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Issue #508 
Jan, 1 2017 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls Unable to Print 20,000 in the DOW!
DOW Friday closing price - 19756
The DOW generated a red weekly close for the first time in 8 weeks, having failed to reach the 20,000 level on 7 different occasions over the past 3 weeks. The inability of the bulls to print 20,000 after repeated attempts was likely the reason for the bears having some control this past week. The index closed near the lows of the week, suggesting further downside below last week's low at 19718 is expected to be seen.
The DOW closed out the month near the highs of the month, suggesting further upside above last month's high at 19987 will be seen in January. Nonetheless, it is important to note that during the past 3 years (since it made a new all-time high in 2013 above the previous all-time high at 19148 seen in 2007) January has not been positive to the bulls, given that each year the first month of the year has been red, including in 2014 when the index closed on the highs of the year but no follow through was seen in January. By the same token, chart history cannot be depended upon this year since it was the change of Administration that caused the index to rally in November and December, meaning that the same reasons for the rally will still be in effect when Trump takes office on January 21st.
To the upside and on an intra-week basis, the DOW shows minor resistance at 19956 and minor to decent at 19980/19987. Above that level, there is some psychological resistance at the 20,000 and up to the top of the demilitarized zone at 20030.
To the downside and on an intra-week basis, the DOW no support until very minor support at 19062, Nonetheless, there is "general" support between 19670 and 19730.
Over the past 24 years, the DOW has not shown a specific tendency for the beginning of the year, given that during this period of time there have been as many green Januaries as there has been red ones. Nonetheless, it must be stated that whatever trend has been in place at the time (up or down) has been a strong determinant to what the index did in January. With the index presently in an uptrend and the Trump Presidency expected to help the market, at least at the beginning of it, the probabilities still favor the bulls.
Chart-wise, the DOW is likely to find support around the 19700 level and the bulls then attempt to print 20,000 by the second week of January. Upon Trump taking office the 3rd week of January, the bulls are likely to regain momentum to the upside and based on the 3 previous occasions when the index got up to 10,000 where rallies of anywhere from 726 to 1138 points above that level were seen, it would suggest that a strong correction is not likely to occur before February and it would probably come from anywhere between 20,726 to 21,138.
Probabilities slightly favor the bears in the DOW at the beginning of the week but by the end of the week the index is likely to be heading back up.
SPX Friday closing price - 2238
The SPX generated a negative reversal, having gone above the previous week's high and then closing below the previous week's low. The reversal could have been more indicative if a new all-time high would have been made but only going above the previous week's high by only 1 point but failing to make a new all-time high by 4 points, it does suggest that it will be a short-term negative (perhaps only 1-week) with the index going below last week's low at 2233 this coming week.
In spite of the negative reversal and the 1.8% drop from the all-time high (29 points), the SPX still closed in the upper half of the month's trading range, suggesting further upside above last month's high at 2277 will be seen in January.
To the upside and on an intra-week basis, the SPX now shows minor resistance at 2277. Above that level there is no resistance.
To the downside and on an intra-week basis, the SPX now shows minor support at 2187 and then just a tiny bit stronger around 2172. On a daily closing basis, minor support is found at 2213 and then decent at 2191.
The SPX gave a sell signal on the daily closing chart on Wednesday when the 3-week low daily close at 2153 was broken. The sell signal was confirmed with 2 additional daily closes below that level, meaning the probabilities are high that follow through to the downside will be seen. With no support below until minor daily close support at 2113 is reached, the index could see a 3% fall from the highs before new buying interest is found. By the same token, at present the SPX is not the index the traders are keying on, meaning that the traders are likely to be looking elsewhere for direction and/or support levels.
On a negative note though, the SPX is now showing a double top on the daily closing chart at 2171/2170 (in addition to the sell signal that was given) and if follow through to the downside is seen at the beginning of the year, a retest of the 2200 level is likely to be seen. If that does occur, the SPX will become the key index to follow as it will mean the 19700 general support in the DOW will have been broken.
Probabilities slightly favor the bears in the SPX this week with the big question being "how much?"
NASDAQ Friday closing price - 5383
The NASDAQ generated a negative "classic" key reversal, having made a new all-time high at 5512 and then closing below the previous week's low. A "classic" key reversal is when an index reaches and a major high or low or an all-time high or low and then closes below or above the previous week's high. Going back 20 years (back to 1996) there have only been 4 "classic" key reversal and they all brought about at least a strong correction, if not a change of trend as the one in March 2009 brought about.
The NASDAQ closed on the lows of the week and further downside below last week's low at 5371 is expected to be seen this week. With the index having reached what can be considered a decent psychological resistance at 5500 and correcting 2.7% from that high in just 1 week, it has to be considered at the very least a short-term indicator or weakness.
To the upside and on an intra-week basis, the NASDAQ now shows minor to perhaps decent resistance at 5403, minor at 5450, decent at 5489 and decent to perhaps strong at 5512.
To the downside and on an intra-week basis, the NASDAQ shows very minor support at 5350 and then decent between 5238 and 5250. On a daily closing basis, there is minor support at 5339 and then nothing of consequence until decent support at 5250 is reached.
In looking at the 20-year chart of the NASDAQ there have been 4 "classic" key reversals and 3 other "key" reversals (not from all-time highs or lows). All of these reversals brought about a correction of at least 13% to as much as 48% and lasting anywhere from 4 weeks to a couple of months. As such, the signal given this past week could be a sign that the start of the year could be worse than what the other indexes are signaling.
There are 2 levels to watch in the NASDAQ this week with 5403 likely being a short-term pivot point intra-week resistance and 5339 (on a daily closing basis) being short-term pivot point support. On an intra-week basis, the 5239 level has become "longer term" pivot point support.
Probabilities favor the bears in the NASDAQ this week.
The indexes seem to have found at least a temporary top after 3 weeks of trying to go higher but failing to make any significant inroads. Sell signals were given in all indexes, suggesting that the start to 2017 will likely be negative. By the same token, the NAZ generated a "classic" key reversal and that could be a sign that a more serious down draft could be seen, at least until Trump takes office and direction, intent, and ability to institute their game plan is clearer.
The year will also start with the 2 most important economic reports of the month (ISM Index and Jobs) being seen the first week. These reports do not have much importance at this time as all eyes are on what the Trump Presidency will change but they will likely give some ammunition to the bears to press down or to the bulls to regenerate new buying interest. The week will also show whether the selling last week was due to end-of-the-year profit taking in order to buy at the beginning of the year at lower prices or whether there are some real concerns, especially after such a run up over the past 8 weeks.
As such, the first week of trading for 2017 is likely to be one of discovery rather than conviction. By the same token, from a purely chart perspective, the bears will have the edge.
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Stock Analysis/Evaluation
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CHART Outlooks
Though there are not many fundamental reasons to think that the market will head lower, the charts (based solely on what happened last week) do suggest that the bears have some short-term control with a small possibility of a decent correction occurring. As such, the mentions given today are shorts but with entry points, stop losses and objectives that are based on the intra-day charts and are all short-term and sensitive, meaning that the probability ratings are all low.
AAPL Friday Closing Price - 115.82
AAPL has traded above the $118 level on 3 occasions over the past 3 months but the most the bulls have been able to achieve is a high print at 118.69. The stock generated a negative reversal week, having made a new 8-week high but then going below the previous week's low and closing in the red and near the lows of the week, suggesting further downside below last week's low at 115.43 will be seen this week. The failure of the bulls to continue the recent uptrend and get above 118.69 this past week (in spite of getting up to 118.01) has to be seen as a disappointment that suggests the bears will be in control for the next week or two.
AAPL still remains in an uptrend, at least considering that every spike low (3 of them) have been higher than the previous one since the uptrend started in May. Nonetheless, the difference between the rally highs and the spike lows have been sufficient for the bears to make a decent profit when shorting the rallies. With the failure seen last week, the possibility of more than just another spike low occurring have increased.
To the upside and on an intra-week basis, AAPL shows minor but likely short-term pivotal resistance at 117.20, then stronger at 118.01, at 118.36 and at 118.68.
To the downside and on an intra-week basis, AAPL shows no support until minor support is found at 113.80. Stronger support is found at 111.55 that will be the main objective of this trade. By the same token, if 111.55 is broken, there is no support until 108.25 is reached and even then the chart suggests that a drop to as low as $103-$104 could occur.
This AAPL short would have a high probability rating in any other week of the year but given that the weakness in the market came on the last week of the year and from an overbought condition and still in an uptrend, makes the rating drop.
Sales of AAPL between 116.33 and 116.54 and using a sensitive stop loss at 117.35 and having a 111.80 objective will offer a 4-1 risk/reward ratio.
My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
IBM Friday Closing Price - 165.99
IBM got back up to the 200-week MA, currently at 169.20, just 4 weeks ago and since then the stock has been slowly deteriorating and suggesting that a correction to the 9-week rally that started in October from a low of 147.79 may be starting. Keep in mind that the stock has been under the MA line since October 2014 (25 months) and if unable to break the line with the indexes making new all-time highs, it would be difficult to believe the bulls will be successful in breaking the line now that the indexes seem to be on some form of correction.
IBM bulls have not built any support over the past 9 weeks, suggesting that some fall back needs to occur for a new support level to be found/built.
To the upside and on an intra-week basis, IBM shows minor but likely short-term pivotal resistance at 168.23 and then decent resistance at the rally high at 169.95.
To the downside and on an intra-week basis, IBM shows minor but short-term pivotal support at 165.25 and then nothing until the $158-$160 level is reached.
For the last 12 trading days, IBM has been eroding having dropped from 169.95 to 165.25 with 8 of the last 11 days closing in the red. The stock closed on the lows of the week and further downside below last week's low at 165.50 is expected to be seen. If 165.25 is broken, the vacuum of support below is likely to push the stock down in a fast manner, meaning that a short trade might end up being a fast in an out and in less than 2 weeks.
Sales of IBM between 166.20 and 166.40 and using a sensitive stop loss at 167.35 and having a $160 objective will offer a 5-1 risk/reward ratio.
My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
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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 12/1 Loss of $16198 using 100 shares per mention (after commissions & losses) Closed out profitable trades for December per 100 shares per mention (after commission)
CLB (long) $241
Closed positions with increase in equity above last months close minus commissions.
CLB (long) $1271 Total Profit for December, per 100 shares and after commissions $1512 Closed out losing trades for December per 100 shares of each mention (including commission)
XON (long) $193
XON (long) $72 XON (long) $14 FB (short) $104 GS (short) $189 NFLX (short) $531 Closed positions with decrease in equity below last months close plus commissions. XON (long) $703 Total Loss for December, per 100 shares, including commissions $1806 Open positions in profit per 100 shares per mention as of 12/31
XOM (long) $283
Open positions with increase in equity above last months close.
FSLR (long) $885 ENG (long) $315 Total $2110 Open positions in loss per 100 shares per mention as of 12/31
LVLT (short) $30
CNX (long) $344 CLF (long) $74 ZIOP (long) $114 Open positions with decrease in equity below last months close.
MT (long) $135 Total $752 Status of trades for month of December per 100 shares on each mention after losses and commission subtractions.
Profit of $1064
Status of account/portfolio for 2016, as of 12/31Loss of $15134 using 100 shares traded per mention.
Ending Results for 2016
Yearly totals:
Total amount of trades for the year = 99
End result of all trades for the year including open positions:
ARNA traders were unable to give any signs on the last week of trading as to whether 2017 will be good or bad for the stock. The stock did close on the lows of the week and further downside below last week's low at 1.41 is likely to be seen this week, suggesting the bears will start the year with a slight edge. Intra-week support is found at 1.39, at 1.37, and at 1.35. Resistance is found at 1.49, at 1.53 and short-term pivotal at 1.56. The first test for the stock will likely come on Monday with 1.40 being a daily close support that if broken would give a new sell signal and suggest further downside would be seen. Probabilities actually favor the bulls but slightly.
CLF generated on Friday the 3rd red weekly close in a row after the 200-week MA, currently at 11.00, was tested. The stock closed on the lows of the week and further downside below last week's low at 8.39 is expected to be seen this week. The stock did give a confirmed short-term sell signal when it broke the 5-week daily close support at 8.75 on Thursday and confirmed it on Friday with another red close. There is no previous intra-week support until 7.70-7.87 is reached but on a daily and weekly closing basis, support is found at the previous closing highs at 8.10/8.11. Probabilities favor the bears this week and a drop down to the 8.00 level. CNX made a new 5-week low on Friday and closed on the lows of the week, suggesting further downside below last week's low at 18.18 will be seen this week. The gap from November 21st at 18.56 was closed on Thursday and that did remove a magnet that was pulling the traders down. Nonetheless, there is no intra-week support until very minor support is found at 18.02 and then again at 17.86. Stronger support is found at 17.13 and then nothing of consequence until pivotal and decent support is found between 16.14 and 16.43. The chart suggests the downside target might be the 200-day MA, currently at 16.65, which is a line that should not be broken unless there is a negative fundamental change. Resistance is minor at 18.77 and pivotal at 19.56. Probabilities favor the bears this week. ENG made a new 25-month intra-week and weekly closing high and closed in the upper half of the week's trading range, suggesting further upside above last week's high at 2.72 will be seen this week. Minor intra-week resistance is found at 2.75 and then decent between 2.92 and 2.99 that if broken would suggest the 31-month high at 4.22 would be tested. On a weekly closing basis, the stock shows pivotal resistance between 2.47 and 2.52. Intra-week and weekly close support should now be found at the 2.00-2.50 level. The stock has more than doubled in price over the past 6 weeks but it is not likely to be related to the Trump win since the stock did not do much until 3-weeks after the election results. The most important thing to look at on the chart is a 3-point downtrend line that started on April 2009 that is presently at 3.10. It is a valid trend line given that it has 3 points on it (beginning high at 6.47, second point at 5.68 and third point at 4.22. As such, the probabilities do favor the stock getting up to the 3.00-3.00 level but needing some fundamental positive to break the trend line. By the same token and looking at the same 8-year chart, support should now be rock-solid at 2.00. A confirmed break of the trend line would suggest a new uptrend that could have the all-time high at 18.37 as a 6-8 year objective. Probabilities favor the stock getting up to $3 and then likely trading down to $2 (all of this over a period of 4-6 weeks) before a new try at breaking the trend line occurs. FB made a new 6-month weekly closing low and generated a new sell signal on the weekly closing chart. The stock closed on the lows of the week and further downside below last week's low at 114.77 is expected to be seen. Intra-week support is found between 113.55 and 114.00 that if broken would offer open air below with no decent support until 108.23 is reached. The stock is presently showing a bearish inverted flag formation with the flag pole being the drop from 133.50 to 113.55 and the flag being the 7-week trading range back up to 122.99. A break of the flag at 113.55 would offer a 103.05 objective to be reached within 5 weeks of the break occurring. Resistance is minor to decent at 212.08 and decent as well as pivotal at 122.99. Probabilities favor the bears this week. FCEL made a new all-time intra-week low at 1.60 before generating a bit of a rally to close on the highs of the day on Friday at 1.75. Nonetheless, the stock closed in the lower half of the week's trading range, suggesting a higher probability of going below 1.60 than above last week's high at 2.00. On a small positive note, the stock did not break the "general" support at 1.70 on a daily or weekly closing basis, leaving the door open for some recovery to be seen. By the same token, the bulls have been unable to generate any buying interest in spite of the stock having dropped 300+% in the last 10 weeks, meaning that the traders remain strongly bearish on the stock. Resistance is now pivotal on a short-to-mid term basis at 2.30. Support remains crucial at 1.70 on a daily and weekly close basis. Probabilities remain on the side of the bears. FSLR followed through to the downside off of the previous week's close on the lows of the week, having gone 14 points below the previous week's low. Nonetheless, with the indexes having suffered a decent down week, the 53-point lower weekly close has to be considered a small victory rather than a signal that the selling interest has resumed. In addition, weekly close support is found at 31.91 and the bulls were able to close the stock above that level on Friday, suggesting that the buying interest remains. Intra-week support is minor at 30.85 and minor to perhaps decent at 29.90. Resistance is found at 34.22 and short-term pivotal at 35.52. Probabilities favor the bears this week but only for a drop down to 30.85. LVLT bulls failed once again (the 6th week in a row) to re-stimulate the uptrend, having gone above 57.00 every week since November 21st but failing to make a new 6-month high above 57.48. The stock closed on the lows of the week and further downside below last week's low at 56.18 is expected to be seen this week. Minor but short-term pivotal support is found at 55.98 and then minor to decent, as well as short-to-perhaps-mid-term pivotal at 54.75 that if broken would suggest a drop down to the 200-day MA, currently at 51.95. Resistance remains decent between 57.22 and 57.48. Probabilities favor the bears this week for a drop down to at least 54.75 but possibly down to 51.75. MT generated another red close and on the lows of the week, suggesting further downside below last week's low at 7.25 will be seen this week. The stock shows minor support at 6.90 and then decent as well as pivotal support at 6.28. Resistance is now found at 7.58 and short-term pivotal at 7.68. It seems now likely that the "general" support at 7.00 will now be tested before any new buying interest is seen. By the same token, the stock remains in an uptrend and with the recent high 16-month high at 8.83 not having been retested yet, the probabilities favor a drop down to the 7.00 and a recovery rally back up to 8.65 being seen over the next 2-4 weeks. Probabilities favor the bears this week. XOM generated another red close (the 2nd in a row) but the week can be considered uneventful, given that on an intra-week basis, the stock only broke the previous week's low by 1 point and still stayed above the $90 level on both an intra-week and weekly closing basis. The stock did close near the lows of the week and further downside below last week's low at 90.01 is expected to be seen. Fundamentally speaking, the probabilities still strongly favor the bulls given that the CEO Tillerson was chosen by Trump to be Secretary of State and until that gets voted on by Congress, it is unlikely the stock will receive much selling interest. Intra-week support remains decent between 89.25 and 90.00, which includes the 200-week MA, currently at 89.20. The stock is showing a runaway gap between 89.00 and 89.76 that should not be closed at this time. Resistance is short-term pivotal at 91.11, minor at 91.67 and decent at 93.25. Probabilities favor the stock being under some sell pressure this week and possibly getting down to as low as 89.20. Nonetheless, next week's close should once again be at or above the $90 demilitarized zone. ZIOP confirmed the break of the 200-week MA, currently at 6.05, with a second close in a row below the line. The stock closed on the lows of the week and further downside below last week's low at 5.26 is expected to be seen. Minor but likely short-term pivotal support is found at 5.14 and then between 4.84 and 4.89. By the same token, if the stock gets down to that support it will create a triple bottom and as such, likely broken, which in turn would open the door for the stock to get down to 3.73-4.00. Resistance is now minor to decent as well as pivotal between 6.12 and 6.24. Probabilities favor the bears. As such, I am likely to be looking for a rally to liquidate the held positions.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .146 (new price 1.75). 2) ZIOP - Purchased at 6.45 and at 5.39. Averaged long at 5.92 (2 mentions). No stop loss at present. Stock closed on Friday at 5.35. 3) ENG - Averaged long at 1.92 (3 mentions). No stop loss at present. Stock closed on Friday at 2.39. 4) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.42. 5) MT - Averaged long at 6.244 (5 mentions). Stop loss now at 6.18. Stock closed on Friday at 7.30. 6) FSLR - Averaged long at 41.758 (5 mentions). No stop loss at present. Stock closed on Friday at 32.09. 7) XOM - Averaged long at 88.845 (2 mentions). Stop loss at 86.50. Stock closed on Friday at 90.26. 8) CLB - Liquidated at 119.92. Purchased at 117.51. Profit of $241 per 100 shares minus commissions. 9) XON - Purchased at 26.01. Liquidated at 24.20. Averaged long at 27.175. Loss on the trade of $877 per 100 shares (3 mentions) plus commissions. 10) NFLX - Covered shorts at 127.53. Loss of $517 per 100 shares plus commissions. 11) CLF - Purchased at 9.15. Stop loss at 7.69. Stock closed on Friday at 8.41. 12) LVLT - Shorted at 56.21. Stop loss at 57.35. Stock closed on Friday at 56.36. 13) CNX - Averaged long at 20.05. Stop loss is at 16.65. Stock closed on Friday at 18.23. 14) FB - Shorted at 121.32. Stop loss at 123.35. Stock closed on Friday at 115.05.
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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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