No stop loss at present. Stock closed on Friday at 4.82.
6) JBL - Averaged short at 23.34 (2 mentions). Stop loss now at 22.95. Stock closed on Friday at 20.71.
7) FSLR - Purchased at 50.40. Averaged long at 45.12. Stop loss now at 48.53. Stock closed on Friday at 59.14.
8) CVX - Shorted at 120.08. Stop loss now at 122.11. Stock closed on Friday at 118.01.
9) JNJ - Covered shorts at 92.50. Shorted at 92.40. Loss on the trade of $10 per 100 shares plus commissions.
10) LEN - Shorted at 37.50. Stop loss at 38.04. Stock closed on Friday at 34.98.
11) YGE - Purchased at 6.11. Stop loss at 5.23. Stock closed on Friday at 6.32.
12) HD - Shorted at 76.02. Stop loss at 78.91. Stock closed on Friday at 76.99.
13) INAP - Purchased at 7.07. Stop loss now at 6.75. Stock closed on Friday at 7.27.
14) XOM - Shorted at 89.03. No stop loss at present. Stock closed on Friday at 89.82.
Previous Newsletters
|
Encyclopedia of Chart Patterns. A must have for chart aficionados! |
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. |
|
|
|