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Issue #568 
May 20, 2018 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls Fail to Achieve Objective. Weakness Seen!
DOW Friday closing price - 24715
The indexes generated a negative reversal week, having made a new multi-week high but then closing in the red and in the lower half of the week's trading range, suggesting further downside below last week's lows will be seen this week (DOW below 24629, SPX below 2701 and NASDAQ below 7320).
The negative reversal and failure to close the gap has to be considered especially disappointing to the bulls in the NASDAQ as the chart, momentum, and news were all in favor of the gap being closed. The breakaway gap on the weekly chart is at 7463 and in the daily chart at 7473 and yet the bulls were only able to get the index up to 7458. Having come so close but failing and then generating a negative reversal week that suggests this coming week will not be of help to the bulls, does suggest the outlook remains sideways to slightly bearish for the next 6 weeks until the next round of earnings reports start coming out.
To the upside and on an intraweek basis, the NASDAQ now shows minor but possibly indicative resistance at 7415, minor again at 7425 and decent as well as likely pivotal at 7459. The DOW now shows minor resistance at 24439, at 24458 and pivotal at 24994. The SPX now shows minor but likely indicative resistance at 7431 and decent as well as pivotal at 2742.
To the downside and on an intraweek basis, the NASDAQ now shows minor but likely short-term pivotal support at 7430 and then nothing until minor to perhaps decent at 7194. Nonetheless, on a daily closing basis, the previous multi-week high at 7295 is pivotal as a close below that level would give a failure signal. The DOW now shows minor support at 24629, minor again at 24535 and the minor to perhaps decent as well as pivotal at 24217. The SPX now shows minor but likely pivotal support between 2694 and 2701 and then nothing until decent support at 2647.
The outlook the previous week for the NASDAQ for the next 2 months (until the next round of earnings reports start coming out in October) was for the index to trade in a 400 point trading range between 7505 and 7084. Nonetheless, last week's action degraded that outlook, suggesting the upper objective of 7500 is not all that likely to be seen until after the support below is tested. The DOW is now likely to trade between 25000 and 24000 and the SPX between 2755 and 2640. It is highly unlikely that there will be the kind of news the bulls need to resume the uptrend. By the same token, the door is always open for the downside if the news coming out of the White House takes a turn for the worse.
This coming week is likely to favor the bears but not on a strong basis. The FOMC minutes from last month come out on Wednesday and the traders are likely to wait and see if there are any clues as to whether the Fed will raise in June or not. Nonetheless, it is unlikely that there will be any changes or clues, meaning no effect. Durable Goods will come out on Friday but unless the indexes are heading in a direction with confidence and the report supports that direction, it is unlikely the report will be catalytic.
Probabilities favor the bears this week but only slightly.
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Stock Analysis/Evaluation
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CHART Outlooks
With the disappointing action seen last week in the index market, the direction for the week is tilted toward the bearish side. As such, I have one sell mention that will likely work if the indexes head lower. I also have the same buy mention from last week, given that the desired entry point was not reached but is likely to be reached this week.
SALES
TXN Friday Closing Price 110.54
TXN is a sell mention I have given twice over the past 2 months with the first sell turning into a $1700 profit (2 mentions) and the second mention turning into an $89 loss.
TXN reported earnings a few weeks ago (just after I got out of the short trade) and they were better than expected and because of it the stock has appreciated in value 11%. Nonetheless and other than breaking the April high (just like the indexes did), the bulls have been unable to make a strong statement that would suggest further upside is to be seen.
In January, right after the first quarter earnings report came out, TXN gapped down between 118.90 and 114.00 and proceeded to drop 20% in value. In March, after a recovery rally occurred, the stock got back up close to the gap area with a rally to 113.55 and that high is now considered not only a successful retest of the all-time high at 120.75 but also a successful retest of the gap area. As such, it is considered strong and pivotal resistance. On Wednesday, the bulls were able to get up to 111.57 but selling interest was seen as the stock fell back on Thursday and Friday.
TXN did close in the upper half of the week's trading range, suggesting further upside above last week's high at 111.57 will be seen this week, but given the fact that the indexes are starting to show some weakness and that the bulls seem to be running out of ammunition without reaching the decent resistance at 113.55, it does suggest the stock is a good risk/reward ratio sale.
To the upside and on an intraweek basis, TXN shows minor resistance at 111.57 but decent resistance is found at 111.63 based on a daily close. Above that level and on an intraweek basis, decent resistance is found at 113.55.
To the downside and on an intraweek basis, TXN shows minor but short-term pivotal support at 108.35 and then nothing until minor to perhaps decent support at 104.66. Below that, there is no support until the $100-$101 level is reached.
It is important to note that TXN has not yet tested the double bottom at 96.99/97.39 due to the earnings report but if the bulls fail to break the resistance above, a retest of that level is likely to be seen with a drop down to at least the 101.34 level. It should be mentioned that the 200-day MA is currently at 99.00 and a drop down to that line is certainly a possibility as well.
The desired entry point into a short of TXN is a bit of a guessing game given that the stock is anticipated to go above last week's high at 111.57 but does show important daily close resistance at 111.63, meaning that any rally up close to or slightly above that level is an opportunity to short the stock.
Sales of TXN around the 111.50 level and using a stop loss at 113.75 and having a 101.37 objective will offer a 4-1 risk/reward ratio.
My rating on the trade is a 3.5 (on a scale of 1-5 with 5 being the highest).
PURCHASES
FSLR Friday Closing Price - 70.00
FSLR received an rating upgrade from J.P. Morgan a week ago last Thursday from neutral to overweight and with a target of $75 and the stock fulfilled that objective with a rally this past week to 75.75. Nonetheless, once the objective was fulfilled the stock proceeded to drop back down to drop down to Friday's low at 69.70. The stock closed on the lows of the week and further downside below that low is expected to be seen this week.
The likely reason why FSLR dropped 8% in value this past week is that an open gap between 69.71 and 70.77 was created right after the upgrade and upgrades are not valid reasons for gaps to remain unclosed. The gap has now been closed but given the likely weakness in the index market this week, as well as the close on the lows of the week, further downside is likely to be seen.
To the downside and on an intraweek basis, FSLR starts showing support at 69.12 and continues to offer copious support all the way down to 66.20, suggesting that somewhere in that trading range, new buying interest will be found. Below 66.20 there is decent as well as pivotal support at 65.05 that will be used as the stop loss point.
To the upside and on an intraweek basis, FSLR shows minor resistance between 71.80 and 72.80, minor again at 74.86 and decent as well as likely short-term pivotal at 75.75.
The upgrade was very clear that due to improving conditions for the solar industry as well as FSLR being the leading provider of solar panels that the stock should have a value of at least $75, meaning that these kinds of dips are going to be seen as buying opportunities each and every time they occur.
From purely a chart point of view, FSLR should head up to at least the 76.61 level if not to 77.95 which is the multi-year daily closing high seen in April. To the downside, the chart suggests the stock will get down below $68 this week and even perhaps close to $67.
Purchases of FSLR below 67.50 and using a stop loss at 64.95 and having a 76.61 objective will offer 3.5-1 risk/reward ratio.
My rating on the trade is a 3.75 (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 made a new 34-month high on Friday but then generated a negative reversal day on the daily chart, having closed below Thursday's low. Evidently, the resistance between 47.40 and 47.90 that held to stock in check for a total of 26 weeks between September 2014 and June 2015 is being used by the traders to take profits, especially considering that the $50 level is not only psychological resistance but also the upside objective of a few of the rating companies. The stock did close near the lows of the week, suggesting further downside below last week's low at 44.83 is likely to be seen this week. Copious support from 2015 is found between 41.30 and 38.50 that is unlikely to be broken but likely to be seen (at least the former). Probabilities do favor the stock trading between $40 and $50 over the next 2-3 months, having found an area of resistance where the bears got involved. The 44.00 level is of short-term important on a daily closing basis, given that it was the previous 32-month high daily close. A close below that level any day this week, will give the bears some short-term ammunition for a push down to the $40-$41 level where some recent support is found. Probabilities favor the bears this week. AXP bulls failed to follow through on the previous week's new all-time high weekly close and close near the highs of the week, having generated an inside week with a red weekly close. The stock closed in the middle of the week's trading range, suggesting the traders will wait to see what happens to the index market before making any new decisions. The stock closed below the previous all-time high weekly close at 101.18, meaning that if another red weekly close occurs this coming Friday, a failure signal will be given. At this time though, the traders are waiting to see if the bulls in the index market can generate new buying (unlikely). Short-term pivotal intraweek support is found at 99.97 would suggest a drop down to at least $98 if not $96. Likely short-term pivotal resistance is now found at 101.64. Probabilities slightly favor the bears. CALM had an uneventful week, having traded a couple of points above and below the previous week's trading range and then closing near the middle of the week's trading range. Nonetheless, the bulls did get up to a decent intraweek resistance area at 48.40 (got up to 48.35) and then heading lower, suggesting that the bulls do not have the power at this time to take the stock higher without help from the index market. Short-term pivotal support is found at last week's low at 46.50 that if broken would likely push the stock down to at least 46.05, which is an area that has been pivotal recently as well as in the past. Any daily close below 46.05 would generate a new sell signal. To the upside, the 48.40 level is pivotal resistance. Probabilities slightly favor the bears. CCJ technically generated a negative reversal week, having made a new 56-week high (by 1 point) and then going below last week's low and closing in the red and near the lows of the week, suggesting further downside below last week's low at 11.21 will be seen this week. Nonetheless, the stock has been trading for the past 11-trading days in a bullish flag formation with the bottom of the flag being at 11.04, meaning that even if the stock goes below last week's low but does not break convincingly below 11.04, it will remain in a bullish flag formation. The upside objective remains the 200-week MA, currently at 12.24, and there has not yet been any negative news that would cause the bulls to stop trying to get to that line. As such, it is expected the stock will continue to move higher over the next week or two. Below 11.04, there is support at 10.55 and decent at 10.31. Resistance is presently found at 11.68. Probabilities continue to favor the bulls. CLB made a new 23-month intraweek high but did find some selling interest when it got above $130, given that the stock backed off almost $3 from that high by Friday. The upside objective (and decent weekly close resistance) is 130.38 and last week's high was 130.34. Though on an intraweek basis there is no resistance until 133.16 is reached, it is evident that selling interest started to come out when the weekly closing high resistance was reached. The stock did close in the upper half of the week's trading range, suggesting further upside above 130.34 will be seen this week. Nonetheless, now that selling interest is starting to appear, rallies above $130 are likely to be sold. The stock did gap up on Friday between 126.61 and 126.81 and given that there was no news to support the gap, the gap is likely to be closed this week. Pivotal daily close support is found at 124.36 as any daily close below that level will give a failure signal. Probabilities continue to favor the bulls but only likely for 1 more attempt to the upside (likely this week), followed by a negative reversal the week after. CLF made a new 17-week high but the bulls failed to get above the decent and pivotal resistance at 9.15 and the stock generated a negative reversal day on Friday, having gone above Thursday's high but then closing below Thursday's low. The stock closed in the middle of the week's trading range but did close on the lows of the day on Friday, suggesting further downside below Friday's low at 8.48 will be seen on Monday. Nonetheless, getting below last week's low at 8.16 is a different matter entirely as that is now considered pivotal short-term support. The stock has appreciated in value 25% over the past 2 weeks and this is likely to be a small profit taking pause before a new attempt to break 9.15 is made. If the support at 8.16 is not broken this week, the bulls will gain further strength. Probabilities continue to slightly favor the bulls. ENG generated a wild week, having traded down as low as .81 cents and then as high as 1.00, which is a new 28-week high. The stock did close in the green $.01 cent above last week's close, technically confirming the breakout last week above the .93 weekly close resistance. Nonetheless, the 1.00 level remains a strong psychological support that needs to be broken this week on an intraweek and weekly closing basis so that the bulls can make a statement of consequence. Probabilities do favor the bulls but slightly as the stock has been under $1 for over 6 months. FCEL once again (the 5th time) tested the 200-day MA, currently at 1.80, having dropped to 1.81 on Tuesday. The stock closed in the middle of the week's trading range, leaving the door open for a rally above last week's high at 1.96 or below 1.81. The latter would be a negative and the former a positive. The 2.00 level remains pivotal resistance as it has been unbroken for the past 3 weeks. The 1.80 level is now pivotal support. Probabilities continue to slightly favor the bulls, given the repeatedly successful retests of the MA line. MSFT generated a negative reversal week as well as given a failure signal, having made a new all-time intraweek high at 98.69 and then closing in the red, below the previous all-time weekly closing high at 96.54 and near the lows of the week, suggesting further downside below last week's low at 95.83 will be seen this week. Over the past 3 months, the stock has actually made a total of 3 new all-time highs and all of them (including this one) have failed to generate any follow through of consequence to the upside. The previous 2 occasions, a correction of anywhere from 6-10% occurred. I don't see anything much different happening at this time. Minor but likely pivotal support is now found at 95.05. Resistance is now found at the previous all-time intraweek high at 97.90 and decent as well as likely pivotal at 98.69. Probabilities now favor the bears. RENN generated intraweek follow through to the upside as well as a green weekly close, suggesting that a bottom to the recent drop has been found. Nonetheless, the outlook for higher prices is not yet clear, given that the stock closed in the middle of the week's trading range and the short-term pivotal resistance at 9.04 has not yet been broken. The previous week's low at 8.43 is now pivotal support, the same that the 9.04 level is pivotal resistance. Having closed at 8.80 on Friday, suggest the bulls have a slight edge.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .1575 (new price 1.89). 2) ENG - Averaged long at 1.764 (5 mentions). No stop loss at present. Stock closed on Friday at .96. 3) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 4.55 (new price (45.53). 4) CLF - Averaged long at 7.786 (5 mentions). Stop loss now at 6.30. Stock closed on Friday at 8.61. 5) RENN - Averaged long at 9.795 (2 mentions). No stop loss at this time. Stock closed on Friday at 8.80. 6) CCJ - Averaged long at 9.585 (2 mentions). No stop loss at present. Stock closed on Friday at 11.36. 7) CLB - Shorted at 127.16 and at 130.12. Averaged short at 128.64. Stock closed on Friday at 127.31. 9) CALM - Shorted at 50.17. Stop loss is at 50.55. Stock closed on Friday at 47.55 10) MSFT - Shorted at 96.43. No stop loss at present. Stock closed on Friday at 96.36. 12) FCEL - Purchased at 1.60. Stop loss now at 1.40. Stock closed on Friday at 1.89. 13) AXP - Averaged short at 101.305 (2 mentions). Stop loss at 103.06. Stock closed on Friday at 100.99.
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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
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information enclosed above, regarding his background, length of trading, and experience, is correct
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