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Issue #4
January 29, 2007 |
Newsletter
The newsletter with chart analysis for stocks and stock indexes |
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Market Humor |
Stock Indexes Update |
Stock Picks for Next Week | |
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We need to find this man
By CHAD KULTGEN
NEW YORK -- Federal investigators have arrested an enigmatic Wall Street wiz on insider-trading charges -- and incredibly, he claims to be a time-traveler from the year 2256!
Sources at the Security and Exchange Commission confirm that 44-year-old Andrew Carlssin offered the bizarre explanation for his uncanny success in the stock market after being led off in handcuffs on January 28.
"We don't believe this guy's story -- he's either a lunatic or a pathological liar," says an SEC insider.
"But the fact is, with an initial investment of only $800, in two weeks' time he had a portfolio valued at over $350 million. Every trade he made capitalized on unexpected business developments, which simply can't be pure luck.
"The only way he could pull it off is with illegal inside information. He's going to sit in a jail cell on Rikers Island until he agrees to give up his sources."
The past year of nose-diving stock prices has left most investors crying in their beer. So when Carlssin made a flurry of 126 high-risk trades and came out the winner every time, it raised the eyebrows of Wall Street watchdogs.
"If a company's stock rose due to a merger or technological breakthrough that was supposed to be secret, Mr. Carlssin somehow knew about it in advance," says the SEC source close to the hush-hush, ongoing investigation.
When investigators hauled Carlssin in for questioning, they got more than they bargained for: A mind-boggling four-hour confession.
Carlssin declared that he had traveled back in time from over 200 years in the future, when it is common knowledge that our era experienced one of the worst stock plunges in history. Yet anyone armed with knowledge of the handful of stocks destined to go through the roof could make a fortune.
"It was just too tempting to resist," Carlssin allegedly said in his videotaped confession. "I had planned to make it look natural, you know, lose a little here and there so it doesn't look too perfect. But I just got caught in the moment."
In a bid for leniency, Carlssin has reportedly offered to divulge "historical facts" such as the whereabouts of Osama Bin Laden and a cure for AIDS.
All he wants is to be allowed to return to the future in his "time craft."
However, he refuses to reveal the location of the machine or discuss how it works, supposedly out of fear the technology could "fall into the wrong hands."
Officials are quite confident the "time-traveler's" claims are bogus. Yet the SEC source admits, "No one can find any record of any Andrew Carlssin existing anywhere before December 2002."
Weekly World News will continue to follow this story as it unfolds. Keep watching for further developments.
Updates on last week's mentions and previous stock positions
2) COMS - Went short COMS at 4.12 and added second position at 3.92 stop now at 4.10. - Stock closed Friday at 3.94
3) SNDA - Purchased SNDA at 21.05 with stop at 20.19 - Stock closed on Friday at 22.54. Looking to add second position.
4) NENG - Triggered entry at 2.52. - Stock closed Friday at 2.55. Stop raised to 2.22.
5) ANGO - Purchased first position at 24.85 and second position at 24.09 - Averaged at 24.47. - Stock closed Friday at 25.17.
6) MTEX - Triggered short entry at 15.35 with stop at 15.76. If stock does not get below 15.00 on Monday or Tuesday will likely cover before stop gets hit - Stock closed Friday at 15.25.
7) CVS - Purchased first position at 32.95 and second at 33.43. Averaged at 33.19 stop at 32.35. Closed Friday at 32.98.
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Chart Analysis
Indexes - Mid-Term
Top Seen? DOW Friday close at 12486 The DOW this past week had a very indicative week on the charts. The DOW was able to rally back up to its previous high at 12621 but was unable to get above it and finished the week going below the most recent important daily low at 12450 and closing below a previously important daily high close at 12510. In addition Friday's close was below the 20-day MA which is the first time since Nov 27/06 that it has been able to do that. The next important level of support in the DOW is 12398. Not only is the 50-day MA around presently at that price but in the first few weeks of January that price level became important with the lowest daily closing price coming in at 12398. The DOW must try to maintain itself, on a closing basis, above that level if it has any chance of trying for a new high. Below 12398 there is a "double bottom" at 12337, which was the catalyst for the thrust up to new highs at 12621. Should the 12398 support level break, the DOW would likely to drop to the next support at 12337 and create a triple bottom. Such a chart formation rarely holds up. A break of 12337 would not bode well for the DOW as the next level of strong support would not be found until the mid 12100's. The weekly charts do show a strong possibility of a drop down to the 12200 as the 20 week MA, which has not been tested since August of last year, is presently close to that price. A drop down to that level would still keep the major weekly up-trend intact but would serve as a decent corrective phase so often needed to maintain a healthy trend. A break of the 20-week MA and of the 12070-12153 support level would create a drop down to the 11670 area where the 50-week MA is likely to be in a few weeks as well as a re-test of the break out from the previous 6-year high. On the upside 12580-82 will now act as a strong resistance area both as an intra-day high as well as a closing price. 12510 should also act as minor resistance and should the DOW be unable to get above that price next week strong pressure should ensue immediately thereafter. Though it seems that the DOW may have found a possible top to its 8 month rally and could be in a corrective phase for the next few weeks and/or months, it important to keep in mind that the DOW is still in a major up-trend and corrective action down to the levels herewith mentioned would not be considered a long term negative. NASDAQ Friday Close at 2435 The chart on the NASDAQ is much clearer than the chart on the DOW and seems to suggest that the NASDAQ will not suffer as greatly as the DOW should a correction phase be in place. The NASDAQ did test the resistance level on Thursday and was immediately re-buffed and closed Friday very near to an important weekly close at 2431. The index on Friday did break and close below the 20-day and 50-day MA and is likely to continue to be under pressure for the coming weeks. The chart suggests that the NASDAQ might be in a very well defined trading range between 2390 and 2470 for the next few weeks with the 2432-2434 area being a pivot point during that period of time. Tests of both the 2470 and 2390 levels could be seen several times before another break occurs. The 20-week MA is fast approaching the 2390 level and should be at that price within the next couple of weeks. The 50-week MA is presently trading just below 2277 at this time. Though the chart points to the probability of the NASDAQ breaking the bottom of the trading range, at some point in time, and moving down to test the breakout level at 2375, it seems that the NASDAQ will likely outperform the DOW during this corrective phase. Several chartists have suggested that a cup-and-handle formation exists in the weekly chart of the NASDAQ. For that formation to continue to be in effect any drops in the NASDAQ would need to be contained above 2375 and even more so above 2300. With the 50 week MA rising and likely to be at the 2300 level within the next few weeks we could be seeing a corrective phase in the NASDAQ between the high of 2508 and a possible low of 2300. Based on the formations now in place in the DOW and the NASDAQ we could be experiencing many days such as Friday where the DOW ended up in the "red" but the NASDAQ in the green. Rallies in the NASDAQ should be contained below 2470 but should that level be broken to the upside it would change the chart outlook. There are presently three daily lows between 2390 and 2396 (considered a triple bottom) and they will act as a magnet until such a time that they are broken. S&Poors 500 Friday close at 1422 SPX was able to make a new high at 1440 this week but closed in the "red" and just below the 20-day MA. It failed to give a classic reversal pattern by closing right at the previous important low at 1422. Resistance should now be strong at 1435 and a close below 1422 should thrust the index down to its major support at 1403. The 50-day MA has been closing in on the 20-day and is presently around 1410. The low on Friday on the SPX was 1416. Major support on the SPX is found right above 1400 and should the index break the 50-day MA that would be the first objective. The 20-week MA is presently around 1389 but moving up and should cross over to 1400 within a couple of weeks thus making that level critical support for the SPX. A break of the 50-week MA and strong support at 1400 could vault the index all the way down to the next major support between 1316-1326.
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Stocks
CHART Outlooks
Once again the downside is looking a little bit more attractive than the upside and short positions will be most preferable.
IN (Friday close 23.49)
IN is one of the better looking charts to put on a short position as the stock has done everything in its power to stimulate a rally over the past few weeks but has been unsuccessful in gaining much.
After making a high at 30.09 in Sep06 IN took a tumble all the way down to 21.00. Previous low before the rally to 30.09 had been 20.50 and that support level proved successful in stopping any further break.
IN was then able to stage a rally back up to 25.92 (20-day MA) and close the gap area the stock had left on the way down but then began to falter once more. IN dropped down to 21.88 where once again support was found and another subsequent rally back up to 24.59 ensued. After a failed attempt to re-establish an up-trend there were two more subsequent rallies to test the 24.59 level and both failed. On Friday IN broke a minor support level at 23.60 as it traded down from having once again re-tested the 20 and 50-day MA's and proceeded to close on its lows and below the 23.60 previous low.
Though there are several levels of support on the way down at 22.74, 21.88, 21.00 and 20.50 it seems evident the upside has been tested consistently without much success and it is now likely the downside will be tested once more.
The weekly chart IN shows that the 20-week MA was tested twice with the move up to 25.92 and then again with the most recent move up to 24.49 and both times it failed to close above it. With the close on Friday on the lows of the week and only a "minor" weekly close at 23.18 standing in its way of testing the 21.21-21.50 major weekly support level it seems that IN is beginning to show some well defined weakness on the charts.
An intra-day move below 20.50 and/or a close below the lowest weekly close since Jun05 at 21.21 should generate a test of the next support level of consequence down at 16.69.
Short positions can be instituted on any rally up to 23.89 placing a stop loss order at 24.67. In order to get stopped out IN would have to break above three resistance levels at 24.43, 24.49 and 24.59 as well as the 20 and 50-day MA and the 20 week MA.
If the break of the $20 level occurs there is a possibility this stock will test its 4-year low at 13.39. Resolution in this stock chart should happen fast and with the indexes looking to be in a corrective phase it gives this trade an additional boost.
Risk/reward ratio is at least 4-1 if the previous major low at 20.50 is the objective. Risk/reward ratio of almost 10-1 if the $20 support level breaks and 16.69 becomes the objective.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
COMS (Friday close 3.94)
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 3.97 and a subsequent 8-week period of a trading range between 4.24 and 3.95. That chart formation can be interpreted as an inverted flag and the breakdown of the flag on Thursday with a print of 3.89 is likely generate a move down to the 4 year low at 2.96.
COMS is now below all the MA's and looking weaker each day. Short positions can now be instituted with a stop loss at 4.10
Objective is a re-test of the 4-year low at 2.96. First support level is 3.47, then 3.21, and finally the 4-year low at 2.96. Risk/reward ratio on this trade is 6-1.
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 2.55)
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 fundamental 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 two weeks 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 will be confirmed this next week if the stock trades higher than 2.55 during the week and closes above 2.46-2.52 next Friday.
The most recent rally took NENG up to 2.85 and should we confirm the weekly support level at 2.28 it will mean the 2.85 is likely to be taken out and a rally above 3.00 will be seen.
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 we already have to weekly tops there should the stock reach that level a third time the probabilities of breaking above it 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.
Drops down to 2.46 and 2.52 can be purchased with a stop loss placed at 2.22. 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 32.97)
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 last week at 33.57.
During this past week the stock tested it's strong support at 32.41 with a drop down to 32.53 and rallied thereafter and was able to close above a previous important low weekly 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 within the next week or two at most.
A possible flag formation seems be forming with minor resistance at 33.38 and minor support at 32.72. Breakout from the flag formation (above 33.57) would give an objective of 35.50.
This trade has become stronger with the recent drop to 32.53 and closing above 32.89 on a weekly closing basis.
Positions purchased on CVS between 32.72-32.98 (placing a stop-loss order at 32.35) and using 34.98 as an objective would have a 5-1 risk/reward ratio.
My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).
Previous Newsletters
View Jan 8, 2007 Newsletter
View Jan 15, 2007 Newsletter
View Jan 22, 2007 Newsletter
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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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