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Issue #527 
May 14, 2017 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Mixed Signals Given, Direction in Question.
DOW Friday closing price - 20896
The DOW generated a red weekly close, making last week's close at 21006 into a double top on the weekly closing chart, using the 21005 weekly close seen the last week of February. The index closed in the lower half of the week's trading range, suggesting further downside below last week's low at 20798 will be seen this week. If another red weekly close is seen next Friday, the double top will be confirmed.
The DOW has underperformed the other indexes the past 2 months, given that on a weekly closing basis it has dropped in value .52%, the SPX has rallied .2% and the NASDAQ has rallied 5.2%. The negative performance of the Blue Chip stocks for the past 2 months, and now the double top on the weekly closing chart, suggests that further upside will not occur without a positive fundamental change (like Tax Reform being passed).
To the upside and on an intra-week basis, the DOW now shows minor to perhaps decent resistance at the 20000 demilitarized zone (20970-21030) and decent between 21046 and 21070. Above that level there is decent to perhaps strong resistance at the all-time high at 21169.
To the downside and on an intra-week basis, the DOW now shows minor to perhaps decent as well as well as short-term pivotal support at 20777/20798. Below that level, there is minor support at 20578 and again at 20,517. Decent and mid-term pivotal support is found at 20412/20379.
The DOW came within 6 points of closing the runaway gap at 20792 this past week (got down to 20798)and if that gap is closed, the breakaway gap at 20601 is likely to be closed as well. With no economic or earnings reports of consequence scheduled for this week and the index having made a new 13-day low on Thursday (below the previous low at 20847) and then not being able to negate the break on Friday, having stayed below Thursday's high and then closing in the red, the probabilities strongly favor the bears this week.
SPX Friday closing price - 2391
The SPX generated a negative reversal week, having made a new all-time intra-week high at 2403 and then closing in the red and in the lower half of the week's trading range, suggesting further downside below last week's low at 2381 will be seen this week.
For the past 3 weeks, the bulls in the SPX have had the upper hand but have failed to make a statement, given that the index has only been able to rally 5 points during that period of time with weekly highs seen at 2398, at 2401, and at 2403. More importantly, the bulls made a new all-time high weekly close the previous week but were not able to confirm that new high this past Friday, suggesting that they have run out of ammunition.
To the upside and on an intra-week basis, the SPX now shows minor resistance at 2298, minor to decent at 2400, and decent at 2403. Above that level there is no resistance until psychological at 2500.
To the downside and on an intra-week basis, the SPX now shows minor support at 2381 and minor again but pivotal at 2379. Below that, there is minor support at 2354, minor again at 2336, minor to perhaps decent at 2328 and decent as well as short-term pivotal at 2322.
With the negative reversal seen in the SPX this past week, which does support the weakness seen in the DOW and not the strength seen in the NASDAQ, the market now finds itself with 2 indexes giving negative signs and does edge the probabilities to the bears.
The key to the SPX this week is 2398/2400 and 2379/2381. It is expected that the index will rally at least to 2398 this week as the index closed on the highs of the day on Friday and a successful test of the all-time high at 2403 is likely to be seen before the bears get more aggressive. There is further resistance at 2400, meaning that 2 point area (2398-2400) should be a brick wall unless the bears can find some fundamental reason to take the market higher. It is also expected that last week's low at 2381 will be broken since the index closed in the lower half of the week's trading range. By the same token, if the 2379 level is broken, the runaway gap at 2376 will likely be closed and that would mean the breakaway gap at 2356 will likely be targeted, which in turn would make it very difficult for the bulls to turn the index around and make a new high. Simply stated, above 2400 or below 2379 will be indicative. Probabilities slightly favor the bears.
NASDAQ Friday closing price - 6121
The NASDAQ made yet another new all-time intra-week and weekly closing high on Friday (the 20th out of the last 40 weeks) and closed near the highs of the week, suggesting that further upside above last week's high at 6133 will be seen this week. The index has yet to show any signs of a top being formed.
On a negative note though, the momentum index in the NASDAQ has come down the past 4 weeks (from an "all-time high" at 875), meaning that the traders are having trouble "keeping the foot on the accelerator at the rate seen the previous weeks". In addition, Wilder's RSI number is at 73, only 2 points below the 3-year high at 75 (which was seen only for 1 week before a correction occurred) and only 4 points from the all-time high at 77 (seen in March 2014), meaning that the index is now strongly overbought and primed for a correction. It also needs to be mentioned that on Friday several guest analysts on Bloomberg TV stated that the 5 big stocks in the index (AMZN, AAPL, GOOGL, NFLX, and FB) are now fairly priced and that further valuations will be difficult to achieve.
To the upside and on an intra-week basis, the NASDAQ shows minor resistance at last week's high at 6133. Above that level there is no resistance until "general" resistance is found at 6300.
To the downside and on an intra-week basis, the NASDAQ show minor but short-term pivotal support at 6075 and at 6054. Below that level, there is minor but also pivotal support at 6002 and then nothing until 5914.
The NASDAQ has been the driver of this rally but there are now fundamental reasons to believe that the 5 big Tech stocks in the index have reached full value and given that weakness is starting to be seen in the other indexes, the probabilities are high that a top will be found this coming week. The index is expected to go above last week's high at 6133 but if it doesn't, it would be the first sign that no further upside will be seen. If it does go above last week's high, then the close on Friday (red or green) would be key. To the downside, last week's low at 6075 has become pivotal as a break of that level would open the door for a drop down to the 6002 level where the runaway gap is located. On the weekly chart, there is no support below 6075 until 6002 is reached. Probabilities favor the bears this week, with the main question likely to be whether a new all-time intra-week high will be made or not.
Mixed signals were given this week again, with the DOW and the SPX giving negative signals and the NASDAQ continuing on its bull run. Nonetheless, with the White House in some disarray with the Comey firing and everything else seemingly pushed aside, no economic or earnings reports of consequence scheduled, and the slow summer months coming into view, the stage seems to be set for a correction to begin.
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Stock Analysis/Evaluation
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CHART Outlooks
Mixed signals were given this past week, suggesting that there is no general consensus of opinion as to whether the bulls will be able to take the indexes higher. Even in the NASDAQ that has been the leader to the upside, there are a few technical indicators that suggest a correction is more likely to start soon than not.
I looked at over 80 different charts this weekend and the same is true regarding mixed signals. Some stocks seem oversold and ready to rally and some stocks seem overbought and ready to fall. There is no consensus among those charts I looked at.
Nonetheless, I do believe the bears have a slight edge and I found 2 stocks that have their own chart reasons for being sell mentions and those are the ones given.
SALES
KMX Friday Closing Price - 59.39
KMX was in a strong uptrend from November 2008 up until March 2015 with a rally from 5.76 to 75.40. At 75.40 a top was found and from which a drop back down to 41.25 (45%) occurred over a period of 10 months. The stock then got back on a recovery peaks and valley uptrend (3 peaks and 3 valleys) that took the stock back up to 69.11, with the last peak having been based on the Trump win in November.
During the last 30 months, KMX has shown a strong and repeated tendency to pivot at the $60 level, having rallied up to 75.40 when it first broke it to the upside, down to 41.25 when it first broke it to the downside, back up to that level (without breaking it to the upside) on 3 occasions between September 2015 and September 2016 and then once again above that level when Trump won the election. Each and every time that level has been broken (to the upside or downside) or held, a 20%+ move has ensued.
KMX broke below $60 once again the third week of March and the break took the stock down to the 200-week MA, currently at 55.70, where a bounce occurred back up to the $60 level. Nonetheless, for the past 3 weeks, the bulls have been unable to get the stock above the actual intra-week resistance at 60.81, having gone up to 60.71, 59.78 and last week up to 60.73. Last week, the stock generated a negative reversal week, having made a new 7-week high and then generating a red weekly close and near the lows of the week, suggesting further downside below last week's low at 58.25 will be seen this week. It does seem that the $60 level has once again thwarted the bull's hope of resuming the uptrend that was in place from 2008 to 2015, in fact they weren't even able to get up to retest the 69.11 high seen in February, suggesting more weakness than strength is presently being seen.
Having failed to get up to say something like $65, the probabilities now favor KMX breaking the 15-month peaks and valleys uptrend and going below the previous low at 47.50 and if that occurs, a drop down to the $40 would become a decent to perhaps high probability.
Sales of KMX above 59.60 and using a stop loss at 60.90 and having a $45 objective will offer a 10-1 risk/reward ratio.
My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest).
NFX Friday Closing Price - 34.76
NFX for the past 6 years and using weekly closing prices, has been trading mostly between $25 and $45 with 1 slight incursion to the upside to 47.84 and 2 slight incursions to the downside to 20.04 and 22.31. During this entire period of time, the 200-week MA, currently at 34.75 (where the stock closed on Friday) has been the arbiter of direction, with 50% of the time trading above the line and 50% of the time trading below the line.
Since February of last year, NFX has been trading above the line but 8 weeks ago the stock got down to the line and bounced up, suggesting that the trading above the line would continue. Nonetheless, after a 1-week rally back up to 37.50, the stock proceeded to generate 5 red weekly closes and a drop back down to the line where it now is awaiting a decision on direction.
With a high probability that the index market is ready to go into a corrective phase and the stock failing to generate any buying interest of consequence once the line was reached 8 weeks ago, the probabilities now favor the bears and a break of the MA line.
The most recent intra-week low in NFX is 33.00 but below that level there is no intra-week support of any consequence until 26.78 is reached and even then it would not be surprising to see the stock head down to the $25 level that has been the area seen often during the past 6 years.
Last but not least, NFX chart is showing a bearish inverted flag formation with the flagpole being the drop from 43.74 to 33.00 and the flag being the trading range seen the past 9 weeks up to 37.61. A break of the bottom of the flag would offer a 26.87 objective.
Sales of NFX at Friday's closing price at 34.76 or higher and using a stop loss at 37.72 and having a 26.87 objective will offer a 3.7-1 risk/reward ratio.
My rating on the trade is a 3.75 (on a scale of 1-5 with 5 being the highest).
FROM LAST WEEK:
SINA remains a viable short but given that the stock rallied strongly this past week off of a better than expected earnings report and made a new 3+ year high weekly close and further upside on an intra-week basis above last week's high at 84.10 is likely to be seen this week, there will be no official mention or desired entry point until the stock shows an inability to get above the 3-year intra-week high at 85.24. As such, the mention will be made on the message board, if and when the action supports taking on a short position.
SINA Friday Closing Price - 83.50
SINA has traded between 40.00 and 80.00 for a total of 240 weeks out of the last 282 weeks (85% of the time) and of the 42 weeks that it traded out of that range, 15 of them were above the range and 27 of them were below the range, suggesting the traders have slightly favored the sell side rather than the buy side.
For the past 32 weeks (7 months) SINA has traded mostly near the top of the range with 3 spike up rallies up to the $80 demilitarized zone but not once during this period of time has the stock gotten above 80.30 or generated a weekly close above 77.48 in spite of the fact the stock has closed on a weekly closing basis 8 times above 75.00. By the same token, the stock has generated a weekly close as low as 60.79 during the same period of time, meaning that if the seasonal correction in the market does occur the chances are higher that the stock could fall $17 than rally $1 above Friday's close (based on a weekly closing basis).
SINA got down to the 200-day MA on April 11th and it seemed that the line was going to break given that it straddled the line for 6 days in a row with seeing any buying interest pop up. Nonetheless, on April 18th an upgrade was given with an upside target of $110 and that upgrade brought in a rash of new buying interest.
SINA spiked up last week after the earnings report and further upside is likely to be seen this week.
This mention on SINA will be based on the idea that a seasonal correction will occur and that the intra-week high at 85.24 will not be broken. Nonetheless, an upgrade was given the previous week with a $110 objective, meaning that if 85.24 is broken (and the probabilities favor it occurring, that the sell mention will be null and void.
To the downside and as the mention's objective, SINA would have at the very least the 200-day MA, currently at 70.45, as a minimum objective but if broken, the $60 level would then become viable.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| ARNA made a new all-time intra-week and weekly closing low this past week, having made a new intra-week low at 1.17 (below the previous one at 1.20) and a new weekly close at 1.20 (below the previous one at 1.22). The stock closed near the lows of the week, suggesting further downside below last week's low at 1.17 will be seen this week. The company reported earnings on Tuesday and they were slightly better than expected but after a 1-day mini spike up, the selling resumed. On a very minor positive note, there was no jump up in volume as the new lows were made, suggesting that there is no big interest in the downside either. Short-term pivotal resistance is now found at 1.29 and now decent daily close resistance is found between 1.36 and 1.39. Very minor support is found at 1.17 and nothing below that until psychological support at 1.00 is reached. The probabilities suggest further downside but on a very minimal and slow basis. CLF continued to slide down, having broken the minor weekly closing support at 6.27 as well as the very minor support at 6.14 and closing on the lows of the week, suggesting further downside below last week's low at 5.97 will be seen this week. There is minor to perhaps decent intra-week support at 5.63 and then decent weekly close support at 5.43 that is not likely to be get broken. Nonetheless, there seems to be no buying interest at this time as inflation has not yet shown itself to be of any concern. The stock is now showing 6 weeks in a row of red weekly closes and 10 out of the last 12 and is overdue for a bounce. In fact, over the past 6 years and even when in the midst of a strong downtrend, the stock has not had a string of more than 12 weeks in a row of down movement without a bounce of consequence occurring (usually $3-$5), meaning that it is now overdue to happen. Past history has shown that under similar chart conditions, when a string of 6 or more red weekly closes in a row have occurred, any green weekly close has been a signal that a decent bounce is about to occur. By the same token and thinking about the $3-$5 bounce, the 8.45 level is now considered decent resistance, suggesting that the stock could fall down to the 5.43 level before a bounce begins. Probabilities continue to favor the bears this week. CNX generated an inside week but still closed in the green and on the highs of the week, suggesting further upside above last week's high at 16.41 will occur this week. The 16.41/16.45 level has proven itself to be pivotal on both an intra-week and weekly closing basis and with the stock having closed on Friday at 16.27 and near the highs of the week, the probabilities strongly favor some decision on direction for the next 6-8 weeks being made this week, especially how the stock closes next Friday. A red weekly close would suggest the stock would drop down to the 13.00-13.50 level while a green close above 16.41 would suggest a recovery back up to the $20 level would occur. Minor to decent intra-week resistance is found at 16.45 and then nothing until minor at 17.21 and decent at 17.51, which is also where the 200-week MA is currently at. Short-term intra-week support is at 15.45 that if broken would suggest a drop down to 14.90 would be seen. It is evident that 15.45 is short-term pivotal support and 16.45 is short-term pivotal resistance. Probabilities favor the bulls this week. ENG made a new 6 month low last week, below the previous low seen last week at 1.42. The stock closed on the lows of the week and further downside below last week's low at 1.35 is expected to be seen. Nonetheless, the stock is now close to a decent as well as pivotal support at 1.28-1.31 that is found on all charts (intra-week, daily close and weekly close) and that is unlikely to be broken at this time, given that the stock has yet to generate a bounce to retest the recent spike high at 3.10, which is something it has done on every occasion before an important support has been broken. Minor intra-week resistance is found at 1.49, at 1.55 and at 1.63. Minor to perhaps decent resistance is found at 1.73 and then mid-term pivotal at 1.79. A break above 1.79 would open the door for a rally up to 2.72-2.89, which is the mention's objective. A break below 1.28 would open the door for a drop down to .94 cents. Probabilities favor the bulls for a green close next Friday. FCEL idled this past week as it traded all week between 1.05 and 1.15. Nonetheless, the stock did close on the lows of the week, suggesting further downside below 1.05 will be seen this week. Support is found at 1.00 and resistance at 1.20. Nonetheless, at this time a break of either level would not suggest much movement in either direction with resistance above 1.20 at 1.25 on a weekly closing basis. Stock at this moment is going nowhere as the traders await more news. FSLR extended the previous week's gains, having gone above the previous week's high and generating a green weekly close. The stock once again closed in the upper half of the week's trading range, suggesting further upside above last week's high at 37.09 will be seen this week. Nonetheless, the stock is now facing a decent intra-week resistance level at 38.50 (37.90 on a weekly closing basis) that is going to prove difficult to break. Support is now minor but likely pivotal at 33.55 that if broken would suggest the $29-$30 level would be seen. The 200-week MA is currently at 34.50 and highly likely to be tested, especially if the 37.90-38.50 level is tested first but not broken. Trading range for the week could be something like 34.50-37.90. Consideration should be given to liquidating positions if the stock gets above 37.09 but cannot get above 38.50 this week. GE made a new 15-month low this past week after a downgrade on the stock was given. A second sell signal was generated on the weekly chart when the stock closed on Friday below 28.44. The 200-week MA is currently at 27.70 and will likely be seen since the stock did close in the lower half of the week's trading range and further downside below last week's low at 27.85 is expected to occur. The key for this week is the 200-week MA as a close below that level next Friday would suggest that the uptrend is over and that a sideways trend would begin with a possible downside objective of as much as $21 and the top of the sideways range being $28. Probabilities slightly favor the bears but it is evidently a pivotal week and it will be difficult for the bears to make a clear statement. Pivotal resistance is now found at 29.31. GS generated a second inside week in a row when the bulls failed to rally the stock above the previous week's high in spite of having closed near the highs of the week the previous week. The bears were also not able to take the stock below the previous week's low at 220.93 but this week will have the chance to try again since the stock closed on the lows of the week and further downside below last week's low at 222.15 is expected to be seen. Support is found at 220.93 and at 220.30 but if the latter is broken, the strongly bullish island formation will be at risk of disappearing as the gap at 219.18 would likely be closed. Closure of the gap would suggest that the 18-month low at 213.18 will be tested and if that level is broken, a retest of the 200-day MA, currently at 209.30 would likely occur. Pivotal resistance is found at 229.36 that if broken would give the bulls back the edge. Stop loss should now be set at 229.46. Probabilities favor the bears this week. LVS made a new 3-week low but the bears were unable to take advantage and make a statement as the stock rallied to close above the 200-week MA, currently at 58.55, and in the upper half of the week's trading range, suggesting further upside above last week's high at 59.14 will occur this week. Evidently this coming week is pivotal since it is expected that a rally above 59.14 will occur and if the bulls can generate a green close next Friday it would give them new ammunition for resuming the uptrend. By the same token, if a rally above 59.14 occurs but the stock still generates a red close next Friday, it would be seen as the required successful retest of the recent high at 59.85 and would be seen as a negative statement. Probabilities slightly favor the bulls but it is an important week. X followed through to the downside and generated another red close and on the lows of the week, suggesting further downside below last week's low at 19.81 will likely be seen this week. Nonetheless, the stock has now gotten down to a support level around $20 that has been strong support since 2008, meaning that the bears will need further negative fundamentals to generate more downside of consequence. Intra-week support will be found at 18.85 that is highly unlikely to get broken. Resistance will now be decent on a weekly closing basis at 23.50, which is where the 200-week MA is currently at. The probabilities now favor the stock trading between $19 and $23 for a few weeks as it did for 5 months in 2012.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .0875 (new price 1.05). 2) GE - Shorted at 29.85. Stop loss now at 29.41. Stock closed on Friday at 28.27. 3) ENG - Purchased at 1.36. Averaged long at 1.764 (5 mentions). No stop loss at present. Stock closed on Friday at 1.36. 4) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 1.20. 5) GS - Averaged short at 227.65. Stop loss at 229.46. Stock closed on Friday at 222.82. 6) FSLR - Averaged long at 37.52 (3 mentions). No stop loss at present. Stock closed on Friday at 36.38. 7) CLF - Averaged long at 8.96 (3 mentions). No stop loss at present. Stock closed on Friday at 6.03. 8) CNX - Averaged long at 19.17 (3 mentions). Stop loss now at 14.66. Stock closed on Friday at 16.25. 9) X - Averaged long at 33.42 (3 mentions). No stop loss at present. Stock closed on Friday at 20.04. 10) LVS - Shorted at 59.232. Stop loss now at 60.35. Stock closed on Friday at 58.65. 11) XON - Liquidated at 22.95. Purchased at 18.57. Profit on the trade of $438 per 100 shares minus commissions. 12) SINA - Shorted at 80.10. Liquidated at 80.75. Loss on the trade of $65 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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