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Issue #569 
May 27, 2018 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Traders Await Clarity! Economic Reports this Weeks May Clarify.
DOW Friday closing price - 24753
The indexes generated an indecisive week given that the DOW had an outside week (higher highs and lower lows) but the SPX and NASDAQ had an inside week (lower highs and higher lows), meaning that the traders were unsure of any direction. The indexes did manage to generate a green weekly close on Friday, suggesting that they are leaning toward the recent uptrend but on the other side of the coin, the DOW and SPX closed in the lower half of the week's trading range while the NAZ closed near the highs of the week, also generating more indecision about direction for this week.
Presently, this is all about the NASDAQ and the island gap that was created in March between 7435 and 7469 to the upside and 7473 and 7421 to the downside. Island gaps are extremely rare and only seen at major tops or bottoms and therefore closure of that gap has been the main objective of the bulls the past 2 weeks, given that failure to close the gap would suggest that a major top is now in place. The bulls have been able to get into the gap this month, having rallied to 7458 on May 14th and 7453 on Friday, including every day this past week up to at least 7430, and yet the gap remains unclosed. The index did close in the upper half of the week's trading range, suggesting further upside above 7453 will be seen this week. Will the bulls be able to close the gap? That is the big question.
Closure of the gap would mean that the door is open for resumption of the 9-year uptrend, though not necessarily immediately given that summer is usually a slow period for the market. Nonetheless, it is a statement the bulls want to make as failure to close the gap would suggest that a downtrend is to begin.
The DOW and the SPX have been lagging (compared to the NASDAQ) and it does need to be mentioned that both indexes have only been able to recover 50% of the correction that occurred this year, which does give the bears a slight edge as to whether a top to this uptrend has been found. In 2015, when the last strong correction in the index market occurred, within 3 months of the low of the correction having been made the DOW and the SPX got up to within 1% from the previous all-time high. It has now been 3 months since the low of this correction occurred and the indexes are still 50% away from the highs. In addition, the volatility being seen now though lesser than in 2008 is still greater than it was in the year 2000 which was the year the indexes made a new all-time high and then proceeded to get into a 3-year downtrend. Volatility is normally associated with negative action for the market. As such, it can be said the market is not likely to see the kind of downtrend seen in 2008 but could be in a scenario where an extended but lesser in scope downtrend than in 2008 could be seen.
To the upside and on an intraweek basis, the NASDAQ now shows minor to perhaps decent but definitely indicative resistance at 7459. Above that level, there is minor resistance at 7486 and decent at 7500. The DOW now shows minor to perhaps decent resistance at 24994 and minor to decent as well as short-term pivotal 25086. Above that level, there is minor resistance at 25293 and minor to decent at 25449. The SPX now shows decent resistance at what is now a double high at 2742 and then nothing until minor at 2754. Above that level, there is minor to decent at 2789 and decent as well as short-term pivotal at 2801.
To the downside and on an intraweek basis, the NASDAQ now shows minor support at 7334 and minor to perhaps decent 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 to perhaps decent support between 24605 and 24629, minor again at 24535 and the minor to perhaps decent as well as pivotal at 24217. The SPX now shows minor support at 2707, minor to perhaps decent as well as pivotal between 2694 and 2701 and then nothing until decent support at 2647.
Nothing was decided last week. The traders were unlikely to decide anything without some catalyst occurring and there were none last week. In addition, the long 3-day Memorial Day weekend was the wrong time to make any decisions. Nonetheless, this coming week on Friday, both the ISM Index and Jobs reports come out and due to the pivotal nature of the area the indexes are presently trading at, it is possible and perhaps even probable that by next Friday some decisions will be made.
Of course, the key index is the NASDAQ and the island gap. Closure of the gap will not necessarily give the bulls a lot of ammunition due to the slow trading nature of the summer months but it would take a huge weight of the shoulders of the bulls and open the door for the uptrend to resume after October. Failure to close the gap, followed by a daily close below 7295 (which would give a failure signal to the recent breakout) would likely mean a top has been determined and a downtrend would ensue. As such, the traders are looking at an 180 point trading range (between 7472 and 7295) that will determine much.
It is very difficult at this time to give any probability assessment on what will happen, especially considering how little the bulls need to make a bull statement in the NASDAQ but then also how much the bulls have to accomplish in the other indexes for it to be a bull outlook overall. One thing though, the probabilities do favor some decision being made by the end of the week.
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Stock Analysis/Evaluation
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CHART Outlooks
With the lackluster action seen last week in the index market, the direction for the week is unclear. Nonetheless, the continuing inability of the bulls to make a statement does give the bears a slight edge. As such, I have 1 new sell mention.
By the same token, I also have a buy mention on a stock that has positive fundamentals and is at a support level of consequence that is not likely to get broken.
PURCHASES
FSLR Friday Closing Price - 68.25
FSLR followed through to the downside this past week and once again closed near the lows of the week, suggesting further downside below last week's low at 67.47 will be seen this week. The stock is nearing a level of support between 66.20 and 67.01 that is likely to hold given that the stock received a rating upgrade from J.P. Morgan 3 weeks ago from neutral to overweight and with a target of $75 and the stock fulfilled that objective with a rally 2 weeks ago to 75.75. This ensuing correction is likely to be a retest of spike low to 65.05 that was seen the last week of April, in which the bulls are simply confirming that a support base is strong.
A drop down to anywhere between 66.20 and 67.01 will fulfill the chart and give the bulls not only a strong support level from which to rally the stock anew but also new ammunition to take the stock above the 75.75 level recently seen.
To the downside and on an intraweek basis, FSLR shows support at 67.01, at 66.58 (important low from March 2016) and at 66.20. 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 that this week the low for this correction will be made and that a positive reversal might occur. On a weekly closing basis, there is support at 67.50 that should not be broken.
Purchases of FSLR between 66.21 and 67.05 and using a stop loss at 64.95 and having a 76.61 objective will offer 4-1 risk/reward ratio.
My rating on the trade is a 3.75 (on a scale of 1-5 with 5 being the highest).
SALES
FB Friday Closing Price - 184.92
FB rallied 21% after a 9-month low at 149.02 was made in March but over the past 2 weeks the rally seems to have run out of steam as no further upside has been made after the 188.32 high was made on May 11th.
On a chart basis, the 188.32 high has now become a successful retest of the all-time high at 195.32 but also a successful retest of the previous all-time high at 188.90, meaning that in spite of the major rally seen, none of the 2 previous all-time highs were broken. More importantly, the 188.32 high has now been tested successful with a high last week at 186.91, followed by 2 red daily closes, suggesting that the upside is over for now and that some testing of support is to ensue.
FB gapped up between 161.06 and 170.80 on May 26th after reporting better than expected earnings. In addition, that day the stock closed above the 200-day MA, currently at 175.49, for the first time after 26 trading days trading below the line. That line and that gap have not yet been tested and a test of both of those is likely to occur if the upside rally has ended for now.
To the upside and on an intraweek basis, FB shows resistance at 186.91 and at 188.32. On the intraday chart, further resistance is now found between 185.30 and 185.42 and minor but likely short-term pivotal at 185.65.
To the downside and on an intraweek basis, FB shows short-term pivotal support at 182.22 and then nothing until minor to perhaps decent between 175.80 and 176.40 that is further strengthened by the 200-day MA, currently at 175.49. Below that level, there is support at 172.99 and then nothing until the gap area at 170.23.
The chart of FB suggests that at the very least a retest of the MA line will be seen, given that the stock traded for 21 days below it. Such a test would also be seen as a retest of the gap that was created by the earnings report. This kind of a drop is still within the confines of a bull trend, meaning it would not weaken the long-term prospects for the stock. Then again, if the indexes have topped out and are to begin a downtrend, then the possibilities of the stock heading even lower might occur.
Sales of FB between 184.95 and 185.26 and using a stop loss at 187.35 and having a downside objective of at least 175.50 will offer a 4-1 risk/reward ratio.
My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
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ARNA generated a red week and a close near the lows of the week, suggesting further downside below last week's low at 44.68 will be seen this week. The red week and going below the previous week's low does mean that the previous week's high at 47.64 did uncover chart selling interest given that in September 2014 (at 47.40) and in April 2015 (at 47.90) those levels brought about a multi-week correction. By the same token, the bears have a lot more to do to confirm that a correction is occurring given that the previous daily and weekly close breakout at 43.37 has not yet been negated. The stock did make a new 10-day low on Friday and with no previous support found nearby, it is highly likely that further downside will be seen this week. In looking at all charts (intraday, daily and weekly), there is no support found until 43.44 and that is a minor intraday support. On that same chart, further and a bit stronger support is found at 200 60-minute MA, currently at 42.72. Nonetheless, on a daily closing basis, the 43.37 level is short-term pivotal as a close below that level will generate a failure signal. Chart does suggest that a drop down to that area is likely to be seen this week. To the upside, Wednesday's high at 46.95 seems to be minor but likely pivotal resistance. This is likely to be a decisive week for the index market (by Friday when the ISM Index and Jobs reports come out) and though the stock is not tied in much to the index market, it is likely to be affected, meaning that a positive resolution to the index market is likely to give the bulls enough ammunition to stay above 43.37 on a daily/weekly closing basis and a negative resolution to the index market is likely to give the bears enough ammunition to take the stock lower. It is a flip of the coin week as far as whether the stock closes below 43.37 or not. AXP made a new all-time intraweek high at 103.24 but then reversed to close below the all-time high weekly close at 101.42. Nonetheless, the bears fell short of giving a failure signal, given that the stock closed 2 points above the previous all-time high weekly close at 101.08. It is evident that the traders are waiting to see what happens this week to the index market before making any decisions. Simply stated, if the NAZ closes the gap at 7473, the stock is likely to continue higher and vice-versa. The stock did close in the lower half of the week's trading range, suggesting further downside below last week's low at 100.47 will be seen this week. As such, last week's high at 103.24 is now considered pivotal and indicative resistance. To the downside, there is some short-term pivotal support at 99.87 that if broken would likely generate a drop down to 98.00. Nonetheless, it is all about the index market this week. CALM generated an uneventful week, having traded within the previous week's trading range. Nonetheless, the chart continues to show a tendency toward the downside, having closed in the red (55 points below the previous week's close) and near the lows of the week, suggesting further downside below last week's low at 46.50 will be seen this week. The chart parameters are clearly defined right now with intraweek resistance at 48.35 and support at 45.60. Nonetheless, on both the daily and weekly chart, the 46.00 level is pivotal. Probabilities do favor the stock getting down to 46.00 this week but closing above or below that level is likely dependent on what the index market does. CCJ received a downgrade this past week from over perform to sector perform and the stock spiked lower. The stock did close near the lows of the week and further downside below last week's low at 10.48 is expected to be seen this week. On a positive note though, the stock closed on Friday 6 points above the previous 52-week breakout high at 10.56, suggesting the downgrade was not sufficient to cause a failure signal to be given. Decent intraweek support is found between 10.31 and 10.34 that based on the close near the lows of the week, should be seen this week. Nonetheless, the probabilities do favor the support holding up and it being a positive reversal week, making a new 4-week low but then closing in the green next Friday. If that occurs, it should give the bulls enough new chart ammunition to move the stock higher over the next few weeks and test the 200-week MA, currently at 12.19. CLF generated an inside week but the stock did generate a red weekly close as well as on the lows of the week, suggesting further downside below last week's low at 8.18 will be seen this week. The red weekly close did strengthen the 14-month weekly close resistance at 8.68, having closed the previous week at 8.61, meaning that the bulls still need some catalyst to break the resistance above. The stock is clearly showing an ascending triangle formation that when broken to the upside would offer an 11.68 objective on a weekly closing basis. Minor intraweek support is found at 7.98 but on a daily and weekly closing basis, support is minor to decent between 7.92 and 8.11. It is likely that level will be seen this week but the possibility of a positive reversal week is high. DGAZ continued lower this week, having made a new 26-week intraweek low. The stock closed near the lows of the week, suggesting further downside below last week's low at 21.68 will be seen this week. Nonetheless, the oil market headed lower this week and lower oil prices do suggest higher stock prices and on Friday the stock generated a positive reversal day, having made the new multi-week low but then closing in the green. Oil went lower today (Monday) and as such, it is expected the stock will open higher tomorrow. The stock is now trading at a decent support level and some upside is likely to to occur. A rally back up to the 24.00 is likely to be seen. There is minor but short-term pivotal resistance at 25.38 and a bit stronger and also pivotal at 26.36 that if broken would suggest a rally to the 200-day MA, currently at 27.20. This stock is tied inversely to oil, so what oil does will affect what the stock does. Probabilities slightly favor the bulls this week. ENG generated a new 9-month intraweek high and a new 8-month weekly closing high this past week. In addition, the stock also generated a failure signal on the weekly closing chart, having closed on Friday above the previous 27-month weekly closing low at 1.11. The stock closed 1 point above the midpoint of the week's trading range, suggesting a slightly higher possibility of going above last week's high at 1.43 than below last week's low at .88. The stock did break convincingly the 200-day MA, currently at .96, which is a line that had not been broken to the upside for the past 14 months. Resistance will be found this week at 1.31, which is a resistance that has been pivotal on an intraweek as well as on a daily and weekly closing basis for at least the last 2 years. Intraweek support should now be found at .96/.97. Last week's high at 1.43 is pivotal on a weekly closing basis, given that it is where the 200-week MA is currently located. Over the past 10 years, the stock has generated 4 previous major rallies and they all started with a spike rally and a break of multi-month high resistance. The trend line using the highs of the past 4 rallies is presently at 2.50, which now becomes a viable upside objective. Intraweek resistance is found at 1.46 that if broken in conjunction with a weekly close above 1.43 will suggest the 5th rally up to that 10-year trend line has begun. Probabilities favor a 1-3 week backing and filling period but then another breakout as the start of the rally to the long-term trend line. Drops down to the 1.00 area should now be aggressively bought. FCEL continues to trade sideways but recently with a very slight bearish bias given that for the past 15 trading days the stock has stayed below 1.99 and for the past 31 trading days it has stayed below 2.11. During this entire period of time, it has visited the 1.81 level twice and is likely to visit that level again this week, given that the stock closed near the lows of the week and further downside below last week's low at 1.83 is expected to be seen. By the same token, the bulls have been trying repeatedly (6 times) since September to break the 200-day MA, currently at 1.80, and all they have accomplished is 1 break for 1 day. It is likely that 1 more attempt at breaking the line will occur this week and if it occurs, there is no support below until 1.66 and that is considered minor to perhaps decent support. Short-term pivotal resistance is found at 1.94. Probabilities favor the bears this week. MSFT made another new all-time intraweek and weekly closing high this past week and closed again near the highs of the week, suggesting further upside above last week's high at 98.98 will be seen this week. The bears failed to follow through to the downside off of the previous week's close near the lows of the week, meaning that the $100 level continues to beckon strongly. By the same token, the continuing rally seen over the past 5 weeks to new all-time highs has been very limited in nature given that 5 weeks ago a new all-time high was made at 97.90 and even though new all-time highs have been made twice since then, the stock is only $.46 cents higher (about .05%). The upside objective continues to be the $100 level. Pivotal support is found at 95.83 that if broken, would likely bring in new selling interest. Probabilities favor the bulls this week. RENN made a new 4-week intraweek and weekly closing high on Friday, getting above the previous high at 9.04 (8.99 on a weekly closing basis). The stock closed on the highs of the week, suggesting further upside above last week's high at 9.20 will be seen this week. To the upside, there is no intraweek resistance above 9.21 until 9.74 is reached but on a daily closing basis the 200-day MA is currently at 9.46 and that will be an strong obstacle the bulls will need to tackle, given that the stock has been below the line since April 30th. To the downside, the 8.70 level, both on an intraweek and daily closing basis, is now support. The probabilities now strongly favor the stock getting up to the MA line but that is now the question that needs to be answered as far as the longer term prospects for the stock. By the same token, the bears failed to take the stock lower and though a small pullback down to 8.70 may occur after the MA line is reached, the chart suggests that ultimately the stock is likely to resume a bullish outlook for the longer term. TXN continued to move upward, having generated the 5th green weekly close in a row. Nonetheless, the bulls have not yet been able to accomplish anything of note, given that on a weekly closing basis there is decent and pivotal resistance at 111.53 and the stock closed on Friday at 111.56. The stock did close near the highs of the week and further upside above last week's high at 112.28 is expected to be seen. Nonetheless and on an intraweek basis, there is decent and pivotal resistance at 113.55 that will need to be broken, as well as a green weekly close next Friday, for the bulls to make a statement that will be heard. This week is all about the resistance at 113.55 and Friday's close at 111.56. Intraweek support is found at 108.35 that if broken would give the edge to the bears.
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1) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .1555 (new price 1.86). 2) ENG - Averaged long at 1.764 (5 mentions). No stop loss at present. Stock closed on Friday at 1.16. 3) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 4.53 (new price (45.33). 4) CLF - Averaged long at 7.786 (5 mentions). Stop loss now at 6.30. Stock closed on Friday at 8.23. 5) RENN - Averaged long at 9.795 (2 mentions). No stop loss at this time. Stock closed on Friday at 9.10. 6) CCJ - Averaged long at 9.585 (2 mentions). No stop loss at present. Stock closed on Friday at 10.62. 7) CLB - Covered shorts at 125.09. Averaged short at 128.64. Profit on the trade of $710 per 100 shares (2 mentions) minus commissions. 9) CALM - Shorted at 50.17. Stop loss is at 50.55. Stock closed on Friday at 47.00 10) MSFT - Shorted at 96.43. No stop loss at present. Stock closed on Friday at 98.36. 12) FCEL - Purchased at 1.60. Stop loss now at 1.40. Stock closed on Friday at 1.86. 13) AXP - Averaged short at 101.305 (2 mentions). Stop loss now at 103.35. Stock closed on Friday at 101.10. 14) TXN - Shorted at 111.87. Stop loss at 113.65. Stock closed on Friday at 111.56. 15) DGAZ - Purchased at 22.31. Stop loss at 20.36. Stock closed on Friday at 22.36.
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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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