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Issue #503 
Nov, 20 2016 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Trump Fever Cools Down!
DOW Friday closing price - 18867
The DOW followed through to the upside after the 990 points rally the previous week but it was only by 20 points (based on the weekly close) and the trading range was only 128 points, suggesting the initial jubilation of the Trump win has ebbed or ended and the reality that nothing has yet changed and will not change until January began to filter into the minds of the traders. Nonetheless, a new all-time intra-week and weekly closing high was made, also suggesting that the bears are not yet looking to short and that the uptrend continues, though probably at a slower pace.
By the same token, the DOW closed in the middle of the week's trading range, contrary to the other indexes that closed near the highs of the week, also suggesting that the traders may be shifting back toward speculation rather than the safety of Blue Chip stocks or that purchasing interest has begun wane, especially considering that the index traded above 18900 every single day of this past week but the bulls were unable to get above the 18934 all-time high that was made on Monday.
To the upside and on an intra-week basis, the DOW shows very minor resistance at the all-time high at 18934 and then only psychological resistance at the 19000 demilitarized zone.
To the downside and on an intra-week basis, the index now shows very minor but possibly short-term pivotal support at 18806. Below that level there is no intra-week support until very minor support at 18466 is reached and then minor as well as possibly mid-term pivotal at 18295. Nonetheless, on a daily closing basis, support is minor to decent at the previous all-time high at 18636.
The action seen in the DOW this past is either a pause before further upside is seen (unlikely because a resumption of the uptrend would suggest the index will reach 19200 within 5 days of a new high being made above 18934) or the first signs that the buying interest is beginning to wane and a retest of the breakout area at 18668 is to occur.
The DOW is facing a high probability that the Fed will raise interest rates in 3 weeks (December 13th) and as such, probabilities suggest that the traders will opt for a retest of the breakout area in order to begin to build the kind of support base needed in January from which to make a run at 20,000, if and when the Trump changes will be looked on as benefits for the market.
The key level to watch in the DOW this week is 18806 as a break of that level will suggest a minimum drop down to the previous high at 18668. Probabilities favor the bears this week.
SPX Friday closing price - 2182
As with all the indexes, the SPX followed through to the upside after the previous week's strong rally but contrary to the other 2 indexes, the bulls failed to generate a new intra-week or weekly closing high, suggesting that it is taking a back seat due to the expectation of the Fed raising interest rates in December.
During the last 2 days of the week, the SPX traded 42% of the time above the all-time high weekly close at 2184 but it was certainly clear on Friday that the bears were going to strongly defend that resistance level, given that only for the first hour of the day was the index above that level and for the last 2.5 hours of the day, the index traded up to that level on 2 occasions for a total of 60 minutes but failed to break it. This does suggest that it will be very difficult for the bulls to accomplish making a new all-time high weekly close before the Fed rate announcement on December 13th unless some positive fundamental change occurs. It also suggests that the SPX will work as an anchor in the market until that time.
To the upside and on an intra-week basis, the SPX now shows decent to perhaps even strong resistance at the double top at 2193. Above that level there is no previous resistance other than perhaps psychologically at 2200.
To the downside and on an intra-week basis, the SPX now shows very minor support at 2172 and at 2168, minor at 2160 and at 2157 and short-term pivotal at 2147. Below that level, there is minor to decent at 2119 and at 2114 and decent as well as longer term pivotal at 2083.
The SPX closed near the highs of the week and further upside above last week's high at 2189 is expected to be seen. Nonetheless, if that occurs it would be highly likely that the double top at 2193 would then be broken, meaning that a new all-time intra-week high would be made. Given the action seen at the end of the week and the high probability of the Fed raising rates in December, it seems difficult to believe that the bulls would be able to maintain a new all-time high (if made) going into the weekly close next Friday, suggesting that the end result for next week is likely to be a negative one. Probabilities favor the bears, at least for the close next Friday.
NASDAQ Friday closing price - 5321
The NASDAQ made a new all-time intra-week and weekly closing high on Friday and closed near the highs of the week, suggesting further upside above last week's high at 5346 is expected to be seen. Nonetheless, it was not a convincing statement by the bulls, given that the new all-time intra-week high was only by 4 points and the weekly closing high was only by 9 points and more importantly, the bulls "failed" to confirm the break on the daily chart, having closed on Thursday at 5333 (below the all-time high daily close at 5339) and then generating a red close on Friday.
With the NASDAQ rallying this past week but both of the other indexes giving signs that further upside will be difficult, it does suggest that the new highs made this week might only be because of short-covering seen in 4 of the big 5 stocks (AMZN, AAPL, GOOGL, and NFLX) that generated positive reversal weeks after the initial surge of selling seen because of the Trump win. It is doubtful that much new buying interest or follow through to the upside will be seen in those stocks since the initial reaction was strongly negative.
To the upside and on an intra-week basis, the NASDAQ still shows decent to perhaps strong resistance between 5340 and 5346. Above that level, there is no previous resistance.
To the downside and on an intra-week basis, the NASDAQ will now show very minor support between 5166 and 5171, minor to perhaps decent but short-term pivotal at 5250 and then nothing until minor to decent support is found at 5169. Below that level, there is minor support at 5143, minor to decent at 5097 and decent and mid-term pivotal at 5034.
The NASDAQ did close on the lows of the day on Friday, after the negative reversal on the daily chart occurred, suggesting the first course of action for the week will be to the downside. With the first level of intra-week support not found until 5271 is reached, which is the middle of last week's trading range, if that scenario occurs the bulls will find themselves 75 points away from the all-time high and that would be difficult to overcome, given the expectation of the Fed raising interest rates in 3 weeks.
As such, the bulls first need to prevent the NASDAQ from getting much below the all-time high weekly close at 5312 and then they need to negate the negative daily reversal seen on Friday in the first couple of days of the week, in order to generate the kind of buying needed to take the index higher. As it is, the 5346 all-time high already represents the most extreme level of resistance based on the general resistance levels given 300 points above a major level such as 5000 is. Any further upside above that level (more than 10 points) is likely to open the door for new technical buying interest to appear.
Probabilities slightly favor the bulls in the NASDAQ, but it is almost a "toss up".
The surge of buying interest seen the previous week almost came to a halt as the traders realized that the buying interest is still highly speculative, given that there are still 2 months left before Trump takes office and nothing is yet "set in stone". In addition, the probabilities are very high that the Fed will raise interest rates in December and even under the most positive scenarios available, that is still a negative.
The run to safety of the Blue Chip stocks seen the previous week also came to a stop, given that the DOW underperformed the other indexes, having rallied .2% versus .8% in the SPX and 1.6% in the NASDAQ. What this suggests is that the "Trump speculative effect" now has to wait for "concrete" changes before further buying of consequence occurs.
This coming week is a short week due to the Thanksgiving holiday and there are no "A" economic reports due out, suggesting that there is nothing on the economic calendar that is likely to generate any special buying or selling interest. As such, expectations are for very little to occur other than perhaps some backing and filling as the traders try to fill out the chart prior to the next set of important reports due out the following week and the Fed rate decision on December 13th. In fact, the probabilities do favor the traders taking the DOW down to test the breakout area, which in turn also means the other indexes would see some selling as well.
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Stock Analysis/Evaluation
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CHART Outlooks
The short-holiday week suggests that very little will happen this week. In addition, after looking at over the charts of about 75 stocks, that outlook was further strengthened as most chart are not at levels of support or resistance where a trade in any direction can be considered.
Nonetheless, I did find 2 stocks where a short position can be considered, one of which was GS that did not reach the desired entry point last week but is likely to do so this week, meaning that a short positions is still viable. The other stock (mentioned below) is close to a resistance level that makes the trade viable from a risk/reward ratio. In addition, it is not a stock that is likely to be negatively or positively affected by a Trump administration, meaning that from a chart point of view it is a trade to consider.
SALES
GS Friday Closing Price - 203.94
GS was one of the strongest beneficiaries of the Trump win, inasmuch as it is the leading financial company in the U.S. and will benefit the most from deregulation of the banking industry, which is something that Trump has strongly advocated and deeply believes, in, being a trader and business man himself. The company has often been accused of using every avenue possible to make money, and was one of the companies most affected by regulation that prevented Banks from investing in leveraged investments.
GS rallied 17% the past 2 weeks off of the election win, which when added to the 23% it had rallied the previous 20 weeks means the stock has rallied over 35% from the 138.20 low seen in June. Nonetheless, the stock is now approaching the 8-year high at 218.77 that was seen in 2015 but more importantly reaching an area between $200 and $250 that represents the highs seen in 2007 when all banks were "rolling in profits" due to the excesses seen prior to the 2008 crash. Even though a Trump win is considered a major benefit for the company (if and when deregulation does occur), it is unlikely that the company will be able to "beat the 2007 highs" meaning that traders are likely to be looking to short the stock at the approaching resistance levels, given that the stock has always been considered a good "trading stock" where support/resistance levels worked.
GS closed on the highs of the week and further upside is expected to be seen, above last week's high at 212.07. Given that the stock rallied $34.43 the last 2 weeks, getting up near to the 8-year high at 218.77 seems to be a high probability this week.
To the upside and on an intra-week basis, GS shows minor resistance at 214.61, at 217.80 and decent to perhaps strong as well as pivotal at 218.77. Above 218.77, there is minor resistance at 222.75, decent at 233.97 and major at 250.70.
To the downside and on an intra-week basis, GS shows minor support at 196.90 and slightly stronger at 194.01. Below that level, there is no support until 182.71 and then nothing until decent support is found at the $172 level that does include the 200-week MA, currently at 171.75.
GS is now showing a breakaway and runaway gap (between 182.68 and 183.45) in which the runaway gap was built the day after the election results. That gap is unlikely to be closed until after Trump takes office in January, if at all thereafter. Nonetheless, there is a third gap between 193.54 and 194.01 that was created last Thursday that is highly likely to be closed, meaning that if the resistance at 218.77 is not broken, closure of that gap will become the main target of the traders. By the same token, closure of the gap will also likely open the door for the runaway gap down at 183.45 to be tested.
GS is likely to continue higher with the traders likely targeting the decent weekly close resistance levels at 212.61 and 213.19 with a small possibility of getting as high as 214.61. To the downside, the mention objective will be the $184 level with a very slight chance of the stock getting back down to $172.
Sales of GS around the 212.61 level and using a stop loss at 218.87 and having a $184.00 objective will offer a 4-1 risk/reward ratio.
My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest).
CBRL Friday Closing Price - 155.27
CBRL is a restaurant/gift shop chain that is not likely to be positively or negatively affected by a Trump administration. Nonetheless, the traders used the Trump win to rally the stock over the past 2 weeks but more likely due to the stock trading at a chart support level for 5 weeks without breaking it, more so than anything that will be gained by the Trump administration.
Nonetheless, CBRL is now reaching an established resistance level around the $160 level that is unlikely to be broken, given that the stock is now showing multiple lows at the support level at $130 and will be a magnet until broken, as well as the fact the stock has traded mostly sideways between $120 and $160 (95% of the time) for the last 2 years.
CBRL closed on the highs of the highs of the week, suggesting the stock will go above last week's high at 155.99 this coming week. If that occurs, the stock will likely reach the $157-$160 level where strong selling has been seen before on 3 of the 4 occasions when the stock reached this area. On those 3 occasions, the minimum drop was back down to the $144 level, meaning the trade is certainly viable from a risk/reward and probability point of view.
To the upside and on an intra-week basis, CBRL shows minor to perhaps decent resistance at 156.65, decent at 159.94 and decent to perhaps strong at 162.33. Nonetheless, on a weekly closing basis, resistance is decent to perhaps strong between 155.21 and 157.14.
To the downside and on an intra-week basis, CBRL shows minor support at 146.65 and a bit stronger at 144.00. Below that level there is no support until the 131.21 to 130.20 level is reached. Below that level there is no support until the 121.89 level is reached, which is further strengthened by the 200-week MA, currently at 122.00. Strong support is found at the 2-year double bottom low at 117.95/118.01.
The probabilities are high that CBRL will continue trading in the sideways trading range between $120 and $160 it has been in for 98 out of the past 104 weeks. In addition, the stock saw lows of 130.50, 130.60, 130.95 and 130.15 for 4 weeks in a row between the weeks of September 26 and October 17, as well as follow through lows of 131.50 and 131.74 the following 2 weeks, meaning that area will likely be a magnet until the stock breaks out of the sideways trend (intra-week above 162.33 or weekly close above 157.14).
CBRL has moved up 15.5% over the last 2 weeks as the traders used the Trump win to stimulate short-covering. Nonetheless, no support was built on the way up, meaning that if the resistance level stops the rally, a fast fall could occur.
Sales of CBRL between 156.64 and 159.89 and using a stop loss at 160.35 and having a 121.89 objective will offer a 9-1 risk/reward ratio.
My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest). My rating would be a 4 if a 162.43 stop loss is used.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| ARNA generated a negative reversal week, having gone above the previous week's high and then closing in the red. The stock closed in the middle of the week's trading range but given the fact that the 9-month low at 1.35 (and new multi-year weekly closing low) seen 2 weeks ago requires a retest, probabilities favor the bears and a drop down to 1.47. Probabilities also favor a positive reversal by the end of the week, meaning that a green close is likely to be seen next Friday. Resistance is now minor to decent but also pivotal at 1.68, which is where the 200-week MA is currently at. Probabilities favor a trading range this week of something like 1.47 to 1.64 with a potential breakout the following week. CLB followed through to the upside this past week with a new 3-week high and a green weekly close but ended up closing slightly in the lower half of the week's trading range, suggesting a higher probability of going below last week's low at 103.43 than above last week's high at 108.99. Nonetheless, there is no resistance of consequence above until 112.00 is reached and oil closed on the highs of the week, suggesting that the bulls still have the edge. Pivotal short-term support is found at 104.96 that if broken would suggest a drop down to 102.50 would be seen. By the same token, a rally above 108.99 would suggest 112.00 or perhaps even 114.00, which is where the 200-day MA is presently located, would be the objective. The 104.96 level seems to be the level the traders will key on this week, as far as whether the stock will go above or below last week's trading range. The stock did close on the highs of the day on Friday and the first course of action for the week is likely to be to the upside, with 108.25 as Monday's upside objective. ENG generated a negative reversal week, having gone above the previous week's high and then closing below the previous week's low and in the lower half of the week's trading range, suggesting further downside below last week's low at 1.20 will be seen this week. The stock did break a decent intra-week support at 1.28, which does open the door about the stock resuming the uptrend anytime soon. Nonetheless, it is difficult to put much confidence in the negative action seen on Friday, given that 92% of the volume for the day occurred in the last 13 minutes of trading and then only when the important intra-week support at 1.28 got broken, meaning that most of the volume was probably stop loss selling. The stock closed at 1.30 and given that 1.31 is a strong and important weekly close support, it cannot be said that the bears accomplished anything of consequence. By the same token, the intra-week support at 1.28 did get broken and the stock did close in the lower half of the week's trading range, meaning that the bears will have the edge at the beginning of the week. Minor to decent intra-week support is found at 1.15 and then stronger and longer term pivotal at 1.07. The 200-day MA is currently at 1.25 and if the bears are able to close below that line 2 days in a row, it will give them a stronger edge. Intra-week resistance is found at 1.42 and pivotal at 1.47. The bulls need a green close next Friday in order to generate new buying interest. FCEL had an uneventful inside week for the second week in a row, meaning that nothing was decided last week. Having closed very slightly in the lower half of the week's trading range, it does suggest a slightly higher probabilities of going below last week's low at 3.00 than above last week's high at 3.25. Nonetheless, if that does happen it would not necessarily be seen as a negative, given that the 2.70 has not yet been tested and it does need to be successfully tested before the bulls do any new buying. Intra-week support is found at 3.00, at 2.80 and at 2.70. Any drop below 3.00 but not below 2.80 would likely turn out to be a positive longer term. Intra-week resistance is found at 3.25 and then at 3.35, that if broken would suggest the gap up at 4.10 would be tested. Probabilities slightly favor the bears this week. FSLR received another negative piece of news, with the company having announced a new and short-term painful restructuring plan that will cut sales of the presently produced Solar panels with the outlook of a cheaper and more effective Solar panels to be introduced in 2018. The news did cause the stock to drop another 9% in value and close not only near the lows of the week but below another important weekly close support at 31.91. The stock now finds itself likely to drop to the next weekly close support between 25.35 and 28.60, which is an area of support that stood up for 5 months between December 2012 and April 2013. On a possible positive note is the fact that the restructuring plan announced by the company is supposed to keep the company as the leader of the Solar industry offering a much more competitive and effective Solar panel, if and when the restructuring plan is successful. On another positive note but on a chart basis, the gap that was created by the news was closed meaning that no breakaway/runaway gap formation was formed, suggesting the selling is likely to be short-term. Short-term pivotal intra-week resistance is now found at 33.49. Intra-week support is now found at 27.60 and decent at 24.46. Probabilities favor the bears this week but the close next Friday is not likely to be lower than 28.60. Any green close, especially if above 31.91 would be a decent positive. GS followed through to the upside, off of last week's strong 14% spike up rally, having added another 3.1% to the weekly closing price. The stock closed near the highs of the week and further upside above last week's high at 212.07 is expected to be seen. By the same token, there was no resistance levels of consequence above the $200 level, meaning that the bears did not have any level they could congregate at to stop the bulls. Now, the stock is reaching a level of weekly close resistance between 212.61 and 213.19 that is likely to be used strongly by the bears to stop any further upside from occurring. As such, my initial mention to short the stock in that area remains viable. Minor to decent resistance is found at 214.61 and decent to perhaps strong at 218.77. A break above 214.61 is likely to generate more buying interest, so a stop loss at 214.71 can be used. Minor support is found at 203.20 and then nothing until minor again at 194.01. Probabilities favor further upside this week but slightly and then a negative reversal. I will be looking to add shorts between 212.61 and 213.19. MT generated an uneventful inside week in which nothing was decided. The stock did close near the lows of the week and further downside below last week's low at 6.90 is expected to be seen. Minor intra-week support is found at 6.77 and on a weekly closing basis at 6.71, Intra-week resistance is found at 7.32. Probabilities favor another non-eventful week but with a slight bearish bias. Chart suggests that the stock will trade in the $7 demilitarized zone (6.70-7.30) for the next couple of weeks but then continue the upside trend the stock is presently in. SINA made a new 14-week low but the bulls managed to rally enough from the lows to close in the upper half of the week's trading range, leaving the door open for a rally above last week's high at 69.92. The stock made the week's low at 64.89 on Monday and spent the rest of the week uneventfully, having generated 3 days in a row of inside days and then on Friday, going below Thursday's low but then closing near the highs of the week, suggesting that the bears have lost their edge and that the bulls will likely have some success this week. There is no established intra-week resistance until 72.41 is reached and there are 4 highs between 72.19 and 72.41 that will become a magnet to be broken if the bulls can get above Thursday's high at 68.89. As such, consideration can be given to taking profits on Monday and looking to re-short the stock above 72.41. Support is found at 64.89 that if broken, would generate new selling interest. XON generated a breakout this past week, having broken above the 7-month intra-week high at 31.35 and closing above the 7-month weekly closing high at 30.02. The stock closed exactly in the middle of the week's trading range, leaving the door open for further upside above last week's high at 32.90 or below last week's low as 29.36. The probabilities favor the bulls, given that the stock is now on a breakout but did close near the lows of the day on Friday and the first course of action will likely be to the downside with Thursday's low at 30.15 and Wednesday's close at 30.50 being tested, especially since Wednesday's close was a successful retest of the daily closing high at 30.49 that generated the breakout. The bulls need to confirm the breakout this coming week with another weekly close above 30.02 but also keep above the daily close breakout at 30.49. As such, this coming week it is likely that the traders will do a fast second retest of the daily close breakout, probably on Monday, and if the bears fail to get below 30.15 or close below 30.49, the traders will likely get on the buy side and work to the upside the rest of the week. It should be mentioned that up to now the chart is mimicking the action seen in January 2012 when the stock broke out of the same kind of weekly close resistance level as seen this time around and moved up to generate a weekly close at 36.82 within a 2 week period of time. Probabilities favor the bulls.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .258 (new price 3.10). 2) CLB - Purchased at 111.89. Stop loss at 99.45. Stock closed on Friday at 106.05. 3) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 1.30. 4) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.58. 5) MT - Averaged long at 5.93 (4 mentions). Stop loss now at 6.23. Stock closed on Friday at 7.00. 6) FSLR - Purchased at 29.15. Averaged long at 41.758 (5 mentions). No stop loss at present. Stock closed on Friday at 29.21. 7) GS - Shorted at 209.13. Stop loss at 214.71. Stock closed on Friday at 210.35. 8) COF - Averaged short at 72.497. Covered shorts at 76.52. Loss on the trade of $1610 per 100 shares (4 mentions) plus commissions. 9) SINA - Averaged short at 76.855 (2 mentions). No stop loss at present. Stock closed on Friday at 68.20. 10) XON - Purchased at 29.47. Averaged long at 27.71. Stop loss now at 28.56. Stock closed on Friday at 31.19. 11) AAPL - Purchased at 104.38. Liquidated at 109.39. Profit on the trade of $501 per 100 shares minus commissions.
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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.
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information enclosed above, regarding his background, length of trading, and experience, is correct
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