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Issue #481 
Jun 5, 2016 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Economic Reports Confuse. Indexes Directionless!
DOW Friday closing price - 17807
The DOW generated a negative reversal week, having gone above the previous week's high by 8 points and then reversing to close in the red, the 5th red weekly close in the past 6 weeks. Nonetheless, the possible negativity of the red close was ameliorated when both the other indexes closed either unchanged (SPX) or in the green (NASDAQ), meaning that the action for this coming week is still "up in the air" and likely dependent on what the other indexes do.
The DOW closed "slightly" in the upper half of the week's trading range, suggesting that the bulls may have a slight edge over the bears this coming week, as far as whether last week's highs or lows are broken, but with the chart showing a mountain of intra-week resistance between 17921 and 17991 and last week's high being 17899, it is evident that the bulls will need fundamental help to generate any substantial rally above that resistance area and that is unlikely this coming week as there are no economic news of consequence on the schedule.
To the upside and on an intra-week basis, the DOW now shows very 17838, minor but possibly short-term pivotal at last week's high at 17899, minor to decent at 17934 and decent between 17977 and 17991.
To the downside and on an intra-week basis, the DOW now shows minor support at 17664 (last week's low), minor to perhaps decent at 17580 and minor to decent between 17464 and 17484. Decent and short-term pivotal support is found at 17331.
The DOW chart continues to have a slight short-term negative bias since the 18167 high seen on April 20th, having generated a total of 3 lower highs since then at 17084, at 17934, and at 17899. As such, the most recent one at 17899 (last week's high) is likely to have some short-term pivotal meaning as a break of that level would suggest the 18000 demilitarized zone would likely be visited again, meaning that "more of the same sideways action" as seen last year and this year since March, will be seen again.
On the other side of the coin, last week's low in the DOW at 17664 also seems to be short-term pivotal as a break of that level will likely bring about a drop down to the 17500 level and some new selling interest.
As such and even though the DOW is not the key index right now, a break above or below last week's trading range of 17899 and 17664 it likely to bring about at least a 100 point move in whichever level is broken first. Probabilities slightly favor the bears because of the negative economic news that came out last week and the short-term downtrend in place at the moment.
NASDAQ Friday closing price - 4942
The NASDAQ had a disappointing week, inasmuch as the bulls were prepared to negate the bearish statement that was made at the beginning of the year in the form of the weekly gap up at 4999 but failed to do so because of the weak Jobs report. The failure has kept the door wide open for the bears to be the ones making a statement if the gap is left unclosed this coming week and a new failure signal is given with a drop below last week's low at 4909.
The NASDAQ closed "slightly" in the upper half of the week's trading range (by 2 points), suggesting the bulls may high a very small edge over the bulls in going above last week's highs at 4971 than below last week's low at 4909. Nonetheless, the bottom of the 5000 demilitarized zone at 4970 is also a "general" resistance level of consequence, meaning that without additional and positive fundamental help the bulls are facing a difficult task.
To the upside and on an intra-week basis, the NASDAQ now shows decent resistance at 4970. Above that level, there is no resistance until minor to decent resistance is found at 5042. Decent resistance is found at 5116 and then nothing until 5176. Strong resistance is found at the all-time high at 5231.
To the downside and on an intra-week basis, the NASDAQ shows minor but definitely short-term pivotal support at 4908/4909 and minor to decent at 4871. Below that level, there is decent support between 4808 and 4825 that includes the 200-day MA, currently at 4815.
The NASDAQ traders have clearly defined chart points this week (last week's high at 4971 and last week's low at 4909) that are both meaningful, inasmuch as a break above 4971 would likely mean closure of the gap up at 4999 and a big negative being cancelled and a break below 4909 would suggest an unimportant but unclosed gap at 4865 would be targeted. By the same token, the bulls have a lot more at risk given that another failure to close the gap up at 4999 would bring in new selling interest and a likely drop back down to test the 200-day MA, currently at 4810, which in turn would make the bull's job of closing the gap at 4999 a lot more difficult.
The bulls in the NASDAQ can ill afford failure this week as it is unlikely they will get another chance anytime soon to close the gap at 4999. With AMZN already at levels that are becoming overdone and with a high probability of some profits being taken, AAPL showing weakness, and GOOGL, NFLX, and PCLN charts showing sideways to perhaps slightly down probabilities, the bulls find themselves at what seems to be a pivotal and important level for at least the summer months (June, July, and Aug). The bulls "need" to get it done this week or face having to wait until the seasonal period for a rally occurs in Sep/Oct.
Probabilities very slightly favor the bulls but without any economic news scheduled, it will be a tough task.
SPX Friday closing price - 2099
The SPX bulls failed to make a bullish statement this past week, having had everything in line for a run at the all-time high at 2134 but then closing unchanged after a Jobs report that put everything on hold. Nonetheless, the bulls were able to close index in the upper half of the week's trading range, suggesting that further upside above last week's high at 2105 will be seen this week.
On a possible negative note, the SPX generated a monthly close (Monday) at 2099, meaning that neither of the 2 previous high monthly closes at 2114 (April 2015) and 2102 (October 2015) were broken, which in turn suggests a decent probability that June's close will be lower, given that the summer months are not usually positive for the market.
The SPX has been showing decent support, given that the interest rate scenario for this year favors the financial industry. Nonetheless, with the raise of interest rates not likely to happen in June and the probabilities of it happening in July being reduced by the disappointing Jobs report, the support being seen presently is likely to ebb for the next couple of months.
To the upside and on an intra-week basis, the SPX now shows minor resistance at 2105, decent and likely pivotal resistance at 2111, decent again at 2116, minor at 2125 and strong at the double top at 2134.
To the downside and on an intra-week basis, the SPX shows minor support at 2085 and minor but short-term pivotal support at 2070 and then minor to decent support between 2039 and 2044. Further pivotal support is found at 2025.
The SPX weekly and monthly chart both suggest the index will get above last week/month high at 2105 but not above 2111 as a move above 2111 would be a strong positive signal on both charts. A rally above 2105 followed by a negative reversal and a break below 2085 would suggest the index would be looking at a downside target for the summer of at least 2039/2044, if not lower. A rally above 2111 would give the bulls enough chart ammunition to keep the index heading higher and likely making a new all-time high within the next few weeks.
Probabilities slightly favor the bulls in the SPX this week but the chart points in play suggest the traders will need to approach the area with "surgical precision".
The disappointing Jobs report was a deflator for the bulls causing the upside momentum to come to a standstill. The question this week will be whether the bulls can shed the negative news based on future speculation or whether the weight of the summer doldrums will cause yet another small correction to occur as the traders are forced to wait for additional economic news to re-stimulate buying interest, such as the start of the next earnings quarter in July.
This coming week there are no scheduled economic news of consequence, meaning that if further upside is to be seen it will have to be off of charts and whatever momentum is left. In addition, oil prices seem to have reached a level where further upside is unlikely to be seen but the downside also seems to be short-term limited. The action seen on Friday, as well as the uninformative weekly closes in the indexes, have left the traders without any clues as to what to expect this week. It may turn out to be a "flip of a coin" week, if not simply an "idling" week.
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Stock Analysis/Evaluation
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CHART Outlooks
As stated on the message board, the indexes seem to be in a no-direction scenario that is not likely to be resolved before the June 15th FOMC rate decision and perhaps not even then. As such, the overall market is not likely to help or hinder stocks during this period of time, meaning that only stocks that are showing individual direction can be considered for trades this week.
Below are a few charts of stocks that I believe will generate enough movement during the next 10 days to be considered for a trade.
SALES
AAPL Friday Closing Price - 97.92
AAPL was unable to generate any follow through to the upside off of the close on the highs of the week the previous week, suggesting that the rally up to 100.73 was just a fast short-covering rally based on the rally seen in the NASDAQ.
AAPL closed in the lower half of the week's trading range suggesting further downside below last week's low at 96.63 is likely to be seen this week. As it is, the recent low 89.47 has not yet been tested on the weekly chart, strongly suggesting that even if the stock has found a bottom to the recent downtrend that a drop back down to retest that low with a drop down to the 200-week MA, currently at 93.25, or down to the August low at 92.00 will be seen. By the same token, the stock has been in a well-defined downtrend for the past 11 months, meaning that the uptrend could resume.
To the upside, AAPL shows minor but likely short-term important resistance at 98.89 and decent at the recent high at 100.73. Further and likely short-term pivotal resistance is found at 101.53.
To the downside, AAPL shows minor support at last week's low at 96.63 and then nothing until 93.42. Further and stronger support is found between 92.58 and 92.00 and then strongly pivotal support at the recent low at 89.47. Below 89.47 there is no support of consequence until the $80 level is reached.
AAPL closed near the highs of the day on Friday and further upside above Friday's high at 98.27 is likely to be seen on Monday. The stock is likely to close Wednesday's gap at 98.33 and get up to the resistance at 98.89 with a slight chance of getting up to the bottom of the $100 demilitarized zone at 99.70.
Downside objective for this trade on AAPL will be the 92.00-92.58 level but the door is open for more.
Sales of APPL between 98.85 and 99.70 and using a sensitive stop loss at 100.83 and having a downside objective of 92.00 will offer a 3-1 risk/reward ratio.
My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest).
NFX Friday Closing Price - 39.60
NFX has been trading mostly between $20 and $45 for the past 5 years and 3 weeks ago the stock got up to 41.99 after having gotten down to 20.84 in February. The stock is presently strongly overbought and for the past 2 weeks has shown signs that further upside is unlikely to be seen, given that 2 weeks ago the stock generated a negative reversal week that was confirmed on Friday with a second red weekly close.
NFX has not built much support on the way up from the 20.84 low, meaning that the recent closest intra-week support is presently at 33.54, suggesting that there is somewhat of a vacuum to the downside if the stock is going to have a small correction to the fiery rally seen.
To the upside and on an intra-week basis, NFX shows minor resistance at 40.37 and decent between 41.09 and 41.36. Above that level, decent resistance is found at 41.99 and then nothing until 44.87.
To the downside and on an intra-week basis, NFX shows very minor support at 38.80, minor at 37.34 and minor to perhaps decent between 33.15 and 33.54. Below that level, support is decent at 30.88, which includes the 200-week MA, currently at 31.10.
NFX seems to be on its way to a corrective phase that will take the stock down to at least the $35 level (based on a weekly closing basis) as that is the area where previous high weekly closes of some consequence are found. As such, the perfect objective under the present market conditions and overbought status of the stock. Nonetheless, on an intra-week basis, a drop down to 33.96 seems likely to occur.
Sales of NFX between 39.69 and 40.00 and using a stop loss at 41.46 and having a 33.96 objective will offer a 3.2-1 risk/reward ratio.
My rating on the trade is a 3.75 (on a scale of 1-5 with 5 being the highest).
PURCHASES
USG Friday Closing Price - 28.31
USG is a stock that for the period between Dec2012 and Oct2015 traded mostly between $25 and $31. Nonetheless, in August of last year the stock broke above that area but failed to follow through and in October the stock broke the 200-week MA, currently at 27.05 which in turn caused the stock to fall to 15.85 in January, at the same time that the index market was having its strong correction.
Since January 25th, USG has been rallying and 8 weeks ago the stock got above the 200-week MA once again and continued rallying up to the psychological resistance at $30. The stock generated a negative week last week, as well as a close near the lows of the week, suggesting further downside below last week's low at 27.88 is likely to be seen. The chart suggest the stock is likely to get back down to the 200-week MA once again to retest it before further upside, likely up to the $31 level will be seen.
To the downside, USG shows decent intra-week support at 26.77 and then decent again at 25.84. Nonetheless, since the stock is in an uptrend, a drop back down to 25.84 would suggest the trend has changed and that is not likely to be the case under the present market conditions.
To the upside, USG shows minor resistance between 29.58 and 29.66, a little bit stronger at the recent high at 29.98 as well as at the top of the $30 demilitarized zone at 30.30. Above that level, there is no resistance until the 20.97-31.38 level is reached.
USG seems to be in the process of doing some backing and filling with support down at the 200-week MA and down to 26.77 and to the upside with the $30 level and up to $31, which has been the high area seen the most over the past 3 years. As such, this trading area seems perfect for trading at this time when the indexes are unsure of direction.
Purchases of USG between 27.00 and 27.30 and using a stop loss at 26.67 and having an upside objective of 30.98 will offer a 6-1 risk/reward ratio.
My rating on the trade is a 3.75 (on a scale of 1-5 with 5 being the highest).
FCX Friday Closing Price - 11.11
FCX made a new all-time intra-week and weekly closing low in November, having broken the previous all-time weekly closing low at 8.40 seen in December 2008 and continuing downward to 3.52 which was the low seen in January. The stock had been on a major 5-year downtrend from 61.34 to 3.52 that was evidently caused by some fundamental problem with the company.
Nonetheless, FCX evidently found a major bottom at the 3.52 level as the stock negated the major break of support in February and has continued upward to the recent high at 14.06 that was reached 3 weeks ago. The 4-month rally has caused the stock to quadruple in value (from 3.52 to 14.06), strongly suggesting that whatever fundamental problem caused the 5-year downtrend has now been eliminated.
FCX convincingly broke above the 200-day MA in February, currently at 9.20, for the first time in 17 months and continued higher to 14.06 (seen 3 weeks ago) which is an area of decent intra-week resistance as it represents the 10-month high seen in October of last year. The bulls were unable to break through that level the first time around, likely meaning that the break of the 200-day MA is likely to be tested.
It does need to be mentioned that the chart of FCX seems to be in the process of building an inverted Head & Shoulders formation with the right shoulder being the drop down to 7.76 (9.52 on a weekly closing basis), the head at 3.52 (3.94 on a weekly closing basis) and the right shoulder being in the process of being built. The necklines are the 14.20 high seen in October and the 14.06 high seen 3 weeks ago. When the right shoulder is built and the neckline broken, the objective of the flag would be 24.74.
To the upside and on an intra-week basis, minor resistance is found between 11.94 and 12.12 and then minor to perhaps decent at 12.64. Decent resistance is found between 14.06 and 14.20.
To the downside and on an intra-week basis, very minor support is found at 9.52, minor at 9.10, minor to perhaps decent between 8.47 and 8.76 and decent at 7.76.
FCX closed near the highs of the week last week and further upside above last week's high at 11.50 is expected to be seen. As such, it is unlikely that the stock will be reaching the desired entry point this week, meaning that it is likely that the trade purchase will need to wait at least another week.
It is highly likely that the 200-day MA, currently at 9.20, is the main target but given that the line is only important on a daily closing basis, intra-week drops could be seen that would take the stock down to at most the 7.76 level. Such action would be considered the construction of the right shoulder of the H&S formation.
I would venture an educated guess that FCX will find strong buying interest somewhere between 8.47 and 9.33 with a higher probability of support being found near the high of that range than the low of that range.
Purchases of FCX between 8.48 and 9.34 and using a stop loss at 7.65 and having a 24.74 long-term objective will offer a 9-1 risk/reward ratio.
My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest).
This is a standing mention, meaning that if the desired entry points are not reached this week but no rally of consequence is seen, it will be just as good the following week or the week after.
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Updates
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| Monthly & Yearly Portfolio Results
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Closed Trades, Open Positions and Stop Loss Changes
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Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted. Status of account for 2016, as of 5/1 Profit of $10,495 using 100 shares per mention (after commissions & losses) Closed out profitable trades for May per 100 shares per mention (after commission)
NONE
Closed positions with increase in equity above last months close minus commissions.
AAPL (short) $131 Total Profit for May, per 100 shares and after commissions $1078 Closed out losing trades for May per 100 shares of each mention (including commission)
AMZN (Put Option) $772
AAPL (short) $95 IBM (short) $429 GRPO (long) $97 AAPL (short) $78 Closed positions with decrease in equity below last months close plus commissions. ADSK (short) $122 Total Loss for April, per 100 shares, including commissions $1593 Open positions in profit per 100 shares per mention as of 5/31
CVX (short) $227
Open positions with increase in equity above last months close. CVX (short) $118 FCEL (long) $56 ARNA (long) $36 Total $1018 Open positions in loss per 100 shares per mention as of 5/31
ORCL (short) $47
Open positions with decrease in equity below last months close.
AMT (short) $240 Total $1066 Status of trades for month of May per 100 shares on each mention after losses and commission subtractions.
Loss of $563
Status of account/portfolio for 2016, as of 5/31Profit of $9932 using 100 shares traded per mention.
AMT once again made a new all-time intra-week and weekly closing high but did by only a few points, much like it has done twice before in the last 9 weeks. The stock closed on the highs of the week and further upside above last week's high at 107.29 is expected to be seen. The stock also broke out of a small bullish flag formation on Friday that offers an objective of 108.30 but also means that any drop below Friday's low at 106.41 will negate the flag. With no news scheduled to be released and the indexes not having much direction, it does seem that it is time to cover the shorts as soon as Monday if the stock does not open lower and go below 106.41.
ARNA generated follow through this past week, having broken above the resistance at 1.76 and rallying up to the 200-day MA, currently at 1.93, on Thursday. Nonetheless, on Friday the stock reversed direction, having gone above Thursday's high at 1.93 (got up to 1.94) and then closing in the red, meaning that the MA line was tested successfully. Given that the stock closed in the upper half of the week's trading range, further upside above last week's high at 1.94 is expected to be seen but also given that the MA line is decent resistance, probabilities favor the stock falling back to the 1.73-1.76 level sometime this week before a new attempt to break the MA line (and likely successfully) occurs. Further resistance of consequence is found at 2.05/2.07 that if broken would mean the stock has built a strong bottom support and that a short covering rally (likely up to the 2.50-2.60 level) occurs. Any daily close below 1.70 would be a negative sign. CVX generated a red weekly close and in doing so the stock now shows 2 successful retests of the 100-week MA, currently at 101.55. The stock closed near the lows of the week and further downside below last week's low at 99.72 is expected to be seen. Pivotal support is found at 98.52 that if broken would offer a downside target of 95.73. Resistance is now found at 102.37 that if broken would suggest further upside will be seen, especially if next Friday the stock closes above the 100-week MA. Probabilities slightly favor the bears. ENG generated a positive reversal week, having made a new 3-month intra-week low at .97 and then closing in the green and near the highs of the week, suggesting further upside above last week's high at 1.14 will be seen this week. The reversal also made Wednesday's close at 1.04 into a successful retest of the 200-day MA, currently at 1.05, suggesting that the expected retest of the line has now occurred and that the bulls are likely to start working higher once again. Minor but likely short-term pivotal intra-week resistance is found at 1.24 and stronger at 1.30. A break above 1.24 would suggest the recent 9-month high at 1.42, including the 200-week MA, currently at 1.36, will be tested and likely broken the second time around. Any drop below last week's low at .97 would now be considered a negative. FCEL generated a new 7-month intra-week and weekly closing high on Friday and in the process gave a new (and now confirmed) buy signal on the daily closing chart. Nonetheless, the bulls were unable to close on Friday above the previous low weekly close from August at 8.25, meaning that the buy signal on the daily chart has not yet been confirmed with a failure to follow through signal on the weekly chart. The stock closed on the highs of the week, suggesting further upside above last week's high at 8.29 will be seen this week. With no intra-week resistance found until 10.73, the bulls might end up having a strong up week. Nonetheless, what the bulls need to accomplish is a weekly close above 8.25 next Friday, in order to finally establish that a bottom has been built. Support will now be found at 7.68 that includes the now-important-for-the-bulls 200-day MA, currently at 7.60. Probabilities do favor that level being seen either this week or next. FSLR spun its wheels this past week, having generated an inside week. Nonetheless, the stock closed on the lows of the week and further downside below last week's low at 48.83 is expected to be seen. By the same token, it was expected that at some point the recent low at 46.65 would be tested on the weekly chart and any drop below 48.83 this coming week would accomplish that need. Minor but possibly resilient support is found between 48.49 and 48.58 that if seen and a positive reversal occurs, would suggest the chart is fulfilled to the downside and that the traders will work toward a recovery rally. Short-term pivotal resistance is found at 51.33. Any drop below the recent low at 46.65 would be a decent negative. Probabilities slightly favor the bulls but with a lower low below last week low occurring first. MMM generated an inside week and a close in the middle of the week's trading range, suggesting action this week may be tied to what the indexes do. By the same token, the bulls failed to generate follow through to the upside last week in spite of the close near the highs of the week the previous week, meaning that the resistance at $170 remains strong. Last week's high at 169.75 and last week's low at 167.00 are both short-term pivotal areas that if broken will bring either a new attempt to break the recent high at 171.27 or a drop down to support at 164.97. Probabilities slightly favor the bears simply because it seems unlikely that the bulls have enough fundamental ammunition at this time to make new highs. ORCL took a fall on Friday after a previous senior finance manager claimed in a lawsuit that company fired her after she threatened to "blow the whistle" about possibly unlawful accounting practices in its Cloud computing business. The stock fell all the way down to the 200-day MA, currently at 38.10, with a drop on Thursday to 38.08. The retest of the line was successful as the stock went above Thursday's high on Friday and closed in the green but the bulls were still unable to close the gap on Thursday at 39.82 or even close in the upper half of the week's trading range, suggesting that the bears now have the edge, especially considering that a new sell signal was generated on the weekly closing chart. Probabilities favor the stock falling further, at least down to the 200-week MA, currently at 37.50 but given the index outlook for the summer, a fall down to that level might be a good reason to consider taking profits. Pivotal resistance is found at 40.29 but closure of the gap at 39.82 would also be enough of a positive at this time to consider taking profits if that occurs.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .685 (new price 8.22).
2) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.11.
3) AMT - Averaged short at 102.79 (3 mentions). No stop loss at present. Stock closed on Friday at 106.97.
4) T - Covered shorts at 38.75. Averaged short at 39.085. Profit on the trade of $67 per 100 shares (2 mentions) minus commissions.
5) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.87.
6) IBM - Covered shorts at 153.62. Shorted at 149.33. Loss on the trade of $429 per 100 shares plus commissions.
7) ORCL - Shorted at 39.73. Stop loss now at 40.74l. Stock closed on Friday at 39.10.
8) MMM - Averaged short at 169.39 (2 mentions). Stop now at 171.37. Stock closed on Friday at 168.38.
9) FSLR - Averaged long at 50.615 (4 mentions). Stop loss is at 46.55. Stock closed on Friday at 49.25.
10) AAPL - Covered shorts at 99.20. Shorted at 98.56. Loss on the trade of $64 per 100 shares plus commissions.
11) IBM - Purchased at 151.69. Stop loss at 150.65. Stock closed on Friday at 152.89.
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Encyclopedia of Chart Patterns. A must have for chart aficionados! |
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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