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Issue #449 
October 18, 2015 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls Gain an Edge. Confirmation Needed!
DOW Friday closing price - 17215
The DOW generated a green close on Friday that could prove to be decisive, inasmuch as the index closed above the weekly close support level at 17164 that when broken produced the sell signal that brought about the drop down to 15730. Another green close next Friday would generate a failure to follow through signal that would not only confirm the correction is over but could give the bulls the needed ammunition to re-start the uptrend, if and when the action is supported with positive fundamental news.
The DOW closed on the highs of the week and further upside above last week's high at 17220 is expected to be seen. Nonetheless, the end result of the action this coming week in the index will be largely dependent on fundamental news, rather than on technical chart issues, as many of the important earnings reports for the index for the quarter (IBM, TRV, VZ, UTX, BA, KO, AXP, CAT, MCD, MSFT, and PG) are scheduled to come out this week.
To the upside and on an intra-week basis, the DOW shows decent resistance at 17350, which does include the "general" resistance at 17300 that is usually found 300 points above a major level. Further but minor resistance is found at 17568 that is strengthened by the 200-day MA, currently at 17590.
To the downside and on an intra-week basis, the DOW shows decent support at the 17000 demilitarized zone, minor at Wednesday low at 16887 and then nothing until minor support is found at the 16700-16730 level.
The DOW closed on Friday above the 100-week MA, currently at 17080, and that is significant inasmuch as the index has remained below the line for the past 8 weeks and it is a line that has "always" been indicative and often decisive as far as the long-term trend is concerned. The last time the line was broken to the downside was in 2011 and though on that occasion the index traded above and below the line for a period of 9 weeks (unlike this time where it has stayed below the line for 8 weeks), the first time it stayed above the line for 2 weeks in a row (third week of October 2011), it did generate the kind of action that ultimately (January of the following year) caused the index to make a new multi-year high. As such, where the index closes next Friday (above or below 17080), could determine what the action will be the rest of the year. Simply stated, this coming week could be "pivotal" as to the general direction of the index will be for the last 12 weeks of the year.
The fundamental circumstances facing the DOW on this occasion are slightly less bullish than in 2011, given that the Fed is somewhat powerless to offer new support and the economic outlook for the U.S. and the entire world is bleaker than it was then, suggesting that the outcome for this week is a big question mark. Nonetheless, because of past history, the probabilities favor the bulls and if that occurs, a rally up to the 200-day MA, currently at 17590, and/or the 50-week MA, currently at 17615, is likely to be seen.
NASDAQ Friday closing price - 4886
The NASDAQ ended up having a week much like the DOW, inasmuch as the index closed above the weekly close support at 4871 that was broken to the downside on August 17th and that generated the drop down to 4293, as well as closing only a few points below the 50-week MA, currently at 4890, that has been as indicative a line for the index over the years as the 100-week MA has been for the DOW. The weekly close seen on Friday also suggests that much like the DOW that a green close next Friday will be indicative of what the index will do the rest of the year.
The NASDAQ closed on the highs of the week and further upside above last week's high at 4886 is expected to be seen. Nonetheless, with AMZN and GOOG reporting earnings on Thursday, the end result for the week is likely to be decided fundamentally rather than technically.
To the upside and on an intra-week basis, the NASDAQ shows decent and likely pivotal resistance at 4960. Above that level, the 5000 demilitarized zone offers minor to perhaps decent resistance.
To the downside and on an intra-week basis, the NASDAQ offers minor to perhaps decent support at 4825 and then minor but pivotal support at 4771. Below 4771, there is no support of consequence until the 4550-4600 level is reached.
The close on Friday in the NASDAQ above 4830 did generate a break of the 9-week sideways formation (based on weekly closes) that is eerily similar to the formation seen in November-January and from which the index 5 months later made a new all-time high. On that occasion, the index saw positive weekly close follow through to the upside for the following 3 weeks before a small correction occurred, meaning that if this formation breakout is to mimic what happened last year then another green weekly close will be seen next Friday. By the same token, the November-January formation was a pause in an uptrend while this formation was part of a correction that could ultimately turn out to be a new downtrend, meaning that there are fundamental differences that could generate a different end result.
The NASDAQ is evidently facing a pivotal week with the 50-week MA, currently at 4885, the 200-day MA, currently at 4920 and the intra-week spike high seen on September 17th at 4960 all being important and pivotal levels that can easily be seen this week. A break of all 3 levels would be a strong positive statement from the bulls while any failure generated at this point in time would be a win for the bears.
The probabilities for this week slightly favor the bulls in the NASDAQ, but then only because of past history.
SPX Friday closing price - 2033
The SPX added to last week's positives with another green close above the psychological 2000 level as well as by confirming the break above the 100-week MA, having generated a second close in a row above the line. The index closed on the highs of the week and further upside above last week's high at 2033 is expected to be seen.
The SPX is likely to return to a secondary role in the index complex, given that most of the important earnings reports for the index came out last week and none were impressive or even much better than expected, suggesting that the focus is now likely to shift back on one of the other 2 indexes as they are the ones with the important earnings reports this week.
To the upside and on an intra-week basis, the SPX shows minor to perhaps decent resistance at 2064 that is further strengthened (on a closing basis) by the fact that both the 200-day and 50-week MA's are currently at 2060. Both of those lines have proven to be important and pivotal to the index throughout the years. Above that level and again on an intra-week basis, resistance is found at 2079 and 2092.
To the downside and on an intra-week basis, the SPX shows minor but short-term pivotal support at 1990 and decent as well as longer term pivotal support between 1972 and 1980.
The SPX shows no resistance above until the 2060-2064 level is reached, meaning that an additional 27-31 points to the upside are highly likely to be seen this week, at least on an intra-week basis. Nonetheless, on a daily closing basis, the index does show some minor to perhaps decent resistance between 2040 and 2046, from previous low daily closes of importance that when broken brought about indicative selling interest. It should be mentioned though, that any failure to reach those levels this week will be considered a disappointment.
Probabilities continue to favor the SPX heading up to the 50-week and 200-day MA's, both currently around the 2060 level. Upon reaching that level, whatever happens is likely to be indicative.
The bulls shrugged off a few lower than anticipated earnings reports in the financial area this past week to generate strong and possibly indicative closes in the indexes on Friday. Some failure-to-follow-through-to-the-downside signals were given this past week that if confirmed this coming week with additional green weekly closes will give the traders enough chart information to determine what the indexes are likely to do through the end of the year.
This coming week a large amount of important earnings reports are scheduled that are likely to give the traders the kind of fundamental information necessary to determine if the market is recovering from the recent correction or not. As such, this coming week (at least until Friday) will be mostly fundamental in nature, with technical signals taking a back seat.
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Stock Analysis/Evaluation
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CHART Outlooks
This week there are 2 buy mentions and 2 sell mentions, given the fact that the seasonal tendency to rally at the end of the year is generally limited and usually determined not by general market direction but individually by the fundamental and chart factors affecting each individual stock.
SALES
LVS Friday Closing Price - 49.72
LVS made a new 3-year low at 36.53 on October 1st, likely because of the rally seen in the indexes, as well as having reached a strong 5-year level of support at $36, the stock has seen a 27% recovery over the past 12 trading days that has been straight up (no pauses or retests of the low). Nonetheless, due to the strong oversold condition of the stock, the rally in the overall market, and the level of support reached, the probabilities are high that the rally has been mostly short-covering and not new buying interest.
LVS is now reaching a level of resistance at $50-$51 that is almost as strong as the support found at $36, suggesting that the recent buying interest is likely to end and a retest of the recent lows occur thereafter.
To the upside and on a weekly closing basis, LVS shows decent resistance between 50.73 and 50.82 as that was a support level that lasted 2 years (from Feb13 to May15) and from which the fall to the $36 level occurred when the level was broken. In addition, there is additional daily close resistance at 52.60 from the 200-day MA that has not been broken to the upside for the past 15 months. On an intra-week basis, minor to perhaps decent resistance is found between 50.49 and 51.05.
To the downside and on an intra-week basis, LVS shows very minor support at 45.74 and minor at 43.70. Below that level, minor to decent intra-week support is found at the $40 demilitarized zone and then decent to perhaps strong at the recent low at 36.53.
Between March 2011 and January 2012, and again between June 2012 and December 2012, LVS traded mostly between $36 and $48/$50, having seen both those highs and lows on 7 different occasions during that period of time, suggesting a high probability of that happening again at this time.
Sales of LVS between 50.69 and 51.05 and using a stop loss at 52.75 and having an objective of 40.00, will offer a 5-1 risk/reward ratio.
My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest).
CVX Friday Closing Price - 91.29
CVX gave a strong sell signal in November of last year when the stock broke below the 200-week MA, currently at 112.30, for the first time since August 2010. It is evident that there were fundamental negatives with the company then, since the break to the downside occurred at a time when the indexes were still in a strong uptrend from which further upside of consequence occurred. The downtrend began in earnest in April, after the stock tested the 200-week MA successfully, as the stock got into a 15-weeks-in-a-row string of red closes that included breaking a previously confirmed support at $100. The end result was a drop down to 69.58, a low that was seen on August 24th.
CVX has seen a 24% rebound off of the August lows and did close on the highs of the week on Friday, suggesting further upside above last week's high at 91.66 is likely to be seen this week. Nonetheless, this rally has likely been mostly short-covering after the 49% drop in price during the last 15 months, as well as some affinity to the rally seen in the indexes over the past 8 weeks.
To the upside, CVX shows very minor resistance at 93.81, minor at 95.79 and decent at the $100 level (based on a weekly close). On a daily closing basis, decent resistance is found at the 200-day MA, currently at 97.80. Nonetheless, it should be mentioned that the stock shows decent to perhaps strong intra-week resistance from July-December 2007 between 95.00 and 95.30.
To the downside and on an intra-week basis, CVX shows minor support at 87.29 and minor again at 82.29. Below that, minor to decent support is found at the $80 demilitarized zone and then again between 74.30 and 75.10. Strong support is found at the August low of 69.58.
Though the action seen in CVX over the past 4 years does suggest the bulls are likely to attempt to get back to the important and pivotal $100 level, the level of weakness seen during periods of strength in the indexes, as well as the fact that the stock hit a brick wall between July and December 2007 at the $95 demilitarized zone, does suggest that the bulls will fail in their attempt to reach either the 200-day MA, or the $100 level.
CVX has now shown 3 green closes in a row without any pause or correction occurring. In addition, the major low at 69.53 does not show a spike low retest of that level, suggesting that when the stock finds resistance that a fast and likely strong move down will occur.
Sales of CVX between 94.70 and 95.30 and using a mental stop loss at 95.89 or a daily close stop loss at 97.87 and having an 80.00 objective will offer at least 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 there was a clear resistance level that could be used as a reliable stop loss.
PURCHASES
WMT Friday Closing Price - 58.89
WMT received a disappointing earnings report and reported lower than expected guidance which caused the stock to drop 12% in value over a period of 3 days. Nonetheless, the company is one of the stalwarts of the economy and with the drop in price seen this past week, it has reached a level of support between $57 and $60 that should hold up, especially considering that the overall market is on a rally that might continue for the next few months.
WMT previously traded in this area ($57-$63) between November 2011 and May 2012, which was also the time frame when the indexes were recovering from the strong correction seen in May-Oct 2011, suggesting that the stock has a decent likelihood or repeating the action seen at that time.
WMT closed on the lows of the week and further downside below last week's low at 58.37 is expected to be seen this week. Nonetheless, if the indexes do not show any weakness of consequence this coming week (not likely), the probabilities will favor some "bargain basement buying" being seen, keeping in mind what happened in November 2011.
To the downside, WMT shows minor to decent intra-week support at 57.18 and minor at 56.32. Nonetheless, on a weekly closing basis, there is minor to decent weekly close support at 56.89 (seen the third week of November 2011) that is further strengthened by a previous high weekly close at 56.70 that was seen the third week of January 2011.
WMT will show some minor to perhaps decent intra-week resistance at 62.57 as well as minor to decent daily close resistance at 63.34 that was the level of support that got broken when the earnings report came out.
The probabilities seem to favor WMT trading between the $57 and $63 level for the next 3 months unless the overall market resumes the correection seen in August and September (unlikely). A decision on long-term direction is not likely to be made until the first quarter of next year when the market decides what 2016 is likely to bring.
Purchases of WMT between 56.70 and 57.30 and using at 56.23 stop loss and having a 63.00 objective will offer a 6-1 risk/reward ratio.
My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
GPS Friday Closing Price - 26.63
GPS is a company that has been mostly in a fundamental free-fall drop due to an unfavorable outlook for the company in the retail clothing business. Nonetheless, the stock has already fallen 43% in value over the past 13 months and is nearing a level of support at $25 that has been important and pivotal during the past 14-years, given that it was a major double-top intra-month high that lasted 11 years (between 2001 and 2012) before it was broken to the upside.
In addition, the $25 level in GPS also represents the 200-month MA, which is certainly a line that represent the long term outlook of the company. It is unlikely that at this time that line will be broken, suggesting that at the very least a decent bounce will be seen when that level is reached.
GPS closed near the lows of the week and further downside below last week's low at 25.97 is expected to be seen. Nonetheless, with the index market likely to rally this coming week, the probabilities do favor some "bargain basement buying" on any drops below last week low, with the traders anticipating that some recovery/bounce will be seen from the $25 area.
To the downside, GPS shows intra-week support between 25.02 and 25.19 as well as weekly close support from a previous high weekly close of consequence at 26.06.
To the upside and on an intra-week basis, minor to perhaps resistance is found at 26.83 and then decent at the $30 demilitarized zone that does a level of support that held up strongly for 3 years between July 2012 and October 2015.
The purchase trade in GPS is based mostly and the important and long term support on the chart at $25, the strongly oversold condition of the stock and the rally being seen in the index market. Nonetheless, the profit potential is limited (probably no more than a rally to $30) as the fundamental outlook needs to change before the bulls can aspire to more.
Purchases of GPS between 25.00 and 25.30, using a stop loss at 24.65 and having a 30.00 objective, will offer a 7-1 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 generated a red weekly close on Friday as the bulls were unable to follow through to the upside after last week's close on the highs of the week. Nonetheless, the action cannot be considered all negative, inasmuch as the 50-day MA (currently at 2.45) which was broken to the upside 2 weeks ago after being below the line since May, was tested successfully, suggesting that the action this past week might be simply backing and filling within a base building scenario. On a positive note, the close at 2.68 will be considered a successful retest of the previous 9-week high weekly close at 2.63 that got broken last week if the stock can generate a green weekly close next Friday. Minor support is found at 2.34 and resistance at 3.18. Probabilities slightly favor the bulls. ARNA generated a second green weekly close on Friday, further strengthening the idea that the low at 1.72, seen 3 weeks ago, is the bottom of this recent downtrend. The stock closed in the middle of the week's trading range, leaving the door open for a retest of the lows should the stock go below last week's low at 2.14, or continuation of the recovery should the stock go above last week's high at 2.45. Resistance continues to be found at 2.62 (2.58 on a daily closing basis) and support is found at 2.00. Probabilities favor further upside up to the 2.58 level and then a retest of the low before more serious buying interest is found. ENG was able to generate a green close on Friday, meaning that no follow through to the new 26-month weekly closing low that was seen the previous Friday was accomplished by the bears. Nonetheless, the bulls were also not able to close the index above the 1.00 psychological resistance level, suggesting that further sideways action as has been seen during the past 9 weeks will continue. Earnings report comes out on November 7th and it is highly likely nothing of consequence will happen until then. Support is found at .88 and resistance at 1.10. Probabilities favor another uneventful week this week. FCEL did not follow through to the upside after the close on the highs of the week last week and did generate a red weekly close on Friday, meaning that the previous week's close at .92 becomes a successful retest of the 16-week high weekly close at .94. By the same token, the stock closed in the middle of the week's trading range, leaving the door open for movement in either direction depending on news and how the indexes end up the week. It is evident the traders are waiting for a positive catalyst to help them break out of this sideways trading range the stock has been in for the past 16 weeks. Minor but short-term pivotal support is found at .83 that if broken would suggest a drop back down to close the gap between .73 and .75. Intra-week resistance is found at .95 and 1.00 that if broken would be a signal that the downtrend is over. Probabilities slightly favor the bulls. FSLR generated a second green close above the 50-week MA, currently at 50.25, as well as a close near the highs of the week, suggesting further upside above last week's high at 52.75 will be seen this week. In addition, the stock on Wednesday also closed above the 200-day MA, currently at 51.05, and followed that break with 2 additional daily closes above the line, suggesting that the downtrend is totally over and that further recovery is likely to be seen. By the same token, the bulls still have more to do before they can generate enough new buying interest to warrant further upside of consequence. Resistance is found at last week's high at 52.75 and then decent and pivotal resistance is found at the double high at 53.63/53.67 that also represents the gap created after the May earnings report between 54.90 and 53.67. Closure of the gap would negate all the negative action seen the past 5 months and likely cause the stock to move back up to the $59-$60 level. Short-term pivotal support is found at 49.70-50.00. Probabilities favor the bulls. QRVO generated a 2nd green close in a row as well as a close near the highs of the week, suggesting further upside above last week's high at 48.79 will be seen this week. The $50 level is a level that will continue to act as a magnet on both a daily and weekly closing basis, suggesting that until that close occurs that the stock will continue to be supported. Likely pivotal support is now found at 43.93 but the intra-day 60-minute chart shows support at 46.53 and again at 45.88 that does not seem will be broken at this time. The same 60-minute chart shows important resistance at 48.47 and 48.79 that includes the 200 60-minute MA, currently at 42.25. A break of intra-day resistance and hourly close above the line would suggest the 50.00 level would be seen shortly thereafter. Probabilities favor the bulls. XOM continued the recent uptrend, having generated the 4th green weekly close in a row as well as closing on the highs of the week, suggesting further upside above last week's high at 82.50 is likely to be seen this week. Nonetheless, the stock is reaching levels of resistance between 83.15 and 83.85 that are unlikely to get broken at this time, at least not on a closing basis, as they represent a previous low daily "and" weekly close of importance at 83.58 that when broken caused the stock to drop all the way down to 66.55 as well as where the 200-day MA, currently at 83.85, is located, meaning that the bulls would need a positive fundamental change for that area to be broken at this time. On an intra-week basis, the stock could rally up to the 50-week MA, currently at 85.05 but the probabilities do not favor that happening. I will be looking to take profits on the positions on any rally above 83.00.
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1) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at present. Stock closed on Friday at .89.
2) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at .99.
3) FSLR - Averaged long at 59.404 (4 mentions). No stop loss at present. Stock closed on Friday at 52.05.
4) AREX - Averaged long at 6.013 (3 mentions). No stop loss at present. Stock closed on Friday at 2.68.
5) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 2.31.
6) XOM - Averaged long at 76.825 (2 mentions). No stop loss at present. Stock closed on Friday at 82.48.
7) KNDI - Liquidated at 8.02. Purchased at 5.07. Profit on the trade of $295 per 100 shares minus commissions.
8) QRVO - Averaged long at 44.23 (3 mentions). Stop loss is at 42.14. Stock closed on Friday at 47.32.
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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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