 |
 |
 |
 |
 |
 |
|
Issue #3
January 22, 2007 |
Newsletter
The newsletter with chart analysis for stocks and stock indexes |
|
Market Humor |
Stock Indexes Update |
Stock Picks for Next Week |
|
Today's Stock Market Report
From Clyde's collection
Updates on last week's mentions and previous stock positions
2) COMS - Went short COMS at 4.12 with stop at 4.30. - Stock closed Friday at 4.04
3) SNDA - Purchased SNDA on Tue at 21.05 with stop at 20.19 - Stock closed on Friday at 22.09.
4) NENG - NENG did not trigger entry point with move above 2.52. - Stock closed Friday at 2.32. Still waiting.
5) ANGO - Purchased first position at 24.85 and second position at 24.09 - Averaged at 24.47. - Stock closed Friday at 23.62.
View Jan 15, 2007 Newsletter
|
Chart Analysis
NASDAQ leading the parade.
NASDAQ Friday Close at 2451 This past week the NASDAQ set "the" major pivot point from which chart traders will key their trading for the next few weeks. The 2432-2435 level in the NASDAQ will now likely be seen as the pivot point for the short-term direction of the indexes. The drop down to 2435 on Friday (considered an important re-test of a major support level at 2432-2434 as well as a test of the 20-day MA) has now set the price from which an expected first quarter correction could begin to occur. Rallies in the NASDAQ will use 2432-2435 as the support level from which to buy and should the level break the traders will likely use that level as well from which to begin instituting short positions. Another short-term key level to watch for this week is 2470, as that was the breakout high from which the NASDAQ was able to generate a rally up to 2508. The NASDAQ must now not only get above that level but close above 2465 on a daily closing basis to re-stimulate a test of the 2508 high or a continuation to the upside. If the NASDAQ is unable to do that, within the first couple of days of next week, pressure will begin to mount and a break of support will likely ensue. Lost in the confusion of this past week's action is the fact that the breakout from the weekly flag formation was negated with the drop in price below the top of the flag at 2470 and a close below the breakout level. Failures-to-follow-through, on flag formations, are usually followed by moves in the opposite direction measuring the exact price-range from the breakout at the top of the flag (2470) to the failure point (2508). Using that formula and looking at the base of the flag being at 2394 it would project a move down to 2356
A move above 2470 in conjunction with a close above 2465 will probably bring a re-test of 2508 and possible continuation of the up-trend. DOW Friday close at 12565 The DOW was once again able to make new all time highs with a rally to 12611 but was not able to close above the previous intra-day high at 12581. Though the DOW has been able to continue to inch itself up to new highs each subsequent week it has yet to show the kind of strength needed to stimulate additional aggressive buying. In addition, the DOW has yet to have the type of correction needed to generate new confidence as well as provide clearly defined risk levels to attract new buyers. The DOW needs to have the type of correction that would point to an evident support level close by. At this moment a correction of over 250 points could easily occur before finding a support level of consequence. The only evident support found in the DOW on this recent move up is at 12337. At 12611 that is too much risk for the buyers to take. A break down to that level could easily occur and still be within the context of an up-trend. A further break of that support would need to occur to indicate that a corrective phase has begun. Breaks below 12337 will likely bring heavy selling and generate a move down to 12070 (a correction of 540 points). A break below 12070 will likely take the DOW back to its 7-year breakout level at 11750 and another 320 points lower. Such a move would parrot the chart of 2004 where the DOW first corrected about 580 points by the end of March and added an additional 300 points by the end of October. 2006/2007 is eerily looking like 2003/2004, at least as far as the movement the year before, and in 2004 a correction of 800 points ensued from the high made in February to the low made in October. On a shorter-term basis the 12529 level could cause a mini breakdown to 12489-12498. A break of 12489 could project the DOW to the 12337 area. All of this could happen and still be within the up-trend There are no possible projections to the upside as the index is in new all time highs almost every week. Continued upside rallies, though, will likely be limited due to the overbought condition of the index. S&Poors 500 Friday close at 1430 SPX has continue to make new highs but by very small margins. The upside momentum seems to be beginning to dry up and a correction phase might ensue. Levels on SPX are now clearly getting clearly defined. A daily close below 1427 will likely bring weakness and thrust the index down to the 20 day MA which is presently right around 1421. A break of that level will take the index down to the strong support area found between 1403 and 1408 and a break of that area will likely generate a drop down to the major support at 1377. Resistance is immediately at hand at 1431.5-1431.8. After that only the previous 4 year high at 1435 stands in the way of a new high being made. SPX Is looking very toppy as the index has only been able to top the previous high at 1431 by 4 points during the last 22 trading days even though the index has spent most of that time trading above 1403. Further upside, if any, will likely be limited and slow to achieve. A break of 1403 will likely signify that the index is in a short-to-midterm correction phase.
|
Stocks
CHART Outlooks
Once again the downside is looking a little bit more attractive than the upside and short positions will be most preferable. MTEX (Friday close 15.13) MTEX is a stock that during the last 4 years has been trading between a low of $8 and a high of $20. Within that range it can be said that the stock is in a sideways pattern as no evident long term weekly trend has been in existence. During this time the $15 level has consistently been a pivotal price for the short term outlook. A couple of months ago after MTEX reached once again the $20 level it began to falter. When news that the company had been restricted from doing business in Texas and was pending a lawsuit in that state hit the newswire, the stock took a dive all the way down to the 13.45 area where it stalled. Just a few days later it was announced that the stock would be placed under the S&Poors smallcap600 umbrella and the stock rallied aggressively up to 15.62 where it found strong resistance. During the past 2 ½ months MTEX has been unable to get above 15.62 and just this last week got down as low at 14.57 where it found a previous support level and rallied to close at 15.13 on option expiration day (last Friday). On Friday MTEX was able to break above the 20 day MA but ran up against the 50-day MA which is currently at Friday's closing price at 15.13. 15.15 has been an important weekly closing level as it has been the highest weekly closing price since Oct20/06. On several occasions during the past few weeks MTEX has closed just below 15.14 but not above it. There is a gap between 14.17-14.57 that is acting as a magnet for the sellers as gaps generally get closed. With the inability of MTEX to get above 15.62, during the last 10 weeks, or close above 15.15 on a weekly basis as well as the recent weakness shown (with the drop down to the 14.57 level, it is probable that the downside has more potential for the traders at this time. A short position can be instituted between 15.13-15.27 using a stop loss order at 15.76 looking at 13.83 as the first objective on the move down. Due to the fact that over the past 4 years this stock has shown a tendency to trade as low $8 - $11 on several occasions, within this weekly sideways pattern, a case could be made for further downside movement to the $11 area and perhaps even lower. Risk/reward ratio is 3-1 on first objective and as much as 8-1 on secondary objective. My rating on the trade is a 6 (on a scale of 1-10 with the strongest probability rating being 10). COMS (Friday close 4.04) COMS continues to look like a good stock to short as each subsequent rally has had a higher low than the previous one. COMS hit a high of 9.36 on Jan04 and a low of 2.96 on Apr05. After a subsequent short covering rally which took the stock back up to 5.70 on Apr05 the stock has now gotten itself back under strong pressure. After establishing a 7-month range between 5.30 and 3.95 the last rally up to 5.22 brought about a sharp drop down to 3.95 and a subsequent 8-week period of a trading range between 4.24 and 3.97. That chart formation can be interpreted as an inverted flag and a breakdown of the flag (a print of 3.89) will likely generate a move down to the 4 year low at 2.96. Recent action in COMS points to the break perhaps occurring as early as this next week. COMS is now below all the MA's and looking weaker each day. Short positions can be instituted at any price below 4.15 with a stop at 4.30 or on a break below 3.89 using a stop loss at 4.19 Risk/reward ratio on this trade is 4-1. My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10). NENG (Friday close 2.32) NENG is a long-term play (rather than a short-term one) as the stock is a slow mover. NENG has a strong support foundation that has taken over 2 years to build. NENG now has what is commonly called a "rounded bottom" which normally signals a steady/slow but positive change of fundamentals in a company. Since the low at 1.07 made in Nov05 the stock has slowly been moving up with each subsequent weekly low being higher than the previous one and each recent weekly high being higher than the previous one as well. This most recent drop down to 2.28 (a week ago) took the stock down to the 50-day MA as well as the 20-week MA and close to the 50 week MA. The 2.28 low has not yet been confirmed as the new weekly support level (1.90 presently has that distinction) but if NENG is able to get above and close above 2.52 on a weekly basis (perhaps this next week) the 2.28 level will become the major weekly support. The most recent rally took NENG up to 2.85 and should it confirm the weekly support level at 2.28 it will mean the 2.85 is likely to be taken out. The major resistance level on NENG is 3.25 (from two major weekly tops at that price). Getting above 2.85 will likely vault the stock to test that level and since it already has two weekly tops there should the stock reach that level a third time the probabilities of breaking above that price will be strong. Above 3.25 there is very little resistance until 4.69 gets reached. Rounded bottoms take a long time to develop and I have no time frame that I can see at this time (could be weeks or could be months) but once a major resistance level is broken, such as 3.25, stocks tend to aggressively rally thereafter in a very short time. Simply said, a break above 3.25 will likely generate aggressive long term buying of the stock. At this time I would wait for a daily close above 2.52 to consider buying into the stock if you are not already long, especially if NENG closes above 2.52 on a Friday (weekly close). At that time the stock could be bought using 2.22 as a stop loss point. Objective on this long-term trade is 4.69 (and perhaps higher). Risk/reward ratio, depending on entry point, could be as much as 10-1. My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10). CVS (Friday close 33.28) CVS looks like a good short term scalping purchase. During the last 7 weeks CVS has rallied from a low of 27.09 to the high made on Friday at 33.38 closing at 33.28 (near the high). Additionally, on Friday, CVS was able to close above a previous important weekly low close at 32.89. At this moment there is little in the way of resistance until it gets up to 34.90 and the way the stock has been running it is likely to attempt getting to that price sometime this week. There will be strong support at 32.14 and again at 32.80-32.90. Both of these levels represent a major previous daily and weekly low as well as a major daily and weekly close. Positions purchased on CVS between 32.90-33.00 (placing a stop-loss order at 32.35) and using 34.98 as an objective would have a 3-1 risk/reward ratio. True Scalpers might want to use a very sensitive stop loss placing at 32.72. This is more of a scalping play for a two or three-day trade but this stock is in an up-trend and the 4 year high at 36.14 could be in jeopardy of being taken out on this move up. My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).
|
|
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. |
|
|
|