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Issue #430 
June 7, 2015 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Economic Reports Positive, Reaction Negative?
DOW Friday closing price - 17849
The DOW reiterated the failure to follow through signal given the previous week, having generated another red weekly close on Friday. The index closed on the lows of the week and further downside below last week's low at 17822 is likely to be seen this week.
The DOW is leading the parade to the downside and that could be a sign that the indexes have reached an important mid-term top, inasmuch as the Blue Chip stocks, which normally would be bought for safety if the traders were thinking the market is "on pause", are being liquidated or perhaps even shorted.
To the upside, the DOW now shows minor intra-week resistance at the 18000 demilitarized zone (17970-18030), a bit stronger at 18103, and minor to perhaps decent between 18168 and 18205. Above that level, there is decent resistance at 18288 and strong at 18351. To the downside, there is minor to perhaps decent support between 17733 and 17774, and likely pivotal support, at least on a closing basis, between 17579 and 17635, which does include the 200-day MA, currently at 17635.
With the close on the lows of the week and nothing scheduled on the calendar for the beginning of the week that could give the bulls fundamental ammunition for a rally, the DOW is highly likely to get down near the 17700 level which has been considered somewhat of a general but pivotal support level since February. Last month's low was 17733 and the lowest weekly close for the past 5 months has been 17712, meaning that if the bears can get the index to go below last month's low and close below 17712 next Friday, the technical selling that would ensue would likely take the index down to the 17000 level, which is the next level of support on the monthly chart.
The 18168 level in the DOW has now taken on additional meaning, inasmuch as it is the present high for the month as well as an intra-week level of resistance that has held the index down on 3 previous occasions since April, and should be bulls be successful in getting above that level after the weakness seen this past week, it would be a chart accomplishment that would likely generate new buying interest. Nonetheless, based on the action seen last week after the better than expected Jobs report came out, the probabilities now favor the DOW continuing to trade sideways (as has been seen the past 6 months) but with a slight bearish bias as technically speaking, the chart now favors the bears.
Expect the bulls to attempt a rally on Monday to negate Friday's weekness. Nonetheless, if the bulls are unable to get above the 18000 demilitarized zone, especially if unable to get above the "bottom" of the demilitarized zone at 17970, the selling pressure will resume and likely stronger than seen on Friday.
NASDAQ Friday closing price - 5068
The NASDAQ generated a minor red weekly close on Friday (3 points below the previous week's close), suggesting the buying interest is still being seen in the Tech sector, in spite of the weakness seen this past week in the other indexes. Nonetheless, the index has now generated 9 red weekly closes out of the last 15 and moved up only 46 points in value (in spite of stocks like NFLX that have appreciated +50% in value during the same period of time), suggesting the bulls are starting to run out of ammunition with which to keep the bullish sentiment alive.
The NASDAQ once again this past week attempted to make a new all-time intra-week high (above 5132) but the index was only able to get up to 5114 before selling was seen. It must be said the index has now been above 5097 on 12 occasions during the past 6 weeks (on 10 occasions in the last 12 trading days) but the bulls have failed each and every time to even get above the high seen on April 27th at 5119. The ensuing summer doldrums and lack of positive catalytic news, added to the consistent failures seen, suggest the traders are now likely to give up trying to take the index higher, at least until October when the market ramps up again.
To the upside, the NASDAQ shows decent intra-week resistance between 5103 and 5119. Strong resistance is found at the all-time high at 5132. To the downside, the low seen 2 weeks ago at 5016 has to be considered indicative support, inasmuch as a drop below that level would give the bears chart reasons to sell. On a closing basis, the 5000 demilitarized zone has to be considered decent support, both psychologically and chart-wise but on an intra-week basis, there is no previous support until 4931 is reached. More important support is found at 4888, which includes the 100-day MA, currently at 4890, that has not been broken convincingly since October of last year.
The NASDAQ generated a green daily close on Friday and it is expected that the first course of action for the week will be to the upside, above Friday's high at 5074. It is likely the bulls will use that rally to try to stimulate new buying interest and a new attempt at the recent highs. Nonetheless, there is some minor but possibly indicative intra-day resistance found at 5087 and if the bulls are unable to break that level on Monday, the disappointment will be high, which in turn could bring about new selling interest at the end of the day, as was seen in the other indexes at the end of the week.
The NASDAQ will likely be the index the traders watch, inasmuch as it represents the bull side of the market. The level the traders will be watching is the recent 5016 low that if broken would suggest the "tide has turned" and the bears have the edge.
SPX Friday closing price - 2092
The SPX confirmed the previous week's failure to follow through, having generated another red close on Friday. In addition, the index also gave a small sell signal on Thursday when the index closed below the 2099 and 2103 low daily closes seen during the past 4 weeks and confirmed that break with another red close on Friday.
The SPX closed near the lows of the week and further downside below last week's low at 2085 is likely to be seen, especially if the bulls are unable to get above the psychological resistance at 2100 early in the week.
To the upside, and on a daily closing basis, the SPX will show resistance at 2100. Nonetheless, on an intra-week basis, no resistance is found until minor resistance at 2106. Further and likely pivotal resistance is found between 2111 and 2114. Additional resistance is found at 2121 and at 2125 and strong at the all-time high at 2134. To the downside, minor intra-week support is found at last week's low at 2085 and also at 2072. Decent and certainly short-term pivotal support is found at 2067 that if broken would likely take the index down to the strongly pivotal support at 2039, which does include the 200-day MA, currently at 2045.
The weekly chart of the SPX offers 2 levels of support (at 2067 and at 2039) that are important. The 2067 level is likely only important for the very short-term as a break of that level would likely take the index down to 2039. Nonetheless, a break below 2039 would be more indicative as it would suggest the 2000 level will be visited, which in turn would strongly increase the chances that a high for the next 3-6 months has been found at 2135.
It should be mentioned that the SPX has been somewhat of a "follower" this year, either siding with the NASDAQ or the DOW when mixed signals are given. Nonetheless, whichever side it favors has usually been the winning side, at least as far as the short-term is concerned. On this occasion, the index is siding with the DOW, suggesting that the market is likely headed down.
The bulls got what they asked for this week, with the ISM Index and Jobs reports coming in better than anticipated. Nonetheless, the traders were evidently more worried about interest rates being raised due to an improving economy than what an improving economy can do to the already high prices being seen in many stocks, as the better than expected reports actually generated a negative reaction.
Having seen that occur this past week, it does leave the bulls without much ammunition to generate new buying as the economic slate for this week (Retail Sales on Thursday) is meagre and not likely to help the bulls in any way. In addition, the Greek debt situation has been extended to the end of the month but it is not likely to get any better, meaning that there is still one big negative hanging over the market.
The traders are now facing mounting reasons (Summer doldrums, sell in May and go away adage, Interest rate hike likely for September, and lack of "new" buying interest) to suggest that the probabilities favor the downside for the time being.
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Stock Analysis/Evaluation
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CHART Outlooks
Though this past week was supposed to be indicative of direction for the summer, the mixed action between the indexes did not offer much clarity to the traders as to what is to come. The DOW and the SPX suggest a summer top has been made while the NASDAQ and the Tech sector continued to lean toward further upside. With the signals still mixed, it is difficult to be aggressive in any direction, at least in a general way.
The mentions this week continue to lean more on the charts of each individual company and not on the overall market. The same 2 mentions from last week are involved but with the desired entry point levels changed, as well as the stop loss levels. The mentions remain viable but the lowered stop loss levels on the 2 mentions from last week have reduced the probability numbers (though not greatly as the indexes now seem to be leaning to the downside and that would help most stocks head lower).
SALES
LNG Friday Closing Price - 71.61
LNG is a natural gas company that moved up from $.95 cents to $85 from October 2008 to September 2014. The stock accelerated the rally after it made a new all-time high in December 2013, above the previous all-time high at 44.40 that had stood up for 7+ years before it got broken. Nonetheless, for the past 10 months the stock has been showing strong volatility and has built a double top on the monthly closing chart at 80.26 and 80.53 which suggests the stock is not likely to go higher at this time and probably will spend a few months exploring the recent support levels built, which are $15 lower than where the stock is presently trading at.
LNG was given as a sell mention last week but failed to reach the desired entry point and as such the short trade was not instituted. The stock took a $6 tumble in price (got down to 68.97) and in the process broke the 200-day MA, currently at 74.75, which had held firm (with 1 exception) during the past year. The bulls were able to generate a small recovery rally on Friday and closed near the highs of the day, suggesting that the stock will go above Friday's high at 72.70, meaning that a retest of the breakdown level at 74.75 is likely to occur before the week is over.
To the upside, LNG shows minor resistance starting at 73.71 and up to 74.75 from previous lows of consequence. Further and likely pivotal resistance is found at 76.98, which is the last high seen prior to the break.
To the downside, LNG shows minor support at the $70 demilitarized zone, a bit stronger at last week's low at 68.97 and at 68.76 and then a bit stronger again at 67.12, which was a spike low seen in August as well as being a "general" support level. Below that level, decent support is found at 65.68 that if broken would suggest the $60 level will be visited.
LNG broke an important support line last week and it is likely that level will be tested before further selling is seen, especially since the stock already corrected 8% in value with the break. Nonetheless, keeping in mind that the probabilities do favor the indexes getting into a seasonal correction, if the retest of the break is successful, the monthly chart suggests the stock could fall down to the $63-$65 level before any new buying is seen.
Sales of LNG between 74.65 and 75.00 and using a stop loss at 77.08 and having a 65.00 objective will offer a 4-1 risk/reward ratio.
My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest).
USG Friday Closing Price - 28.84
USG is a manufacturer and distributor of building materials world-wide that has been stuck in a $24 to $31 trading range since September 2012 (139 weeks), with only 14 of those weeks (10%) trading either above or below those levels.
USG saw a low of 24.61 just 11 weeks ago and since then has been rallying, likely with the objective of reaching the top of that trading range once more. Nonetheless, the bulls failed this past week to get above the recent high at 29.35 (got up to 29.20) and then proceeded to close on the lows of the week, suggesting not only that the stock will go below last week's low at 28.00 but that further upside may not be seen without the indexes heading higher.
To the upside, USG shows intra-week at 29.36, at 29.86, at 30.44, at 30.97 and at 31.34. To the downside, support is found at 27.54, at 26.38, at 26.03 and at 24.61. Further support on a weekly closing basis, is found at 23.90, which is where the 200-week MA is currently located. The possibilities of the stock getting down to that level, if it fails to get above the recent high at 29.35, are high.
USG did get down to the 200-day MA, currently at 27.95, with the drop down to 28.00 seen on Thursday. The stock did see a bounce to close near the highs of the day on Friday and further upside above Friday's high at 28.46 is likely to be seen on Monday. Nonetheless, with the stock closing out the week near the lows of the week and the failure to get above the 29.35 high seen a couple of weeks ago, the desired entry point has been lowered, as well as the stop loss point to be used.
USG is a trade that is based mostly on 125 weeks of trading sideways, suggesting strongly the sideways trend will continue. Nonetheless, it should be mentioned that the low seen during the past 139 weeks has been 21.35 and the monthly chart does suggest that a drop down to that level is more likely to occur than not.
Sales of USG between 28.65 and 28.85 and using a stop loss at 29.45 and having a 23.90 objective will offer a 4-1 risk/reward ratio.
My rating on the trade is a 2.75 (on a scale of 1-5 with 5 being the highest). The rating has been lowered from 3.75 to 2.75 due to the lowered stop loss point that does lower the probabilities of the trade being successful. By the same token, if the index evaluation is correct and the action seen this past week in the stock is indicative, the stock should not see higher levels anymore.
SINA Friday Closing Price - 56.08
SINA is a Chinese company servicing the online media needs of the Chinese (much like YHOO and GOOG does in the U.S. and worldwide). Due to a few blunders as well as some government regulations that directly affected the company, the stock had gotten into a strong downtrend that started in October 2013 at a price of 92.83 and that reached a low of 31.92 just 10 weeks ago.
Nonetheless, SINA reported positive investment gains as well a slightly better outlook for 2015 on its April earnings report and some short covering (as well as some speculative buying) was seen, taking the stock up to and above the previous 42.45 high that had held the stock down for the previous 8 months.
The rally, which topped out at 44.87, began to fade as SINA seemed to be on its way back to test the breakout level when it was announced on June 1st that the CEO of the company had purchased $465 million of stock in cash at a price of $41.49 and that news caused an additional flurry of buying and short-covering, taking the stock up to a high of 56.99 seen last week.
The purchase of the stock by the CEO is certainly a strong statement of belief in the future of the company but it must be stated that the outlook for the company for 2015, as stated by the company itself, is at best mediocre and as such the present prices are not likely to represent the "present" true value of the company, especially after jumping up almost double in price over a 10-week period of time.
Chart-wise, SINA is reaching the 200-week MA, currently at 58.50, which is a line that has been pivotal support and resistance for the stock since 2012. In 2013 when the stock was trading below the line, the line was tested successfully on 4 occasions (at 58.77, at 59.60, at 60.81 and at 61.74), suggesting that without some strong earnings figures, the line is likely to be difficult to break at this time.
As far as the downside, SINA shows no support until 51.26 is reached. Further support is found 46.86, at 45.68, at 43.12 and at 41.25. With the CEO having purchased the stock at 41.49, it is highly unlikely that the stock will fall below the 41.25 support, which is considered decent support on the charts already. Nonetheless, in 2013 after the stock tested the 200-week MA successfully, it fell back down to 45.68 and that level is certainly a viable objective.
SINA is likely to see follow through to the upside this week but does face the MA line as it approaches the 58.77 level. With the line being mostly a weekly closing resistance, on an intra-week basis the stock could get up as high as 61.74, though in reality the probabilities do not favor the bulls having that much success.
Sales of SINA above 58.69 and using a stop loss at 61.85 and having an objective of 45.68 will offer a 4-1 risk/reward ratio.
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 generated another red weekly close, the 5th in a row and the 6th out of the last 7 weeks but the short-term downtrend was at least stopped as the stock stayed above the previous week's low at 6.55 and traded mostly sideways during the week in a 50 point trading range between 6.71 and 7.21. The stock did close near the lows of the week and further downside below 6.71 is likely to be seen but if the recent low at 6.55 holds up, the bulls might be able to generate a positive reversal by next Friday. The probabilities still favor the bears but less so than the past few weeks. ARNA had a decently strong week with the bulls generating a close above the 200-day MA, currently at 4.30, as well as a close on the highs of the week, suggesting further upside above last week's high at 4.37 will be seen this week. Nonetheless, the bulls still have more to accomplish before new buying is seen, inasmuch as the stock closed at a level of weekly close support/resistance between 4.31 and 4.39 that has been an important pivot point level since October 2013. A close above 4.39 any "day" this week would be considered a decent positive inasmuch as a small buy signal will be given if that happens. A close next Friday above 4.64 would "seal the deal" for the bulls. Decent and likely short-term pivotal intra-week support is now found between 4.09 and 4.15 that needs to hold up for this rally to continue forward. Probabilities now slightly favor the bulls. COF generated a positive reversal week, inasmuch as the stock went below the previous week's low and closed in the green and on the highs of the week, suggesting further upside above last week's high at 85.01 will be seen this week. What made the positive reversal more indicative of strength was the fact the indexes closed in the red and on a negative note. Nonetheless, the stock still shows minor to perhaps decent intra-week resistance at 85.39 and decent at the recent 9-year high at 85.68, as well as at the high seen in 2004 at 85.97. If the stock can get above 85.97, it will probably keep on going higher to test the all-time high at 90.04. Support is found at 83.48 and at 83.05, which is a level that if broken would swiftly turn the outlook to a bearish one. Probabilities favor the bulls but if the indexes head lower it could be enough to turn the tables around. ENG experienced some unexplained volatility on Thursday and Friday, having generated a 17 point and 15 points trading range during those 2 days. Given that the stock has not seen that kind of trading range during the past 35 trading days, it was surprising that no public news seems to have been attached to the event. It was announced several weeks ago that the company would be buying back some $2 million dollars in shares and that is probably the explanation for the volatility. By the same token, such a purchase has to be considered a positive, meaning that the unexplained volatility is probably good news for the bulls. Nonetheless, on a weekly closing basis, the bulls were not able to accomplish anything of consequence, meaning the outlook remains the same. Pivotal support is found at 1.42 and pivotal resistance at 1.74. The stock is not showing any indications of direction though right now the bears still seem to have the edge. FCEL had an uneventful week, having generated a small trading range of 7 points for the week. The company reports earnings on Monday after the close and off of the report the stock is likely to move. Minor but short-term pivotal resistance is found at 1.28. Decent and also pivotal resistance is found on the weekly closing chart at 1.45. Minor to perhaps decent support is now found at 1.14/1.15. FSLR generated a positive reversal week, having made a new 14-week low and then turning around to close in the green and on the highs of the week, suggesting further upside above last week's high at 51.74 is likely to be seen. Minor resistance is found at 51.87 and then nothing until the bottom of the gap between 54.90 and 53.03 is reached. Support is now found at last week's low at 49.26 and a bit stronger at 47.03. Probabilities continue to favor the stock being in a $47-$53 trading range but it is likely the top of that trading range will be tested this week. Closure of the gap at 54.90 would be a strong positive. NFX had a relatively uneventful week but did generate a spike type rally on Friday, as well as a close near the highs of the week, suggesting further upside above last week's high at 38.08 will be seen this week. Resistance is found at 38.17 and at 38.45, which is a level that if broken would suggest the stock would rally up to at least 39.37. The chart picture using the weekly chart is unclear, inasmuch as the action suggests a rally and break of short-term resistance will occur this week but the chart remains somewhat unfulfilled as far as the downside is concerned. Probabilities favor the bulls this week but if unable to get above 38.45, it would not be surprising to see a downside reversal occur. TOL generated an uneventful inside week as well as a close in the middle of the week's trading range, which means that the stock is likely to follow whatever the overall index market does. By the same token, the bears presently have the edge as the stock is showing a bearish inverted flag formation with a downside objective of 33.59 if the recent low at 35.63 is broken. Resistance is found between 36.92 and 37.18 that if broken would negate the bearish flag and likely generate enough buying to take the stock back up to the mid 38's. The first course of action for the week is likely to be to the upside, above Friday's high at 36.51. Stop loss should be placed mentally at 37.28. Probabilities slightly favor the bears. XOM generated a new 8-week low this past week and closed near the lows of the week, suggesting further downside below last week's low at 83.78 will be seen this week. The stock shows minor daily close support at 83.87/84.08 and pivotal daily and weekly close support at 83.58, that if broken would open the door for a drop down to at least the $80 level. Intra-week support is found at 82.68. Minor but likely pivotal resistance is now found at 85.84 that if broken would likely negate some of the negative outlook, meaning that a stop loss at 85.94 can now be considered. Probabilities favor the bears, inasmuch as OPEC left production unchanged at Friday's meeting, meaning the glut of oil in the market is likely to continue.
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1) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at this time. Stock closed on Friday at 1.22.
2) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.50.
3) FSLR - Averaged long at 59.404 (4 mentions). No stop loss at present. Stock closed on Friday at 51.30.
4) AREX - Averaged long at 6.28 (4 mentions). Stop loss now at 5.99. Stock closed on Friday at 6.87.
5) ARNA - Averaged long at 4.30 (3 mentions). No stop loss at present. Stock closed on Friday at 4.36.
6) TOL - Averaged short at 37.45 (2 mentions). Stop is now at 37.02. Stock closed on Friday at 36.46.
7) BWA - Liquidated at 60.42. Purchased at 60.38. Profit on the trade of $4 per 100 shares minus commissions.
8) NFX - Averaged short at 38.94 (2 mentions). Stop loss at 40.35. Stock closed on Friday at 37.30.
9) COF - Shorted at 84.89 and at 83.91. Averaged short at 84.66 (3 mentions). Stop loss now at 86.07. Stock closed on Friday at 84.94.
10) XOM - Shorted at 84.65. Averaged short at 85.93 (2 mentions). Stop loss at 85.94. Stock closed on Friday at 84.28.
11) MMM - Covered shorts at 159.14. Shorted at 163.54. Profit on the trade of $440 per 100 shares minus commissions.
Previous Newsletters
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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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