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Issue #404 
November 30, 2014 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Mixed Signals Given! Thanksgiving Week Pause?
DOW Friday closing price - 17828
The DOW made yet another new all-time weekly closing high on Friday, the 4th in a row above the previous one at 17279, but a new intra-week high was not accomplished, suggesting the index might be ready for a pause or a small correction.
The DOW has now generated 6 weeks in a row of green weekly closes and 6 or 8 (weeks) seems to be the magic number since there have been 2 of each (none other) since the index began its uptrend in March 2009. With the index closing in the bottom half of the week's trading range, the probabilities do favor the index going below last week's low at 17793 this week and 6 weeks in a row of green weekly closes being the magic number this time around.
The DOW did close near the lows of the day on Friday and in the bottom half of the week's trading range, suggesting that if there are no positive fundamental surprises this coming week to stimulate new buying that the index is more likely to correct than not, due to its highly overbought/overdone condition and lack of retest of the previous all-time high weekly close at 17279.
The DOW has moved straight up 2039 points over the past 7 weeks (13% in value) without a single pullback and technically speaking that kind of movement is unsustainable without some backing and filling and building of a new support level from which the bulls can then launch another leg of the rally, especially when trying to attempt to get above a strong psychological resistance such as 18000 is.
To the upside, the DOW has no previous high resistance but psychological resistance is expected to be found at the 18000 level. To the downside, the DOW shows very minor intra-week support at last week's low at 17603 and then a bit stronger (but still minor) support at 17536. Below that level, the index does not show any kind of intra-week support until the 17000 demilitarized zone is reached. Nonetheless, on a daily and weekly closing basis, support will be found at the previous all-time high daily and weekly close at 17279.
The DOW is unlikely to get much help from ISM index that comes out Monday morning as it is already expected to be near the all-time high and if Friday's low at 17807 is broken and a double top is generated, it is likely that last week's low at 17790 will be broken as well, which in turn will bring in some decent profit taking. Below 17790 there is no support until minor support at 17603 and if that level is broken, the probabilities would favor the stock heading down to the 17279 level that was the previous high weekly close.
Probabilities favor the bears this week, at least for a small correction.
NASDAQ Friday closing price - 4791
The NASDAQ made a new all-time high monthly close on Friday when the index closed above the February 2000 high at 4696. The index closed on the highs of the day/week/month and further upside above last week's/month's high at 4810 is expected to be seen.
The NASDAQ is now poised to test the all-time weekly closing high at 5048 and the all-time intra-week high at 5132 and if history is repeated, the index will be doing it this coming month.
The NASDAQ did outperform the other indexes this past week, having rallied 1.65% above last week's close while the other indexes barely went up less than .3%, suggesting that this is now all about the tech sector and not necessarily about the overall market.
To the upside, the NASDAQ only shows weekly close resistance at 5048 and intra-week resistance at 5132. To the downside, the index will now show minor intra-week support at 4653 and weekly close support at the previous 14-year high daily and weekly close at 4598/4582 respectively. Further but minor support is found at 4542 that could be seen due to the chart showing a "third" unclosed gap between 4575 and 4594 that should not remain unclosed before much further upside is seen. Important and pivotal support is now found at the 4500 level.
The NASDAQ did close near the lows of the day on Friday and the first course of action for the week is likely to be to the downside below Friday's low at 4786. Nonetheless, the downside is likely to be minimal and limited as whatever buying is seen this coming week will likely be targeted to the NASDAQ, rather than any of the other indexes. With the index not likely to go below last week's low at 4723, support is likely to be found between 4735 and 4760, which are both minor support levels on the 60-minute chart.
Probabilities favor the NASDAQ continuing to outperform the other indexes, perhaps even impressively so.
SPX Friday closing price - 2063
The SPX continued its uptrend, having made a new all-time intra-week high at 2075 as well as another green weekly close. Nonetheless, the new intra-week high was only by 1 point and the weekly close only by 4 points, meaning that the buying spiral is decreasing significantly and might be at a temporary end.
The SPX closed near the lows of the week and the index is likely to go below last week's low at 2064 this week, meaning that a small pause/correction is likely to start. This is especially true since the index is showing an open gap between 2053 and 2056 that is a magnet, especially since this is an index that rarely generates gaps and even more rarely leaves the gaps unclosed.
To the upside, the SPX has no resistance above. To the downside, the SPX now shows show minor intra-week support 2040 and very minor at 2030. Further daily and weekly closing support is found around the 2011/2010 which are the previous all-time high daily and weekly close respectively. Further intra-week support is found at 1979 and then minor support between 1966 and 1970.
The SPX is finding decent selling between 2070 and 2075 as that area has been the high each of the past 5 trading days. Keeping in mind that in 2007 the 15(76) level became the high for the 5-year uptrend, it would not be surprising if the similar 20(76) level turns out to be the high for this rally. As it is, the upside objective for many analysts has been the 2100 level, and 2075/2076 is high enough to say that objective has been reached.
The fact the SPX was unable to generate much upside this past week in spite of the NASDAQ making a new all-time high monthly close does suggest that other than being "dragged upward" by that index, the probabilities now favor some type of correction, at least down to test the 2000-2010 that was the previous all-time high.
The indexes started to give mixed signals this past week as the chart suggests further upside will be seen for the NASDAQ but not for the DOW or the SPX. In addition, the VIX spiked up on Friday and that also suggests volatility will increase and that usually means selling interest. The mixed signals are likely to create a dilemma for the traders that are already having problems finding what stocks to purchase.
This week the 2 most important reports of the month are scheduled with the ISM Index due out on Monday and the Jobs report on Friday. Nonetheless, it is going to be difficult for those reports to come out better than expected and help the bulls push the market higher since the ISM index is expected to come out at 59 and during the past 14 years the highest that index has been is 61. With unemployment and non-farm payrolls are already at target levels it is unlikely the bulls will get additional ammunition with which to generate new buying interest.
With the ISM Index coming out on Monday and being the most likely to disappoint, or at least not improve, the probabilities do suggest the week will see more profit taking than new buying interest.
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Stock Analysis/Evaluation
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CHART Outlooks
The indexes, with the possible exception of the NASDAQ, are highly likely to generate some type of pull back or correction this coming week. As such, mentions this week will be mostly in DOW stocks. By the same token, the sell mention given the last 2 weeks for a sale in AMZN remains viable.
SALES
BA Friday Closing Price - 134.36
BA has been in a downtrend since January (when the stock made the all-time high at 144.57) in spite of the fact that the DOW has continued higher, meaning that any type of pullback or correction in the index will likely affect the stock more negatively than others.
BA has already tested successfully the all-time high once before when in May the stock rallied to 138.25, meaning that the stock is officially considered to be in a short-to-mid-term downtrend, especially since the stock made a new 11-month low in October after that successful retest occurred.
BA has been on a rally for the past 7-weeks from 116.32 to 135.78 (seen last week) but did generate a negative reversal on Friday, having made the new 5-month high but then closing below Thursday's low at 134.39. The negative reversal also generated a small double top using Tuesday's high at 135.60, as well as a successful retest of the gap seen on June 11th from 136.29 to 135.53. It should also be mentioned that in January the stock also gapped down from 135.65 to 131.76, suggesting the 135.60-135.80 level has decent resistance strength.
To the downside, BA shows no support until the $130 level is reached and if the DOW is to generate any kind of pullback, the $130 level looks quite certain to be reached. By the same token, it also needs to be mentioned that the stock has moved straight up from 116.32 to 135.78 without any kind of pullback or correction, meaning that the support at $130 is not recent and if it doesn't hold up the traders would likely attempt to get down to $120 since the support below $130 is mostly minor.
Sales of BA between 134.73 and 135.29 and using a stop loss at 135.88 and having a minimum 130.00 objective will offer a 4-1 risk/reward ratio. A drop down to $120 would offer a 14-1 risk/reward ratio.
My rating on the trade is a 3.5 (on a scale of 1-5 with 5 being the highest).
DD Friday Closing Price - 71.40
DD has been on a major bull run the last 2 years from the low seen in November 2012 at 41.67 to the high seen 10 weeks ago at 72.92. Nonetheless, 2 weeks ago the stock got up to 72.70 and last week the stock generated an inside week but with a red close, meaning that a double top now exists on both the intra-week and weekly closing chart, suggesting that there is a decent possibility that the stock may have topped out. In addition, the stock has seen increased volatility and trading ranges over the past 11 weeks, also suggesting that a top may be forming.
DD has delivered disappointing earnings the last 2 quarters, but in September the stock rose from 64.32 to 72.92 based on one of the major holders of the stock (Trian Fund) launching a campaign to force the company to break itself up after the chemical firm rebuffed its repeated private calls for change. It is believed the company would be more valuable if split up than as it is currently built. Nonetheless, nothing has yet happened on that front and is also a decent fundamental reason to believe the stock will erode in price at this time.
DD closed near the lows of the week and further downside below last week's low at 71.05 is expected to be seen this week. If that does happen and the stock closes in the red again next Friday, the double top will be confirmed and selling interest will increase.
To the downside, DD shows some minor to perhaps decent support at the $70 demilitarized zone but the support is mostly from a previous spike high and a couple of very minor previous lows, meaning that it is not dependable support that is only likely to hold if the traders are looking to continue the uptrend. Below the $70 demilitarized zone there is no support until the 66.22 level is reached which does include the 200-day MA, currently at 67.35, and the 50-week MA, currently at 66.70.
Sales of DD between 71.50 and 71.90 and using a stop loss at 73.02 and having an objective of 67.00 will offer a 3 or 4-1 risk/reward ratio, depending on the entry point.
My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
HPQ Friday Closing Price - 39.06
HPQ has been on a tear to the upside for the past 2 years from a low at 11.35 seen in November 2012 to the high seen last week at 39.57. In addition and as an added benefit for the bulls, the stock just finished having a decent correction in Sep/Oct having dropped from 38.25 to 31.62 at the same time the DOW was having its recent correction, meaning the stock could be poised for higher prices.
HPQ spiked up this past week due to a better than expected earnings report and did close near the highs of the week, suggesting further upside above last week's high at 39.57 will be seen. Nonetheless, the stock is reaching the $40 level that has been a strong pivot point resistance/support for the past 9 years and if the DOW is to correct, it is probably the stock will do the same.
HPQ is a speculative play based on the long-standing resistance at $40 as well as the overbought condition of the stock and the index it represents. The probability rating is low but the chart reasons for the short trade are solid.
To the upside, HPQ will find resistance at the $40 demilitarized zone and a bit stronger (but still minor) at 41.74. To the downside, the stock shows very minor support at the low at 37.25 seen the day of the earnings report. Further but also very minor support is found at 36.01 that includes the 50 and 100-day MA's. Nonetheless, the stronger support is not found until the 50-week MA, currently at 33.20, is reached. It should also be mentioned that like the $40 level is considered a long-standing resistance/pivot point level, so is the $30 level considered a long-standing support/pivot point level, meaning it is possible to think the stock may trade between $30 and $40 for the next few months.
Sales of HPQ between 40.00 and 40.30 and using a stop loss at 41.84 and having an objective of 33.35 will offer a 3.7-1 risk/reward ratio.
GS Friday Closing Price - 188.41
GS made a new 5-year high 6 weeks ago at 190.00 (above the previous one made in October at 189.59) but even though the indexes have continued strongly higher, the stock was only able to generate 2 additional weeks of "minor" follow through to the upside, having gotten up to 192.68 4 weeks ago, but then followed by 3 red close weeks since. The action being seen suggests a stock that is "tired" and requires additional positive fundamental news to generate new buying interest. In addition, with the SPX near its fundamental objective of 2100, it is also unlikely the stock will get help from the index it represents.
It should also be mentioned, that the $190-$193.60 area has been a decent to perhaps strong resistance level in GS since an intra-week support level of consequence from April 2007 at 189.25 got broken convincingly in April 2008. Since then, the stock has seen a high of 190.04 (July 2008) and a high of 193.60 (October 2009), as well as the recent high at 192.68, making that area important and pivotal resistance.
To the downside, GS shows support at the 187.55 low seen a week ago Thursday. That low could be pivotal support as the stock is still showing an open gap (considered a breakaway gap) at 187.10, meaning that if the gap is closed it will take away a chart positive. Below 187.55 there is no previously-built support until the 180.00 level is reached. By the same token, the weekly chart does not show any intra-week support until the October low at 171.26 is reached, meaning that if the stock starts heading lower, the $180 level could get broken.
The chart of GS might still see some backing and filling this week with a possible trading range between $187 and $190. Nonetheless, the $190 level must now be considered resistance, if and when the stock is to generate some type of correction.
Sales of GS between 189.70 and 190.30 and using a stop loss at 191.75 and having a $180 objective will offer a 5-1 risk/reward ratio. It should be mentioned that a stop loss at 193.75 can also be used that would reduce the risk/reward ratio but increase the probability rating.
My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
AMZN Friday Closing Price - 338.64
AMZN has been on a downtrend for the past 10 months, ever since the January's earnings report came out. During this period of time the stock has generated 3 rallies (not counting the one the stock is seeing now) and each rally has been lower than the previous one. None of the earnings reports since the one in January have been good enough to change the trend around, suggesting that fundamentally the stock remains a sell.
Five weeks ago, AMZN got down to a previous intra-week low of consequence at 284.38 with a drop down to 284.00 and likely because of the impressive rally in the indexes, the bulls were able to stop the selling and generate a double low at that price that in turn has caused the stock to rally aggressively this past week. Nonetheless, the previous rally high at 349.38 has not yet been broken, suggesting this rally might end up simply being the fourth rally high of the year without a break of the downtrend.
It should be mentioned that the double intra-week low seen in the AMZN chart is not supported by the weekly closing charts as on that chart the stock made a new 52-week low the last time around.
AMZN closed near the highs of the week this past week and further upside above last week's high at 341.26 is likely to be seen. By the same token, the stock gapped up on Friday between 334.65 and 346.03 and that gap will become a magnet if the stock heads higher first without closure.
To the upside, AMZN does not show any intra-week resistance until 346.67 is reached but does show daily close resistance at 343.17. Further resistance will be found at the third rally high in the downtrend at 349.38 (346.38 on a daily closing basis).
To the downside, AMZN does not show any resistance of consequence until the 304.69-305.50 level but even then that resistance is considered minor. The stronger support is found at the double low on the intra-week chart at 284.38/284.00. By the same token, if the stock fails to break the downtrend, the probabilities of the downtrend continuing and the double low getting broken would be high. If that does occur, the downside objective would be the 200-week MA, currently at $262.
Sales of AMZN between $342 and $344 and using a stop loss at 350.35 (346.48 on a daily closing basis) and having a $262 objective will offer a 10-1 risk/reward ratio.
My rating on the trade is 2.75 (on a scale of 1-5 with 5 being the highest).
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Updates
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| Monthly & Yearly Portfolio Results
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Closed Trades, Open Positions and Stop Loss Changes
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Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted. Status of account for 2014, as of 10/1 Profit of $25132 using 100 shares per mention (after commissions & losses) Closed out profitable trades for November per 100 shares per mention (after commission)
NONE
Closed positions with increase in equity above last months close minus commissions. NONE Total Profit for November, per 100 shares and after commissions $0 Closed out losing trades for November per 100 shares of each mention (including commission)
NONE
Closed positions with decrease in equity below last months close plus commissions. ADSK (short) $145 Total Loss for November, per 100 shares, including commissions $145 Open positions in profit per 100 shares per mention as of 11/30
FSLR (long) $98 Open positions with increase in equity above last months close. ENG (long) $200 FB (long) $271 Total $1236 Open positions in loss per 100 shares per mention as of 10/31
NONE
Open positions with decrease in equity below last months close.
FSLR (long) $4040 Total $4282 Status of trades for month of November per 100 shares on each mention after losses and commission subtractions.
Loss of $3191
Status of account/portfolio for 2014, as of 11/30Profit of $21941 using 100 shares traded per mention.
AKS made a new 11-month weekly closing low and did close on the lows of the week and further downside below last week's low at 5.88 is likely to be seen. The stock did have 3 previous weekly closing lows at the 6.12 level so breaking of the support there was not totally unexpected. Nonetheless, the support between 5.70 and 5.79 is now critical since a break below 5.70 will likely mean a retest of the recent 5.14 low and a higher possibility of the original runaway gap between 4.59 and 4.80 being targeted and closed. As such, the 5.70 level needs to hold. Bulls need to generate a green close next Friday and hopefully above the 6.12 level, in order to re-generate buying interest. Decent to strong resistance is now found between 6.80 and 6.83. Probabilities favor the bears this week.
ARNA generated an inside week and a green close in the upper half of the week's trading range, suggesting further upside above last week's high at 4.29 will be seen this week. The action seen was considered positive since the stock did not follow through on the previous week's close near the lows of the week, suggesting the 4.00 level is a level where buying interest is continuing to be found. The bulls still need to generate a green weekly close above 4.37 in order to stimulate new buying interest. Probabilities slightly favor the bulls this week. ENG generated a reversal week, having made a new 14-week high and then closing in the red and on the lows of the week, suggesting further downside below last week's low at 2.29 will be seen this week. Weekly close support is found at the 50-week MA, currently at 2.25 and at the 200-week MA, currently at 1.98. Daily close support though, is found at the 200-day MA, currently at 2.38, and at a previous high daily close of some importance at 2.27. Intra-day support is not found until 2.11 but that is a minor support. The bulls need to hold the stock above the 2.25-2.38 level on a daily closing basis. Any green close now would be a positive. Probabilities slightly favor the bulls. FB had a positive week, having generated a green weekly close and getting into the gap between 79.57 and 76.88 with a rally up to 78.27 this past week. The stock closed near the highs of the week and further upside above 78.27 is likely to be seen. The green weekly close means the previous weeks close at 73.75 was a successful test of the 4-month low weekly close at 72.91 and does suggest the stock may be resuming the uptrend, especially if the gap is closed this week. Intra-week resistance is found at 78.36 and at 79.70. Weekly close resistance is found at 78.79 and strong at 80.67. Closure of the gap, especially if followed by a weekly close above 78.79, will strongly increase the chances of the stock resuming the uptrend above the all-time high at 81.16. Support is found at 75.64 that if broken on a closing basis would be a negative. Probabilities slightly favor the bulls. FCEL made a new 9-month weekly closing low below the previous one made in October at 1.68. The new weekly closing low was only by 1 point though, and if the bulls can generate a green close Friday, it could become a double bottom of consequence. Nonetheless, the stock closed on the lows of the week and further downside below last week's low at 1.65 is likely to be seen. Intra-week support is found at 1.55 and the probabilities are high that level will be seen. If both the intra-week and weekly close levels hold up, it should generate strong buying interest. A break below 1.55 would likely push the stock down to 1.45 which is where the 200-week MA is currently located. A drop down to that line but no weekly close below the line would still keep the stock in a positive long-term mode. A rally above 1.83 would now be considered a positive. Probabilities favor the bears this week. FSLR had a negative week after failing to get above the 100-week MA, currently at 51.90, that it broke to the downside 4 weeks ago. The stock closed on the lows of the week and further downside below last week's low at 47.89 is likely to be seen this week. Intra-week support is found at 47.88, at 47.75, at 47.04 and at 45.94. The bulls need to hold the stock above the 47.00 level and turn the stock around. The stock gapped down between 50.80 and 50.25 and the gap could have some negative connotations as it could be considered a runaway gap when the gap seen on November 10th between 55.80 and 53.48 is considered. By the same token, the first gap was generated with a less than expected earnings report but the second gap was not based on news of the company, meaning that if the bears fail to break below 47.00 that the possible runaway gap will become a magnet. Probabilities slightly favor the bears for this week but the probabilities do favor the stock being in a $47-$53 trading range. FUEL generated another red weekly close and on the lows of the week, suggesting further downside below last week's low at 16.26 will be seen this week. The stock is now nearing a level of support at 15.74 that if broken would weaken the chart substantially and if 15.20 gets broken would put the stock back into a downtrend. Resistance is now found at 17.80 and a bit stronger at 18.60. Probabilities favor the bears but it is a pivotal week for the bulls. They need to generate some new buying interest or the traders will turn bearish. GIGM had an uneventful inside week with very little trading interest (had a .4 cent trading range). The probabilities remain high that the stock has been building a bullish flag formation with the flagpole being the rally from .75 to 1.08 and the flag being the trading range the past few weeks between .95 and 1.08, giving an upside objective of 1.28 if the 1.08 level is broken. The stock closed in the middle of the week's trading range, meaning the traders are waiting for some type of catalyst to generate a break above or below the flag. In the meantime, the stock is likely to continue trading sideways. PACB generated a negative reversal week, having made a new 9-month high and then closing in the red and near the lows of the week, suggesting further downside below last week's low at 6.61 will be seen this week. The red close did make last week's close at 6.85 into a successful retest of the 3-year double top weekly close at 7.19. Weekly close support is found at 6.50 that should be seen next Friday. A break of that support would likely take the stock down to 6.18 and a break of that support would likely generate enough selling to take the stock down to the 5.00-5.50 level. Probabilities favor the stock holding above 6.50 on a closing basis and further buying interest being seen the following week. RFMD generated yet another new 12-year intra-week and weekly closing high this past week and ran up the string of green closes in a row to 7, suggesting that some type of pullback is likely to be seen this coming week. In addition, the stock did get up to the psychological resistance at $15 with a high this past week at 14.97. The stock closed in the middle of the week's trading range, meaning that the door is open for either side to generate some action this week. Nonetheless, the stock did close on the lows of the day on Friday, meaning that the bears are likely to get first crack at last week's lows at 14.35. With no support built until 13.90 is reached, the probabilities slightly favor the bears this week. A rally above last week's high at 14.97 would likely generate new buying but the top of the $15 demilitarized zone at 15.30 is likely to offer resistance under these present conditions. Probabilities favor the bears this week for a small pullback/correction. Long term, probabilities still favor the bulls.
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1) PACB - Averaged long at 6.535 (2 mentions). Stop loss at 6.08. Stock closed on Friday at 6.76.
2) AKS - Averaged long at 7.44 (3 mentions). Stop loss now at 5.69. Stock closed on Friday at 5.92.
3) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at this time. Stock closed on Friday at 1.67.
4) RFMD - Averaged long at 13.13 (2 mentions) Stop loss is at 12.68 on a daily closing basis. Stock closed on Friday at 14.61.
5) GIGM - Averaged long at 1.225 (2 mentions). No stop loss at present. Stock closed on Friday at 1.00.
6) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 2.31.
7) FSLR - Averaged long at 59.404 (5 mentions). No stop loss at present. Stock closed on Friday at 48.80.
8) FB - Averaged long at 73.725 (2 mentions). Stop loss is now at 71.93. Stock closed on Friday at 77.70.
9) FUEL - Purchased at 19.31. No stop loss at present. Stock closed on Friday at 16.35.
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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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