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Issue #405 
December 7, 2014 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Economy News Positive, Indexes Continue Uptrend!
DOW Friday closing price - 17958
The DOW generated yet another green weekly close, the 7th in a row and that suggests that the index will once again close in the green next Friday since over the past 10 years the index has only had 2 runs of over 6-weeks in a row of green closes and both of those were 8 weeks. As it is, the index generated a positive reversal, having gone below the previous week's low and then closing above the previous week's high and on the high of the week, suggesting that further upside, both intra-week and on a weekly closing basis, will be seen this week.
The DOW has now gotten up to the 18000 demilitarized zone, having seen a high this past week of 17991 but the bulls can ill afford to allow the bears to generate a red close this week as it would open the door for the bears to say the upside objective has been reached. With the fundamental news being all positive and no catalytic news scheduled for this week, the bulls need to make a statement by closing the index above 18000. Such a statement would allow the bulls to keep the index up at these levels (give or take a bit) for the next few weeks, at least until the New Year and the new reports that come out then. That scenario fits well with what usually happens during the Xmas holiday period.
The DOW did make a minor spike low at 17814 on Thursday and that level is now going to be seen as a small trigger point to the downside that if broken would generate dips down to the 17700 area.
To the upside, the 18000 demilitarized zone in the DOW will offer some resistance but the last 2 times that the index broke above a major even level such as 16000 and 17000, it continued upward anywhere from 151-176 points, suggesting that any kind of pull back or mini correction will not occur until the index reaches the 18150-18176 area.
Action in the DOW for the next 3-4 weeks will diminish each week as the end of the year approaches. Probabilities for this week will favor it being a small trading range weeklike 17900 to 18100 or something in that neighborhood.
NASDAQ Friday closing price - 4780
The NASDAQ was outperformed by the other indexes this past week, having been the only index to generate a red weekly close. The reversal of leadership has to be of some worry to the bulls as it means the money is flowing into the safety of the Blue Chip stocks rather than into speculative ones. By the same token, speculative buying at the end of the year is not something that makes a lot of sense since many traders are absent from the market and will wait for next year to start buying again.
The NASDAQ did close near the highs of the week and further upside above last week's high of 4788 is likely to be seen. Nonetheless, with December generally being a slow month, the probabilities of the index running up to 5132 this month has been curtailed substantially with the lack of strong participation last week.
By the same token, if the NASDAQ gets above the recent high at 4810, the traders might be tempted to generate a run since there is absolutely no resistance above until 4976 is reached.
To the downside, the NASDAQ will show some short-term pivotal support at 4724. A break of that level would likely stop the upside momentum for the rest of the year.
Probabilities slightly favor the NASDAQ making a new 14-year high this week, above the recent high at 4810, but not making much inroad to the upside. Possible trading range for the week might be something like 4763 to 4830.
SPX Friday closing price - 2074
The SPX made a new intra-week and weekly closing high this week and closed near the highs of the week, suggesting further upside above last week's high at 2079 is likely to be seen. Nonetheless, buying interest has waned as the index has only rallied 8 points (2071-2079) over the past 10 trading days, suggesting that getting up to the 2100 objective mentioned by many analysts is not going to be easy or fast.
The SPX, like the DOW, generated a positive reversal, having gone below the previous week's low and then closing at last week's high. The positive reversal does suggest the index will close once again in the green next Friday.
To the upside, the SPX has no resistance above, except psychologically at 2100. To the downside, the SPX now shows show minor intra-week support 2062 and stronger as well as likely pivotal at 2049.
The SPX is likely to continue inching upward until the end of the year with 2100 as the upside objective. The 2049 level will now be considered important short-term support, meaning that the index is likely to trade within a 50 point trading range for the rest of the year.
The fundamental information that came out this week was all positive and does suggest that the rest of the year the indexes will be supported and generating higher prices. By the same token, the end of the year usually means small trading ranges and limited movement, meaning that little will be accomplished during the next 4 weeks.
Retail Sales and PPI are the important reports due out this week but neither of those reports is likely to be catalytic in any way. Probabilities favor further upside this week but with limited gains and labored trading.
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Stock Analysis/Evaluation
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CHART Outlooks
With the economic reports all being positive and showing the economy continuing to grow, as well as December being a generally positive month, the probabilities now favor further upside for the next 3-4 weeks.
All mentions this week will be purchases but then again there are specific chart reasons for these 2 mentions that have more to do with the individual chart pictures of the stocks than of the indexes likely to head higher. In addition, these mentions are tailored more for a short term trade than a longer term one, looking to take advantage of the general support found in the market in December.
PURCHASES
LEN Friday Closing Price - 45.55
LEN made a new 7+-year high 5 weeks ago, breaking above an intra-week double top at 44.40 (43.82 on a daily closing basis) and then rallying up the 48.00 level where some technical profit taking interest began to be seen, likely from the fact the stock got close to the $50 demilitarized zone which is a natural resistance level where selling should be seen.
LEN closed on the lows of the week last week and further downside below last week's low at 45.43 is likely to be seen, likely with the trader's intent of testing the breakout level at 43.82-44.40 where support will probably be found while building a level from which the $50 can be attacked.
During the last bull market between 2003 and 2007, LEN traded between $40 and $68 and having now made a new multi-year high and established itself clearly above the $40 level once more, as well as having an index (the NAZ) that is close to reaching its all-time high at 5132, it does make sense to think the stock will be trading once more above the $40 and with at least a $50 objective, if not up to the all-time high at 68.86.
To the downside, LEN will show support on a daily and weekly closing basis between 43.82 and 44.40. Further support will be found on an Intra-week basis at 42.46, which was a positive reversal week low seen the first week of November.
To the upside, LEN shows minor resistance at the recent 48.00 high but with little or no history of previous resistance there, the probabilities are high that the $50 demilitarized zone will be reached. By the same token, no previous resistance above 48.95 is found until 54.61, meaning that the $50 demilitarized zone may not stop the rally once it gets going.
Purchases of LEN between 43.82 and 44.40 and using a stop loss at 42.25 and having a $54 objective will offer a 5-1 risk/reward ratio.
My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
AMZN Friday Closing Price - 312.63
AMZN has done much of what has been expected of it during the past few week, having found resistance above $340 and now getting close to the short-trade objective of $304-$307.
With AMZN likely trading technically at this time and the downside objective probably to be reached this coming week, as well as the the stock indexes still showing a tendency to continue rallying to the upside, a long trade can now be considered, if the stock reaches the desired entry point.
To the downside, AMZN shows intra-week support at 304.58 and minor at 303.84. On a daily closing basis, the stock shows support at 307.06 and then minor at 302.86. To the upside, the stock will show minor intra-week resistance at 318.98 and then nothing of consequence until daily close resistance between $324 and $326 is reached. Further intra-week resistance is found at 332.88 and then at the trade's upside objective between 337.40 and 338.33.
AMZN closed near the lows of the week and further downside below last week's low at 310.84 is likely to be seen. The probabilities favor the stock getting down to at least the $307 level which is where daily close support is found. Nonetheless, on an intra-week basis, the stock could get down as low as the 303.84-304.58 area.
Purchases of AMZN between $304 and $307 and using a stop loss at 302.65 and having a 337.40 objective will offer a 6-1 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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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| AKS confirmed the break of weekly close support at 6.12 with a second red close in a row. Nonetheless, the bears were not able to generate a break of the intra-week low at 5.14 and the bulls were able to generate enough buying to close the stock in the middle of the week's trading range, suggesting the probabilities slightly favor the stock moving up to test the 6.00-6.12 level rather than the bears having success in keeping the downtrend moving down. Either way, this coming week is likely to be non-eventful with a trading range something like 5.50 to 6.00. ARNA had a very uneventful week, having traded almost exactly the same trading range as the previous week (4.05-4.29). Nonetheless, the stock did generate a second green weekly close in a row and a close near the highs of the week, suggesting that further upside above last week's high at 4.30 will be seen this week. The stock shows decent intra-day resistance at 4.30, which is where the 200 10-minute MA is currently located, and that is a line that has not been broken to the upside for the past 12 days even though the line has been tested 3 times. A break above that line would be seen as a positive statement and would likely stimulate new buying. By the same token, the bulls still need to generate a weekly close above 4.37 to get the traders to buy in to the long side, meaning that no matter what the stock does during the week, all eyes will be on a weekly close above 4.37 before anything longer term gets decided. Probable trading range for the week is 4.23-4.54. A break below 4.13 would now be considered a short-term negative. ENG generated another down week, the second in a row, with the likely intent of testing the breakout above the 200-week MA, currently at 1.97. The stock closed at 1.94 on Friday and that means that if the stock closes in the green next Friday that the MA will have been tested successfully. Nonetheless, the stock did close on the lows of the week and further downside below last week's low at 1.93 is likely to be seen. Intra-week support of some consequence is found between 1.78 and 1.86 and intra-day support of consequence is found at 1.90, which is where the 200 60-minute MA is currently at. Resistance is found at 2.15 and a bit stronger and more pivotal at 2.37. Probabilities slightly favor the bulls this week with a possible trading range of 1.90 to 2.37. The bulls "need" a green close next Friday, as well as preventing closure of the gap between 1.59 and 1.78. A weekly close above 2.47 would be a "strong" positive. FB had an uneventful week as well, having generated an inside week. Nonetheless, the weekly close was a red one and that does set up a potential negative Head & Shoulders formation on the weekly closing chart, with the left Shoulder at 78.79, the Head at 80.67, and the right shoulder at the previous week's close at 77.70. The H&S formation will be negated if the stock closes next Friday above 77.70 and fulfilled if it closes below 73.75. The stock did close near the highs of the week and further upside above last week's high at 77.31 is likely to be seen. The chart is mostly non-committal though it has to be said the bulls still have an edge due to the fact the stock is in an uptrend. FCEL made a new 10-month intra-weekly low at 1.52, below the previous low seen 2 months ago at 1.55. Nonetheless, the bulls were able to generate a positive reversal, having closed in the green and in the upper half of week's trading range, suggesting the stock will go above last week's high at 1.77 this week. If that occurs and a green close is seen next Friday, a double bottom on both the intra-week and weekly closing chart will be built, which in turn should bring in new buying as well as short-covering. Resistance is found at 1.83 and a bit stronger at 1.95. Support is found at 1.64 and then at the double bottom between 1.52 and 1.55. Nonetheless, the bulls should hold the stock at 1.64 in order to give themselves the chance to go confirm the positive reversal. Probabilities slightly favor the bulls. FSLR made a new 14-month intra-week and weekly closing low on Friday and the stock closed in the lower half of the week's trading range, suggesting further downside below last week's low at 45.46 will be seen. Nonetheless, the weekly close was at 46.91 and the probabilities favor that "general" support (at $47 - $3 below the $50) level holding up on a weekly closing basis, meaning that the stock should generate a green close next Friday. If the bulls are unable to generate any buying this week and the stock generates yet another red close next Friday, it will be a strong negative statement as there is no support below until 40.46 is reached and even then that support is considered minor. Resistance is found at 47.56 that if broken would likely mean some buying interest would be generated with the $50 demilitarized zone as the objective. Last week's high was 48.78 and if the bulls are able to get above that level, it will be seen as a positive statement. Probabilities still favor the bears. GIGM has now generated 5 weeks of uneventful trading, having closed each of the last 5 weeks in a trading range between .99 and 1.02. The intra-week high at 1.08 and the intra-week low at .94 cents remain pivotal as a break above or below those levels is likely to generate additional movement in that direction. The chart at this moment offers no clue as to what that direction will be, and that may continue to be the case for the next 4 weeks. PACB generated an uneventful inside week but the stock did close near the lows of the week, suggesting some downside below last week's low at 6.62 will be seen this week. Weekly close support is found at 6.50 that should be seen at some point this week. 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. Resistance is found at 6.84, at 7.13 and at the recent high at 7.45. Probabilities slightly favor the bears and a drop down to 6.18. 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 8, suggesting the stock is presently in a runaway-freight-train category. No resistance from previous high weekly closes is found until the $18-$20 level is reached. Some very minor resistance is found in the low to middle $16 level but it is from previous "low weekly closes" and is from 12-14 years ago, suggesting that it will not have much of an effect. Probabilities strongly favor the bulls continuing the rally but each green close week does increase the overbought condition of the stock, meaning some pull-back can be seen at any moment.
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1) PACB - Averaged long at 6.535 (2 mentions). Stop loss at 6.08. Stock closed on Friday at 6.70.
2) AKS - Averaged long at 7.44 (3 mentions). No stop loss at present. Stock closed on Friday at 5.66.
3) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at this time. Stock closed on Friday at 1.69.
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 15.62.
5) GIGM - Averaged long at 1.225 (2 mentions). No stop loss at present. Stock closed on Friday at .99.
6) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.96.
7) FSLR - Averaged long at 59.404 (5 mentions). No stop loss at present. Stock closed on Friday at 46.91.
8) FB - Averaged long at 73.725 (2 mentions). Stop loss is now at 71.93. Stock closed on Friday at 76.36.
9) FUEL - Liquidated at 15.28. Loss on the trade of $404 per 100 shares plus commissions.
10) GS - Shorted at 190.60. Covered shorts at 192.77. Loss on the trade of $217 per 100 shares plus commissions.
11) DD - Shorted at 72.33. Covered shorts at 73.04. Loss on the trade of $71 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
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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