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Issue #520 
Mar 26, 2017 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Market in Corrective Phase. Disappointment over Failed Health Bill!
DOW Friday closing price - 20596
The DOW is now officially in a correction, having now dropped 3.1% from the 21169 high. The index closed near the lows of the week and further downside below 20529 is expected to be seen this week.
The DOW has a possible downside objective of 20400 (give or take 30 points on either side) based on the drop seen in 1999 from 11130 to 10409, which was the high and drop seen the first time the index got above 10000.
To the upside and on an intra-week basis, the DOW now shows minor but short term pivotal resistance at 20757, Above that level, there is minor to now perhaps even decent resistance at 21000 and minor to perhaps decent at 21169. Above that level, there may be some "general" resistance at 21,300.
To the downside and on an intra-week basis, the DOW now shows very minor support between 20529 and 20532 and then nothing until the 20000 demilitarized zone (19970-20030) is reached. Further support is found at 19831 and minor to perhaps decent as well as pivotal at 19784.
The correction being seen right now in the DOW is probably the first valley in a peaks and valleys scenario that will likely be seen for the next few weeks/months. Fundamentally speaking, the reason for the drop this past week was the failure of the Trump administration to pass their Health bill. It was a disappointment but the Health plan was not the driver of the market to the upside. The driver is the Tax reform bill that is now the next in line to be tackled and as such, is likely to keep the index supported and will likely generate peaks and valleys as it moves forward in the House and then the Senate.
From a chart point of view, history now leans in favor of the bears (not the bulls) since the DOW has now rallied 1169 points above 20000, meaning that more fundamental help is now needed now than was needed at that major psychological level.
The probabilities favor the bears in the DOW this week but it could end up being a reversal week with lower lows than last week but a green close at the end of the week.
SPX Friday closing price - 2343
The SPX generated a hew 5-week low and closed near the lows of the week, suggesting further downside below last week's low at 2335 will be seen this week. The index has now dropped 2.7% in value, meaning that it too is now officially in a correction.
On a negative note though, the SPX now shows a successful retest of the 2400 all-time high, given that the high seen the previous week was 2390 (seen after a down week with a high of 2378), followed by a high this past week at 2381 and the new 5-week low. As such, it can be said that some type of top has been built though it is not yet know whether it will be temporary or not.
To the upside and on an intra-week basis, the SPX now shows minor but short term pivotal resistance at 2357. Above that level, there is very minor resistance at 2381, minor to perhaps decent at 2390 and decent at 2400.
To the downside and on an intra-week basis, the SPX shows no support until minor support at 2285 and likely short-term pivotal at 2267/2271. On a daily closing basis though, important support will be found at 2298 (top of the flag).
The SPX chart suggests that the 2298/2300 level will now become a magnet, meaning that the correction being seen at this time will likely be at least 4.2%. There is quite a bit of support between 2277 and 2285 in the form of previous highs and lows seen over a period of 6 weeks last December to January that should not be broken unless another negative fundamental change occurs (not likely at this time). As such, the probabilities now favor a drop down to the next level of support, followed by a period of peaks and valleys for a few weeks or until some new information about Tax reform comes out.
NASDAQ Friday closing price - 5828
The NASDAQ generated a key reversal this past week, having made a new all-time high at 5928 and then closing in the red and below the previous week's low at 5831. The index closed near the lows of the week and further downside below last week's low at 5781 is expected to be seen this week.
The NASDAQ bulls were able to generate a weak bounce in the last 3 days of the week but in spite of the green daily close on Friday, the index still closed in the lower half of the day's trading range, suggesting that the weak bounce rally that was seen at the end of the week is simply the building of a bearish flag formation that has as a downside objective a drop to 5710 if the bottom of the flag at 5781 is broken. Since that is/was a previous downside objective as well as a general support level, the probabilities of that now being targeted as the main objective by the traders is high.
To the upside and on an intra-week basis, the NASDAQ now shows minor resistance at 5867. Above that level there is very minor resistance at 5877 and then nothing until minor to perhaps decent resistance is found at 5900. Decent resistance is now found at the all-time high at 5928.
To the downside and on an intra-week basis, the NASDAQ now shows minor support at 5800 and at 5781. Below that level, there is very minor support at 5649 and again at 5616 and minor to perhaps decent but short-term pivotal at 5576.
The key reversal seen in the NASDAQ is not likely to be negated without some strong positive fundamental change, meaning that 5928 could now be a major top instead of just a temporary top as might be seen in the other indexes unless the Tax reform bill scheduled to be voted on before August is passed.
For the time being, the NASDAQ is likely to trade down first and then get into a sideways trading range between 5600/5700-5900 until new fundamentals come out. Probabilities favor the bears this week.
The failure of Trump/Ryan Health bill was a rude awakening from the euphoria that created the 18% rally seen since the election results came out. This was the bill that every Republican had been dreaming of repealing for the past 7 years and it failed in spite of the Republicans having a majority in the House and in the Senate. It has made Trump human instead of the Superman that he and every Republican thought he was. The disappointment of this failure will weigh heavily on the market until they start working on the Tax reform bill, which was the main reason for the rally (lower taxes = higher profits for companies).
This coming week does have some economic reports that the traders may give some short-term attention to, such as Consumer Confidence, 3rd estimate of GDP, Personal Income and Spending, Chicago PMI and Michigan Sentiment, given that there is not likely to be much news from the Trump administration. Nonetheless, none of the numbers are likely to be longer term catalytic.
The traders are likely to be chart-oriented this week as they search for levels of support where some bargain hunting is seen. The initial thrust should be to the downside but if a level is reached where chart buying interest is found, bounces will occur. Volatility is likely to be the rule for the next week or two.
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Stock Analysis/Evaluation
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CHART Outlooks
I have no new mentions this week except the purchase mention from last week is still valid.
Traders are likely to push the market lower due to the disappointment over the failure of the Health Bill. Nonetheless, with attention now turned toward Tax Cut reform, the downside is likely to be limited. Nonetheless, with no support found closeby below, it is not known how much more will be seen to the downside this week, meaning that shorting the market with likely limited downside or buying the market without a level of support that can be depended upon does not maket sense. As such, new trades don't make much sense this week as the probability number on either side is low.
PURCHASES
CLB Friday Closing Price - 109.00
CLB is more sensitive to the price of oil than it is to the index market and the price of oil took a tumble 2 weeks ago and has not reached its downside target or rallied enough to negate the break, suggesnting there is further downside to be seen. Oil dropped about 14.3% in value from $54.94 to $47.09, gave a failure signal, and confirmed the failure with a third close below 49.64 on Friday. Nonetheless, oil closed in the lower half of the week's trading range, suggesting that further downside below last week's low at 47.08 will be seen this week. If the general support at $47 gets broken, there is no previous support of consequence until the $44-$45 level is reached, suggesting that after a small pause that further downside will be seen.
CLB reacted negatively to the oil fall, dropping from 119.98 to the low seen 2 weeks ago at 107.16. The stock closed an open gap at 107.34 and bounced, suggesting some of the traders believed that closure of the gap was the "only" downside the stock was targeted to do. Nonetheless, the chart suggests differently and after a week of trying to rally back up but likely failing, it is probable that the stock will renew the downdraft and reach the levels of support below that are more likely to offer "real" buying interest than what is seen off of a bounce.
To the downside and on an intra-week basis, CLB shows minor to decent support at 106.92, at 105.49, at 102.50 and at 102.29. On a weekly closing basis though, there is minor to decent support at 104.76 and decent between 103.56 and 104.11.
To the upside and on an intra-week basis, CLB shows minor resistance at 116. 49, minor to perhaps decent between 118.03 and 118.87.
It is not likely that oil will fall below $44, meaning that another $5 drop is probably the most that it could drop. Though the probabilities do not favor oil resuming the uptrend at this time, it is probable that it will be trading between $44 and $54 for the next few months with the $50 being a repeatedly seen pivot point. As such, CLB is also likely trade in a similar trading range between $103 and $118, meaning it should be "traded" within those parameters.
CLB did not accomplish anything of consequence on the bounce up as no daily close resistance levels were broken and the stock remains below the 200-day MA, currently at 115.25. In fact, the bulls were not even able to negate the break of the most recent low daily close at 112.82, having closed on Wednesday at 112.77 and then following that up with 2 red closes in a row. As such and after a small bargain hunting rally, the probabilities still favor further downside being seen. There is no support found on the chart until 106.15 is reached, meaning that closure of the gap is not likely to stop further selling from occurring. It does need to be mentioned that the support at 106.15 is on a daily closing basis, meaning that on an intra-day basis it might not mean much either. Nonetheless, that support does have some short-term consequences and is not likely to be broken unless there are some additional problems with the oil market. As such, the purchase price will be around that level even though lower levels might be seen intra-day.
Purchases of CLB below 106.30 and using a stop loss at 102.15 and having a 118.87 objective will offer a 3-1 risk/reward ratio.
My rating on the trade is a 3.5 (on a scale of 1-5 with 5 being the highest).
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| ARNA continued to trade in the sideways trading range between 1.34 and 1.70 that the stock has been in for the past 5 months. There were no clues or action that suggests that the stock is ready to break out of that trading range, meaning that this directionless trading is likely to continue this week. A break below 1.34 or above 1.70 is needed to break the traders out of the mindless malaise. BWA generated a minor sell signal, having closed below the most recent low weekly close at 41.79. This is the first time since the last week of October that a previous low weekly close has been broken and it suggests that the stock is now in a sideways trading scenario or in a slight short-term correction. The stock closed in the lower half of the week's trading range and further downside below last week's low at 40.41 is likely to be seen this week. Intra-week resistance is found at 41.98 that is likely to be seen at the beginning of the week, given than the stock closed near the highs of the day on Friday and likely to get above Friday's high at 41.51 to start the week. Consideration can be given to taking profits around 41.98 and look to repurchase the stock on drops down to the $40 demilitarized zone. If the stock gets above 41.98 it will likely rally up to 43.32 but at this time the chart does not suggest the stock can go above that level as the probabilities now strongly favor the $40 level being visited with a decent chance of a drop to $37 occurring. CCJ made a new 5-week low but the bulls were able to generate a close near the highs of the week, suggesting further upside above last week's high at 11.15 will be seen this week. Based on the weekly closing chart, the stock now seems to be stuck in a $1 trading range between 10.67 and 11.72 that is likely to require news to break out or down from it. Nonetheless, for the past 21 trading days the bears have attempted over and over again to generate a break but have failed, meaning that if there is going to be a break it will likely be to the upside. This coming week is highly likely to be "more of the same" with the stock seeing a trading range between 10.70 and 11.30 as the traders await new news. CLF generated a sell signal on the weekly closing chart, having made a new 17-week intra-week and weekly closing low. The stock closed on the lows of the week and further downside below last week's low at 8.08 is expected to be seen. The sell signal given suggests that the uptrend that started 14 months ago has come to a temporary halt and that some sideways trading and new base building will occur over the next few weeks and/or couple of months. On a positive note, the stock is still trading above the 200-day MA, currently at 7.60 and it is unlikely that line will be broken without some negative news (not expected). As such, further downside will likely be seen this week but limited in nature and if the MA is reached it is likely that a bounce of consequence will occur. The stock will likely get into a trading range between 7.50-7.70 and 10.50-10.90 for the next 2-3 months (or less), meaning that after the MA line is reached the probabilities will favor the bulls for a bounce of some consequence. CNX generated the first green weekly close in the last 8 weeks and closed near the highs of the week, suggesting further upside above last week's high at 16.05 will be seen this week. The green close suggests that the selling interest/pressure has abated (at least temporarily) and that the bulls will now attempt to annul the recent negative action. Nonetheless, at this moment the bears are still in control and this rally might just be a minor correction in the recent downtrend. The pivotal resistance level above is 16.40/16.44, both on an intra-week and daily/weekly closing basis. If the bulls can get above and more importantly close above that level on a weekly closing basis, the bulls will gain back the edge. For now, all that is expected is that the stock will rally back up to 16.40. Support is now minor to perhaps decent at the $15 demilitarized zone. ENG continued the recent downtrend, having generated another red weekly close, the 3rd in a row and the 5th out of the last 6 weeks. Nonetheless, the stock did get down to the 200-day MA, currently at 1.70 and found buying support, having closed on the line on Wednesday, above the line on Thursday, and back on the line on Friday. In addition and on the weekly chart, the stock also got down to the 200-week MA on Friday, currently at 1.62, and bounced up to close near the highs of the day, meaning that both MA's were touched this week and a bounce occurred. The stock has now corrected 48% over the past 7 weeks from the 3.10 high and given that there has not been any change of fundamentals, it is now likely that new buying will start to be seen. There is minor but likely short-term pivotal daily close resistance at 1.77 and the same can be said about support at 1.70. As such, it probably means that by Tuesday or Wednesday at the latest that direction from this level will be determined. On an intra-week basis, there is minor resistance at 1.95 and again at 2.10 and support at 1.62 and at 1.52. Probabilities strongly favor the stock moving up this week given that both MA's have been reached and that there seems to be no reason for them to be broken at this time. FCEL has come to a standstill given that for the last 2 weeks the stock has traded in very narrow trading ranges of less than 15 points and shown no direction on the weekly closes. The 1.25 intra-week low seen 7 weeks ago remains unbroken, as well as the 1.50 high that has not been broken for the past 12 trading days. As such and with the stock presently at the midpoint of that trading range (at 1.35), the traders will likely need some news to stimulate new movement. More of the same is expected for this week. FSLR made a new 4-year intra-week and weekly closing low this past week and closed on the lows of the week, suggesting further downside below last week's low at 28.05 will be seen this week. On an intra-week basis, there is minor support at 27.60, again at 25.66 and then minor to perhaps decent at 24.46. Nonetheless, with the target of $21 given by the recent downgrade, the bulls are fighting a difficult battle to stop the stock from going substantially lower. Nonetheless, between November 2013 and April 2014, a period of 5 months, the stock traded between a low of 24.46 and a high of 36.98 and the probabilities do favor that scenario occurring again. The first trading range likely to be seen is drop to 27.60 and then a short-covering rally up to 36.96 though using the recent trading action, it is more likely that the trading range will be 27.00 to 36.40. Probabilities favor the bears this week but it could end up being a positive reversal week. I may end up using the positions I liquidated this week to trade in an out on a short-term basis in an attempt to lessen the losses presently seen in the stock. LVLT was unable to follow through to the upside off of last week's close near the highs of the week and the stock generated a red weekly close and on the lows of the week, suggesting further downside below last week's low at 55.84 will be seen this week. The stock did generate a new sell signal, having closed below the previous low weekly close at 56.47 and if the recent intra-week low at 55.25 is broken this week, the target would likely become the $50 level. By the same token, if the stock goes get below last week's low but does NOT break the 55.25 low and then goes above the recent high at 57.74, it would become a new buy signal and of some short-term consequence. As such, this coming week looks pivotal for the stock. Probabilities though, favor the bears. MT made a new 6-week low and in the process generated a sell signal on the weekly closing chart (having closed below the most recent low weekly close at 8.37) as well as having built a double top on the same chart at 9.11/9.03. This does seem to be a signal that will be respected and that may ultimately cause the stock to test the 200-day MA, currently at 6.95. The stock closed on the lows of the week and further downside below last week's low at 8.24 is expected to be seen this week. Very minor support is found at 8.04, minor support is found at 7.89 and minor to decent at 7.70. Very minor resistance is found at 8.40 and minor to decent at 8.83. The probabilities favor the bears this week. I will be looking to liquidate the positions this week, hopefully up around 8.80 but perhaps as low as 8.40. I will be looking to repurchase below 7.00. NFLX generated a negative reversal week, having made a new all-time high at 147.70 and then closing in the red and near the lows of the week, suggesting further downside below last week's low 140.76 will be seen this week. Minor intra-week support is found at 140.76, again at 139.74, and minor to decent at 138.28. Below that level, there is support at 137.03 that represents a gap area down to 133.65 that could be a target for closure since it is a third gap. Minor to perhaps decent resistance is found at 143.45, then at 144.49 and decent at 145.95. The stock is showing what could become a bearish inverted flag formation with the flagpole being the drop from 147.70 to 140.76 and the flag the action seen the past couple of days with the rally up to 143.80. A break below 140.76 would give an objective of 136.84. Probabilities favor the bears this week. X generated a sell signal on the weekly closing chart, having closed below the most recent low weekly close at 34.88 but the bulls may have avoided a stronger sell signal, having stayed above the 18-week low weekly close at 32.70 in spite of trading below that level on Friday. The stock closed near the lows of the week, suggesting further downside below last week's low at 32.34 will be seen this week. Minor intra-week support is found at 31.81, again at 31.31 and decent as well as longer term pivotal at 30.57/30.73. Minor but likely short-term pivotal resistance is found at 34.94, again at 35.30 and decent and unlikely-to-get-broken-at-this-time at 37.41. The chart suggests the stock will get into a sideways trading range between 31.31/31.81 and 37.41 for the next few weeks or couple of months. XON made a new 14-month low this past week and closed in the lower half of the week's trading range, suggesting that further downside below last week's low at 18.55 will be seen this week. Nonetheless, some buying interest was seen at this level, given that the stock got down to 18.55 on Wednesday and the bears were unable to take it down further and on Friday generated a green close and on the highs of the day, suggesting the first course of business for the week will be to the upside. In addition, on the daily chart if the stock goes above Friday's high at 19.35, and especially if it goes above 19.51, new chart buying interest will be seen. There is important and decent intra-week support at 18.52, meaning that the stock could fulfill the chart and go below 18.55 but still stay above the support at 18.52. Pivotal short-term daily close resistance is found at 20.49, meaning that if the stock closes above that level any day this week that the target would become the $23 level. By the same token, if 18.52 is broken this week by more than 10 points, the target would become the 17.52 to 16.91 area. The chart suggests that the stock may have found a level of support that will hold and that a rally back up to the $23 area will occur over the next 3-5 weeks.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .112 (new price 1.35). 2) CCJ - Averaged long at 10.47 (2 mentions). Stop loss at 9.65. Stock closed on Friday at 10.89. 3) ENG - Purchased at 1.70. Averaged long at 1.865 (4 mentions). No stop loss at present. Stock closed on Friday at 1.72. 4) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.46. 5) MT - Averaged long at 6.244 (5 mentions). Stop loss now at 8.18. Stock closed on Friday at 8.29. 6) FSLR - Averaged long at 37.52 (3 mentions). No stop loss at present. Stock closed on Friday at 28.31. 7) LVLT - Purchased at 59.11. Stop loss now at 55.15. Stock closed on Friday at 56.12. 8) CLF - Averaged long at 8.96 (3 mentions). No stop loss at present. Stock closed on Friday at 8.14. 9) CNX - Averaged long at 20.05. No stop loss at present. Stock closed on Friday at 15.71. 10) X - Purchased at 33.03. No stop loss at present. Stock closed on Friday at 32.82. 11) BWA - Averaged long at 40.856 (3 mentions). No stop loss at present. Stock closed on Friday at 41.28. 12) NFLX - Shorted at 144.44. Stop loss now at 144.59. Stock closed on Friday at 142.02. 13) XON - Purchased at 18.57. Stop loss at 18.42. Stock closed on Friday at 19.14. 14) FSLR - Liquidated at 28.50. Purchased at an average price of 47.945. Loss on the trade of $3889 (2 mentions) 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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