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Issue #417 
March 1, 2015 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Mixed Results Week. Economic Reports to Decide Fate?
DOW Friday closing price - 18140
The DOW generated a negative reversal week, having made a new all-time high at 18244 but then closing in the red on Friday. Nonetheless, the red close was only slightly in the lower half of the week's trading range and still above the previous all-time high weekly close at 18053, meaning that it was not all that indicative that further negative action will be seen.
The DOW did close in the lower half of the week's trading range and further downside below last week's low at 18054 is likely to be seen. Nonetheless, with the most important economic reports of the month (ISM Index and Jobs) due out this week, it is unlikely that anything that happened last week was indicative.
To the upside, the DOW now shows minor daily close resistance at 18224 and also minor weekly close resistance at 18140. In addition, general resistance is expected to be found at the 18300 level. To the downside, the DOW will now show weekly close support at 18053, intra-week support at the 18000 demilitarized zone (17970-18030) and pivotal support at the most recent spike low at 17878. Further support is found at the 17700 level.
The DOW generated a positive reversal month to the upside, having gone below January's low and then closing above January's high, and more importantly generating a new all-time high monthly close. Further upside above last month's high at 18244 is likely to be seen in April. The same thing (positive monthly reversal) happened last October and the index in November did generate a rally 599 points above October's high and an additional 104 points in December before selling was seen. As such, the index is expected to head substantially higher this month and if the "general" resistance at 18300 stops the rally, the bulls may find themselves looking at a potential top.
It should also be mentioned that the DOW, just like the other indexes, has seen a consistent seasonal correction (12 out of the last 15 years) "starting" sometime in the first quarter of the year, meaning that the possibilities favor a high being made this month.
The DOW is also likely to follow the NASDAQ and that index is expected to still test the all-time weekly closing high at 5048 (85 points higher), meaning that the DOW could rally up to 18385 based on the correlation of appreciation percentage seen in both indexes over the past 5 weeks.
Though the DOW did generate a negative reversal on the weekly chart this past week, the probabilities still favor further upside this week.
NASDAQ Friday closing price - 4963
The NASDAQ continued to inch higher toward testing the all-time high weekly close at 5048 with another green weekly close (the 4th in a row) and a high of 4989. Nonetheless, the bulls were unable to close the index in the upper half of the week's trading range (closed at the mid-point) suggesting that the selling is increasing as the index nears the strong psychological resistance at 5000.
The NASDAQ's upward momentum began to falter as the index generated 2 red close days (Wednesday and Friday) after having rung up a string of 10 green close days in a row, from February 10th to February 24th. Nonetheless, the pause was more likely due to the traders waiting for that 2 important economic reports that are due out this week than anything else.
The NASDAQ continues to outperform the other indexes having been the only index that generated a green weekly close on Friday. This is now 4 weeks in a row that the NASDAQ has outperformed the other indexes and that should not change this week, at least not until the index reaches its upside objective.
To the upside, the NASDAQ now shows general resistance at the 5000 demilitarized zone (4970-5030), major weekly close resistance at 5048 and major intra-week resistance at 5132. To the downside, minor intra-week support is found at 4860 (runaway gap) and at 4823 (breakaway gap) and minor to perhaps decent daily and weekly close support at 4806 (previous 14-year high daily/weekly close). Further minor but likely pivotal support is found at 4700/4719.
It should be mentioned that the NASDAQ continues to show a new breakaway/runaway gap formation with the breakaway gap being between 4810 and 4823 and the runaway gap between 4857 and 4860. This gap formation is now very important as closure of it would suggest the index has found a top to the rally.
It should be mentioned that in the year 2000 when the NASDAQ made the all-time high at 5132, the index closed on the highs of the month in February (much like it did on Friday) and then went up to the all-time intra-week high at 5132 in the first week of March, before turning down to generate a monthly red close and a major top that has now lasted 15 years.
It is certainly possible to visualize that the economic reports this week will be better than expected and that the NASDAQ will stage a rally up to the all-time high at 5132, followed by a strong round of profit taking at that level and a possible top, albeit perhaps a temporary one, being seen.
SPX Friday closing price - 2104
The SPX made a new all-time intra-week high at 2119 this past week but then generated a negative reversal, having closed in the red on Friday. The red close does suggest that some selling interest is being seen at these levels but having generated a close near the highs of the month, the probabilities still favor a new high being made in March, at least on an intra-week basis.
The SPX closed near the lows of the week and further downside below last week's low at 2103 is likely to be seen this week. Nonetheless, as long as the index continues to close above the previous all-time high daily and weekly close at 2088, it cannot be said that last week's negative reversal had any lasting meaning.
To the upside, the index now shows minor daily close resistance at 2115 and minor weekly close resistance at 2110. To the downside, the SPX shows likely pivotal support at the previous week's low at 2085. Further but minor intra-week support is found at 2049 that has been acting somewhat like pivotal support for the past few months. Further support found at the 2000 level and pivotal support at 1972.
The SPX has now taken on additional responsibility as the index that is most likely to be the first to show any topping out action. With the index having closed on Friday only 15 points above the previous all-time high daily/weekly close at 2088, it does make sense to believe it would be the first to give a failure-to-follow-through signal if indicative selling is seen. This idea was further strengthened by the fact that last week it was the index that generated the most downside on a percentage basis.
Probabilities favor further upside in the SPX this coming week, above 2119, but if that occurs but the bulls fail to generate a new all-time high daily and weekly close, it could mean the index is ready to head lower.
The uptrend continued this past week as no new fundamental negatives came out. Nonetheless, the momentum did ebb a little as the NASDAQ got closer to the all-time high weekly close at 5048, as well as to the strongly psychological resistance at 5000.
The 2 most important economic reports for the month (ISM Index and Jobs) come out this week and though the probabilities do not favor those reports having any big surprises, it is likely that the traders will use them to generate some action due to the importance of the chart levels being seen.
A possible scenario could be made that the traders will use the economic reports to rally the indexes up to the upside objectives but then sell the indexes down due to the overbought situation, seasonal tendency to correct, and chart resistance of consequence reached.
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Stock Analysis/Evaluation
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CHART Outlooks
I continue to strongly believe that a top to this uptrend is close at hand. By the same token, based on the action seen last week, it is evident that "close at hand" could still mean a bit more upside being seen first.
There is only 1 sell mention given this week but I will also be concentrating on increasing my positions in the other stocks recently shorted (OSK, KMX, ORCL, and AXP). Desired entry points for additional positions will be given in the message board as the trading action offers clues as to where to add.
SALES
HAL Friday Closing Price - 42.94
HAL has been on a strong downtrend this year, having gotten up to an all-time high at 74.33 in July of last year and then plummeting close to 50% in value to a low of 37.21 seen just 3 weeks ago. The company is the second largest provider of oilfield services in the world and the drop in the price of oil as well as the recent merger with Baker-Hughes has been the main culprit of the fall in price.
HAL broke the 200-week MA, currently at 44.95, 13-weeks ago and even though the stock has been able to generate a bit of a rally over the past 5 weeks, the line still remains unbroken to the upside, suggesting the stock remains in a mid-term downtrend. From a fundamental point of view, it has been said that oil prices are to continue lower and even break below the recent low at $43.50 (perhaps even down to $20 as some analysts have predicted) and that suggests that it will be difficult for the bulls to stage any kind of meaningful rally (other than a short-covering one) after such a precipitous fall. It should also be mentioned that the merger with Baker Hughes also provides many short-term reasons for lower prices as such a merger is not immediately positive for the company.
To the upside, HAL shows minor intra-week resistance at 44.92 from the high made the previous week as well as it being the price from which the break to the downside occurred. Further but also minor resistance is found between 45.25 and 45.75 that includes 2 previous low weekly closes of some importance from April 2008 and June 2011 and one previous high weekly close from May 2013. In addition, the 200-week MA, currently at 44.95, must also be included in that resistance area since that line does represent long term trend and the stock has been trading below the line for the past 12 weeks.
To the downside, HAL shows minor intra-week support between 36.77 and the recent low at 37.21. Below that level though, there is no support of consequence until the $30 level is reached.
HAL got up to 44.92 the previous week and did generate a red close last week, giving the 44.92/44.95 level additional strength. Nonetheless, the bulls managed to clsoe the stock in the middle of the week's trading range and if the indexes rally this week (likely), the stock is also likely to get back up to test the 200-week MA again. Having shown the level is now being looked at closely by the traders, it is unlikely to get broken, at least on a weekly closing basis.
Sales of HAL above 44.37 and using a stop loss at 45.85 and having a downside objective of 30.00 will offer an 8-1 risk/reward ratio. The stop loss should be mental as the resistance at 45.75 is minor but even using a stop loss at 47.10 (which would mean the runaway gap would get closed), would still 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). The rating would be higher if it wasn't for the fact the stock has already dropped a lot and this is a good solid company, meaning that if oil prices do recover, the trade will likely be a loss.
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Updates
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| Monthly & Yearly Portfolio Results
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Closed Trades, Open Positions and Stop Loss Changes
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Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted. Status of account for 2015, as of 2/1 Loss of $1006 using 100 shares per mention (after commissions & losses) Closed out profitable trades for February per 100 shares per mention (after commission)
AMZN (short) $257 AMZN (long) $14 Closed positions with increase in equity above last months close minus commissions. AKS (long) $65 Total Profit for February, per 100 shares and after commissions $336 Closed out losing trades for February per 100 shares of each mention (including commission)
NFLX (short) $106
IR (short) $148 AMZN (short) $197 Closed positions with decrease in equity below last months close plus commissions.
AXP (short) $303 Total Loss for February, per 100 shares, including commissions $2003 Open positions in profit per 100 shares per mention as of 2/28
AXP (short) $412
Open positions with increase in equity above last months close. AREX (long) $438 VHC (long) $422 ARNA (long) $60 FSLR (long) $6968 FCEL (long) $44 Total $8701 Open positions in loss per 100 shares per mention as of 2/28
ORCL (short) $74
KMX (short) $241 OSK (short) $47 Open positions with decrease in equity below last months close.
QRVO (long) $223 Total $615 Status of trades for month of February per 100 shares on each mention after losses and commission subtractions.
Profit of $6419
Status of account/portfolio for 2015, as of 1/31Profit of $5413 using 100 shares traded per mention.
AMZN generated a negative reversal week, having made a new 13-month high and then closing in the red. The stock did close in the bottom half of the week's trading range, suggesting it will go below last week's low at 376.16 this coming week. By the same token, the bears were unable to close the stock below the most recent daily close at 378.59, which is also where the previous 13-month high daily close is at 378.77, meaning that the reversal was not as indicative as it could have been. Any daily close below 378.59 will be considered a negative. Any daily close above 383.66 will negate the reversal. Intra-week support at 373.16, at 372.67, at 367.20 and most important and likely pivotal at 363.61. Probabilities still favor the bulls but very slightly.
AREX generated a small but positive reversal, having made a new 3-week low and then closing in the green and near the highs of the week, suggesting further upside above last week's high at 7.85 will be seen this week. The low for the week at 6.85 will become a pivotal support if the stock gets above 7.85 this week (likely). Daily close resistance is found at 8.65 that if broken would suggest the uptrend continues (also likely). Upside objective continues to be the 10.22-10.65 level. Probabilities favor the bulls. ARNA generated an uneventful week as neither the bulls nor the bears were successful in doing anything of consequence. Important intra-week support is found at 4.13 and short-term important intra-week resistance is found at 4.97, but on a daily closing basis the levels at 4.27/4.32 and 4.77/4.90. A break above or below either of those levels would be indicative. It should be mentioned that those levels represent the high and the low for February. Based on the chart, the probabilities slightly favor the bears, mostly due to the fact that stock remains trading below the 200-day MA, currently at 4.67. For this coming week and using the 60-minute chart, the 4.62 level is considered resistance and the 4.37 level is considered support. The chart gives very few clues as to what is going to happen, suggesting the best thing to do is simply to watch and not trade. AXP generated a second green weekly close in a row but even though the stock traded above the weekly close breakdown level at 82.58, the bulls were unable to generate a close above that level in order to negate the break, meaning the stock remains in control of the bears. The bulls were successful in generating 5 green close days in a row and getting into the gap area between 85.32 and 81.53 with a rally up to 83.47. Nonetheless, the gap was not closed and the stock did generate a close on the lows of the day on Friday, suggesting the first course of action for the week will be to the downside. Support is found at 80.56 and again at 78.41. Last week's low was 79.47 and with the stock having closed in the middle of the week's trading range, both the highs and the lows of last week are at risk of being broken. A break below 79.47 would be considered a decent negative while a break above 83.47 would not be a big positive. The stock is likely to react to whatever the indexes do, especially since this is an important economic reports week. Nonetheless, probabilities favor the bears since the stock is still in a sell signal. ENG generated a negative week, having closed below the 200-week MA for the first time in the last 4 weeks. The stock closed on the lows of the week and further downside below last week's low at 1.69 is expected to be seen. Important support is found at 1.65/1.66 that is broken would likely thrust the stock down to the 1.50 level. It is likely the sell pressure is being seen due to the upcoming earnings report on Thursday March 12th before the opening bell. Resistance is found at 1.92 that if broken would likely generate new buying interest. Probabilities favor the bears, at least until the earnings report comes out. FCEL had an uneventful week in which nothing was decided and no clues given as to direction for the short term. Traders are likely waiting for the earnings report due out on Tuesday March 12th after the close. The stock did close in the upper half of the week's trading range and did generate a mini spike-up rally on Friday, suggesting the bulls may have a slight edge this week. Minor resistance is found at 1.36 and a bit stronger at 1.40. The 200-week MA is currently at 1.41 and if that level of resistance is broken on a weekly closing basis next Friday, a rally up to 1.64 is likely to be seen. The earnings report is expected to come out at -.02 cents, which would be the best number seen in years as no better than -.04 has been seen since the company started trading. Anticipation of that report is likely to support the stock for the next 7 trading days. If the earnings reports comes out as expected, it would be considered a positive. Based on the action this past week, the 1.24 level is now considered support. Probabilities slightly favor the bulls. FSLR received a better than expected earnings report and generated a strong spike up week, as well as a close on the highs of the week, suggesting further upside above last week's high at 60.21 will be seen this week. The bulls did accomplish a lot this week, having closed above the 200-day MA on Wednesday and the break was confirmed with 2 subsequent green daily closes on Thursday and Friday. In addition, the stock closed above the 50-week MA, currently at 59.15, also suggesting further upside will be seen. General resistance is found at the $60 demilitarized zone, minor to perhaps decent intra-week resistance is found at 65.99 and then nothing until minor between 66.68 and 66.88. Support is now found between 57.60 57.80 that is now likely pivotal on a daily closing basis as that is where the 200-day MA is currently located. Probabilities favor the bulls for at least a rally up to the 65.99 level. KMX generated a red weekly close on Friday and below the previous all-time high weekly close seen in December at 67.61. If the red close is confirmed next Friday with another red close, the possibilities of a double top using last week's close at 68.13 will increase. As it is, the drop below Thursday's low on Friday and close in the red, already created a double top on the intra-week chart at 68.71/68.41. The stock closed in the middle of the week's trading range, suggesting the traders are waiting to see what the indexes do off of the important economic reports due out this week before committing to a direction. Short-term pivotal support is found at 65.87 that if broken would suggest a drop down to at least 63.06 but more probably down to 61.83. Longer term pivotal support is found at 60.83. Intra-week resistance is now decent between 68.41 and 68.71 that if broken would open the door for a rally up to at least the $70 demilitarized zone. Probabilities still favor the bulls simply because the stock is in an uptrend and no sell signals have been given yet. ORCL generated an uneventful week as the traders await the economic reports due out this week. Minor but perhaps pivotal resistance is found at 44.37 and the same to the downside as support at 43.30. Important resistance is found at 45.33 and important support is found at 41.56. Probabilities are about even at this time but it is likely that market action this week, after the economic reports come out, will decide direction. OSK generated the 6th green weekly close in a row and a rally up near to the $50 level that has been an established resistance area since September. The stock closed near the highs of the week and further upside above last week's high at 49.40 is expected to be seen. Resistance is found at 49.50 and at 50.27, as well as from the 50-week MA, currently at 49.60. Minor daily close support is found at the 200-day MA, currently at 48.15, and at a previous daily closing high of some consequence at 47.86. A daily close below that level would open the door for a drop all the way down to 45.85 that does include the 50-day MA, currently at 45.40. Probabilities favor the stock trading between $48 and $50 this week and then some decisions being made after the indexes decide what to do. Overall though, probabilities favor the bears as the stock seems to be in a $40-$50 trading range. QRVO had a positive week, having generated a new 19-trading day high and closing in the upper half of the week's trading range, suggesting further upside above last week's high at 71.72 will be seen this week. The stock did close on the lows of the day on Friday, suggesting the first course of action for the week will be to the downside. Minor support is found at 68.06 and then decent support between 66.50 and 66.60. Resistance is found at the $70 demilitarized zone and a bit stronger at 71.72. Probabilities slightly favor the bulls with the all-time high weekly close at 73.87 (made 9 weeks ago) as the target for the week. VHC extended its recent short-term uptrend, having made a new 23-week high. The stock closed near the highs of the week and further upside above the week's high at 8.09 is likely to be seen. The stock did accomplish quite a bit, having gotten above a minor to perhaps decent intra-week resistance from 4-years ago at 7.99, as well as closing above the weekly close resistance from that time at 6.70. The stock has no resistance above until the 200-day MA, currently at 9.70, or the 50-week MA, currently at 10.45, are reached. By the same token, no "previous" daily or weekly close resistance is found until the 12.16 level is reached. Minor support is found at 6.80-6.85 and pivotal daily close support is found at 6.17/6.27. Probabilities strongly favor the bulls.
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1) PACB - Liquidated at 6.80. Averaged long at 6.535. Profit on the trade of $53 per 100 shares (2 mentions) minus commissions.
2) AXP - Shorted at 83.28. Averaged short at 83.65 (2 mentions). Stop loss now at 83.57. Stock closed on Friday at 81.59.
3) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at this time. Stock closed on Friday at 1.31.
4) QRVO - Averaged long at 52.52 (2 mentions) No stop loss at present. Stock closed on Friday at 69.40.
5) KMX - Shorted at 64.70. No stop loss at present. Stock closed on Friday at 67.11.
6) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.69.
7) FSLR - Averaged long at 59.404 (4 mentions). No stop loss at present. Stock closed on Friday at 59.74.
8) VHC - Averaged long at 4.86 (2 mentions). Stop loss now at 5.95. Stock closed on Friday at 7.55.
9) AREX - Averaged long at 6.08 (3 mentions). Stop loss now at 5.71. Stock closed on Friday at 7.73.
10) ARNA - Averaged long at 4.30 (3 mentions). No stop loss at present. Stock closed on Friday at 4.51.
11) ORCL - Shorted at 43.08. No stop loss at present. Stock closed on Friday at 43.82.
12) AMZN - Purchased at 376.59. Stop loss at 376.06. Stock closed on Friday at 380.16.
13) OSK - Shorted at 48.32. Stop loss at 50.81. Stock closed on Friday at 48.79.
14) AMZN - Purchased at 379.82. Liquidatated at 380.10. Profit on the trade of $28 per 100 shares minus 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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