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Issue #457 
December 13, 2015 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Traders Await Fed Rate Decision!
DOW Friday closing price - 17823
The DOW generated a negative week, having failed to follow through on the previous week's rally and close on the highs of the week, to close substantially below last week's low and on the lows of the week, suggesting further downside below last week's low at 17230 will be seen this week. Furthermore, the DOW gave up in just 1 week 99% of the gains garnered over the past 7 weeks, having fallen 625 points from high to low and getting to within 20 points of the intra-week low seen 4 weeks ago at 17210.
The DOW is facing a pivotal week, both fundamentally and chart-wise, given that it is expected the Fed will raise interest rates on Wednesday for the first time in 8 years (a major change of fundamentals) and that the chart is showing pivotal support at the 17000 demilitarized zone that if broken would suggest much further downside would be seen.
To the upside, and on a daily closing basis, the DOW will show minor but likely pivotal resistance at 17574, given that it is the most recent high daily close but more importantly where the 200-day MA is currently located. A close above that level would likely turn the traders back to the buy side. Further but minor intra-week resistance is found at 17767, stronger at 17866 and decent at 17977.
To the downside and on an intra-week basis, the DOW shows decent support at 17210 and then decent again at 17037/17067. On a weekly closing basis, decent support is found at 17164 that if broken would open the door for a drop down to the next level of support down at 16380/16493.
The week ahead in the DOW will be decided fundamentally by whether the Fed raises interest rates or not, but more importantly by how that change of fundamentals is evaluated by the traders (has the rise interest rates been factored in already or not). Nonetheless, the charts will play an integral part as they will be the measuring stick that the traders will use to evaluate how the change of fundamentals will likely affect the market. It is evident on the DOW charts that the 17000 level is a major pivot point as the index has traded above that level for 54 out of the last 60 weeks. As such, any close below the 17000 demilitarized zone would be considered a strong negative.
Having closed out the week on the lows of the week and the fundamentals being presently seen as short-term bearish (lower oil prices and likelihood of an interest rate increase), the probabilities strongly suggest that the DOW will drop down to the 17000 level either Monday or Tuesday as the traders await Wednesday's Fed rate decision. What the index does thereafter, especially if the Fed does raise the interest rate, is a big mystery.
NASDAQ Friday closing price - 4941
The NASDAQ dropped 4% in value this past week, having closed out the previous week at 5142 and at 4941 (201 points lower) on Friday. The index closed on the lows of the week and further downside below last week's low at 4928 is expected to be seen. Nonetheless, no break of important support or sell signal has yet been given.
The NASDAQ is likely to be a key this coming week, given that it is the "only" index that has stayed above the 50-week MA, currently at 4940, for the past 8 weeks and has mostly traded sideways between 4908 and 5173 for that period of time, whereas the other indexes have "straddled the 50-week MA" during the same period of time and have generally shown lower highs on each rally, suggesting that the mid-term downtrend has not yet been negated. As such, all eyes will be on the index at the beginning of the week, with the traders looking to see whether the support below is broken or not.
To the upside and on an intra-week basis, the NASDAQ will show minor to decent resistance at 5008 and again at 5042. On a daily closing basis though, resistance will likely be found at 4975, given that it is where the 200-day MA is currently located. Above that level and again on an intra-week basis, resistance is not found until the 5114/5119 level is reached.
To the downside and on an intra-week basis as well as on a daily closing basis, the NASDAQ shows decent support between 4888 and 4908 that if broken would suggest the bears are once again in control. On a weekly closing basis, decent support is found at 4927 that if broken would suggest 4871 would be seen. A break below 4871 would suggest 4828 would be seen and a break of that support would weaken the chart substantially.
The NASDAQ is likely to move lower at the beginning of the week with the 4886/4908 level as the objective. It is unlikely that level will be broken unless the Fed rate decision is deemed bearish. The entire 4908-4927 level on a daily and weekly closing basis is pivotal and as such, the traders will be closely monitoring those levels for indication as to what is expected to happen the rest of the year.
SPX Friday closing price - 2012
The SPX generated a sell signal on the weekly chart, given that the index closed on Friday below the November low weekly close at 2023. The index closed on the lows of the week and further downside below last week's low at 2008 is expected to be seen.
The SPX is the index mostly likely to be affected by an interest rate hike, suggesting that was the reason the index generated a sell signal on Friday whereas the other indexes did not. Nonetheless, the sell signal still needs to be confirmed next Friday with another close below 2023, meaning that the index is still sensitive to what happens on Wednesday, as well as how the change of fundamentals will be evaluated by the traders. By the same token, the fact that a sell signal was given and that the probabilities favor an interest rate high on Wednesday, does suggest that the probabilities favor the bears overall.
To the upside and on an intra-week as well as on a daily closing basis, the SPX shows minor to decent resistance at 2063, given that level has been of importance on 3 occasions over the past year (2 to the upside and 1 to the downside) as well as where the 200-day MA is currently located. Above that level, intra-week resistance is found at 2093 and at 2104.
To the downside and on an intra-week basis, the SPX shows minor to decent support between 1970 and 1980. Below that level, there is no support until minor support is found at 1904. Decent to perhaps strong support is found at 1867/1870.
The SPX chart suggests the stock will get down to and likely below the 2000 level at the beginning of the week, with the 1972-1980 area as the objective. Nonetheless, thereafter it will be all about the Fed rate decision and the assessment of it. Any break below 1970, especially after the Fed rate decision, will likely bring about further selling and a drop down to at least the 1904 level. Any daily close above 2064 would e considered a positive.
This coming week is highly pivotal as it is expected the Fed will raise interest rates for the first time in 8 years. Having been trading with Fed support and Stimulus for this period of time, it is impossible to evaluate how much an interest rate rise has already been factored into the market no matter how much the traders have already talked about it and are expecting it, meaning the traders are facing a big unknown this coming week. It is likely though, that it will be a pivoting decision that will either thrust the indexes lower or generate new and likely strong buying interest.
There are no economic reports this week that will help or hinder the decision but based on lower oil prices, the uncertainty of how the rate hike will affect the market and the negative action seen last week, it is highly likely that for the first 2 days of the week the indexes will trade lower. By the same token, with some important pivotal supports close by below, it is also unlikely that anything of consequence to the downside will be seen before Wednesday afternoon.
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Stock Analysis/Evaluation
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CHART Outlooks
The market is in a pivotal status this week, given that the probabilities are high that the Fed will raise interest rates for the first time in the past 8 years and it is unknown how much of that outlook has already been factored into the price of the indexes. By the same token, for the past 4 weeks traders have been anticipating the interest rate hike and some (if not most) of the raise has likely been factored into the price. In addition, with oil prices pushing the market down of late and oil nearing a major support level, it is possible that the rise in interest rates will be offset if the price of oil bottoms out.
As such, this week will all be purchase mentions with 2 of the mentions being the same from last week but at lower prices and 1 new one.
PURCHASES
CLB Friday Closing Price - 112.14
CLB provides reservoir description, production enhancement, and reservoir management services to the oil and gas industry in the United States, Canada, and internationally. CLB is also a company on the Motley Fool list of 3 best companies in the oil industry to buy for the long term. See article: (http://www.fool.com/investing/general/2014/12/28/3-best-oil-stocks-for-2015.aspx).
Based on the weekly closing chart, CLB has traded between $102 and $120 for the past 27 weeks but now, because of the price has been dropping, finds itself near the bottom of that trading range (got down to 105.49 this past week), meaning that a good opportunity to buy the stock will probably occur this coming week.
It should be mentioned that in spite of the price of oil dropping and closing at the lowest price in 7 years, CLB did find buying interest this past week, having rallied from the low at 105.49 to close in the upper half of the week's trading range, which in turn suggests that the stock will go above last week's high at 115.87 at some point during the week (likely toward the end of the week).
Oil prices are likely to continue lower at the beginning of the week and the probabilities are high that CLB will test the lows first before heading higher, opening the door for a purchase being considered.
To the upside and on an intra-week basis, CLB shows minor but likely short-term pivotal resistance at last week's high at 115.87. Further but minor resistance is found at 118.03 and at 118.78 and then decent up between 120.00 and 120.87. Above that level, decent resistance is found at 125.42 and then nothing until decent resistance is found again at 134.87. Above 134.87 there is no resistance until the $144 level but it should be mentioned that the 200-week MA is currently at 138.75, and not likely to get broken on a weekly closing basis at this time.
To the downside and on an intra-week basis, CLB shows minor support at 110.00, minor to perhaps decent at 106.92 and decent at 105.49. Below that level, there is no previous intra-week support until the stock gets down to below the $100 level.
CLB has shown inclination toward higher prices, having seen weakness in the price of oil this past week but rallying from its lows in spite of it. In addition, the stock has been above the 200-day MA, currently at 113.90, repeatedly over the past 9 weeks and the chart suggests that next time the stock closes above it, it will likely generate a new high above the high seen in November at 125.42. If that occurs, the traders will likely attempt to get up to the 13-month high at 134.87 and perhaps even test the 200-week MA, currently at 137.90.
Due to the price of oil likely to continue lower this week, CLB is also likely to get back down to at least the 110.00 level if not down near to the 107.00, which will be the opportunity to buy.
Purchases of CLB between 107.00 and 110.0 and using a stop loss at 105.29 and having a 134.87 to 137.90 objective will offer a 5-1 risk/reward ratio.
My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest).
EOG Friday Closing Price - 74.89
EOG is an oil producer that has acreage in the drilling sweet spots of the three best horizontal oil plays in America. Because of that the company can make money even if oil prices slide to $40 per barrel.
EOG generated a negative week this past week due to the price of oil dropping to its lowest level in 7 years. The bullish flag formation got negated this past week, as well as the breakaway gap between 77.45 and 78.00 closed. In addition, the stock closed below the 200-week MA, currently at 78.70, for the first time in the past 10 weeks. The stock closed near the lows of the week and further downside below last week's low at 73.93 is expected to be seen this week.
Nonetheless and in spite of all the negatives mentioned above, EOG is likely only retesting the 29-month low at 68.15, seen in seen in August, as well as the previous successful retest of that low at 69.10 seen in September, meaning that the negatives seen this past week are likely to be limited and short-lived.
Prior to last week, EOG had traded above the 200-week MA for a total of 9 weeks, strongly suggesting that the 17-month downtrend from 118.81 to 68.15 is over. The break below the MA line this past week was caused by the price of oil making new multi-year lows but with the probabilities that oil will soon find support nearby, it does suggest that the break will be negated either this coming week or the next and the short-term uptrend to restart.
To the upside and on an intra-week basis, EOG does show minor to decent resistance between Wednesday's high at 88.40 and up to the high seen in September at 81.18. Above that level, decent resistance is found at the 6-month high at 85.65, which does include and strengthen the resistance given that is the same level where the 200-day MA is currently at. Further resistance is found at the November high at 89.52 and then nothing of consequence until the 94.15 level.
To the downside and on an intra-week basis, EOG shows decent support between 72.85 and last week's low at 73.93. Below that level, support is decent at the September low at 69.10 and strong at the August low at 68.10.
EOG closed on the lows of the week on Friday and further downside below last week's low at 73.93 is likely to be seen this week. Nonetheless, the chart suggests that probabilities of the August and September lows getting broken are minimal, meaning that any weakness this coming week will likely be seen as a buying opportunity by the traders.
Purchases of EOG between 72.87 and 73.04 and using a stop loss at 69.00 and having an upside objective of at least 85.65 will offer a 3-1 risk/reward ratio.
My rating on the trade is a 3.5 (on a scale of 1-5 with 5 being the highest).
BA Friday Closing Price - 144.62
BA has been on a tear to the upside since the August, having rallied from 115.14 to the high seen in November at 150.58. The company fundamentals have not only been strong but the company has continued to grow and the future outlook is bright, suggesting that the dip presently being seen is a good buying opportunity.
For the past 6 weeks, BA has traded between $140 and $150 with both levels offering decent support and resistance. Nonetheless, the stock broke above the 200-day MA, currently at 143.80, 4 weeks ago and the fact the stock has stayed above the line for this period of time is a strong indication that a new leg to the upside will occur after the present weakness in the index market subsides.
BA closed near the lows of the week on Friday, suggesting further downside below last week's low at 142.27 will be seen this week.
To the upside and on an intra-week basis, BA shows minor resistance at 147.45, and decent between 149.18 and 150.58. Above that level, resistance is decent at 155.50 and strong at the all-time high at 158.83, seen in February of this year.
To the downside and on an intra-week basis, BA shows minor to perhaps decent support at 142.71, a bit stronger at 141.59 and then decent between 138.44 and 140.00.
BA is a strong growth company that is likely to be targeting the all-time high at 158.83 and possibly higher if the indexes resume the uptrend next year.
As far as a purchase is concerned, BA is unlikely to see indicative weakness unless the overall market heads strongly lower. The $140 level seems to be brick wall support but it is somewhat unlikely that the stock will head down to that level even if the indexes show weakness at the beginning of the week. As such, reaching up to purchase the stock above the 2 recent lows at 141.59 and at 142.71 seems to be the way to go. Nonetheless, unless a "sensitive" stop loss is placed at 141.49, the risk/reward ratio will not be high.
Purchases of BA between 142.85 and 143.05 and using a stop loss at 138.29 and having an objective of 158.83 will offer a 3-1 risk/reward ratio. The 138.29 stop loss is a strong one but a short-term stop loss can be placed at 141.49 and if stopped out, the stock can then re-purchased on a drop to 140.00.
My rating on the trade is a 3.75 (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 |
| AREX made a new all-time low weekly close on Friday, confirming the break of support seen the previous week. The stock closed on the lows of the week and further downside below last week's low at 1.52 is expected to be seen. There is no support below but the 1.50 level should be considered psychological support and with oil prices within $3 of a major level of support, the probabilities are starting to favor a turn-around with the previous all-time weekly closing low at 2.02 as the first objective. With the stock being driven mostly by oil prices (fundamentals), the chart levels will be used mostly as resistance guidelines that if broken would suggest the selling pressure is over. Pivotal resistance is presently at 2.57. Probabilities favor the bears this week. ARNA generated follow through to the downside off of last week's negative reversal, having convincingly broken below the 2.00 level and now only a few points from the multi-year low at 1.60. The stock closed on the lows of the week and further downside below last week's low at 1.75 is expected to be seen. Support is found at 1.73, at 1.66 and at 1.60 that if broken would suggest a drop down to the 1.50 level. Below 1.50 there is no support until the 1.21 all-time low is reached. The chart does suggest that enough base building has been done that the stock is likely to stop around 1.70 (the bottom of the $2 demilitarized zone) and 1.73 (the spike low seen on October 2nd and turn around). Minor but likely short-term pivotal daily close resistance is found at 1.97 as well as psychological at 2.00. Above that level, daily close resistance is found at 2.20 and then decent to strong at 2.39/2.40. Probabilities favor a turn around this week with the stock likely to see a trading range of 1.70 up to 2.00 or further to the upside if the indexes rally at the end of the week. ENG generated another non-eventful trading week within the 1.00-1.31 trading range the stock seems to be stuck in at this time. The stock did close on the lows of the week and further downside below last week's low at 1.03 is expected to be seen. Support is found 1.00 and resistance at 1.31 and a weekly close above or below those levels will likely stimulate further movement in that direction. Probabilities favor the bears this week. FCEL confirmed the new all-time low weekly close with another red close on Friday. The stock closed on the lows of the week and further downside below last week's low at 6.12 is expected to be seen. Nonetheless, the company announces earnings on Monday after the close and since most of the recent fall has been because of the reverse split, if the earnings report comes in better than expected (expected at $-.28) a rapid appreciation could occur. Intra-week support is found at last week's low at 6.12 and then nothing until psychological support at $5. Daily close resistance is found at the previous low weekly close support at 8.25 that got broken right after the reverse split was announced. Further resistance is found at the gap between 9.49 and 9.78 that was generated after the announcement. Pivotal resistance is found at the recent 10.73 high. Probabilities favor the bulls if for no other reason than the fundamental picture has not changed, meaning that the recent 40% fall in price is related to the reverse split and not to any negative news. FSLR gapped down on Thursday after the less-than-expected guidance report came out. Nonetheless, there was no follow through to the downside on Friday as the stock failed to go below Thursday's low at 52.51 and did get into the 58.42-53.59 gap with a rally up to 56.60, suggesting the earnings report was not as negative as the action on Thursday suggested. The stock did generate a successful retest of the 200-day MA, currently 52.80, as well as of 2 previous high daily closes of importance at 53.48, having closed on Thursday at 54.35 and then generating a green close on Friday. The stock closed in the upper half of the day's trading range on Friday, suggesting further upside above Friday's high at 56.60 will be seen on Monday. By the same token, the stock closed in the lower half of the week's trading range suggesting the stock will go below last week's low at 52.51. Important intra-week support is found at 52.16 that if broken would suggest the $50 level will be visited. Closure of the gap up at 58.42 would be a strong positive, suggesting that the selling pressure will abate. Probabilities favor the bulls. KNDI generated a small sell signal on the weekly closing chart, having closed on Friday below the low weekly close for the past 6-weeks at 9.63. The stock closed in the lower half of the week's trading range, suggesting further downside below last week's low at 9.08 will be seen this week. Minor intra-week support is found at 8.95 and then decent between 8.36 (intra-week low seen the second week of November) and at 8.52, which includes the 200-week MA, currently at 8.50 as well as a strong intra-week low seen in May. Probabilities favor a drop down to 8.50 but a bounce thereafter. A break below 8.36 would suggest a drop down to 7.25. Resistance (likely short-term pivotal) is found at the top of the $10 demilitarized zone and up to 10.42. QRVO bulls were unable to generate follow through to the upside above last week's high (and close near the high) at 60.00, which in turn caused selling pressure to be seen, a drop below the previous week's low at 56.82 and a close in the lower half of the week's low at 54.86, suggesting further downside below that low will be seen this week. By the same token, some buying interest was seen late in the week in spite of the weak close of the indexes, which suggests that the weakness is likely to be only temporary. Support is found at 54.86, at 54.07 and at 53.12, which does include the 100-day MA, currently at 52.80. On a daily and weekly closing basis, support is minor to decent between 55.12 and 55.55 that should not get broken (on a closing basis) if the stock is to head back up to the upside objective between $62 and $63, Probabilities favor the bulls, though some weakness could be seen at the beginning of the week. WMT has held up well during the past 4 weeks as the indexes have been under sell pressure, having generated 3 red weekly closes in a row but only falling a total of 71 points from the high weekly close at 60.07 seen on November 20th. Nonetheless, the stock did close in the lower half of the week's trading range, suggesting further downside below last week's low at 58.81 will be seen this week. Support is found at 58.31 that not only represents a short-term pivotal support but also a level that if broken would suggest the breakaway gap at 58.03 would be closed. Closure of the gap would suggest the stock would fall down to at least the 56.77-57.00 level. A successful retest of the 58.31 level and non-closure of the gap would likely stimulate enough new chart buying interest to take the stock above the recent high at 61.47 and up to the mention's objective at 63.00. The key issue for this week will be the gap. Overall though, the bulls seem to have been successful in building a decent support base to keep the stock trading for at least a few weeks between $57 and $63. Probabilities slightly favor the bulls this week. XOM made a new 10-week low and closed near the lows of the week, suggesting further downside below last week's low at 73.79 will be seen this week. Stock is following the price of oil and as such, further downside is expected to be seen this week. Support is not found until 71.51/71.72 level is reached but even then that support could easily be broken since there are multiple bottoms in that area. As such, there is a decent possibility the stock will get back down to the $69-$70 level to retest the 5-year low at 66.55 seen in August. Present stop loss is 73.69 but if the stock is unable to get above 74.95 on Monday, consideration should be given to liquidating the positions before the stop loss is hit and re-purchasing the stock on a drop to the $70 level, using a stop loss at 66.45.
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1) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at present. Stock closed on Friday at .54.
2) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.04.
3) FSLR - Purchased at 53.52. Averaged long at 57.428 (6 mentions). No stop loss at present. Stock closed on Friday at 55.26.
4) AREX - Averaged long at 6.013 (3 mentions). No stop loss at present. Stock closed on Friday at 1.61.
5) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.75.
6) WMT - Averaged long at 57.285 (2 mentions). Stop loss at 55.58. Stock closed on Friday at 59.66.
7) QRVO - Averaged long at 47.895 (2 mentions) Stop loss now at 49.65. Stock closed on Friday at 59.36.
9) KNDI - Averaged short at 9.62. No stop loss at present. Stock closed on Friday at 9.53.
10) XOM - Covered shorts at 81.30. Averaged short at 84.34. Profit on the trade of $680 per 100 shares (2 mentions) minus commissions.
11) DXD - Liquidated at 2000. Averaged long at 20.08. Loss on the trade of $16 per 100 shares (2 mentions) plus commissions.
12) XOM - Purchased at 74.48. Stop loss at 73.69. Stock closed on Friday at 74.34.
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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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