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Issue #529 
June 4, 2017 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Indexes on a Runaway Freight Train Track?
DOW Friday closing price - 21206
The DOW made a new all-time intra-week and weekly closing high, having broken out of a 3-month sideways trend between 20400 and 21000 in which the index underperformed both the SPX and the NASDAQ. The index closed on the highs of the week and further upside is expected to be seen this week above last week's high at 21225.
The DOW continues to follow the script seen in 1999 when the index first broke above the 10,000 level. The first high weekly close before a minor correction occurred was 11,031 (this time it was 21,005) and it took 11 weeks to make the second all-time high weekly close at 11209 (204 points above the previous high) before a correction occurred. On Friday and after 13 weeks, the index made a new all-time intra-week high at 21225 and closed at 21209. If the similarities continue, the index will run up to 21250-21300 intra-week and generate a red close next Friday.
To the upside and on an intra-week basis, the DOW has no resistance other than "general" at 21,300.
To the downside and on an intra-week basis, the DOW now shows minor but likely pivotal support at 20942. Below that level, there is minor support at 20,847 and at 20,777 and decent at 20553. Below that level, there is important and pivotal support at the double bottom at 20412/20379, which is also pivotal.
In spite of the new all-time high made, the DOW continues to underperform the other indexes, having rallied .6% above the previous week's close, whereas the SPX closed 1% above and the NASDAQ closed 1.6% above. The underperformance suggests that the index is being dragged up rather than running up and that there is no new interest in purchasing Blue Chip stocks.
With no resistance above, the traders in the DOW will have to rely on what happened 18 years ago as a measuring stick of what may happen now.
SPX Friday Closing Price - 2439
The SPX made another new all-time intraweek and weekly closing high this week and closed near the highs of the week, suggesting further upside above last week's high at 2440 will be seen this week.
The SPX continues to run up to the top of an uptrend channel line that started in December 2014 when the index got up to 2092 and that is running "parallel" to the 200-week MA that has been moving up at the "same rate of ascension" as the channel line has moved up. The channel line has 3 points on it, having started at 2092, then the 2119 high seen in February 2015 and then the 2400 high seen in February 2017. The channel line actually connects around 2437, meaning that the index surpassed the line by a few points this past week but given that it is a 2+-year channel, surpassing by a "few" points does not break it. Nonetheless, another rally above last week's high this week, like was seen above the previous week's high (22 points), would negate the channel and suggest the index is accelerating the uptrend.
To the upside and on an intra-week basis, the SPX has no resistance other than perhaps psychological at 2500.
To the downside and on an intra-week basis, the SPX now shows minor but likely short-term pivotal support at 2403. Below that level, there is minor support at 2379 and at 2354, minor to perhaps decent at last week's low at 2351, minor again at 2336, minor to perhaps decent at 2328 and decent as well as short-term pivotal at 2322.
If and when the SPX is not accelerating the uptrend and the channel line mentioned above holds up this week (meaning it is only broken by 1-3 points), a small correction is likely to occur over the next 4 weeks, much like what happened in February when the index got up to 2400 and then corrected down to 2322 by the end of March.
NASDAQ Friday closing price - 6305
For the 6th week in a row the NASDAQ made a new all-time intraweek high and for the 5th week out of the past 6 weeks it made a new all-time weekly closing high. In fact, since Trump won the election (30 weeks ago), the index has made 19 new all-time weekly closing highs and has appreciated 20.2% in value from 5034 to 6308.
The NASDAQ has now rallied 6% above the 5936 high seen just 6 weeks ago, meaning that the index is appreciating at an average rate of 1% per week and if that continues, another 63 points above last week's high at 6308 will be tacked on this week. Nonetheless, it should be noted that both GOOGL and AMZN reached the $1000 level for the first time ever this past week and with no earnings reports due out at this time on those 2 companies, it is expected those levels will be psychological obstacles, suggesting the index may not get the help it needs to continue the torrid pace upward. In addition, the 6300 level is a "general" resistance area that due to the overbought condition may slow the index down.
To the upside and on an intra-week basis, the NASDAQ has no resistance above. On a "general" basis, resistance is expected to be found at 6300.
To the downside and on an intra-week basis, the NASDAQ show minor but pivotal support at 6164. Below that level, there is minor support at 6074 and at 6053 and minor to perhaps decent at last week's low at 5996. Below that level, there is no support of consequence until 5805 is reached.
The NASDAQ has surpassed by about 40 points the 2 point uptrend line that started in March 2015. As such, if the index continues higher this week, and especially if it closes in the green next Friday, it will be a clear sign that the uptrend is accelerating. As such, this week does have some chart importance, though from a fundamental basis, there are no economic reports scheduled that could be considered possible negative catalysts.
The bulls are in total control of the index market and with no scheduled economic reports that could act as negative catalysts, the probabilities continue to favor the bulls. Nonetheless, with the NASDAQ having appreciated over 20% in value since Trump won the election, somewhere along the line the anticipation needs to be fulfilled with actions and that has not yet been the case, meaning that this market is "walking on egg shells" that could start breaking at any time. In addition, this has not been a full market run as 25% of all stocks have made new 52-week lows this year, meaning that the rally is keyed on just a few prime stocks.
Nonetheless, so far the bulls have been able to ignore all negative signs, such as the lower than expected Jobs report on Friday and the continuing attention of the populace to the Russian connection in the Trump administration, instead of Health and Tax reform.
The traders this week will likely keep their eyes on any "unexpected" weakness, given that the indexes seem to be on a "runaway" freight train pace. Simply stated, the bears are in hibernation and if the indexes fail to continue higher, second thoughts will start to pop up and that may be "all that is needed" to stop the train.
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Stock Analysis/Evaluation
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CHART Outlooks
There are no new mentions this week as the market is presently illogically rallying (both fundamentally and chart-wise), meaning that further upside is undependable but selling interest equally undependable. In addition, 25% of all stocks have made new 52-week lows this year, meaning that choosing trades by direction of the indexes is not working at this time. Simply stated, probability ratings on purchases or sales is very low. Nonetheless, one of the mentions from last week is still viable as it is a stock that depends more on oil prices than economic outlook. That mention remains.
Should the index picture begin to clear up, mentions will be given on the message board.
CLB Friday Closing Price - 102.49
In keeping with the idea that oil is going to stage a rally over the next few months, CLB is down to price levels that make it an attractive purchase.
CLB reported better than expected earnings 4 weeks ago and opened higher at 119.56 (above the previous day's close at 113.43) but fell in price due to a comment by David Einhorn that the company was overpriced and should be shorted. The stock that day generated a negative reversal and with oil also going into a bit of a tail spin and a drop down to 43.77 (from the $50 level), the stock has continued lower, having made a low last week at 99.31, which is a 17% drop in price over this period of time.
Nonetheless, CLB is now reaching a level of weekly close support between 92.75 and 97.34 that has held up for the past 6 years and that is unlikely to be broken at this time, especially considering the bullish picture being seen for oil.
CLB idled last week, having generated an inside week and a red close but only by 22 points, suggesting that everything remained the same as the previous week, much the same as what oil did. Nonetheless, it was a red close and in the middle of the week's trading range, suggesting that further downside could still be seen.
It is difficult to predict how CLB will act this week as oil has fulfilled its chart and could begin to move up. Nonetheless, the probabilities still favor some weakness, likely only intraweek and short term, meaning that the desired entry point mentioned last week might be changed. That won't be known though, until Monday's trading action is seen. Based on the negative reversal action seen twice over the past couple of weeks and the negative comment from Einhorn, the stock still could see drops down to around the 97.00 level.
To the upside, CLB is unlikely to get above the high seen right after the earnings report, at least not until oil breaks out of its bullish inverted Head & Shoulders formation with a break above the neckline at $54. Nonetheless, the intra-week high at 116.79 seen in October of last year is a viable upside objective once the selling interest subsides.
As far as the stop loss is concerned, CLB has been showing higher low weekly closes since January 2015, with closes at 92.75, 95.27 and the most recent at 97.34. I do not want to see the stock break that minor uptrend, meaning that a weekly close below 97.34 would be considered a negative. What this suggests is that for the time being no intra-week stop loss is used but that a close eye on the action and on the intra-week supports mentioned above be kept.
Purchases on CLB below 98.00 and using a weekly stop close at 96.65 and having a 116.79 objective will offer a 15-1 risk/reward ratio (with the caveat that the risk is not clearly defined).
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 2017, as of 3/1 Loss of $7972 using 100 shares per mention (after commissions & losses) Closed out profitable trades for May per 100 shares per mention (after commission)
GS (short) $2577 LVX (short) $213 NFX (short) $206
Closed positions with increase in equity above last months close minus commissions.
GE (short) $144 Total Profit for March, per 100 shares and after commissions $5382 Closed out losing trades for May per 100 shares of each mention (including commission)
SINA (short) $79
KMX (short) $32 GS (short) $74 BWA (short) $86 Closed positions with decrease in equity below last months close plus commissions. CNX (long) $175 Total Loss for March, per 100 shares, including commissions $446 Open positions in profit per 100 shares per mention as of 5/31
NONE
Open positions with increase in equity above last months close.
NONE
Total $0 Open positions in loss per 100 shares per mention as of 5/31
NONE
Open positions with decrease in equity below last months close.
X (long) $447 Total $838 Status of trades for month of May per 100 shares on each mention after losses and commission subtractions.
Profit of $4098
Status of account/portfolio for 2017, as of 5/31Loss of $3874 using 100 shares traded per mention.
ARNA generated a positive week, given that the stock went below the previous week's low and then closed in the green and in the upper half of the week's trading range, suggesting further upside above last week's high at 1.39 will be seen this week. If that does occur, last week's low at 1.27 will become a successful retest of the all-time low at 1.13. In addition, a bull flag remains in place with the flagpole being the rally from 1.13 to 1.40 and the flag being the trading range the last 2 weeks between 1.40 and 1.27. A break above the top of the flag offers a 1.54 objective, which fits in well with the stock testing the 200-day MA, currently at 1.50. The action seen last week is the first truly positive chart action seen since October of last year when the stock rallied to 1.92 and does support the idea that a major low has been built at 1.13. Short term pivotal support is now found at 1.27, minor to perhaps decent at 1.20, and decent as well as longer term pivotal at 1.13. Probabilities favor the bulls this week.
AMTD generated a mini reversal week, having gone below last week's low at 36.56 (low last week was 36.50) and then closing near the highs of the week, suggesting further upside above last week's high at 38.22 will be seen this week. If that does occur, last week's low will become a successful retest of the double bottom at 36.36/36.12 and would likely generate some additional buying interest for a rally up to the 38.74-39.05 level where decent resistance is found. By the same token and on a weekly closing basis, the stock generated a red weekly close on Friday, which has to be seen as a small negative given the strength and new highs made in the index market, suggesting that if the stock rallies up to resistance it will be more about being "dragged up" than the stock doing something positive. The weekly chart remains with a negative bias, meaning the longer term probabilities still favor the bears though a small rally might be seen this week. The "key" level of resistance remains 40.00. A break above that level would give the bulls an edge. For the time being, the stock remains below the 200-day MA, currently at 38.80, and until that line gets broken and confirmed, the bears will remain in control. A break below 36.12 would be a sign that the downtrend continues. AXP generated a positive reversal week, having gone below the previous week's low and then closing above the previous weeks high. The stock closed near the highs of the week and further upside above last week's high at 78.73 is expected to be seen this week. On a positive note for the bulls, if the stock gets above last week's high this week (likely), a second successful retest of the April low at 75.51 will occur, which will give the bulls new ammunition to retest the recent high at 81.39, perhaps as early as this week. Minor resistance is found at 79.43 and then nothing until the $80 demilitarized zone is reached. Chart suggests the stop loss mentioned at 78.74 remain in place and liquidation occur if hit on Monday. By the same token, a drop below Friday's low at 77.77 on Monday would give the edge back to the bears. CLF continued the recent downtrend, having made a new 8-month intra-week and weekly closing low last week. The stock closed near the lows of the week and further downside below last week's low at 5.61 is expected to be seen. Nonetheless, the stock is now close to a strong weekly close support level between 5.34 and 5.52 that held the bears at bay for 4 months between June and October of last year and from which a rally up to 10.90 occurred within 6 weeks after holding up the last time. Unfortunately, on an intra-week basis, support is not found until the 4.91-5.18 area is reached, meaning that on an intra-week basis the stock could drop as much 78 points more before strong buying interest appears. Probabilities favor the stock dropping down to the 5.26-5.30 area this week but closing somewhere between 5.34 and 5.52 next Friday. Weekly chart still supports the idea that the stock will rally back up to at least the 200-week MA, currently at 10.00 before further weakness below 4.70 can be considered, meaning that at Friday's close at 5.69, the risk/reward ratio of holding on to the stock is still at least 4-1 in favor of holding, meaning that liquidation at this time does not seem to be the best course of action, even though more weakness is likely to be seen before strength returns. The 6.95 level is now pivotal resistance that if broken would suggest the worst is over. ENG broke 2 important intra-week and weekly close supports this past week, having convincingly broken the important intra-week support from October 2014 at 1.28 as well as the most recent intra-week support from November of last year at 1.20 and the weekly close support at 1.29-1.31. The stock closed on the lows of the week and further downside below last week's low at 1.16 is expected to be seen. The stock shows no support until minor at 1.15, minor to perhaps decent at 1.07 and decent between .96 and 1.00. To the upside, intra-week resistance is now found at 1.37. Chart-wise, the stock is showing complete weakness and a decent probability of dropping to the .96-1.00 level where an important 2-point trend line is found that started in May 2013 and that is highly unlikely to be broken. On a fundamental basis though, things could be looking to turn slightly positive, given that this is a company tied in to the energy market and oil prices have now built a chart formation that seems to favor oil prices starting to head higher. For this week, the 1.15 level will likely be support and from which a rally back up to the 1.28 level might occur. Nonetheless, if 1.15 breaks, there is nothing until 1.07 is reached and if 1.07 gets broken, a drop down to 1.00 will likely occur. Probabilities favor the bears. FCEL showed a little bit of life this week, having made a new 13-day high and closing on the highs of the week, suggesting further upside above last week's high at 1.15 is expected to be seen. The company was awarded a $3 million contract to supply clean energy storage units, which is a technology that could bring the company a new income source that had not been available in the past. Intra-week resistance is found at 1.15 and then short-term pivotal at 1.20. Intra-week support is found at 1.00, at .91 and at the all-time low at .80. The chart suggests the stock may have found a bottom at .80. The 1.00-1.20 area is now the most likely trading range for the stock but a break above either of those levels will likely be indicative. Stock has a gap between 1.20 and 1.55 that if closed would be a strong sign that the worst is over. KO made a new 11-month high last week and closed on the highs of the week, suggesting further upside above last week's high at 45.89 will be seen this week. The stock has been on a tear of late, having generated 10 green weekly closes out of the last 11 weeks and 13 out of the last 16, ever since the stock built a double low at $40 which occurred in February. Intra-week resistance is found between 45.89 and 46.01 that stopped rallies on 3 occasions between May and July of last year. If resistance is broken, a rally up to test the all-time high at 47.13 is likely to occur. Minor support is found between 45.11 and 45.22 and then nothing until minor at 44.38. On the weekly chart though, no support is found below until 43.94. The stock is extremely overbought as the RSI is at the highest level seen since December 2010. Nonetheless, the bulls have the momentum on their side and if 46.01 is broken, there is nothing to stop the stock until 47.13 is reached. Stop loss at 46.11 should be maintained. RIG made a new 8-month weekly closing low, having closed below the September 23rd weekly closing low at 9.10. Nonetheless, the bulls were able to keep the close within 10 points of the previous close, meaning that if a green close occurs next Friday, it will be seen as a double low. The stock did close in the lower half of the week's trading range, suggesting further downside below last week's low at 8.68 will be seen this week but on the intraweek chart there is now a 52-week double bottom at that price, having seen 8.68 on Wednesday and a higher high on Thursday. On another small but positive note, the stock went below Thursday's low on Friday and then closed near the highs of the day, meaning that if the stock gets above Friday's high at 9.10, a successful retest of the double bottom will have occurred. In addition, if Wednesday's high at 9.35 is broken, a small buy signal will be given on the daily chart. Very minor intra-week resistance is found at 9.73, minor at 10.31 and decent between 10.49 and 10.88. Support is found at 8.68 that if broken would open the door for an intraweek drop to the all-time low at 7.66 (8.33 on a weekly closing basis). Though the weekly chart suggests further weakness will be seen this week, the double bottom gives the bulls the edge. X generated an inside week, having traded within the previous week's high and low at 21.93 and 19.20. The bulls were able to generate a second green weekly close in a row, suggesting that decent support is being found at the $20 level. Nonetheless and just like the previous week, the stock closed in the lower half of the week's trading range, suggesting a higher likelihood of going below last week's low at 19.52 than above last week's high at 21.58. The key to look at once again this week is whether the recent low at 18.55 gets broken or not, if and when the last weeks low at 19.58 is broken. If the bulls are able to keep the stock above 18.55 and generate a green weekly close next Friday above 20.53 (minor but short-term indicative weekly close resistance), it would be a clear sign that a bottom to this downtrend has been found and that the possibilities of a short-covering rally would increase. The stock seems to be mimicking the action seen between June and December 2012 when the stock traded between 17.67 and 23.84 for a period of 6 months. Probabilities favor that scenario occurring.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .09 (new price 1.09). 2) ENG - Averaged long at 1.764 (5 mentions). No stop loss at present. Stock closed on Friday at 1.18. 3) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.35. 4) CLF - Averaged long at 8.96 (3 mentions). No stop loss at present. Stock closed on Friday at 5.69. 5) CNX - Liquidated at 14.69. Averaged long at 19.17. Loss on the trade of $1344 per 100 shares (3 mentions) plus commissions. 6) X - Averaged long at 29.765 (4 mentions). No stop loss at present. Stock closed on Friday at 20.26. 7) AXP - Shorted at 76.45 and at 77.75. Averaged short at 76.95. Stop loss at 78.74. Stock closed on Friday at 78.49. 8) RIGM - Purchased at 9.48, at 9.31, and at 8.88. Averaged long at 9.22 (2 mentions). No stop loss at present. Stock closed on Friday at 9.03. 9) AMTD - Shorted at 37.58. Stop loss at 40.35. Stock closed on Friday at 37.75. 10) KO - Shorted at 45.48. Stop loss at 46.11. Stock closed on Friday at 45.89. 11) BWA - Shorted at 41.78. Covered shorts at 42.50. Loss on the trade of $72 per 100 shares plus 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.
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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