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Issue #506 
Dec, 11 2016 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Indexes on a Runaway Freight Train Track!
DOW Friday closing price - 19756
The DOW generated the 5th green weekly close in a row causing the rally to accelerate for the second time in as many weeks, having moved up 879 points the week after the Trump win and 573 points last week. The index has now moved up 1874 points (10%) due to the change of administration and has more than tripled in value since March 2009 when the low at 6469 was seen.
The 9-year uptrend far surpasses the 5-year uptrend seen between October 2002 and October 2007 in which the index doubled in price (from 7197 to 14198).
The DOW closed on the highs of the week and further upside above last week's high at 19757 is expected to be seen. The index is likely to reach the next "major" psychological level at 20,000 this coming week, leaving lots of questions as to what the index will do thereafter. By the same token, when the index reached the previous major psychological level (10,000) the first time (March 1999) it blew past that level by 1138 points before correcting. The second time (in December 2003) it blew past the level by 753 points before correcting, and the last time (October 2009) it blew past that level by 729 points before correcting, suggesting that the 20,000 is not likely to be the kind of resistance that will stop the rally at this time. Each and every time on those past 3 occasions, the index did not see any kind of selling of consequence until the second or third month after reaching the level.
It is also important to note that this past week, the DOW was not the leader of the indexes (as has been the case of late), having moved up 3% in value while the SPX moved up 3.1% and the NASDAQ moved up 3.5%. What this suggests is that this rally has "legs" to it as the traders are buying stocks across the board and not keying only on the safety of Blue Chip stocks.
To the upside and on an intra-week basis, the DOW has no resistance other than "psychological" resistance around 20,000 and "general" around 20,300.
To the downside and on an intra-week basis, the DOW shows very minor support at 19527 and minor at 19184. Below that level, there is minor support at 19062 and again at 18736 and then minor to perhaps decent at 18636, which is the previous all-time high daily close.
The DOW is presently a "runaway freight train" where the bears dare not make a stand since there is no level where they can all gather to offer resistance. The 20,000 level is likely to offer "some" initial resistance but given the track record in the past of blowing through this kind of resistance, it is not likely to offer much "push back".
The only thing that could stop/slow down/pause the index this week is the Fed rate announcement on Wednesday. By the same token, it is 100% anticipated that the Fed "will" raise interest rates at this meeting and as such, unlikely to stop the market for more than a day or two, if that long. In addition, with the market likely to head higher in January, at least through January 21st when Trump takes office, it is unlikely that any "profit taking" will be seen before the end of the year as traders will not have any assurances that they can re-buy at a lower price at the beginning of next year.
Probabilities favor the bulls in the DOW, at least until something happens to change the fundamentals and technical in place right now.
SPX Friday closing price - 2259
The SPX generated another new all-time intra-week and weekly closing high and closed on the highs of the week, suggesting further upside above last week's high at 2259 will be seen this week.
Based on the chart, The SPX is likely to be the strongest index at this time given that the red close seen the previous Friday at 2191 can be seen as a successful retest of the previous all-time high weekly close at 2184, meaning that the bulls now have a support level close-by from which new buying can be made with some limitation of risk. This is not the same case with the other indexes, suggesting traders are more likely to purchase the SPX than the other indexes, at least from a limitation of risk point of view.
To the upside and on an intra-week basis, the SPX whow no resistance, psychological or otherwise.
To the downside and on an intra-week basis, the SPX now shows minor but short-term pivotal support at 2187. Below that level, there is very minor support at 2172 and at 2168, minor at 2160 and at 2157 and minor to decent and likely pivotal at 2147. On a daily closing basis, support will be found at the previous all-time daily closing high at 2190 (2184 on a weekly closing basis).
The SPX is the index that is most likely to be affected by the Fed rate hike on Wednesday. Though it is likely 100% factored in already, the language regarding interest rate hikes next year will likely cause the index to be the leader or anchor of the market by the end of the week.
By the same token and just like with the other indexes, the SPX is a runaway freight train also and given that it is the only index with a close-by support level on the chart, it is more likely the index will lead the market than anchor it. Probabilities favor the bulls.
NASDAQ Friday closing price - 5255
The NASDAQ disregarded the negative key reversal seen the previous week and made a new all-time intra-week and weekly closing high. The negation of the negative reversal came without any specific catalyst, meaning that the bears simply "threw in the towel" in the face of the kind of buying interest shown. That kind of action strongly suggests that much further upside is likely to be seen before any selling of consequence occurs. The index closed on the highs of the week and further upside above last week's high at 5450 is expected to be seen.
The NASDAQ has not been the preferred index since the Trump win and that is not likely to change at this time, meaning that the index will be more of a follower than a leader. Then again, with all the big stocks in the index (AAPL, AMZN, GOOGL, NFLX and PCLN) having resistance levels above and unlikely to be broken (new highs made), it would suggest the traders will keep a close eye on the index more as a way of determining how much farther the overall market can go, given that when the stock reach the levels of resistance of their own, the index will begin to falter. The NASDAQ may be the "measuring stick" as to how much farther the market will go up.
To the upside and on an intra-week basis, the NASDAQ shows no resistance above (psychological or otherwise).
To the downside and on an intra-week basis, the NASDAQ will show very minor support at 5350 and then nothing until decent support at 5238. On a daily closing basis, the index will show minor support at 5398 and minor to perhaps decent at 5339.
Following the big stocks in the NASDAQ could offer a clue as to how much further to the upside the index may go. AAPL has an upside objective 2% higher than Friday's close. AMZN has 4%, GOOGL has 2.6% and PCLN has 2.3%. NFLX seems to have reached its upside objective. The average possible upside of those stocks is 2.75% meaning that the index could have an upside objective of 5594, if and when the index follows what those 5 stocks are expected to accomplish to the upside.
Like the other indexes, the NASDAQ is expected to continue higher this week. As such, probabilities favor the bulls.
The indexes shrugged off the selling seen the previous week and "roared" back in an impressive way, suggesting they are on a "runaway freight train" track. With no resistance and the bears "heading for the hills" there is open air above.
The Fed will be announcing their rate decision on Wednesday but it is 100% expected that they will raise rates, suggesting that the decision is already factored into the price and that a rate hike will not cause any selling of consequence to occur. The language in the announcement will be paid attention to, but it is already expected they will announce at least 2 more rate hikes next year. Anything more would be a negative but anything less than that would give additional fuel to the bulls for accelerating the uptrend.
With Xmas in view and the unlikelihood of any profit taking of consequence occurring, the probabilities favor the bulls being in control not only this week but at least until the New Year.
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Stock Analysis/Evaluation
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CHART Outlooks
The indexes are presently in a runaway bullish more, suggesting that looking for any short positions this week will not likely be a successful venture even though not all industries or stocks are enjoying the benefits of the Trump win and participating in the rally. As such, the only mentions given this week are purchases and even then only the purchases that have been mentioned recently (but not filled) as they are in stocks that still have a lot of upside potential.
It is evident that at some point this rally will "run out of steam" and short positions, especially in those non-participating-in-the-Trump-win industries will be attractive. As soon as some selling interest is seen, those mentions will be given, either on the newsletter or the message board.
PURCHASES
CLF Friday Closing Price - 9.93
CLF is an iron ore producer and supplier that got as high as $102 a share just 6 years ago but with commodities being out of fashion since 2009, the stock dropped as low as $1.20, a level seen at the beginning of this year.
CLF has been on an uptrend for the past 10 months, having tested the all-time low successfully on 2 occasions (higher lows than the previous lows) as well as broken a previous high on 2 occasions as well. The stock extended its gains this past week, having made a new 25-month intra-week high at 10.90. Nonetheless, selling began to be seen as the stock neared the 200-week MA, currently at 11.35, which is a line that has not been broken for 55 months and is not likely to be broken the first time around.
CLF closed in the lower half of the week's trading range, suggesting further downside below last week's low at 9.63 will be seen this week. The downside objective could end up being the needed and required retest of the 23 month weekly closing high at 8.90.
To the upside and on an intra-week basis, CLF now shows minor resistance at 10.90 and again at 11.70. On a weekly closing basis though, decent resistance is found at the 200-week MA, currently at 11.30.
To the downside and on an intra-week basis, CLF will now show pivotal support at 8.57 (8.75 on a daily closing basis).
CLF has now clearly established a mid-term uptrend but until the 200-week MA is broken the longer term sideways trend that has 11.70 as the upside parameter will keep the stock from going into a long-term uptrend. Simply stated, the bulls still have some work to do before further upside above 11.70 can occur.
The longer term weekly chart of CLF does leave the door open for a drop as low as 7.00 to occur but the breakaway/runaway gap formation (6.33-6.63 and 7.68-7.79) as well as the fundamental picture change with the Trump win does not suggest that scenario will occur. The key at this moment is the 8.57 low seen 2 weeks ago that is a short-term pivot point. Probabilities favor the stock dropping down this week to somewhere 8.75 and 9.20 and turning around.
As far as the upside objective of CLF, once the breakout above the 200-week MA is accomplished, the stock shows no previous intra-week high resistance of consequence until the $24-$29 level is reached. On a weekly closing basis though, the March 2009 major weekly closing low at 13.00 could give the bulls some trouble getting above that level the first time seen. Even so, if inflation does become a problem, ultimately the stock could be heading back to the $40 level, suggesting this trade could end up being a big winner, though a rally up to that level would likely take 8-12 months once the MA line is broken.
Purchases of CLF between 8.75 and 9.20 and using a stop loss at 7.69 (closure of the runaway gap) and having a 3-6 month objective of $24 will offer a 10-1 risk/reward ratio.
My rating on the trade is a 3.75 (on a scale of 1-5 with 5 being the highest).
CNX Friday Closing Price - 21.30
CNX is a natural gas and coal exploration company that got into a strong downtrend between June 2014 from a high of 48.30 to January 2016 when it reached a low 4.54. Nonetheless, this year (for the past 11 months) the stock has been on an uptrend, having seen a high of 22.31 this past week.
CNX confirmed this past week the failure to follow through signal given the previous Friday, having generated a second green weekly close in a row above the weekly closing low from November 2008 at 20.80, suggesting that the stock is now on an uptrend. Nonetheless, the stock closed in the lower half of the week's trading range, suggesting further downside below last week's low at 20.85 will be seen this week, which in turn suggests the breakout level on the daily closing chart at 20.26 will be tested as well as the 20.80 level on a weekly closing basis.
To the upside and on an intra-week basis, CNX shows minor resistance at last week's high at 22.34 and then no resistance until 24.62 is reached. Nonetheless, that resistance at 24.62 I also minor and old (from 2005). Above that level there is no intra-week resistance until 34.14 is reached. On a weekly closing basis though, resistance is minor to perhaps decent at 26.51, which does get strengthened by the 200-week MA, currently at 27.15.
To the downside and on an intra-week basis, CNX now shows minor to perhaps decent support at 20.01 and then minor but likely short-term pivotal support at 19.07. Below that level there is minor to perhaps decent support at 17.86 and longer term pivotal at 17.13.
CNX has now generated 2 closes above the 20.80 level, suggesting an uptrend has begun. If the retest of the breakout level at 20.26 occurs this week and the stock closes next Friday above 20.80, the breakout will be confirmed totally and the bulls will be able to purchase the stock with confidence.
Purchases on CNX between 20.28 and 20.56 and using a stop loss at 18.97 and having a 27.00 objective will offer a 4-1 risk/reward ratio.
My rating on the trade is a 3.75 (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 |
| ARNA generated a successful retest of the 9-month intra-week low at 1.35 and a successful retest of the 5-year weekly closing low at 1.39, with the bears failing to produce any further downside off of the previous week's low at 1.37 and then closing in the green on Friday above 1.39. By the same token, it was not a convincing retest given that the bulls were not able to close in the upper half of the week's trading (closed at 1.41 and needed to close above 1.43), leaving the door open for the selling interest to resume this week. Pivotal intra-week resistance is found at 1.49 and pivotal support at 1.35. Probabilities still slightly favor the bears as the gains the bulls accomplished may have had more to do with the strong spike rally in the indexes than with any new buying interest in the stock. By the same token, a rally above last week's high at 1.49 would turn the edge back to the bulls. CLB confirmed the break above the 50 and 100 week MA's, both currently at 113.00, with a second green close above those lines. The stock closed near the highs of the week, suggesting further upside above last week's high at 121.56 will be seen this week. The bulls were successful in getting above 7 spike highs seen during the past 23 months between 118.03 and 120.87, meaning that there is now "open air above" until the spike high seen in November of last year at 125.42is reached. With the OPEC and non-OPEC nations agreeing to further oil production cuts on Saturday, there are definite possibility of the 125.42 mention objective being broken. Above 125.42 there minor resistance at 127.82 and then nothing until 133.38. Strong resistance is found between 134.87 and 135.49, which does include the 200-week MA, currently at 136.10. Decent intra-week support is now found at 115.18, which his strengthened by the 200-day MA, currently at 114.90. Pivotal support is found at 113.00. Stop loss can now be raised to 112.90. Probabilities favor the stock getting up to 125.00 this week and if oil gets above 54.24, further upside above 125.42 will likely be seen. ENG made a new 20-week intra-week and weekly closing high on Friday and closed on the highs of the week, suggesting further upside above last week's high at 1.85 will be seen this week. Intra-week resistance of some consequence is found at 1.88 and then nothing until 2.28. On a weekly closing basis, the stock closed "at" resistance (1.79-1.80) meaning that another green close next Friday would likely push the stock up to the 2.05/2.11 level where further resistance is found. The resistance at 2.05/2.11 is from important low weekly closes, meaning the resistance in minor to decent at best but pivotal for establishing a new uptrend. To the downside, intra-week support is very minor at 1.51 and then nothing until 1.33. Nonetheless, on a daily closing basis, short-term pivotal support is found at 1.69. Probabilities favor the bulls with the big questing being whether the intra-week resistance at 1.88 will be broken. FCEL generated a green weekly close suggesting that at least a small pause in the downtrend may be occurring. Nonetheless, the stock closed in the middle of the week's trading range, meaning that the traders are not yet convinced that a bottom has been found, especially considering the high for the week was 2.30 and the probabilities favor the stock trading between 1.70 and 2.30 for the next few weeks, meaning there is still a higher chance of the stock making new all-time lows below 1.90 than it recovering above 2.30 at this time. A rally above last week's high at 2.30 would be a small positive that would likely push the stock up to the 2.70-2.80 level. FSLR generated a spike-type rally, having moved up 3.5% in value from the low of the week 30.18 to the high of the week at 33.87, before closing on Friday at 30.57. Nonetheless, the bulls were not able to generate a failure to follow through signal to the upside, given that they needed to close above 34.09 and they failed by 54 points. Nonetheless, the stock did close near the highs of the week and further upside above last week's high at 33.87 is expected to be seen, meaning that they will get a second chance of generating that failure to follow through signal next Friday, which if given would open the door for a rally up to the $37-$38 level. Likely pivotal support is now found at 29.65 that if broken would re-open the door for the bears to push down again. Very minor intra-week resistance is found at 34.10 but a daily close above 34.00 would give the bulls the edge. Probabilities slightly favor the bulls this week. LVLT had an uneventful inside week (lower highs and higher lows than the previous week) but in looking at the daily chart, it can be said that a successful retest of the recent 20-week high at 57.48 occurred, having seen a high of 57.00 on Wednesday, followed by 2 red closes on Thursday and Friday. The stock closed slightly in the lower half of the week's trading range, suggesting a higher chance of the stock going below last week's low at 55.60 than above last week's high at 57.00. Short-term pivotal support is found at 54.75 that if broken would likely cause the stock to fall down to at least 51.75. Short-term pivotal, as well as decent intra-week resistance is found at 57.00. A break above 57.00 would likely cause the stock to get up to and probably above 57.48 and probably above the 8-year high at 57.59, which in turn would open the door for a lot more upside. Probabilities slightly favor the bears but the key levels are at 57.00 and 54.75. Whichever one gets broken first will give the traders direction. MT generated further upside, having made a new 16-month intra-week high at 8.83 as well as another green weekly close. Nonetheless, the stock got up to and above a previous low weekly close at 8.57 that is the first (but minor) resistance area seen since the stock got above 6.93 3 weeks ago and saw some profit taking and selling interest come in. The stock closed on the lows of the week, suggesting further downside below last week's low at 8.01 will be seen. The stock did gap up last Monday between 7.85 and 8.01 and there is no reason for the gap, meaning the first course of action this week is likely closure of the gap. Intra-week support is found at 7.39 but it is unlikely the stock will fall that far. Daily close support is found at 7.65, suggesting the stock may get down as low as 7.65-7.70 and then turn around and begin resumption of the uptrend by the end of the week. Probabilities favor the bears at the beginning of the week but will likely favor the bulls at the end of the week given that a rally and close up at 8.57 is likely to be seen next Friday. XOM made a new 20-week weekly closing high and closed on the highs of the week, suggesting further upside above last week's high at 89.00 is likely to be seen. Intra-week resistance is found at 89.37 that is further strengthened by the 200-week MA, currently at 89.20. Above that level, there is minor to decent resistance at 90.09 and then minor again at 91.93 and at 93.50. Stronger resistance and likely objective of this mention is found at 95.49. Nonetheless, if the CEO of the company (Tillerson) becomes Trump's Secretary of State, the upside objective could be almost unlimited, given that under that scenario it is likely the sanctions against Russia will be lifted and an oil exploration deal between the company and Russia, worth $500 Billion dollars would likely occur. The key this week is the 200-week MA at 89.20 as a close next Friday above that level would be a strong chart boost for further upside, likely up to at least the $95 level. Pivotal support is now found at 86.60. Probabilities strongly favor the bulls. XON generated an uneventful week, having had an inside week (lower highs and higher lows than last week). Nonetheless, the stock closed in the upper half of the week's trading range, suggesting further upside above last week's high at 30.96 will likely be seen. On a slight negative note, the bulls were unable to close above a decent weekly close resistance area at 30.02 (previous resistance area that got broken to the upside 4 weeks ago and gave a buy signal) in spite of trading above that price the last 4 days of the week, suggesting the selling interest is still there and still effective. Minor intra-week support is found at 29.15 and more important daily close support is found at the 200-day MA, currently at 28.80, which is a level that should hold if the bulls want to take the stock higher. Intra-week resistance is decent between 30.56 and 31.35. Probabilities are evenly matched for this week, meaning that some catalyst is needed to break out or break down from the current trading range.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .175 (new price 2.10). 2) CLB - Purchased at 101.89. Stop loss now at 112.90. Stock closed on Friday at 120.34. 3) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.80. 4) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.41. 5) MT - Averaged long at 6.244 (5 mentions). Stop loss now at 6.18. Stock closed on Friday at 8.07. 6) FSLR - Averaged long at 41.758 (5 mentions). No stop loss at present. Stock closed on Friday at 33.56. 7) XOM - Shorted at 87.87. Stop loss at 86.50. Stock closed on Friday at 89.00. 8) GS - Shorted at 232.60. Covered shorts at 234.35. Loss on the trade of $175 per 100 shares plus commissions. 9) XON - Averaged long at 27.71. Stop loss now at 27.42. Stock closed on Friday at 29.83. 10) NFLX - Shorted at 122.60. Stop loss now at 126.35. Stock closed on Friday at 122.88. 11) FB - Shorted at 117.70. Covered shorts at 118.60. Loss on the trade of $90 per 100 shares plus commissions. 12) LVLT - Shorted at 56.21. Stop loss at 57.35. Stock closed on Friday at 56.24.
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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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