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Issue #476 
April 24, 2016 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Pivotal Week Ahead. Important Earnings and Economic Reports Scheduled!
DOW Friday closing price - 18003
The DOW continued the recent uptrend, having generated a new 10-month intra-week high and 9-month weekly closing high this past week. The index closed slightly in the lower half of the week's trading range, opening the door for a top to this rally having been found, if and when the important earnings and economic reports due out this week do not support higher prices.
The new multi-month intra-week and weekly closing high in the DOW, above the high weekly close at 17910 seen in November, strongly suggests that the downtrend/weakness seen the past 10 months is now over and that the index is back to the sideways trend that was in place between October 2014 and August 2015.
The DOW finds itself at the most overbought condition seen since January 2014 with an RSI number at 77. Every time in the past 3 years that the index has gotten above an RSI of 75 a correction has occurred immediately or within a couple of weeks. With the index not presently in a long-term uptrend, such as it was back in the early months of 2014, the probabilities of a correction are high.
To the upside and on an intra-week basis, the DOW now shows minor resistance at 18188, minor to decent at 18288 and strong at the all-time high at 18351.
To the downside and on an intra-week basis, the DOW shows minor support at 17848 and then minor to decent between 17700 and 17730. Below that level there is minor to perhaps decent but short-term pivotal 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 17125.
There is a lot at stake in the DOW this week as the last of the important and possibly catalytic earnings reports come out this week, as well as the new GDP number, meaning that if the bulls cannot accomplish resumption of the long term trend, they may have to wait until October to try it again. In addition, May is just 1 week away and given the overbought condition, the amount of strong resistance close by above, and the mostly disappointing earnings reports going into the summer months when things normally get even slower, the old adage about "Sell in May and go Away" is likely to have as much or more impact this year than any other year.
The DOW is likely to begin a correction this week or the next at the latest. Given the 4 important and clearly defined intra-week support levels between 17000 and 17200 seen over the past 17 months (17067 - Dec14, 17037 - Feb15, 17210 - Nov15, and 17124 - Dec15), it is likely that area will be target/objective for the 5-6% correction that has been expected to occur.
With the DOW now showing 10 weeks in a row of higher lows than the previous week, it can safely be said that if the index gets below last week's low at 17848 this coming week, that the correction has started.
Probabilities slightly favor the bears in the DOW this week.
NASDAQ Friday closing price - 4906
The NASDAQ had a disappointing inside red-close week as the index failed to get above the previous week's high (in spite of closing near the highs of the week the previous week) and also failing to close the January gap up at 4999 that needed to be closed in order to remove the negative bias from the charts. The red close week was mostly due to lower-than-expected earnings reports on NFLX and GOOG and it does suggest that if that negative fundamental earnings trend is not reversed this week with the earnings reports on AAPL and AMZN that the index may not recover technically/chart-wise.
The NASDAQ closed near the lows of the week and further downside below last week's low at 4872 is expected to be seen. It also needs to be mentioned that the red close makes the previous week's close at 4938 into a successful retest of the 4930 area that was previously decent weekly close support all of 2015 but is now considered resistance.
To the upside and on an intra-week basis, the NASDAQ shows decent resistance at 4960/4970 and then some psychological resistance at the top of the 5000 demilitarized zone at 5030. Above that level, resistance is minor at 5042 and decent between 5116 and 5119.
To the downside and on an intra-week basis, the NASDAQ shows minor support at 4970 and at 4832 and minor to decent, as well as pivotal support at 4808. Below that level, there is minor support between 4750 and 4770 and then nothing established until the 4607/4614 level is reached.
The bulls in the NASDAQ failed once again to close the gap up at 4999 but they are likely to have 1 more chance this week, given that AMZN and AAPL report. By the same token, it seems evident that if the gap is not closed this week that further attempts will not happen. Failure to close the gap is likely to generate renewed selling interest in Tech Stocks and given the still high value that some of these stocks presently have, it could mean a correction of consequence (more than is likely to be seen in the other indexes) will occur once the Sell in May and go Away adage starts to work.
The 4808 level in the NASDAQ is now a likely important pivot point because if broken a drop down to somewhere between 4487 and 4546 is likely to occur. A drop down to that level would be double than what is expected in the other indexes. Then again, such underperformance of the index would certainly be commensurate-in-the-opposite with what happened to the upside when the NASDAQ over-performed the other indexes by the same percentage.
Probabilities favor the bears in the NASDAQ.
SPX Friday closing price - 2091
The SPX extended its gains and made a new 6-month intra-week last week at 2111 but the bears failed to close above the 2 November high weekly closes at 2094 and at 2091 and did close slightly in the lower half of the week's trading range, suggesting that the selling interest is starting to rise and perhaps to the point that a top to this rally may have been found.
The SPX has now received all of its important earnings reports and is now likely to be dependent on what the other indexes do, especially this week when the last big batch of earnings reports from the DOW and the NASDAQ come out.
To the upside and on an intra-week basis, the SPX shows decent resistance at 2116 and strong resistance at the all-time high at 2134.
To the downside and on an intra-week basis, the SPX shows minor but likely short-term pivotal support at 2070/2073. Below that level, minor support is found at 2039, pivotal support at 2033 and minor support at 2022 and on a daily closing basis at 2015, which is where the 200-day MA is currently located. Further and longer term pivotal support is found at 1969.
The bulls in the SPX did accomplish breaking above the 2104 level of intra-week resistance, as well as generating a convincing daily close above 2081, which now becomes a pivotal daily close support that if broken would suggest a top has been found. In addition, the November high at 2116 was not broken and the fall back from the week's high at 2111 t close on Friday at 2091 was disappointing, likely meaning that the bulls will need additional fundamental help this week to generate any further upside.
The probabilities slightly favor the bears this week.
The charts are now set/fulfilled and with all the important economic and earnings reports scheduled for this week (Earnings= AMZN and AAPL and Economic= Durable Goods, GDP Adv, 20-city Case/Shiller, FOMC rate decision, Michigan Sentiment, and Chicago PMI) it is highly probable that the traders will make a decision on direction for the next couple of months.
The indexes are strongly overbought and May is just 1 week away, meaning that the "Sell in May and go Away" adage will start to work in the minds of the traders. With earnings this quarter being mostly as expected or disappointing and the summer months offering additional slow-downs for earnings, it is going to be very difficult for the bulls to keep the recent torrid uptrend heading higher, at least not without some strong positive fundamental information.
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Stock Analysis/Evaluation
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CHART Outlooks
Important Economic and Earnings week suggests that trading off of charts this week is perilous. As such, no "new" mentions will be given in this newsletter. By the same token, once all the fundamental information is out (by Friday), chart trading for the following weeks will likely be the way to go.
The FSLR mention that I have had for the past 2 weeks is not "on" this week as the stock is unlikely to get to the desired entry point. I would also like to see the action in the stock this week before I put it on again as it was previously, or change it to a new desired entry point.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| AAPL generated a clear failure signal this past week, having convincingly broken below the 200-day MA, currently at 110.10, and then closing on the lows of the week, suggesting further downside below last week's low at 104.62 will be seen. In addition, the red weekly close below the most recent low weekly close at 108.62 generated a small sell signal that was not clearly confirmed on Friday when the stock closed just barely below the decent low weekly close support at 105.76 but is suggestive that further downside will be seen if the earnings report on Tuesday afternoon is not better than expected. Support is found at last week's low at 104.63, given that it was also a spike low seen on Jan2015. A break of that support will open the door for a drop down to at least the 101.42 level, if not the $100 demilitarized zone. Nonetheless, on the weekly chart there is no support of consequence until the $95-$96 level is reached. To the upside, there is very minor resistance at 108.06 and then a bit stronger at the gap area between 108.95 and 109.73. Further resistance and likely pivotal is found at 110.42, meaning that consideration can be given to lowering the stop loss to 110.52. Probabilities favor the bears. ADSK broke out of a bullish flag formation when it rallied above the 59.34 high seen 4 weeks ago. The stock closed near the highs of the week and further upside above last week's high at 60.49 is expected to be seen. Nonetheless and on a possible negative note, the bulls failed to close a small gap between 60.80 and 60.91 that was generated the first week of the year and did close below the bottom of the $60 demilitarized zone at 59.70, suggesting the bulls may not have enough ammunition to reach the flag's objective at 72.81. Any daily close below the breakout of the flag at 58.31 would give a failure to follow through signal. Minor to decent intra-week support is now found at 58.55 that if broken would suggest the breakout was false. Resistance is minor but likely pivotal at the gap area at 60.80. Probabilities favor the bulls. AMT gave a failure to follow through signal on the weekly closing chart, having closed on Friday below the previous all-time high weekly close at 105.02 and having made the first lower-than-the-previous-week low in the last 10 weeks. Nonetheless, even though the volatility picked up strongly the last 2 days of the week (suggesting that a top may have been found) the bulls were able to rally on Friday to close exactly in the middle of the week's trading range, suggesting that the stock will follow whatever direction is chosen by the traders in the indexes after the earnings and economic reports for the week come out. Minor resistance is found at 105.89 and decent, as well as pivotal resistance is found at the all-time high at 106.75. Minor to decent pivotal support is found at last week's low at 102.38 that if broken would suggest the $100 demilitarized zone will be visited. Probabilities slightly favor the bears. ARNA generated another uneventful week, having traded in a narrow 12 point trading range between 1.80 and 1.92 and closing just slightly below the middle of the trading range, suggesting further downside below 1.80 will be seen this week. Support of pivotal consequence is found between 1.67 and 1.73 that is likely to be tested before any new attempts to the upside occur. Longer term 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 also seems likely that the stock will continue to trade with a slight short-term downward bias (with 1.70 objective) until new news comes out. CVX broke out of a bullish flag formation this past week that offers a 107.25 objective. The stock closed on the highs of the week, suggesting further upside above last week's high at 102.80 will be seen this week. On a negative note though, the stock finds itself in an area of weekly close resistance of consequence between 101.62 and 102.53 that is comprised of the 4 major weekly closing lows seen since November 2012 that when broken caused the stock to fall to the multi-year low at 69.58. In addition, the 100-week MA is currently at 103.00 and that is a line that has not been broken for the past 19 months, meaning that the bulls will need some strong positive fundamental news to generate further upside above this level. The stock does report earnings on Friday before the market open. Minor support is found at 98.91 and pivotal support is found at the breakout-of-the-flag area at 97.69. Any daily close below 97.69 would be considered a negative. Probabilities slightly favor the bulls but this is a pivotal area. DOW generated a new 5-month intra-week and weekly closing high on Friday. The stock closed slightly in the upper half of the week's trading range, suggesting further upside above last week's high at 53.35 will be seen this week. Nonetheless and on a negative note, the stock is reaching a level of decent intra-week resistance between 53.35 and 53.80 that goes back to June 2014 and shows 4 previous highs in that area, meaning that the bulls will need some positive fundamental information to generate further upside. The company does report earnings on Thursday before the opening bell. Minor but likely short-term pivotal support is found at 51.70 and decent support is found at the $50 demilitarized zone. Resistance is found between 53.33 and 53.80. Probabilities slightly favor the bulls at this time. ENG broke out of a bullish flag formation this past week that offers a 1.45 objective. The stock closed near the highs of the week and further upside above last week's high at 1.38 is expected to be seen. On a negative note though, the bulls were unable to generate a close above 1.31, which is a major weekly closing low that when broken caused the stock to fall down to the .68 level. In addition, the 200-week MA is currently at last week's high at 1.38, meaning that the bulls are looking at an area of resistance that likely will need further positive fundamental news to break. The company reports earnings on May 5th and that likely means that this coming week the stock will probably fulfill the chart requirements (means further intra-week upside to 1.45) but a close next Friday below 1.30 as the traders await the earnings report. Volume has picked up a bit but not yet enough to help the bulls break resistance this week. Probabilities slightly favor the bears this week, as far as next Friday's weekly close. FCEL generated an uneventful inside week but did close in the lower half of the week's trading range, suggesting further downside below last week's low at 6.65 will be seen this week. Minor but pivotal support is found at 6.37. Minor to perhaps decent resistance is found at 7.35 and decent at 7.99. Probabilities favor another week of uneventful trading likely between 6.50 and 7.15. GPRO continued the recent uptrend, having made a new 11-week daily and weekly closing high on Friday. The stock closed on the highs of the week and further upside above last week's high at 14.18 is expected to be seen. Minor intra-week resistance is found at 14.35 that if broken would likely push the stock up to the next "psychological" resistance at $15. By the same token, above 14.35 there is no previous resistance until the 16.89 level is reached. Support is now decent and pivotal at 12.82, meaning that the 12.65 stop loss given for the trade is now a valid and dependable stop loss. Probabilities favor the bulls. LVLT generated a negative reversal week, having made a new 16-week high but then reversing to close in the red. The stock closed in the middle of the week's trading range, suggesting the traders will wait to see what happens with the indexes and the economic/earnings reports before deciding what to do. Nonetheless, the negative reversal does give the bears the slight edge, especially considering that the stock got up to 54.48 this past week and the 54.40 level on the weekly closing chart is a pivotal resistance that if broken would suggest higher prices will be seen. The company reports earnings on Thursday before the opening. Minor support is found at 52.56 and pivotal short-term support is found at 50.84. Probabilities are evenly spread as the stock does have strong positive fundamentals but likely requires help from the indexes to continue higher. T generated a key negative reversal, having gone above the previous week's high and then closing below the previous week's low. The stock closed near the lows of the week and further downside below last week's low at 37.85 is expected to be seen. Minor to perhaps decent intra-week support is found at 36.43 and again at 35.91. The stock gapped down on Thursday between 38.66 and 38.58 and it is possible that at the beginning of the week the bulls will attempt to test and try to close the gap, especially since there was no news to cause the gap. The company reports earnings on Tuesday after the close. The weakness shown recently in the stock in spite of the strength still seen in the indexes, suggests that the bears are in control and may retain control even if the indexes do not head lower.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .568 (new price 6.82).
2) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.30.
3) AMT - Averaged short at 102.79 (3 mentions). No stop loss at present. Stock closed on Friday at 104.19.
4) T - Averaged short at 39.085 (2 mentions). No stop loss at present. Stock closed on Friday at 38.07.
5) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.85.
6) ADSK - Shorted at 60.11. Averaged short at 57.30 (3 mentions). No stop loss at present. Stock closed on Friday at 59.54.
7) AAPL - Shorted at 109.10. Stop loss now at 112.49. Stock closed on Friday at 105.69.
8) LVLT - Shorted at 53.49. Stop loss at 54.82. Stock closed on Friday at 53.73.
9) PHM - Covered shorts at 18.93. Shorted at 18.42. Loss on the trade of $51 per 100 shares plus commissions.
10) GPRO - Purchased at 13.18. Stop loss now at 12.65. Stock closed on Friday at 13.98.
11) CLB - Shorted at 112.36. Covered shorts at 112.96. Loss on the trade of $60 per 100 shares plus commissions.
12) CVX - Shorted at 102.70. No stop loss at present. Stock closed on Friday at 102.01
13) DOW - Shorted at 52.62. Stop loss at 55.06. Stock closed on Friday at 52.61.
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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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