Issue #468
February 28, 2016
The Oasis

Newsletter


The newsletter with chart analysis for stocks and stock indexes

Stock Indexes Analysis/Evaluation


Mixed Signals Given. Traders Await ISM Index and Jobs Reports!

DOW Friday closing price - 16639

The DOW generated a buy signal on Friday, having made a new 6-week intra-week and weekly closing high and closing in the upper half of the week's trading range, suggesting further upside above last week's high at 16795 will be seen this week. By the same token, the index generated a negative reversal day on Friday, as well as a close on the lows of the day, suggesting the first course of action for the week will be to the downside and below Friday's low at 16623. The mixed outlook seen, though overall favoring the bulls, means that the traders remain uncertain at this time as to the longer term health of the market and the underlying fundamentals to support a rally (such as oil prices).

With the unexpected positive action seen this past week, the DOW has now done enough to the upside to negate the similarities with 2011 that had been plaguing the index as of late, meaning that a new low below the year's low at 15450 is no longer the expected outcome. As such, what is now in question is what the index will be doing on a short to mid-term basis.

To the upside and on an intra-week basis, the DOW shows minor resistance at 16933 and then minor to perhaps decent at 17151. On a weekly closing basis though, the resistance is decent between 17100 and 17164.

To the downside and on intra-week basis, the DOW shows minor but likely short-term indicative support at 16458 and then minor again at 16278. Below that level, minor to decent, as well as short-term pivotal support is found at last week's low at 16165. A break of that support would likely take the index down to 15942 and perhaps even as low as 15850, which is where the 200-week MA is currently at.

Short-term and chart-wise, the bulls in the DOW have the upper hand right now, inasmuch as there is no resistance above until 16933 is reached and even then, that resistance is not likely to stop the rally, meaning that a rally up to the 17100-17164 level is now the likely scenario if no negative news comes out. Nonetheless, fundamentally there are still unanswered questions that could stop the rally, especially when it comes to oil prices, and that means that neither the bulls nor the bears can feel comfortable that the index will do what is expected technically. In addition and considering the mid-term outlook, the index is still showing multiple weekly closing lows around the 16000 level, suggesting that the downside is not yet over for the year, though the possibilities of a drop down to break those lows has likely been pushed back out a few weeks or perhaps even a few months.

For this week in the DOW, I do believe that Thursday's low at 16458 may be a pivotal support key, especially if the bears are able to generate a daily close below 16431. If both of those events occur, the traders will likely turn sellers for the rest of the week.

The probabilities do favor the bulls in the DOW this week. I do expect the index to drop down to 16500 at the beginning of the week and then new buying to appear. Potential trading range for the week could easily be something like 16500 to 16933 or even 16500 to 17131. Based on last week's trading range of 635 points, the latter seems the most probable. The key fundamental issue to keep an eye on is the price of oil.

NASDAQ Friday closing price - 4590

The NASDAQ generated a green weekly close as well as a close near the highs of the week, suggesting further upside above last week's high at 4618 will be seen this week. Nonetheless, it cannot be said that the bulls accomplished anything on this rally as no resistance levels of any consequence were broken (unlike in the DOW and the SPX).

The NASDAQ is likely to be the key this coming week, inasmuch as further upside of "lasting consequence" in the market is likely to be led by the NASDAQ (rather than by either of the other 2 indexes) as it is the index where bullish speculation has occurred the last few years.

To the upside and on an intra-week basis, the NASDAQ shows minor to decent but pivotal resistance at 4636. Above 4636 there is no resistance until minor to decent resistance is found at between 4810 and 4814. Further resistance is found on a daily and weekly closing basis between 4900 and 4925, which does include the 50-week and 200-day MA's.

In spite of the breakout above resistance that was seen last week in the other 2 indexes, the NASDAQ bulls failed to even get the index up to the pivotal resistance at 4636, meaning that the rally last week was not representative of overall strength in the market, just individual sectors such as Blue Chip stocks and Financials.

As such, not only will the NASDAQ bulls have to do more this week (above last week's high) but they will likely need to see a fundamental positive catalyst, such as oil breaking out above 34.87 (33.61 on a daily and weekly closing basis) to generate its break of resistance. The 4636 level of resistance is pivotal to the index as it is a level that not only represents the recent intra-week high from 4 weeks ago but also represents the weekly close level of support that stood up for 49 weeks (from the last week in January 2015 to the first week of January 2016). A weekly close above 4636 would be a strong sign that the recent downtrend/correction is totally over and that the market is ready to recover what was lost this year.

All eyes will be on the NASDAQ this coming week, given that a rally above 4618 is expected to be seen at some point this week. Nonetheless, the index did close on the lows of the day on Friday and the first course of action for the week is likely to be to the downside, meaning that the bulls will first need to prevent any break of support that would give the bears' additional ammunition. The chart suggests that a drop back down to the 4488-4500 level will be seen before a new attempt at last week's highs occurs. Further support is found at 4455 and 4425, which is a level that is pivotal support that if broken would give the edge back to the bears.

Given that the bulls have not yet established a break of resistance in the NASDAQ, the probabilities still favor the bears. Nonetheless, it does seem that this coming week will be pivotal as not only important support and resistance levels will be in play but is also a week of important economic reports that will likely clear up the fundamental picture somewhat.

SPX Friday closing price - 1948

The SPX gave a buy signal on Friday, having made a new 8-week intra-week and weekly closing high and closing near the highs of the week, suggesting further upside above last week's high at 1962 is likely to be seen. By the same token and like the DOW, the index generated a negative reversal day on Friday, as well as a close on the lows of the day, suggesting the first course of action for the week will be to the downside and if a red close below 1940 is generated, the breakout will be negated.

On a positive note, the SPX has "open air" above until the 1993-2000 level is reached and if the bears fail to negate the breakout on Monday or Tuesday, the bulls are likely to generate enough buying to take the index up to the next resistance level.

To the upside and on an intra-week basis, the SPX shows very minor resistance at 1975 and then minor to decent at 1993. Above that level, decent resistance is found at 2020 that is further strengthened by the 200-day MA, currently at 2026, but coming down.

To the downside and on an intra-week basis, the SPX shows minor support at 1902/1903 and minor to perhaps decent support at 1891. Below that level, there is decent support between 1867 and 1871 and decent to perhaps strong support at 1810/1812.

Chart-wise, the bulls presently have the upper hand in the SPX but given that the fundamental picture regarding oil prices and the Asian market is still unclear, the bulls will likely need additional help to carry the index higher.

The key for the week in the SPX is likely to be the 1940 level on a daily closing basis and the 1922 level on an intra-week basis. If either of those levels get broken, the bullish action seen last week will be negated.

Probabilities slightly favor the bulls in the SPX but the fundamental picture needs to improve additionally for the bulls to accomplish the week's goals.


Mixed signals were given last week with the DOW and the SPX giving buy signals but the NASDAQ and oil prices unable to accomplish the same. With oil still experiencing a huge glut and the likelihood of oil producers agreeing to a cut in production being low, the probabilities favor failure, which in turn would likely cause the indexes to fall as the indexes have been closed tied to oil for the past 2 months. Nonetheless, the 1-1 ratio seen this year between the indexes and oil might be changing as seen last week with oil failing to break out but the DOW and the SPX making a new 8-week high, meaning that if the important economic reports due out this week (ISM Index and Jobs) are bullish, the divorce with oil could begin.

It is evident that this coming week is pivotal as traders should have enough fundamental information to decide on short-term direction.

Stock Analysis/Evaluation
CHART Outlooks

No mentions in the newsletter were given this week due to the mixed signals supplied in the index and oil markets last week. Nonetheless, the indexes are likely on the cusp of a decent move up or down after this week as the important economic reports, as well as the pivotal chart areas being seen in the indexes and oil, suggest that some short-term decisions are likely to be made this week.

As such, mentions will be given in the message board as soon as one side or the other (bulls or bears) shows a decided advantage. Preference still lies on the short side and last week's mentions of CALM and LVS are still in the cross hairs.

Updates
Updates on Held Stocks
Closed Trades, Open Positions and Stop Loss Changes

AREX continued its downtrend, having made yet another new all-time intra-week low at .60 cents in spite of oil rallying. With oil having failed to generate a buy signal, the probabilities favor further downside. On a small positive note, the general support at .70 held up on a weekly closing basis as the stock was able to rally on Friday to close at .71. Minor but possibly short-term pivotal resistance is found at .80 and a bit more indicative at 1.00. The 200 60-minute MA, currently at .92, has not been broken to the upside all year (2016) and if broken could signal that the bottom has been found. Probabilities continue to favor the bears.

ARNA went below the previous week's low, which could end up being the required retest of the double bottom at 1.30/1.32 if the bulls are able to get above last week's high at 1.64 this week. The stock closed exactly in the middle of the week's trading range, suggesting that the traders are waiting to see the earnings report on Monday PM before making any new decisions. Support is found at 1.30 and resistance at 1.65 and at 1.75. Probabilities favor the bulls simply because enough base/building action has occurred over the past 7 weeks to suggest that the bears need negative news to push the stock lower.

ENG generated another red weekly close on Friday, as well as a close on the lows of the week, suggesting further downside below last week's low at .79 will be seen this week. Nonetheless, the week turned out to be relatively uneventful as no support levels were broken, suggesting the stock is still "trading the recent range". Volume remains anemic, meaning that there doesn't seem to be any interest at this time from either the bulls or the bears. Intra-week support is found at .75 and at .68. Resistance is found at .92, at 1.00 and pivotal at 1.12. Probabilities favor "more of the same", likely until the earnings report on March 10th.

FCEL generated a buy signal on Friday, having made a new 8-week daily and weekly closing high. The stock closed near the highs of the week and further upside above 5.42 is expected to be seen this week. Intra-week resistance is found at 5.58, at 5.83 and decent at 7.05. The double bottom at 4.51/4.56 has now been confirmed, especially given that the volume on Friday was the highest seen in the past 6 weeks. If the bulls are able to get above the 5.58 high seen on January 13th, further buying interest is likely to be seen, suggesting that the double daily closing top at 6.16/6.17 will be tested. A daily close above that level would be considered an important breakout. Intra-week support is now considered pivotal at 4.80. Probabilities favor the bulls this week.

FSLR made a new 17-month intra-week and weekly closing high this past week and closed near the highs of the week, suggesting further upside above last week's high at 73.37 will be seen this week. The stock generated the rally when it received a better than expected earnings report on Wednesday. The stock did receive a couple of downgrades (from buy to hold) after the earnings report as it has reached a level of resistance between 73.78 and 74.84 that has stood up to the past 53 months. Nonetheless, one of the downgrades still kept the upside target at $82. The stock closed on the lows of the day on Friday and the first course of action is likely to be to the downside at the beginning of the week, with the 69.00 level as the likely target. A break below 68.54 (Thursday's low) and a daily close below 69.13 would be considered a negative. In addition, this stock is now strongly overbought and on a daily closing basis the stock is now showing a double top at 72.03/72.25, meaning that if the indexes and/or the stock are unable to extend their gains this week that taking profits on a rally to test the highs should be considered. Probabilities favor the bulls but likely only for a rally above last week's highs but not above the multi-year highs.

LVLT generated a second green weekly close in a row, as well as on the highs of the week, suggesting further upside above last week's high at 49.51 is likely to be seen. Nonetheless, the stock is reaching a level of intra-week resistance between 50.15 and 51.21 (the $50 demilitarized zone on a daily and weekly closing basis) that will likely require further upside in the indexes to break. Reaching this level was expected to be seen but like with the indexes, this is now a pivotal week in which the bulls likely require additional fundamental help to go further to the upside. If the bulls are unable to close above the 50.30 level any day this week, the probabilities will shift back to the stock dropping down to the 43.65 level (45.56 on a daily closing basis). Any intra-week rally above 51.21 will negate the short-term negative outlook and open the door for a rally up to the mid 53's. Probabilities favor the bulls for the start of the week but the bears for the end of the week. By the same token, the stock will be mostly dependent on what the indexes do.

QRVO confirmed the buy signal given the previous week, having generated another green weekly close. Nonetheless, the bulls fell short of generating the failure to follow through signal that is needed to suggest that further upside will be seen for the short-term, having closed below the previous all-time low weekly close at 43.96 on Friday. The stock did close on the highs of the week and further upside above last week's high at 44.14 is likely to be seen this week. What this all likely means is that the traders have left the door open for both a short-term bullish or bearish resolution by the end of next week with a bullish resolution being a rally back up to at least the $50 level while a bearish resolution being a retest of the recent 33.30 low, which has not been seen yet. The stock is showing a bullish flag formation that offers a 51.42 objective if the previous week's high at 44.72 is broken. By the same token, if the bottom of the flag at 40.11 is broken, the downside objective would likely be the $35 level. Probabilities slightly favor the bears but it really is mostly dependent on what the indexes do.


1) FCEL - Averaged long at 2.227 (4 mentions). No stop loss at present. Stock closed on Friday at 5.34.

2) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at .81.

3) FSLR - Averaged long at 58.506 (5 mentions). No stop loss at present. Stock closed on Friday at 70.25.

4) AREX - Averaged long at 6.013 (3 mentions). No stop loss at present. Stock closed on Friday at .71.

5) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.53.

6) LVLT - Averaged long at 45.386 (3 mentions). Stop loss at 40.47. Stock closed on Friday at 48.99.

7) QRVO - Averaged long at 48.85 (3 mentions) No stop loss at present. Stock closed on Friday at 43.46.

8 CALM - Shorted at 50.46 and at 53.00. Liquidated at 53.81. Loss on the trade of $416.00 per 100 shares (2 mentions) plus commissions.

9) CLB - Shorted at 111.28. Covered shorts at 104.22. Profit on the trade of $706 per 100 shares minus commissions.

9) LVS - Shorted at 47.48. Covered shorts at 47.98. Loss on the trade of $50 per 100 shares plus commissions.


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Disclaimer

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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