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Issue #602 
Feb 10, 2019 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls Edge Small Gains but Resistance is Felt!
DOW Friday closing price - 25106
The indexes generated another green week (the 7th in a row) but the gains were minimal and the indexes all closed slightly in the lower half of the week's trading range, suggesting that the rally is on its last legs and that there is a slightly higher probability of going below last week's lows than above last week's highs but in either case the movement would likely be minimal as what happened last week. The action seen suggests that the bulls require additional positive fundamental news to generate further upside of any consequence.
This coming week does have some economic reports that could generate some movement, such as CPI, PPI, and Retail Sales. Nonetheless, none of these reports have been catalytic of late, meaning the probabilities do not favor them generating any movement of consequence.
Traders are likely to be trading this coming week off of charts and there is one strong obstacle that the traders attempted to reach this week but fell short and will likely will try again this week, in the form of the 200-day MA's in the SPX at 2742 and the NASDAQ at 7457. These indexes got up to 2738 and 7408 last week and the line is a magnet at this time due to the lack of negative news. By the same token, it is a line that is unlikely to be broken without positive news.
To the upside and on an intraweek basis, the DOW shows minor resistance at 25449 and then minor to perhaps decent at 25800. Above that level, there is pivotal resistance at 25980. Nonetheless, on a weekly closing basis, there is decent resistance between 25316 and 25335. The SPX shows minor to perhaps decent at 2742 and then nothing until pivotal at 2800. A weekly close above 2760 would generate a buy signal. The NASDAQ shows minor resistance at last week's high at 7408, minor at 7438 and pivotal at 7485. On a weekly closing basis though, a close above 7330 would generate a buy signal.
To the downside and on an intraweek basis, the DOW shows multiple supports (7 to be exact) between 24323 and 23881. Nonetheless, on the weekly chart there are only 2 supports at 24122 and at 23997. Below that, there is no support until 23531. The SPX also shows multiple supports (5) between 2594 and 2624. On the weekly chart though, the support is found between 2603 and 2594. The NASDAQ also shows multiple supports (7) between 6830 and 7017. On the weekly chart though, there is support at 6922 and then at 6830. In looking at the weekly closing charts, these are the likely pivotal levels. In the DOW at 23997, in the SPX at 2588 and in the NAZ at 6874.
As you can see by the above mentioned support levels, there is quite a bit of risk to the bulls given that no support levels of consequence are nearby. Any negative news or pause of momentum can generate a down draft of consequence and that is of concern. In addition, there is a magnet in the DOW that will again beckon strongly this week and that is the gap made a week ago last Tuesday between 24674 and 24790. The gap is not supported by news and therefore highly likely to be closed at some point. This past week the traders attempted to close the gap with a drop down to 24883 but failed. The index did get above a resistance level last week at 25403 with a rally up to 25438 but even with the resistance area being broken, the index dropped to within 210 points of closing the gap. If the bulls are unable to get above last week's high this week, another attempt at closing the gap will likely be seen.
The bulls continue to need positive news to continue higher but other than perhaps a resolution to the Trade War (which is not going well) there seems to be nothing on the schedule for next 2 months that will give them the help they need, suggesting that the probabilities now favor the bears and a downward resolution.
More importantly, all the indexes made a new 17-20 month lows in December and those lows have not been tested successfully as yet. Without any game changing positive fundamental news (which there has not been), it is extremely unlikely that an index (or most stocks) can generate additional gains of consequence. So far, the only thing the bulls have been able to accomplish is negating the break of weekly close support, suggesting that the December lows have a high probability of holding up. Nonetheless, without some form of retest of those lows, it is only speculation that they will hold up. As such, the probabilities favor the indexes starting to turn back downward either this week or at the latest next week if the bulls cannot accomplish anything more "concrete" than what they have accomplished so far.
Probabilities favor another week of chart backing and filling but if there are any surprises, they will likely favor the bears.
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Stock Analysis/Evaluation
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CHART Outlooks
Though the bears were unable to make a statement this past week and some further upside is likely to be seen, it was evident that the bulls have lost the momentum that was there before and given that the December lows have not yet seen or are showing any kind of retest, it is likely that the traders will start looking at short positions as a way to get better risk/reward ratios.
As such, I do have some mentions this week with desired entry points that are now reachable (contrary to last week's mentions).
BIDU Friday Closing Price - 169.90
BIDU is the Chinese version of Google and this past week, Google reported disappointing earnings that caused the stock to generate a negative reversal week. BIDU did the same and in so doing, likely set up a recent price resistance level against which the stock can be sold against. As it is, it was expected that the stock would head higher toward the $180 level but the reversal came from a high of 176.89, suggesting more (rather than less) chart weakness and offering a new level of resistance that is not yet confirmed but because of the negative reversal can be used to sell against. In addition, the negative reversal also gives the bears a few more reasons to consider shorting the stock at these levels.
BIDU closed in the lower half of the week's trading range, suggesting further downside below last week's low at 166.66 will be seen this week. Nonetheless, the stock closed on the highs of the day on Friday, suggesting the first course of action for the week will be a rally that would be used as a successful retest of last week's high if it failed to make a new high.
To the upside and on an intraweek basis, BIDU shows very minor resistance at 171.33, minor to perhaps decent at 174.28 and again at 175.09. Above that level, pivotal resistance that would also negate the negative reversal is found at 176.89.
To the downside and on an intraweek basis, BIDU shows very minor support at 161.59, minor to perhaps decent at 158.52 and pivotal at the recent low at 153.78. Below that level, there is no support until 139.61, which will be the mention's objective.
BIDU is showing what could be considered a bearish inverted flag formation with the flagpole being the drop from 190.00 to 153.78 and the flag the recent rally up to 176.89. A break of the bottom of the flag would offer a downside objective of 134.67.
The negative reversal seen this week is either a non-event that will be negated or a signal that weakness has started. The inability of the bulls to get up to the $180 level, which was a natural magnet given that there was no previous resistance built before that level is reached, does open the door for a stronger down move but also lowers the probability rating.
Sales of BIDU around the 174.28 level and using a stop loss at 176.99 and having a 139.61 objective will offer a 9-1 risk/reward ratio. If stopped out, I would re-short the stock above 180.00 and use a 185.35 stop loss with at least $160 objective but likely the $140 objective would remain viable.
ORCL Friday Closing Price - 51.03
ORCL made a new 20-month low in December and since then (and with the help of the indexes) the stock has appreciated 20% in value in a straight up way. Nonetheless, the stock is now nearing a 9-month area of resistance between 51.36 and 53.48 that represents 8 previous spike highs (at 51.85, 51.36, 53.14, 51.28, 52.79, 53.48 (all-time high), 52.11, 51.45 and last week's high so far at 51.49) that suggests that strong chart selling will start to be seen this week if the indexes fail to make strides to the upside above their resistance areas. Without some fundamental help from the indexes or from a positive earnings report from the company (not due out until March 18th), it is highly unlikely that such a strong resistance area as this has proven to be will be broken.
It also needs to be mentioned that the ORCL is showing 7 weeks in a row of higher lows and higher highs, as well as green weekly closes, since a double bottom was built at 42.57/42.40, meaning not only that it is presently overbought but that no recent support levels have been built. In addition, no retest of the double bottom has yet occurred and from a chart basis and without catalytic game changing news, retesting the recent low is a high probability. Without any positive catalyst to support such a rally, it is unlikely the bulls will be able to maintain further upside without help.
To the upside and on an intraweek basis, ORCL shows resistance at 51.85 and at 52.11 (previous successful retest of the all-time high). Above those 2 levels, there is further resistance between 52.79 and 53.14 and then strong and pivotal at the all-time high at 53.48.
To the downside and on an intraweek basis, ORCL shows no support until 49.16 level, which is a very minor support from 1 year ago. Below that level, support is found at 47.98, at 47.64, at 47.33, at 47.00, at 46.34, at 45.92 and then clear sailing to 44.04, which will be the downside objective of this mention.
It does need to be mentioned that the 200-week MA, currently at 43.82, has been a very good support area since it was first broken to the upside in November 2004 (14 years ago). Since then, the line has been broken 3 times for more than 1 week (2008, 2016 and 2017) and was broken again 8 weeks ago on an intraweek basis. Given that there has been no catalytic news to support the recovery rally from the recent retest of the line, the chances of getting back down to the line are high.
It does need to be understood that ORCL is not a fast moving stock and it is a stock that often has much backing and filling, meaning that getting back to the MA line and fulfilling the objective of the mention could be a 4-12 week journey. On the other side of the coin, the stock has proven to be a good chart stock, meaning that the probabilities of success with this trade are high.
ORCL did close near the highs of the week and further upside above last week's high at 51.49 are likely to be seen this week. By the same token, it is unlikely that the September high retest at 52.11, which was the retest of the all-time high will be broken or broken by much.
Sales of ORCL above 51.49 and using a stop loss at 53.58 and having a 44.00 objective will offer at 3.6-1 risk/reward ratio.
My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest).
I did not find any other stocks among the ones that I researched (about 60) that could be given as a viable short mention at this time. Nonetheless, I will be looking at other stocks during the week and if I find other possible shorts, I will mention them in the message board.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| ARNA generated a new 8-month intraweek high and confirmed last week's break of weekly close resistance at 46.02 with another green weekly close above that level. The stock got to within $.40 cents of the 3+ year high at 50.05 with a high last week at 49.65 but evidently there is still quite a bit of selling interest at that level, given that the stock fell $3.55 from that high over the last 3 days of the week (dropped down to 46.10). Nonetheless, having tested the weekly close breakout at 46.02, the bulls were able to generate a positive reversal day on Friday and close the stock in the middle of the week's trading range, leaving the door open for either higher highs or lower lows than last week, depending on what the index market does. By the same token, the stock has generated 7 green weekly closes in a row and unless there is a fundamental negative or a strong sell off in the index market, the probabilities continue to favor the 50.05 level being broken and a rally up to the bullish flag objective at 51.80. Intraweek support is found at 45.35 and daily close support is found at 43.86. If both of those levels are broken, the bears will get their edge back. Probabilities favor the bulls this week. AXP continued its rally with a 7th green weekly close in a row and unlike the indexes, the stock closed near the high of the week, suggesting further upside above last week's high at 105.08 will be seen this week. On an intraweek basis, there is very minor resistance at 105.29 and then nothing until decent resistance at 107.55. The position shorted is likely to get stopped out as the bears failed to make a statement last week. As such, consideration should be given to covering the shorts and re-shorting the stock above the $107 level, as was the original mention. Very minor intraweek support is found at 102.80 that is further strengthened by the 200-day MA, currently at 102.63. If those 2 levels are broken, further downside is likely to be seen. Probabilities favor the bulls this week. CCJ generated a breakout on the weekly closing chart this past week with a clear close at 12.38, which is above the 12.08-12.12 resistance area that has been unbreakable the past 4 months. In addition, a new 24-month intraweek high was made above 12.78 that confirmed the breakout. Nonetheless, the bulls ran into additional selling interest as they got above the $13 level (got up to 13.04), given that there is further decent resistance between 13.36 and 13.59 that will likely need positive fundamental news to break above. The stock did sell off at the end of the week, to close in the lower half of the week's trading range, suggesting further downside below last week's low at 11.94 will be seen this week. By the same token, the company reported earnings on Friday after the close and though there is no after-hours trading on Friday, the earnings report seems to have been much better than anticipated as it came in at $.51 cents and expectations were for $.23 cents, meaning that if the report is seen as better than expected, the stock should start the week on a strong upside note. Any daily close below 12.08 would now be considered a negative. Any weekly close above 12.98 or an intraweek rally above 13.36 would be a strong short-term bullish statement that would suggest the stock is on its way to the $17-$20 level. Probabilities favor the bulls. CLF reported earnings on Friday and they were much better than expected ($2.03 vs expected $.59). Based on the report, the stock blew right through the intraweek resistance areas at 11.28 and 11.44 and got to within $.11 cents of the decent intraweek resistance at 12.37. The stock closed on the highs of the week and further upside above last week's high at 12.26 is expected to be seen this week. A break above the September intraweek high at 13.10, followed by a weekly close above 13.00 (major and important low weekly close from March 2009, would be a strong bullish sign and open the door for the $20-$25 area to become the upside objective to be reached within 6-12 months. Daily close support is now found at 10.82. Probabilities favor the bulls this week but the $13 level on a weekly closing basis is an important and pivotal area that will be tested and if failed, it would bring in a new selling binge. ENG bulls were unable to make a statement this past week, having closed at exactly the same price (at $.80) as the previous week. Nonetheless, this is the 5th week in a row that the stock has gone up to the .80 level and given that the company has no debt and is a thoroughly established entity, it is unlikely that the bears can gain any foothold to the downside, meaning that it is likely only a matter of time for the bulls to break the resistance area and start heading higher. The stock closed on the highs of the week, suggesting this coming week it is highly likely that a break of resistance will occur. Support is found at .70 and a break above .80 is likely to carry the stock up to the next resistance level at .95. Further and more important resistance is found at .99 that includes the 200-day MA, currently at .98. If that level of resistance gets broken, a strong short-covering rally is likely to occur. For now, the probabilities favor the stock trading up to .95 and back down to .80 until the earnings report comes out this Thursday, February 14th. FSLR generated follow through to the downside off of the previous week's negative reversal after getting up to the decent psychological resistance at $50. The stock did close in the lower half of the week's trading range and further downside below last week's low at 47.16 is expected to be seen. Nonetheless, on Friday after the 47.16 level was reached, the stock generated a positive reversal day, suggesting that there is buying interest near the $47 level. I did mention a couple of weeks ago that the chart suggests that the stock will get into a backing and filling spree between the "general" support and resistance areas of $47 and $53 and that is looking like a good probability. Having gotten down near to the $47 area this past week, it is now likely that going into the earnings report on Thursday February 21st that the stock will have an upward bias and likely get up near the $53 level on this next rally. As it is, less than a month ago, several rating companies did upgrade the stock and offered a $60 upside objective. Probabilities favor the bulls this week but a drop down to the $47 level could be seen. FNSR generated a small inside week after the previous week's strong spike up rally. Though no new highs were made on an intraweek basis, the stock did generate a green weekly close as well as a close near the highs of the week, suggesting further upside above last week's high at 22.96 is expected to be seen this week. The stock has built a bullish flag formation over the past week, with the flagpole being the rally from 21.33 to 23.12 and the flag the trading range the past 6 days down to Thursday's low at 22.32. A break above the top of the flag at 23.12 offers an upside objective of 24.10. If that occurs, a new 26-month high above 23.68 will be made that will suggest that the upside objective of the flag formation on the weekly chart at 28.25 is on pace to occur. Such an objective would be scheduled to be accomplished over a period of 13 weeks (one full quarter). Any daily close below 21.90 would now be considered a negative. Probabilities favor the bulls. MCIG was able to get above the previous week's high at .18, meaning that the previous week's low at ,155 is now a second successful retest of the 200-week MA, currently at .1539, suggesting that the downtrend is now over and that the bulls have the edge for a recovery rally. The stock closed near the highs of the week and further upside above last week's high at .185 is expected to be seen this week. Minor resistance is found at .20 and minor to decent as well as short-term pivotal at .21. A break above .21 would suggest a rally up to the 200-daily MA, currently at .241. Support is now minor to decent as well as pivotal at .155. The probabilities favor the bulls this week. MDT got above the previous week's high and generated a green weekly close but like the indexes it was all by minimum amounts. Also like with the indexes, the stock has a decent obstacle above in the form of the 200-day MA, currently at 90.26, that is not likely to be broken unless the earnings report on Tuesday February 19th is better than expected. Nonetheless, a rally up to the $90 demilitarized zone is likely to be seen before the earnings report and if the bulls are able to get above the intraweek resistance at 91.21, then further upside would likely occur. This is a stock that seems to be tied in to the index market at this time, meaning that what the indexes do, the stock is likely to do as well. Short-term pivotal support is now found at 86.84 and it is my suggesting that the stop loss be raised to 86.65 as a break of that support would suggest a drop down to at least 83.61. Probabilities favor the bulls this week but only for a rally up to the $90 demilitarized zone. SLCA generated a negative reversal week, having made a new 9-week high and then closing below the previous week's low at 13.28. The stock closed on the lows of the week and further downside below last week's low at 13.02 is expected to be seen this week. What is even more indicative is that the red weekly close means that the close 3 weeks ago at 14.04 is now seen as a successful retest of the decent and indicative low weekly close from 2015 at 14.47, meaning that the stock is still in a downtrend with the possibility of new lows below 9.30 being made or at least retested. There is minor to decent intraweek support between 12.89 and 12.97 that might hold up for a few days and generate a rally back up to 14.05 and even up to 14.35. Nonetheless, and based on what happened this week, in addition to the failure signal given in oil with the close on Friday below 53.99, such a rally should be used to liquidate the positions and get on the sideline. Probabilities slightly favor the bulls this week for a bounce but the bounce should be sold.
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1) ENG - Averaged long at 1.764 (5 mentions). No stop loss at present. Stock closed on Friday at .80. 2) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 4.76 (new price (47.63). 3) CLF - Averaged long at 8.976 (3 mentions). No stop loss at present. Stock closed on Friday at 11.83. 4) FSLR - Purchased at 47.54. Averaged long at 49.017. (4 mentions). No stop loss at present. Stock closed on Friday at 48.10. 5) CCJ - Averaged long at 10.637 (5 mentions). Stop loss now at 9.65. Stock closed on Friday at 12.37. 6) CRON - Liquidated at 23.67. Averaged long at 8.95. Profit on the trade of $2944 per 100 shares (2 mentions)minus commissions. 7) FCEL - Averaged long at 2.2275 (4 mentions). No stop loss at present. Stock closed on Friday at .037 (new price .445). 8) SLCA - Averaged long at 16.85 (2 mentions). No stop loss at present. Stock closed on Friday at 13.07. 9) MCIG - Purchased at .17. Averaged long at .215. No stop loss at present. Stock closed on Friday at .1799. 10) MDT - Purchased at 84.20. Stop loss now at 85.56. Stock closed on Friday at 89.01. 11) AXP - Shorted at 104.09. Stop loss at 105.35. Stock closed on Friday at 104.52. 12) FNSR - Purchased at 21.43. Stop loss at 20.28. Stock closed on Friday at 22.70 13) UGAZ - Purchased at 30.92. Liquidated at 30.67. Loss on the trade of $25 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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