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Issue #432 
June 21, 2015 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Mixed Signals Given. Traders Awaiting Further News.
DOW Friday closing price - 17898
The DOW generated a red weekly close, making the previous week's close at 18115 into a successful retest of the all-time high at 18312 as well as of the decent weekly close resistance area between 18112 and 18127. The index closed on the lows of the week, suggesting further downside below last week's low at 18010 will be seen this week.
The DOW chart does suggest that enough has been done to the upside that the bears might now have a slight edge. By the same token, no support levels of consequence have been broken to the downside, also suggesting that a sideways trading range with a very slight bias to the downside is the most likely scenario.
To the upside and on an intra-week basis, the DOW now shows decent resistance between 18167 and 18205 and then at 18288 and at the all-time high at 18351. Nonetheless, any break above 18205 might be a sign that the bulls regained control. To the downside, there is minor to perhaps decent intra-week support at 17924 and then nothing of consequence until the area between 17714 and 17774 is reached. Further support is found at the 200-day MA, currently at 17660 and then nothing until the low for the past 4 months at 17579 is reached.
The DOW has been trading mostly in a 700 point trading range between 17600 and 18300 for the past 4 months without the bulls or the bears being able to generate any kind of meaningful trend. The action has been mostly "yo-yo" type with both highs and lows having been seen repeatedly. It is evident that some catalyst needs to occur for the index to be able to get out of this sideways trading range.
Nonetheless, the DOW had not yet generated a true test on the weekly chart of the all-time high at 18351 until these past 2 weeks when the index rallied up to 18174 and then closed in the red on Friday. The successful retest of the highs was technically needed before the traders could start even thinking about turning their bullish outlook around. As such, it can now be said the bulls need some fundamentally bullish news to stimulate new buying interest.
The chart probabilities now slightly favor the bears, inasmuch as it can be said the chart is "fulfilled" to the upside, at least as far as resistance levels are concerned.
NASDAQ Friday closing price - 5117
The NASDAQ made a new all-time intra-week and weekly closing high, having broken above the March 2000 intra-week all-time high at 5132 and closing above the previous all-time weekly closing high seen 5 weeks ago at 5089. The index did close near the highs of the week and further upside above last week's high at 5143 is likely to be seen this week.
Nonetheless, the NASDAQ did not see any follow through to the upside on Friday (after Thursday's breakout) and did close in the red and on the lows of the day, suggesting the first course of action for the week will be to the downside below Friday's low at 5113.
The NASDAQ did leave an open gap on Thursday between 5080 and 5082 and the probabilities do favor that gap being closed, as well as the index testing the previous all-time high daily close at 5106 and perhaps even the previous all-time high weekly close at 5089 before the traders consider taking the index higher. Confirmation of the breakout is the key issue for the bulls this coming week.
To the upside, the NASDAQ has no resistance above. To the downside, no previous intra-week support is found until minor at 5045. Nonetheless, the previous high daily close at 5106 is considered a minor support. Further intra-week support is found at 5016 and then important and pivotal at 4974.
The NASDAQ is the only index that accomplished something of consequence to the upside this past week, meaning that the overall market has not yet confirmed a new leg to the upside has started. Mixed signals suggest the traders are mostly following the "hot stocks" (which are the Tech stocks in the NASDAQ) and not necessarily giving a signal that the overall market is heading higher.
Probabilities do favor the bulls in the NASDAQ this week but it is certainly a pivotal week because if the breakout is not confirmed, a double top of consequence and stature could be built if the bulls fail to take the index higher.
SPX Friday closing price - 2109
The SPX generated a green weekly close on Friday, as well as a close near the highs of the week, suggesting further upside above last week's high at 2126 will be seen this week. Nonetheless, the bulls were unable to close the index above the previous all-time high weekly close at 2110, suggesting that this past week's rally could end up being only the needed/required retest of the all-time high weekly close at 2126 as well as of the all-time intra-week high at 2135.
The SPX did generate a red daily close on Friday, meaning that Thursday's close at 2126 is the needed/required retest of the all-time high daily close at 2130. The index did close on 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 2109. If the bears can get the index below 2100 on Monday, as well as close below 2104, the momentum is likely to shift back to the bears.
To the upside, the SPX shows intra-week resistance at 2126 and stronger at the all-time high at 2135. To the downside, minor intra-week support is found at 2099 and then nothing until 2085. Pivotal support is found at 2072 and then nothing until the 200-day MA, currently at 2050. A break below 2039 would be a strong bearish sign.
The probabilities slightly favor the bulls in the SPX but the index continues to be more of a follower than a leader and will likely do what the other indexes do.
The Greek debt problem continues to be a major obstacle to the bulls but with the time frame for a decision being consistently extended, it is losing some of its "scare factor" since the traders seem to be getting inured to it. Nonetheless, it has been said that this week is a "decision" week and with the charts now totally fulfilled to the upside and any further upside seen likely to generate "new" buying, it does suggest this week is important.
The indexes continue to give mixed signals with the NASDAQ suggesting higher prices while the DOW suggesting no further upside will be seen. The mixed signals given require some form of fundamental catalyst to help the traders decide which index to follow. Apart from the Greek problem, this week's economic schedule includes Durable Goods, 3rd estimate of GDP, as well as Personal Income and Spending and Michigan Sentiment. As such, from a fundamental basis, the table is set for something happening this coming week.
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Stock Analysis/Evaluation
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CHART Outlooks
Staying with the idea that the indexes have found a top, the mentions this week are all sales. Nonetheless, with so much uncertainty, all sell mentions have a low probability rating.
It should be mentioned though, that the sell mentions this week have one main characteristic and that is that the stocks are all at close-by levels of long-term resistance, meaning the bulls are likely to need a positive catalyst to break through.
SALES
DOW Friday Closing Price - 53.28
The DOW is trading only $3 (5%) below its all-time high at 56.75 seen 10 years ago in March 2005. Nonetheless, the level where it is presently trading has already proven to be viable resistance once before in September of last year when the stock rallied up to 54.96 but then fell back in just a few weeks to 41.45. As such, it does seem the bulls need some fundamental change (either the indexes to start a new leg up or the company receive some positive fundamental news) to break the already proven resistance area built.
The DOW closed near the highs of the week on Friday and further upside above last week's high at 53.77 is expected to be seen. Nonetheless, with 4 intra-week resistance levels close-by above, as well as the all-time high weekly close at 55.15 being only $1.79 away from Friday's close, it does suggest this coming week could offer the best opportunity and price for a short position.
To the upside, the DOW shows intra-week resistance at 53.80, at 54.28, at 54.96 and at the all-time high at 56.75. On a weekly closing basis, resistance is found at 53.71, at 54.80 and at 55.15. To the downside, last week's low at 50.27 is now considered minor to perhaps decent support due to the fact it has been seen (and held up) 5 previous times and is also a psychological support ($50 level). Below that level there is no prior intra-week support until 46.56 is reached. Further support of some consequence is found between 41.45 and 42.57 and then nothing until the 200-week MA, currently at 39.10.
The DOW has spent 30 weeks (out of the last 56 weeks) trading between the $50 and $55, with the other 26 weeks trading below the $50 level, which is turn suggests the bulls need something tangibly positive for the stock to move higher. With the stock likely to get up this coming week near the top of that 56 weeks trading range, it does offer an opportunity to short the stock with a decent probability rating.
Sales of the DOW between 53.79 and 54.27 and using a sensitive stop loss at 55.06 or a stronger one at 56.85 and having a downside objective of $42-$45 will offer a 4-1 risk/reward ratio.
My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
PRAA Friday Closing Price - 62.66
PRAA closed on Friday just $2.34 from its all-time high seen in November of last year at 65.00. The stock closed on the highs of the week and further upside above last week's high at 62.84 is likely to be seen this week, which in turn will offer an opportunity to short the stock with a small risk factor.
PRAA is a stock that for the past 2 years (25 months) has traded between $50 and $65, suggesting the probabilities favor more of the same occurring and with the stock trading near the top of the trading range, a short position seems to be the best choice.
To the upside, PRAA shows intra-week resistance at 63.96 and at the all-time high at 65.00. On a weekly closing basis, resistance is 63.25, and on a daily closing basis it is at 63.85. To the downside, the stock shows very minor support at 60.86, a little bit stronger at 58.26, and then decent at 56.20. Stronger support is found between 52.00 and 52.90.
PRAA is considered one of the better growth stocks in the market and that rating was given to the company by Zachs back in May. It is likely one of the reasons why the stock has rallied $6 (11%) over the past 4 weeks.
Nonetheless, PRAA has rallied from $47 to $63 over the past 3 months and has done it without much base/support building in the process, leaving the stock at risk of a correction generating enough selling to take the stock back down to the $53 level which is this mention's downside objective.
Sales of PRAA between 63.96 and 64.39 and using a stop loss at 65.35 and having an objective of $53 will offer an 8-1 risk/reward ratio.
My rating on the trade is a 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 |
| AREX continues to erode, having made a new 10-week low and generating yet another red weekly close, the 7th in a row and the 8th out of the last 8 weeks. The stock did get close to the weekly closing support at 6.48 with a 6.525 low but the bears were unsuccessful in generating the close below that level, with the stock closing at 6.59 on Friday. Nonetheless, the stock did close near the low of the day/week and further downside, at least on an intra-week basis, is expected to be seen. Weekly close support is pivotal at 6.48, though on an intra-week basis the 6.22 and 6.09 levels are support. Resistance is now found at 7.09 and at 7.30. The probabilities still favor the bears but the inability to generate a new sell signal on the weekly closing chart after 9 weeks of selling, does suggest it won't take much to turn the stock around. ARNA broke above the 200-day MA on Monday, currently at 4.30, and proceeded to confirm the break, having generated a close above the line the rest of the week. On Friday, the stock also closed above a minor but possibly pivotal weekly close resistance at 4.36 with a close at 4.42. Nonetheless, the bulls were unable to generate a close above the weekly close resistance at 4.53, suggesting that the bears still have some control. The stock did generate a negative reversal day on Friday, suggesting the first course of action for the week will be to the downside, likely to test the 200-day MA, as well as the previous and decent daily close support at 4.31. If the retest is successful, it should give the bulls' further ammunition to generate additional upside. The stock did close in the upper half of the week's trading range and the probabilities favor the stock going above last week's high at 4.57. There is some minor but repeated intra-week resistance at that price that if broken would suggest a rally up to 4.70-4.75. Probabilities slightly favor the bulls. COF continued to move upward, having generated yet another +9-year high last week. The stock got 1 step closer to the all-time weekly closing high at 89.92 (90.04 on an intra-week basis) and it likely to continue above last week's high at 88.76, after closing near the high of the week on Friday. Nonetheless, some selling is starting to be seen, with the stock having shown 3 red daily closes out of the last 5 days, as well as a negative reversal day on Friday, suggesting the first course of action for the week will be to the downside, below Friday's low at 88.02. Support is found at 86.78 that if broken would suggest further downside would be seen. Nonetheless, the probabilities continue to favor further upside, likely with the $90 objective, before selling interest increases enough to generate a meaningful correction. ENG continued to slide downward, having made a new 8-month weekly closing low this past week. The stock closed near the lows of the week and further downside below last week's low at 1.38 is likely to be seen. Intra-week support is found at 1.32 but on a weekly closing basis, the 1.42 level is considered decent support, suggesting that next Friday a green close is likely to be seen. The stock is somewhat mimicking the 23-week action seen between November 2013 and April 2014 between 1.88 and 1.32, suggesting that if the 1.32 level is seen this week but holds up, that the stock will start moving higher (though in a slow manner) for at least another 6 weeks. FCEL made a new 26-month low on Friday, having broken below the low seen in January at 1.05. The stock closed on the lows of the week and further downside below last week's low at 1.03 is expected to be seen. The company has not shown any growth pattern of late and continues to offer downward revisions to the previous earnings reports, suggesting there is little reason to be a fundamental buyer at this time. The break below 1.05 does suggest that not only will the stock test the 1.00 level but if broken, the stock could return to test the multi-year lows between .75 and .80 cents. Intra-week support is found at .92 cents and it should be mentioned that in March-May 2012 the stock dropped from 1.95 to .92 cents but then bounced up to 1.39 before resuming its downward drift. The same scenario could occur on this occasion. Nonetheless, the break of the support at 1.05 does put the stock in the category of "stocks unlikely to rally any time soon and should be put on the list of stocks to consider taking the loss". FSLR unveiled a better solar panel this past week and the stock rallied and got into the gap between 53.03 and 54.90 with a rally up to 53.67. Nonetheless, the good news wore off soon thereafter and the stock reversed direction on Friday to close near the lows of the week (though still in the green) but suggesting further downside below last week's low at 50.03 will be seen this week. Support is found at the $50 demilitarized zone and again at 49.21 and at 49.07. Resistance is once again decent between 52.97 and 53.03. Probabilities favor the bears this week.
KMX received a slightly disappointing earnings report this past week, causing the stock to gap down and generate a new 12-week weekly closing low on Friday. The stock closed near the lows of the week and further downside below last week's low at 68.25 is expected to be seen. Intra-week support is found at 67.69 and important previous daily/weekly closing high support is found at 68.11/68.13 that if broken on a closing basis, would suggest a drop down to the 200-day MA, currently at 62.75, would be seen. It is evident this coming week will be pivotal as last week's low at 68.25 is likely to be broken, which in turn would put the bulls at a level that has to be considered pivotal intra-week support between 67.00 and 67.69. If the bulls are able to hold up that support, the stock is likely to attempt to close the gap between 70.88 and 71.72 that was generated after the report. NFX generated another uneventful week, staying within the $3 trading range seen the past 5 week between 35.48 and 38.48. The stock did close in the green but near the lows of the week, suggesting further downside below last week's low at 36.07 will be seen this week. The traders are likely waiting for the indexes to decide what they are going to do and then follow suit. Probabilities favor another uneventful week of trading. SINA saw minor follow through to the upside to the previous week's strong rally and close above the 200-week MA, currently at 58.00, but then reversed to close in the red and near the lows of the week, suggesting further downside below last week's low at 57.13 will be seen this week. Nonetheless, the bears were unable to negate the break of the 200-week MA, as the stock closed on Friday at 58.25, suggesting that a correction to the $30 move up is not yet a high probability. It is evident that on a short-term basis, this coming week is pivotal, inasmuch as a break below the "general" support at 57.00, as well as a close next Friday below the 200-week MA, would suggest the stock is heading back down to the $50 level, which is considered somewhat of a magnet if the bulls are unable to keep the rally moving higher. Intra-week support is found at 57.13 and very minor between 55.64 and 56.03. Minor resistance is found at the 60.00 demilitarized zone. TOL generated another green weekly close but the bulls were unable to make any kind of a statement, other than to say the traders are waiting to see what happens to the index market. Nonetheless, the stock did close near the highs of the week and further upside above last week's high at 38.13 is likely to be seen. Pivotal resistance is found at 38.96 (38.04 on a daily closing basis). Short-term pivotal daily close support is found at 36.94. The chart seems to be slightly favoring the bulls but it is evident that this is a pivotal week. XOM bulls were unable to build on the previous week's rally as the stock generated a red weekly close and near the lows of the week, suggesting further downside below last week's low at 84.92 will be seen this week. Nonetheless, the stock is presently trading at the $85 level which is somewhat of a "rest" spot for both the bulls and the bears as they wait to see what oil prices are going to do. The stock continues to be in a strong downtrend and as such, the bears have the edge. Important daily close resistance is found at 86.07 and important daily close support is at 83.57. A break above or below either one of those levels would suggest further movement of consequence will occur in that direction. Probabilities still favor the bears.
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1) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at this time. Stock closed on Friday at 1.03.
2) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.41.
3) FSLR - Averaged long at 59.404 (4 mentions). No stop loss at present. Stock closed on Friday at 51.03.
4) AREX - Averaged long at 6.28 (4 mentions). Stop loss now at 5.99. Stock closed on Friday at 6.59.
5) ARNA - Averaged long at 4.30 (3 mentions). No stop loss at present. Stock closed on Friday at 4.42.
6) TOL - Averaged short at 37.45 (2 mentions). Stop is now at 39.02. Stock closed on Friday at 37.71.
7) SINA - Shorted at 60.95. Averaged short at 60.57 (2 mentions). Stop loss at 61.85. Stock closed on Friday at 58.25.
8) NFX - Averaged short at 38.94 (2 mentions). Stop loss at 40.35. Stock closed on Friday at 36.76.
9) COF - Averaged short at 84.66 (3 mentions). No stop loss at present. Stock closed on Friday at 88.42.
10) XOM - Shorted at 85.95. Averaged short at 85.933 (3 mentions). Stop loss now at 86.47. Stock closed on Friday at 85.21.
11) KMX - Shorted at 73.52. Stop loss now at 73.35. Stock closed on Friday at 69.27.
12) QQQ - Shorted at 110.13. Covered shorts at 110.62. Loss on the trade of $49 per 110 shares plus commissions.
13) AMZN - Shorted at 436.35. Covered shorts at 438.01. Loss on the trade of $166 per 100 share 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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