Issue #474 ![]() April 10, 2016 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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Small Swing in Mood. Bears in Position to Capitalize!
DOW Friday closing price - 17576
The DOW generated a red close week, meaning that last week's close at 17792 is now considered the "fourth" successful retest of the all-time high weekly close at 18272 (previous 3 successful high weekly retest closes at 18086, 17910 and 17847). The inability of the bulls to break the 11-month downtrend pattern, especially after having generated a strong rally last week, a close on the highs of the week, and getting within 55 points of the previous high weekly close, suggests that this 2-month rally has found its top and that the traders will now be looking to the downside.
The death cross of the MA's in the DOW has now occurred (100-week now at 17298 and 50-week now at 17272) and having closed near the lows of the week and further downside below last week's low at 17484 expected to be seen this week, the probabilities strongly favor the index getting down to test that cross with a drop to the 17270-17300 area.
The death cross to the downside in the DOW has occurred only 2 times in the past 20 years (2001 and 2008) but only the 2001 death cross has similar characteristics to what is being seen now. On that occasion, the death cross occurred in January but the index traded mostly sideways for the next 7 weeks before any move of consequence to the downside was seen. Ultimately though, and over a period of 21 months, the index dropped a total of 3831 points (35%) from the high seen when the cross occurred.
To the upside and on an intra-week basis, the DOW now shows minor resistance between 17718 and 17750, minor to decent resistance at 17811 and decent between 17907 and 17977. Above that level, resistance is once again decent between 18103 and 18133.
To the downside and on an intra-week basis, the DOW shows minor support at 17484, minor again but likely short-term pivotal at 17399 and then decent as well as longer term pivotal at 17116, which does include the 200-day MA, currently at 17118.
The bears in the DOW still need to generate a sell signal in order to confirm the negatives. A daily close below 17502 and weekly close below 17515 would fulfill those requirements. Given that the index is likely to see and go below last week's low at 17484, the probabilities are high that the bears will be in a position this coming week to generate some confirmation that a top to this rally has been found and that a downtrend might have begun.
Probabilities favor the bears in the DOW this week.
NASDAQ Friday closing price - 4850
The NASDAQ closed in the red on Friday, making the previous week's close at 4914 into a successful retest of the previous low weekly closes from November and December at 4927 and at 4923 respectively. In addition, the bulls attempted to close the January gap between 4926-4999, having gone above the previous week's high at 4917 (got up to 4921) but then failing as the index turned around to close in the red and near the lows of the week, suggesting further downside below last week's low at 4831 will be seen this week.
The NASDAQ bulls have had every opportunity to take the index higher, having closed above the 200-day MA (currently at 4855) on 4 out of the last 7 days, having gotten help from the Fed with the Dovish Statements, and having seen the Tech Sector leading the market the last 2 weeks. Nonetheless, the chart resistance levels have proven to be impossible to overcome so far and now the bulls likely need additional fundamental help to accomplish what they have not been able to accomplish yet.
To the upside and on an intra-week basis, the NASDAQ shows minor resistance at 4921 and at the gap area at 4926 and then nothing until decent resistance is found at 4960. Nonetheless, on a daily closing basis, the index has decent resistance between 4920 and 4933, having generated a total of 6 closes (4 to the downside and 2 to the upside) in that area for the past 52 weeks.
To the downside and on an intra-week basis, the NASDAQ shows minor support at the low for the past 8 days at 4831 and then nothing until slightly stronger and more pivotal intra-week support at 4734. Further support is found between 4607 and 4614.
The NASDAQ has built a bullish flag formation with the flagpole being the rally from 4734 to 4921 and the flag the trading range the last 8 trading days between 4831 and 4921. A break above the top of the flag at 4921 would offer a 4998 objective. On the negative side, the index has now closed below the 200-day MA the last 2 days, currently at 4855, and another red close below the line, in conjunction with an intra-week break below 4831, would negate the bullish flag formation and suggest that a top formation has been formed and that the index will start moving lower from here on out. A daily close below 4766 and/or a weekly close below 4773 would be a sell signal.
The probabilities favor the bears in the NASDAQ this week given the repeated failures to close or get into the gap area, the now twice successful retest of the daily close resistance area (close on 4/1 at 4914 and on 4/6 at 4920), and the close near the lows of the week that suggests the index will start under sell pressure this week.
SPX Friday closing price - 2047
The SPX generated a red weekly close on Friday, keeping the index under the 2072-2081 intra-week and daily and weekly close resistance area that has been in place for the last 52 weeks. The index closed near the lows of the week suggesting that further downside below last week's low at 2033 will be seen this week.
The SPX bulls have been unable to break the 11-month downtrend that now shows a double top on the weekly closing chart at 2026 and 3 successful retests at 2099 and 2091 in November and the previous week's close at 2072.
By the same token, the bears in the SPX have not yet made any negative statement as they need to generate a daily and/or weekly close below 2035 for a sell signal to be given, which in turn would confirm that the recent uptrend has found a top.
To the upside and on an intra-week basis, the SPX shows minor to decent but also likely pivotal resistance between 2075 and 2081. Above that level, there is minor to decent resistance at 2092/2093 and decent at 2104. Decent to possible strong resistance is found at 2116.
To the downside and on an intra-week basis, the SPX shows minor support at 2033 and at 2022 and on a daily closing basis at 2014, which is where the 200-day MA is currently located. Further and longer term pivotal support is found at 1969.
Based on the daily closing chart, the SPX now finds itself in a narrow trading range between 2035 and 2072 that looks to be a determinant to what the index will do thereafter. The trading zone could be stretched to 2081 and 2014 (200-day MA) without much ado but anything above or below those levels would likely be decisive.
It also needs to be mentioned that the death cross in the SPX continues to get closer to occurring with the 50-week MA, currently at 2030 and the 100-week MA, currently at 2022. With the death cross having already occurred in the DOW it does suggest that it will occur in the SPX as well. Probabilities favor the bears at this time.
The momentum to the upside stalled this past week with 2 of the indexes failing to go above the previous week's high and all of the indexes closing in the red and near the lows of the week. With oil prices rallying and the Fed in a Dovish stance, the inability of the bulls to accomplish further upside this past week is a big red flag.
The is a decent slate of economic reports this coming week, with PPI and CPI, Retail Sales, Industrial Production, Capacity Utilization and Michigan sentiment scheduled to be released. Nonetheless, none of these reports are likely to be catalytic enough to change anything. Nonetheless, OPEC meets a week from today on April 17th and what they decide could have an impact, given that oil and the market have been on the same path recently.
This coming week though is likely to be mostly technical in nature and based on the inability of the bulls to make things happen last week, it is likely that the bears will have their opportunity this week.
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Stock Analysis/Evaluation
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CHART Outlooks
The probabilities favor the bears this week but due to the OPEC meeting scheduled for next Sunday 4/17, it is unlikely that the bears will accomplish much to the downside as that meeting could change the oil fundamentals and those have been directing the market of late. Simply stated, the bias should be to the downside but likely limited.
Though sales continue to be "the preferred direction" the uncertainty about what will happen with oil the week after will prevent any aggressive selling from occurring. As such, no sell mentions will be given this week.
Nonetheless, there is one "buy" mention this week in a long-term favorite stock that has reached a downside level of support where some buying interest is likely to be found. It is also a stock that is not always sensitive to the indexes and that is likely to be helped if oil prices do head higher.
PURCHASES
FSLR Friday Closing Price - 60.63
FSLR recently got up to a major resistance level between 73.78 and 74.84 that got a lot tougher to break when the stock was downgraded after the company refused to offer guidance for 2017. In addition and over a period of 4 weeks, the bulls had attempted to break resistance, having gotten up to a high of 74.29 and above 73.37 on 3 of those weeks and that is when the news came out that gave the bears the reason to generate a correction and the bulls a reason to take profits.
FSLR generated a spike drop this week in which the stock dropped 12.7% in value (a loss of almost $9). Having closed on the lows of the week, further downside below last week's low at 60.27 is expected to be seen.
Nonetheless, FSLR is reaching an area of support between $57 and $60 that has been decent for the past 23 months and that should generate at least some chart buying interest. In addition, one of the likely reasons that the company refusing to offer guidance for 2017 was the uncertainty of the price of oil, but now that it seems that oil may have found a bottom, the possibilities of a rally from these lower prices have increased.
To the upside and on an intra-week basis, FSLR will now show minor to decent resistance at 65.50. Above that level, there is minor resistance at 66.65 and at 67.80, which does include the 50-day MA, currently at 67.35, as well as the recent gap between 67.09 and 65.97.
To the downside and on an intra-week basis, FSLR shows minor support at 60.15 and minor to decent support at 58.08. Decent support is found at 57.80 (spike low from May 2014) and that is further strengthened by this year's low (seen in January) at 57.20.
The lack of guidance for 2017 given by FSLR did generate a strong round of profit taking, especially considering that the stock was at strong resistance and overbought. Nonetheless, having dropped 19% in value over the past 4 weeks does suggest that some buying interest is likely to be found this week if the stock does go below last week's low.
The 2 spike lows seen this year in FSLR at 58.08 and at 57.20 are going to be difficult for the bears to break, even though it is possible that the traders may go for the stop losses likely placed below those 2 points. Nonetheless, given that the stock generated a strong spike down last week, as well as a close on the lows of the week, does suggest that the stock will get below the $60 level at some point.
Purchases of FSLR between 58.50 and 58.85 and using a stop loss at 56.65 and having an objective of at least 65.50 will offer a 3.5-1 risk/reward ratio.
My rating on the trade is a 3 (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 |
AA generated a small sell signal on the weekly chart, having closed below the low weekly close for the past 6 weeks at 9.52. By the same token, the sell signal was not confirmed on the daily chart, given that the stock is still above the 200-day MA, currently at 9.25, and the stock did not break the low daily close for the same 6 weeks at 9.16. Nonetheless, the stock closed near the lows of the week and further downside below last week's low at 9.26 is expected to be seen, suggesting the bears have a small measure of control now and that further sell signals could be generated this week. The key remains the 200-day MA that the bulls have been able to stay above for 17 days in a row. A confirmed close below the line would be a bearish signal. Intra-week resistance is found at 9.80, at 9.87, at 10.07 and pivotal at 10.22. Probabilities favor the bears. AAPL generated a negative reversal week, having made a new 15-week high and then closing in the red and near the lows of the week, suggesting further downside below last week's low at 108.12 will be seen this week. In addition, the red weekly close made last week's close at 109.99 into a successful retest of the 100-week MA, currently at 110.70, and the close last Monday at 111.12 a successful retest of the 200-day MA, currently at 110.95. Minor intra-week support is found at 108.12 and a bit stronger and likely more pivotal support is found at 107.35. Further support is found at 104.63 and then nothing until the bottom of the $100 demilitarized zone at 97.00 is reached. Stop loss should now be at 112.35. Probabilities favor the bears. ADSK failed to follow through to the upside after last week's positive reversal and close near the highs of the week. The stock generated an inside week as well as a red close and on the lows of the week, suggesting further downside below last week's low at 56.32 will be seen this week. Minor resistance is found at 57.50, decent resistance is now found at 58.61 and pivotal resistance is found at 59.34. Minor support is found at 56.18, a bit stronger at 55.34 and likely pivotal at 54.57. Chart suggests the bulls still have an edge but the recent action suggests stock has found a top to the rally. The 54.70 to 55.30 level seems to be short-term pivotal support. A break below 53.00 would be a decent negative. AMT made a new 16-month weekly closing high this past week above the previous one at 105.02 and closed near the highs of the week, suggesting further upside above last week's high at 106.07 will be seen this week. The all-time intra-week high is at 106.30 and it seems likely that it will be tested this week. Bears need to generate a negative reversal week and close the stock next Friday below the previous all-time high weekly close at 105.02 in order to give themselves a chance to generate some new selling interest. The stock has rallied 21.7% over the past 9 weeks and done it in a straight-up fashion, given than every single week the low has been higher than the previous week's low. Last week's low was 103.74 and if the bears can take the stock below last week's low, especially this week with the new high having been made, it would be a negative sign. Probabilities favor the bulls but only slightly. ARNA had an uneventful week, having traded in a narrow 20 point trading range between 1.86 and 2.06. Nonetheless, the stock now shows 7 failed attempts over the past 3 weeks to get above the 2.05-2.07 after rallying above 2.00, suggesting that the bulls need some positive catalyst to generate a break of resistance. The stock closed near the lows of the week and further downside below last week's low at 1.86 is expected to be seen, meaning that the traders will now be testing the equally important support between 1.67 and 1.73. Probabilities continue to slightly favor the bulls as it does seem the stock has built a strong bottom over the past 3 months. Nonetheless, it may take some catalyst to break out of the 1.67-2.07 trading range. ENG had another uneventful week but the stock continues to tally positives inasmuch as the stock has now closed above the 200-day MA, currently at 1.08, on 20 out of the last 25 days and has now established itself on the positive side of the line, suggesting the probabilities favor the bulls for further upside, rather than the bears for further downside. On a negative note, the stock has not yet been able to close above the 50-week MA, currently at 1.14, for the past 6 weeks since it first got back up to the line after a 16-month hiatus, also suggesting that some catalyst is needed to generate further buying interest. A close above the line would be a clear signal that the downtrend is over, which would likely cause more short-covering to occur. Intra-week resistance remains decent and likely longer term pivotal at 1.31. A weekly close above 1.31 will not only give a failure to follow through but would likely bring about not only short-covering but a spike in volume. The chart looks supported at this time and the probabilities favor the bulls continuing to chip away at the resistance above. Any drop below 1.00 would now be considered a decent negative. FCEL generated another uneventful week but did generate another red weekly close and on the lows of the week, suggesting further downside below last week's low at 6.37 will be seen this week. Nonetheless, it seems the stock has found an area where consistent buying interest is being seen, given that for the past 11 trading days the stock has traded every day below 6.52 but the bears have not been able to generate more than 15 points (down to 6.37) during this period of time. In fact, for the past 4 days the stock has seen lows of 6.38, 6.40, 6.37 and 6.38, suggesting that it is likely going to take negative news for further downside to be seen. Important and pivotal intra-week support is found at 6.10 that is unlikely to be broken. Minor intra-day resistance is found at 7.10 that if broken would suggest the stronger resistance at 8.08 will be targeted. Stronger and more meaningful resistance, but on a daily closing basis, is found at 8.50, which is where the 200-day MA is currently located. The chart suggest that the MA line will be touched sometime over the next week or two but that it will not be broken the first time around and that it will take anywhere from 1-2 months of backing and filling before the line is broken convincingly and the bulls can safely say that the downtrend is over. LVLT generated a negative reversal week, having made a new 3-month high but then closing in the red and near the lows of the week, suggesting further downside below last week's low at 50.84 will be seen this week. On Tuesday, the stock left a gap up at 52.45 that the bulls attempted to close with a rally on 52.39 on Friday. If last week's low at 50.84 is broken before the gap is closed, it will be seen as a negative sign. Intra-week resistance is found at 52.21, at 52.39, at 53.34 and at 53.52. Support is found at 50.84, at 50.47 and at 49.52. Pivotal support is found at 49.52 that if broken would likely bring about a drop down to 46.65 and if that level is broken, a drop down to 43.62. Probabilities favor the bears. PHM generated a spike drop last week off of news that the CEO of the company resigned. The drop took the stock down to the intra-week support at 16.56, having dropped down to 16.60. Nonetheless, the bulls were able to generate enough buying to close the stock slightly in the upper half of the week's trading range, leaving the door open for a rally or further downside depending on what the overall market does and on further news regarding the change of management. The stock did generate a sell signal on the daily and weekly closing chart, having closed below the previous low weekly close at 17.91 and below the low daily close for the last 4 weeks at 17.89. Daily close resistance that is short-term pivotal is found at 18.38 and daily close support that is equally pivotal is found at 17.18. Probabilities favor a drop down to at least 17.08 before the traders are forced to make any decisions. T generated a red close on Friday, opening the door for either a successful retest of the previous all-time high weekly close or a failure to follow through signal, depending on what the index market does this week. The stock closed on Friday at 38.50, which is 9 points below the previous high weekly close at 38.59, meaning that a red or a green close next Friday will be indicative of further upside or new downside occurring. The stock did close near the lows of the week, suggesting further downside below last week's low at 38.22 is likely to be seen this week. Minor intra-day support is found at 37.80 but intra-week support is not found until 36.43. Traders are likely to look to the 200 60-minute MA, currently at 38.55, for direction during the week. If the bulls are unable to get above and stay above the line, selling pressure will increase. Probabilities slightly favor the bears.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at 6.45 (old price .537).
2) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.08.
3) AMT - Averaged short at 101.085 (2 mentions). No stop loss at present. Stock closed on Friday at 105.71
4) T - Averaged short at 39.085 (2 mentions). No stop loss at present. Stock closed on Friday at 38.50.
5) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.90.
6) ADSK - Averaged short at 55.895 (2 mentions). No stop loss at present. Stock closed on Friday at 56.76.
7) CLB - Covered shorts at 106.99. Shorted at 114.93. Profit on the trade of $$794 per 100 shares minus commissions.
8) AAPL - Shorted at 109.10. Stop loss now at 112.35. Stock closed on Friday at 108.66.
9) LVLT - Shorted at 53.49. Stop loss at 54.82. Stock closed on Friday at 51.83.
10) PHM - Shorted at 18.42. Stop loss at 18.92. Stock closed on Friday at 17.80.
Previous Newsletters
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The opinions and commentaries by Mr. De Vito are not a recommendation to buy or sell, but rather
a charting guideline, based on his own knowledge and experience, regarding the stocks he is following or
that are brought to him by others. Mr. De Vito does not presently offer a track record of his trading experiences.
No inference of success and/or failure should be assumed. The
information enclosed above, regarding his background, length of trading, and experience, is correct
but is not meant to suggest, state, or infer any future success in trading, based on his opinions. The information herewith included should only be used by investors who are aware of the risk inherent in securities trading. Mr. De Vito accepts no liability whatsoever for any loss arising from any use of the information and/or comments he supplies. |
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