Issue #414 ![]() February 8, 2015 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
|
Indexes Rally, Short Squeeze?
DOW Friday closing price - 17824
Last week, the DOW had the biggest 1-week rally in the past 6+ years having moved 913 points from low to high. It is believed that much of the rally was a short squeeze since many traders had decided to short the market after a sell signal was given on the weekly chart the previous week and were forced to cover when follow through to the downside was minimal even with the lower than expected ISM Index report.
The DOW ended up having a positive reversal week, having gone below the previous week's low and then closing above the previous week's high, suggesting that further upside above last week's high at 17951 will be seen this week.
It should be mentioned that in the past 4 years the DOW has given 2 sell signals on the weekly chart and the first one caused the index to get into a 20% correction and the second one (seen last October) caused the index to make a new all-time high the second week after the signal was reversed, meaning the bulls have that onus on them for this week. A failure to make a new all-time high this week above 18103, especially with the previous all-time high being only 279 points from Friday's close (compared to last October's 545 points), would be a strong disappointment.
To the upside, the DOW shows intra-week resistance at 17991 and at the all-time high at 18103. Nonetheless, on the daily closing chart, the index shows 3 resistance levels at 17907, at 17954 and at the all-time daily closing high at 18053. Having generated a red daily close on Friday, the 17907 daily close level is likely to be pivotal this week.
To the downside, the DOW will now show minor but possibly pivotal support at the 17700-17726 level, minor at 17603 and then nothing until 17262/17243 area is reached. Decent to possibly strong support is found between 17037 and 17067, which also includes the 200-day MA, currently at 17090.
It can also be said that the bulls in the DOW got chart support for the rally when the 200-day MA was tested successfully and a double low was built at 17067/17037. Both of those events came to be after there was very little follow through to the less-than-expected ISM Index report, giving the bulls chart ammunition for the short squeeze to occur.
The big question that will be asked this week is whether the bulls have the fundamental wherewithal to make a new all-time high in the DOW or not. The bulls are now "committed" to accomplishing that feat "this week" because if they fail the bears will once again gain the ammunition they need to take the index down strongly. With only minor support until the recent lows at the 17000-17200 area are reached, it would not be surprising to see the index get that low again, within a week or two, if the bulls fail to make a new all-time high this week.
NASDAQ Friday closing price - 4744
The NASDAQ ended up being the "weak sister" this past week, having failed to close above the most recent high weekly close, contrary to what the other indexes did. The failure-to-lead the market this week has to be considered a negative, especially since most of the much-better-than-expected earnings reports over the past 2 weeks have been in the index, suggesting it should have been the index "leading" the market.
The NASDAQ made a new intra-week high for the year (2015) at 4787 (above the previous one at 4771) but the bulls were unable to close above the previous weekly closing high at 4757 and did generate a reversal day on Friday, having made a new 27-day high and then closing in the red. The action does not support the positive reversal rally and short squeeze seen in the other indexes and will likely cause doubts this week as to the viability of new highs being made.
The NASDAQ has been averaging 183 point trading ranges the past 5 weeks but had traded within a 224 point trading range. In addition, for the past 14 weeks (3 months) the index has traded within a 267 point trading range (between 4547 and 4814) meaning there is volatility but no clear future direction in spite of all the positive earnings reports. As such, the probabilities of new 14-year highs being seen this week are considered low, also suggesting that the other indexes will fail as well.
To the upside, and on an intra-week basis, the NASDAQ now shows minor resistance at 4774 and at 4787 and decent to possibly strong resistance at 4810/4814. On a daily closing basis, resistance is found at 4771, at 4791, and at 4806. Nonetheless, based on Friday's red close, the 4771 daily close resistance could be considered pivotal.
To the downside, and on an intra-week basis, the NASDAQ will show minor support at 4724 and again at 4674. On an intra-day basis, support is found at 4700. Minor support is found again at 4653 and then a mountain of support between 4547 and 4580. Further support is found between 4490 and 4500 that includes the 200-day MA, currently at 4490.
The NASDAQ has to participate in the short-squeeze rally this week if the bulls want to continue upward to make new all-time or multi-year highs. With the index actually under-performing the other indexes last week, it probably will be the index that the traders watch for clues. A break below the 4697/4700 level, which is where the 200 60-minute MA is currently at, is likely to be a negative clue. As such, if the bulls want to continue last week's rally this week, the 4697/4700 level of support in the NASDAQ must hold up. A daily close above 4771 would be considered a positive clue.
Probabilities are about even but based on the sideways action but high volatility seen the past 14 week, I would say the bears have a slight edge.
SPX Friday closing price - 2055
The SPX was also able to negate the sell signal given on the weekly chart last week (when the stock closed below the previous 3-month low weekly close at 2002), having generated a positive reversal week with lower lows than the previous week and a close above last week's high. The index closed near the highs of the week and further upside above last week's high at 2072 is expected to be seen this week.
The SPX is now only 38 points away from making a new all-time high above 2093 and if the index mimics what happened in October, within 8 weeks the index will likely get up to a high around 2167.
The 2000 level has now proven itself to be a major pivot point support in the SPX, having seen 6 weekly closes between 1985 and 2010 over the past 8 months. Psychologically, that level will need to be broken "convincingly" before the traders make the decision to stop buying dips.
To the upside, and on an intra-week basis, the SPX now shows minor resistance at 2075, a bit stronger at 2079 and decent to probably strong at 2093. On a daily closing basis, resistance is found at 2063, at 2075 and at 2090.
To the downside, the SPX shows minor intra-week support at 2049 that has been acting somewhat like pivotal support for the past few months. Further support is found at the 200 60-minute MA, currently at 2038 then minor intra-week support at 2029. The important support is now found between 1972 and 1980 that does include the 200-day MA, currently at 1980.
The SPX generated a couple of days at the end of the week that could be indicative, inasmuch as on Thursday the index broke and closed above a double high at 2063/2064 (2063 daily close) but then negated the break on Friday with the negative reversal day and close at 2055. The action seen at the end of the week opens the door for a failure signal being given this week if the bulls are unable to negate Friday's negative reversal on Monday.
Nonetheless, based on the positive reversal on the weekly chart, the probabilities still favor the bulls. By the same token, there are quite a few doubts floating around and the onus is on the shoulders of the bulls, meaning they better get it done early in the week or the probabilities will change.
The indexes had an unexpected positive reversal week, having negated the sell signal given on the weekly chart the previous Friday. By the same token, having reached the 50-week and 200-day MA's, the positive reversal was not all that unexpected since those lines have only been broken once in the past 3 years and then only the 200-day MA on a closing basis, suggesting the rally last week was mostly chart-oriented.
Based on what happened in October of last year, the probabilities favor new all-time highs being made in the DOW and the SPX and new 14-year highs made in the NASDAQ. Nonetheless, the economic outlook is worse than it was in October, meaning the bulls will have a tougher job accomplishing new highs than they did then.
This week is mostly devoid of important reports with only Retail Sales due out on Thursday. As such, the bulls will need to get the job done with momentum and chart history. Any failure to get it done this week will likely bring about a strong selling spree again. It is clearly evident this week is pivotal.
|
Stock Analysis/Evaluation
|
CHART Outlooks
There are no mentions in the newsletter this week due to uncertainty about the meaning of last week's action. By the same token, it is possible and perhaps even likely that by the end of Monday or at the latest Tuesday that the traders will key on a direction and if that does happen, I will have mentions in the message board.
|
Updates
|
Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
AREX generated a buy signal on the weekly closing chart when it made a new 10-week intra-week and weekly closing high, above the previous weekly closing high at 6.98. The stock closed near the highs of the week and further upside above last week's high at 8.05 is likely to be seen. The stock shows very minor intra-week resistance at 8.90, then minor to perhaps decent between 9.65 and 10.47. Nonetheless, it does need to be mentioned that those resistance levels are 5-years old and may not have the same impact at this time, though the $10 level is a natural psychological resistance anyhow. The most recent intra-week resistance level is at 13.31. Support is minor between 6.70 and 7.00 and decent as well as pivotal at 5.81. Probabilities favor the bulls and a run to the $10 level. ARNA generated follow through to the downside below the previous week's low at 4.29 , having reached the 3.82 to 4.12 intra-week support level with a low of 4.13 this past week. Nonetheless, the bulls were able to generate a positive reversal week, having made a new 4-week low and then closing in the green and in the upper half of the week's trading range, suggesting further upside above last week's high at 4.58 will be seen this week. Nonetheless, the stock did generate a mini negative reversal day on Friday and the first course of action is likely to be to the downside. Minor support is found at the 50-day MA, currently at 4.40, further but minor support is found at 4.37, at 4.29 and at 4.18. Resistance is decent between 4.74 and 4.93 that includes the 200-day MA, currently at 4.80. Probabilities slightly favor the stock holding the 4.37 support level and rallying up to the 4.80 level this week with the decision for the future direction made the following week. Any daily close above the 4.80 level would likely generate new buying interest and resumption of the rally seen 4 weeks ago. AXP (much like the DOW and the SPX) was able to negate the weekly close sell signal given the previous Friday. Nonetheless, unlike the indexes, the bulls were unable to accomplish enough to generate much new buying interest, given that the stock closed on Friday at the 85.00 level, which had previous been considered weekly close support, suggesting that the bulls must do more this week and close in the green next Friday to get the benefit of the doubt. The stock did close near the highs of the week and further upside above last week's high of 86.01 is expected to be seen. Intra-week resistance is found at 87.72 that if broken would suggest a rally up to the $90 demilitarized zone would be seen. Nonetheless, the stock is showing a mini island formation with a down gap between 86.77 and 86.12 that will serve as a clue to the traders, given that a failure to close the gap early in the week would be disappointing. Any daily close below 84.55 would be considered a negative, especially if it happens on Monday. Probabilities slightly favor the bulls but like the indexes, this is a pivotal week. ENG generated a spike up rally, having generated the biggest trading range in 10 weeks (55 points) but ending up the week uneventfully and without any long-term decisions being made. The stock closed exactly in the middle of the week's trading range and at the 2.00 level that has been an important pivot point on more than 7 occasions over the past 10 years, suggesting the traders need more information (either from the overall market or from news) to help them decide in which direction the stock will be moving over the next few weeks and/or months. The trading range for the last 2 weeks (high of 2.28 and low of 1.65) is important as those levels represent the 50-week MA (upside number) and the 100-week MA (lower number). A break of either levels will likely be indicative. Probabilities slightly favor the bulls as the bears had the opportunity to break the chart to the downside for the past 4 weeks and failed. FCEL ended up having an uneventful week, having traded the last 3 days of the week in a 5-point trading range between 1.22 and 1.27 in spite of the volatile action seen in the indexes. The stock did manage to generate a green weekly close, suggesting the probabilities slightly favor the bulls this week. Nonetheless, the most recent high at 1.38, that does include the 200-week MA, currently at 1.42, still needs to be broken in order for the bulls to gain an edge. Support is now found at 1.14 that if broken would give the edge back to the bears. FSLR generated a positive spike-up week, making a new 8-week closing high and giving a signal that the recent downtrend is over. The stock closed in the upper half of the week's trading range and further upside above last week's high at 48.62 is expected to be seen. Minor resistance is found at the 50.00 demilitarized zone and stronger resistance is found at 51.65/51.87 that includes the 200-week MA, currently at 51.45. Minor but possibly pivotal support is now found between 45.47 and 45.94. Further support is found at 42.68 and minor to decent but definitely pivotal support is found at 41.15. The stock is showing an open gap between 45.64 and 46.14 that should be closed, suggesting the stock may end up generating a 45.47 to 51.45 trading range this week. Probabilities favor the bulls. KMX generated a positive reversal week, having made a new 8-week low and then closing in the green and near the highs of the week, suggesting further upside above last week's high at 64.98 will be seen. Resistance is found at 65.85 and at 66.30 that if broken would suggest the all-time high at 68.71 will be retested with a rally at least up to the 67.95 level. Support is found at 63.06, at 61.83 and at the 8-week low at 60.83. There are a lot of question marks on the chart, inasmuch as it can be said that the all-time high weekly close at 67.61 only shows a "minor" retest with the close the third week of January at 64.87, meaning that a strong retest of the high can still occur. To the downside, the stock now shows 2 gaps with the first being 60.55 to 60.83 that the bears tried to close this week but failed and the second one having been generated on Tuesday between 62.59 and 62.75. If it evident that if the second gap is closed that the first gap is also likely to be closed but if the stock gets above the resistance at 65.85, those 2 gaps might be considered a breakaway and runaway gap formation. As such, this stock has a lot of question marks that need to be answered and will probably be answered this week, meaning the traders will likely then know what to do. Probabilities slightly favor the bulls because of the resurgence in buying interest of used cars. ORCL generated a positive reversal week, having made a new 7-week low and then closing in the green and near the highs of the week, suggesting further upside above last week's high at 43.47 will be seen this week. Nonetheless, the stock gave a clear sell signal on the daily closing chart on January 30th when the stock closed below a previous low daily close of importance at 42.63, that also gave a failure to follow through signal, having closed below the previous all-time high daily close from June 18th at 42.81. The stock generated a negative reversal day on Friday, having made a new 7-day high but then closing in the red, possibly making Thursday's close at 43.16 into a successful retest of the breakdown level. A rally above Friday's high at 43.47 will likely bring in new buying and a rally at least up to 44.10, which in turn would suggest the stock has totally negated the sell signal given previously. By the same token, a drop below 42.25 would weaken the chart and likely carry the stock down to the 200-day MA, currently at 41.15. A close below that line would be a negative statement. Probabilities are evenly split as the traders are likely to take a cue from what the indexes do. PACB had a negative week after the earnings report came out, having generated a strong spike down move, a close near the lows of the week, suggesting further downside below last week's low at 6.50 will be seen this week, and a close below the double top on the weekly chart at 7.19 that when broken generated the rally to 8.77. The earnings report was not considered negative as it came out as expected but it is evident the traders expected more and were disappointed. Support is found at 6.41 and decent and likely pivotal support is found at 6.25. A break below 6.25 would suggest the 200-day MA, currently at 5.90, will be seen and that the stock would be at best in a sideways trading range for the next few months between 5.00 and 7.50. The bulls need to make a statement "this week" and generate a reversal, with the 6.41 level of support holding up and the stock closing above 7.19 next Friday. Pivotal intra-week resistance is found between 7.45 and 7.60 that if broken would likely cause the selling pressure to go away. Probabilities favor the bears. QRVO got back down to the lowest weekly close at 65.81 seen since the stock started trading 6-weeks ago, having closed on Friday at 65.89. The daily closing chart still shows support at 64.39 but having generated 6 red close days in a row and closing on the lows of the day/week on Friday, the probabilities suggest that level will be seen this week and probably broken. Pivotal short-term resistance is found at 67.59 that if broken would likely bring in some new buying and a rally to 68.50 that if broken would likely take the stock to 70.60 where resistance is pivotal for the longer term. The 65.00 level is likely to offer some support this week but if the bulls cannot hold above that level, further new selling interest is likely to be seen. Probabilities favor the bears. VHC continues to trade sideways, having generated a lower low than last week and a red weekly close, without any support levels getting broken. The bulls have been having problems getting and closing above the 100-day MA, currently at 5.27 and if the most recent low at 5.13 is broken, the stock will likely continue to trade sideways around the 5.00 demilitarized zone for a few weeks, if not a couple of months. Minor resistance is found at 5.74 and pivotal resistance is found at 6.16. The bulls still have a "very slight" edge but it is certainly fragile and could turn on a dime. A break above 5.74 or below 5.13 is likely to be short-term indicative.
|
1) PACB - Averaged long at 6.535 (2 mentions). No stop loss at present. Stock closed on Friday at 6.80.
2) AKS - Liquidated at 4.10. Averaged long at 7.44. Loss on the trade of $1002 per 100 shares (3 mentions) plus commissions.
3) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at this time. Stock closed on Friday at 1.24.
4) QRVO - Averaged long at 52.52 (2 mentions) No stop loss at present. Stock closed on Friday at 65.89.
5) AXP - Shorted at 83.13. Averaged short at 82.58. Covered shorts at 83.60. Loss on the trade of 204 per 100 shares (2 mentions) plus commissions.
6) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 2.00.
7) FSLR - Averaged long at 59.404 (4 mentions). No stop loss at present. Stock closed on Friday at 46.90.
8) VHC - Averaged long at 4.86 (2 mentions). No stop loss at present. Stock closed on Friday at 5.30.
9) AREX - Averaged long at 6.08 (3 mentions). Stop loss now at 5.71. Stock closed on Friday at 7.74.
10) ARNA> - Averaged long at 4.30 (3 mentions). No stop loss at present. Stock closed on Friday at 4.44.
11) DD - Shorted at 72.84. Averaged short at 72.75. Covered shorts at 75.99. Loss on the trade of $648 per 100 shares (2 mentions) plus commissions.
12) ORC - Shorted at 43.08. No stop loss at present. Stock closed on Friday at 42.98.
13) KMX - Shorted at 64.70. Stop loss at 65.95. Stock closed on Friday at 64.42.
14) AXP - Shorted at 84.02. Stop loss is at 87.82. Stock closed on Friday at 85.01.
15) AMZN - Shorted at 377.04. Covered shorts at 374.33. Profit on the trade of $271 per 100 shares minus commissions.
16) NFLX - Shorted at 455.73. Covered shorts at 456.65. Loss on the trade of $92 per 100 shares plus commissions.
Previous Newsletters
|
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. |
![]() |
|
|