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Issue #398 
October 19, 2014 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Indexes Recover. Bottom of Correction Found?
DOW Friday closing price - 16380
The DOW generated a sell signal, as well as a failure to follow through signal, on the weekly closing chart, having broken the previous low weekly close at 16493 seen in July and closing below the previous all-time high weekly close at 16478 made in December of last year. Nonetheless, both signals will need to be confirmed next Friday with a second close below the levels broken and with the index having rallied 525 points from the 8-month low at 15855 and having closed in the upper half of the week's trading range, negation of the signals is a definite possibility.
The DOW has now corrected 8.8% from the 17350 all-time high and if this correction is mimicking the 8.8% correction seen between October and November 2012, it would mean the low for the correction has been seen. If that is the case, then the index is likely to trade with a slight upward bias for the next 10 weeks but not make a new all-time high before the first quarter of next year.
The DOW closed in the upper half of the week's trading range, suggesting the index will go above last week's high at 16602 at some point this coming week.
To the upside, the DOW will show daily close resistance between 16573 and 16576 that does include the 200-day MA, currently at 16590. Intra-week resistance will be found between 16588 and 16613. Above that level there is minor resistance at 16735 and then nothing until the 16943/16970 level is reached. On a daily closing basis, there will be some resistance at the 50 and 100 day MA's, both currently between 16885 and 16900.
To the downside, the DOW should show some support between 16300 and 16333 and then nothing of consequence until the top of the 16000 demilitarized zone is reached. Decent support should now be found at last week's low at 16855.
The action seen this past week in the DOW does suggest that the low made on Wednesday will hold up for the next week or two. A rally up to the 200-day MA, currently at 16590 is a high probability for this week but having closed in the upper half of the week's trading range, a rally up to 16631 is likely to be seen.
The 16631 level in the DOW is now considered a pivot point that if broken would likely cause the index to rally back up to the 17000 demilitarized zone and likely bring about a trading range for the rest of the year between 16500 and 17000. Nonetheless, for the time being (this week), the bulls need to generate further upside or the sell pressure will come back.
Probabilities slightly favor the bulls.
NASDAQ Friday closing price - 4258
The NASDAQ confirmed the sell signal given the previous week with another weekly red close below 4352, as well as below the previous 14-year high weekly high close from March at 4336. Nonetheless, the bears were unable to make a definitive statement as the index rallied 142 points from the low at 4116 to close at the yet-unbroken 23-month 50-week MA line, currently at 4260, meaning that no clear signal that the uptrend is over has yet been given.
The NASDAQ closed near the highs of the week and further upside above last week's high at 4303 is likely to be seen, which in turn would mean a spike low of consequence will have been created if the bulls are able to negate the sell and failure signal given by closing the index next Friday above the 4336/4352 level.
On a negative note though, the bulls in the NASDAQ were unable to negate the break of the 200-day MA, currently at 4302, that occurred 6 days ago, meaning that the spike low rally has not yet accomplished anything of consequence. It does mean that the bulls have more work to do this coming week before any new buying of consequence can begin to occur.
To the upside and on a daily closing basis, the NASDAQ will now show decent resistance between 4336 and 4357 which represent the previous 14-year high weekly close from March and the previous low daily close from August and from which a sell signal was given.
To the downside, the NASDAQ continues to show that 4250 is a minor pivot point with additional minor support between 4207 and 4212. Below that, the index shows some minor to perhaps decent support at 4131 and a bit stronger at last week's low at 4116. If 4116 is broken, no support is found until the 4000 demilitarized zone is reached.
The key to what the NASDAQ does from here is going to be the 200-day MA, currently at 4302. A couple of closes above that line would turn the trader's mentality positive. If the bulls are able to accomplish that feat, then the 4371 level will become a critical pivot point that if broken would likely generate enough new buying to test the 4485/4500 level of resistance and perhaps even make an attempt at the 14-year high at 4610.
Probabilities favor the NASDAQ trading with a slight upward bias the rest of the year and being in a 4200-4500 trading range.
SPX Friday closing price - 1886
The SPX, with the 1820 low seen this past week, has now corrected 10% in value from the all-time high seen 4 weeks ago at 2019. Nonetheless, the bears have not yet been successful in making a clear negative statement as to the long-term uptrend, inasmuch as the 50-week MA, currently at 1890, has not been broken for the past 34 months and with the close on Friday at 1886, if the index is able to generate a green close next Friday, it will mean the line has simply been tested 1 more time successfully and that this move down was just a correction from which uptrend will continue at some point.
The SPX closed near the highs of the week and further upside above last week's high at 1912 is likely to be seen this week. If the bulls are able to negate the sell signal given the previous week when the index generated a weekly close below 1925, the probabilities will strongly rise that the buying interest will return.
On a negative note though, the bulls were not able to negate the break of the 200-day MA, currently at 1907, that occurred on Monday and that likely means that the bears maintain the edge and that the burden of proof is still in the shoulders of the bulls.
To the upside and on a daily closing basis, the SPX will show resistance between 1897 and 1909 that includes the 200-day MA. On a weekly closing basis though, resistance will be found at 1925 and that is a level the bulls must close above in order to negate the weakness seen the past 2 weeks. Above 1925 the index shows no resistance of consequence until the 1971 level is reached and even then the stronger resistance is not found until 1991.
To the downside, the SPX shows no intra-week support until the 1839 level is reached and even then that support is considered minor. Further support will be found at last week's low at 1820 and a bit stronger between 1808 and 1816.
As is the case with the other indexes, the bulls must first negate the break of the 200-day MA, currently at 1907, before any further buying interest can be generated. Having closed near the highs of the day/week on Friday, it is highly likely that the line will be seen at some point this week and even broken intra-day as last week's high was 1912. Nonetheless, unless the index closes above the line 2 days in a row, the bulls will have accomplished nothing of consequence with the late-week rally seen this past week.
The indexes had a wild week in which selling of consequence was seen early in the week, as well as an unexpected recovery toward the end of the week. Overall though, the bears remain mostly in control as the bulls were unable to invalidate all the negatives that occurred. By the same token, the bulls did put themselves in a position that if there are no new negative fundamentals that come out this week that they might be able to "turn the tables around" on the bears.
Earnings reports will once again be the center of attention this coming week, especially since there are no major economic reports due out. The CPI number does come out on Wednesday and with disinflation being a growing concern at this time, that number could be slightly of more interest than in the past. Nonetheless, the fact that earnings have so far come in overall slightly better than expected and that it was one of the reasons for the late-week turnaround, would suggest that if earnings continue to come out better than expected that the market will react positively.
It is unlikely that the market will recover enough this year for new highs to be made, meaning that the question for this week and next will be whether the correction will continue or whether the low for the correction has been seen and a slight upward bias generated for the rest of the year. It should be mentioned that last week's recovery did not start at a previously established level of support, meaning that the bulls are not "out of the forest" as yet.
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Stock Analysis/Evaluation
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CHART Outlooks
The probabilities favor the market moving higher over the next week or two due to the spike low that might have been created this past week. Nonetheless, the rally and index closes on Friday were not sufficient to establish that scenario as a high probability, meaning that there are still a lot of questions and no clear answers yet.
Due to that scenario, there will be no mentions this week, at least not on the newsletter, as risk/reward ratios and probability ratings on both sides of the coin are unattractive using Friday's closes.
Nonetheless, clarification of the probabilities could get clearer within the first 2 days of the week and if that happens, mentions will be given in the message board.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| AKS was upgraded by Nomura from neutral to a buy with a $10 objective. As such, the stock generated a positive reversal week when it closed in the green on Friday after having made a new 11-month low at 5.14. On another positive note, the weekly close support at 6.12/6.15 was not broken and the stock closed near the highs of the week, suggesting further upside above last week's high at 6.75 will be seen this week. On a weekly closing basis, resistance is found at the 50-week MA, currently at 7.35, at 7.50, at the 200-week MA, currently at 7.65, and at 8.11. Probabilities favor a rally up to the 7.75 level before longer term decisions will have to be made. Support will be found between 5.70 and 6.00. The stock gapped up on Friday between 5.89 and 6.10 and there is no fundamental reason for the gap to stay unclosed, suggesting the traders will first close the gap before further upside is seen. I would expect the 5.79-5.90 level to be seen first before further upside occurs. I would venture to say that a 5.79 to 7.24 trading range will be seen this week. ARNA had a positive reversal week, having made a new 29-month low and then closing in the green and near the highs of the week, suggesting further upside above last week's high at 4.20 will be seen this week. Nonetheless, the stock did generate a minor negative reversal day on Friday to close near the lows of the day suggesting the first course of action for the week will be to the downside with 3.82 as a possible downside objective. The positive reversal on the weekly chart does suggest the 4.20 level will be broken, which in turn will likely stimulate a retest of the 4.37 weekly close support level that was broken to the downside 10-weeks ago. Intra-week resistance is found at 4.29/4.30, minor at 4.54 and then decent at 4.74. Probabilities favor a trading range this week of 3.82 to 4.30. CVX made a new 22-month low this past week at 106.65 but the bears were unable to make a definitive negative statement with the stock rallying enough to close just slightly below the 200-week MA, currently at 112.05, and still above an important weekly close support from January at 111.63. The stock closed in the upper half of last week, suggesting that at some point this week last week's high at 114.59 will be broken. Support is now found at 109.27 and resistance at 116.74, suggesting that trading range could be seen this week. A green close next Friday above 111.80 would be a positive statement that would suggest that the 118.52-120.00 level would be the least upside objective to be seen in the next couple of weeks. ENG had another negative week, having confirmed the break of the 2.00 level with a second close in a row below that support. The stock closed on the bottom half of the week's trading range and further downside below last week's low at 1.63 is likely to be seen. Support will now be found at the 1.47-1.50 level. Resistance will now be found at 1.88 and stronger at 2.00. The stock generated a small negative reversal on Friday and the first course of action is likely to be to the downside with 1.70 as the first objective. Nonetheless, if the bulls are able to hold the stock at 1.70 and reverse direction and get above 2.15, further upside is likely to be seen with the 200-day MA, currently at 2.32 as the objective. Probabilities favor the bears but the bulls do have a shot at turning the tables around on the bears this week. FCEL generated a positive reversal week, having made a new 8-month low at 1.55 and then closing in the green. The stock did close in the upper half of the week's trading range, suggesting that further upside above last week's high at 1.95 will be seen this week. Resistance is found between 1.95 and 2.07 and again at 2.23. A weekliy close above 2.15 would be considered a decent positive. The stock did generate a negative reversal on the daily chart on Friday, suggesting the first course of action for the week will be to the downside. Support is found at 1.65 that would be considered a needed successful retest of the 1.55 low if it holds and the bulls are able to turn the stock around once again. Possible trading range for the week could be 1.65 to 2.05. If the stock is able to get above the 2.05 level, it will probably test the 200-day MA, currently at 2.20, and if that line is broken, buying interest will resume. Probabilities slightly favor a 1.65-2.05 trading range this week. FSLR got down to the important support at $50 that includes the 100-week MA, currently at 50.40, with a low this past week at 50.13. The stock was able to turn around to close slightly in the upper half of the week's trading range, suggesting that further upside above last week's high at 55.98 is likely to be seen and that the $50 level will continue to be decent to perhaps even strong support. The stock generated a minor negative reversal on Friday, suggesting that further downside below Friday's low at 52.75 will be seen on Monday. Some support is found at 52.42. Such a drop could end up being a successful retest of the 50.13 low, which is needed to generate any new buying interest. Minor resistance will be found at the gap area between 56.08 56.47 and then nothing of consequence until the 58.30-59.44 level is reached. Further resistance will be found at the $60 demilitarized zone. Strongest resistance will be found at the 200-day MA, currently at 63.10. Probabilities favor some weakness at the beginning of the week but then a reversal. Possible trading range for the week could be 52.42 to 58.30. GIGM has not followed through to the downside, below .75, over the past 2 weeks in spite of the strong weakness seen in the indexes during that period of time. The stock did close near the highs of the week and further upside above last week's high at .82 will be seen this week. Resistance is found at .87 that if broken would suggest the 1.00 level will be visited. A drop below .75 would now be considered a negative. Probabilities slightly favor the bulls, at least for a rally up to .87. LEN generated a strong positive reversal week, having made a new 9-week low and then making a new 16-week high, as well as closing above the previous week's high and near the highs of the week. Further upside above last week's high at 42.14 is likely to be seen this week. Resistance is found at 42.67 and then at 43.22. Stronger resistance is found between 43.90 and 44.40. Probabilities suggest the stock will move up to the 43.90 level though further upside above that price does not have a high probability number. Intra-day support is now found between 40.81 and 41.07 and if that level holds up, covering of the short positions should be considered even though the positions are at a loss. If the 40.81 level is broken, then a drop down to the 39.83 could be seen. Either way though, this trade now looks like a short-term loser and should be considered for liquidation on Monday. By the same token, the probabilities are decent that I will give a new sell mention on the stock around the 43.90 level. OXY made a new 18-month low this past week when it got down to 82.30. Nonetheless, the stock recovered enough to close above the 2 previous weekly closing lows seen during that period of time at 87.57 and 86.51, meaning that no strong sell signal was given. The stock closed in the red but in the upper half of the week's trading range, suggesting that further upside above last week's high at 92.25 will be seen this week. The stock did close below the 200-week MA, currently exactly at last week's high at 92.25, meaning that if the bulls are able to get the stock above that high and close above that level next Friday, that the break of the line will not be confirmed. The stock did close near the lows of the day on Friday and the first course of action should be to the downside below Friday's low at 87.34. Support will be found between 85.90 and 86.50 that if seen and the stock move up from there would be considered a needed retest of the low. Probabilities favor that a spike low was built this past week and that a recovery with the $95-$97 level as the upside objective to be reached over the next few weeks. SIGM continued lower, having generated another lower low than the previous week, as well as another red weekly close. Nonetheless, the red weekly close was not all that convincing as it was only by 1 point (3.76 versus the previous week's close at 3.77). By the same token, the stock did close slightly below the mid-point of the week's trading range, suggesting the probabilities favor the stock going below last week's low at 3.65. If that scenario does not occur and the bulls are able to take the stock above last week's high at 3.97, it will be a positive statement. Minor support is found at 3.67 and at 3.50 and then stronger support at the 12-year low weekly close at 3.28. The 3.67 level seems to be a short-term pivot point that if it holds and the stock reverses to go above last week's high at 3.97 would suggest some new buying interest might come in. Nonetheless, until the stock generates a weekly close above 4.17, the sell pressure will continue. Probabilities continue to favor the bears. WYY has been under some sell pressure for the past 3 weeks, likely due to the weakness seen in the index market. Nonetheless, the bears have not been able to accomplish anything to the downside and the stock did close near the highs of the week on Friday and further upside above last week's high at 1.66 is likely to be seen this week. Resistance is found at 1.74 and again at 1.85 and the strong resistance found between 1.90 and 1.95. The stock during the past 2 weeks has tested successfully the 200-day MA, currently at 1.58, and the chart does support the stock moving higher from here if the indexes don't generate any new lows.
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1) SIGM - Averaged long at 4.82 (2 mentions). No stop loss at present. Stock closed on Friday at 3.76.
2) AKS - Averaged long at 7.415 (2 mentions). No stop loss at present. Stock closed on Friday at 6.30.
3) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at this time. Stock closed on Friday at 1.80.
4) WYY - Purchased at 1.63. Stop loss at 1.45. Stock closed on Friday at 1.64.
5) GIGM - Averaged long at 1.225 (2 mentions). No stop loss at present. Stock closed on Friday at .80.
6) ENG - Averaged long at 2.195 (2 mentions). No stop loss at present. Stock closed on Friday at 1.80.
7) FSLR - Purchased at 51.77. Averaged long at 64.323 (3 mentions). No stop loss at present. Stock closed on Friday at 53.23.
8) OXY - Purchased at 83.66. Stop loss now at 82.20. Stock closed on Friday at 88.36.
9) DLTR - Covered shorts at 54.59. Profit on the trade of $580 per 100 shares (3 mentions) minus commissions.
10) CVX - Purchased at 111.40 and at 107.27. Averaged long at 109.335 (2 mentions). Stop loss now at 106.65. Stock closed on Friday at 111.80.
11) LEN - Shorted at 39.69. Stop loss at 42.77. Stock closed on Friday at 41.46.
12) OXY - Purchased at 90.14. Liquidated at 89.26. Loss on the trade of $88 per 100 shares plus commissions.
12) BIDU - Shorted at 202.54. Covered shorts at 203.51. Loss on the trade of $97 per 100 shares plus commissions.
13) WHR - Shorted at 146.57. Covered shorts at 147.36. Loss on the trade of $79 per 100 shares plus commissions.
Previous Newsletters
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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. |
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