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Issue #635 
November 03, 2019 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls Took Advantage of "Not Negative" News to make New All-time Highs. Confirmation Needed.
DOW Friday closing price - 27347
The SPX and NASDAQ both made new all-time intraweek and weekly closing highs and the DOW came within 12 and 51 points of doing the same. All indexes closed on the highs of the week, suggesting further upside above last week's highs (DOW at 27347, SPX at 3066 and NAZ at 8386) will be seen this week.
The new highs were accomplished after the Jobs and GDP reports came out slightly better than expected. In addition, the Fed did lower the interest rates 25 points (as expected) and in the subsequent press conference with Fed Chief Powell it was clearly stated they have no outlook for now to raise interest rates. That scenario gave strength to the bulls to buy, knowing that there was no ammunition for the bears to sell. With this and the also better than expected earnings reports on AAPL and FB, the bulls were able to generate enough new buying interest to make new all-time highs after failing to do so for the past 7 weeks. Nonetheless, it must be mentioned that both Jobs and GDP are still falling (not getting better) as each month they have been lower than the previous month, meaning that even though they surprised this week, it still shows a slowing economy.
As such, the new highs are suspect inasmuch as there is not enough good news to bring aggressive new buying or even to "maintain" these levels for a period of time. This has been proven over and over again over the past 22 months as each new all-time high has been followed by corrections of anywhere between 6.5% to as much as 20%, all starting within 1-4 weeks after the new highs have been made and generating anywhere between .6% to as much as 3.1% rally above the previous high weekly close. Using the SPX as a barometer and the previous all-time weekly closing high at 3025, it would suggest that the most that could be seen (using the previous rallies above new highs) would be 3115 (3.1% rally above the previous high). Using the average of all 3 occasions over the past 22 months that a new high was made, it would be 1.9% above and using that average, it would suggest a high at 3082 would be the most probable. With the index having closed at 3066 on Friday, it would mean a subsequent follow through rally of 16 points above it. If the least of the corrections is used as a parameter for the correction-to-come, it would suggest a drop back down to 2878 (using a high at 3082).
It must be mentioned that for the next 2 months it is unlikely that there is going to be any catalytic economic news that would give the bulls additional ammunition. The next earnings quarter does not start until January and there are no earnings reports left to come out that would be catalytic for either side. It is highly unlikely that the Fed will lower interest rates further in December, meaning that what is still hanging over the market is the trade war in which the Chinese themselves stated this past week that it was unlikely that any further concessions would be made until Trump is out of office, meaning the chances of new good news in that sector is extremely low. December (starting around the second week) is usually a very slow month but generally supported, meaning that if anything is to happen to the downside it would likely start this coming week or the next and last 4 weeks.
To the upside and on an intraweek basis, the DOW still shows resistance at 27398. The SPX and the NASDAQ have no resistance above.
To the downside and on an intraweek basis, the DOW now shows minor but likely short term pivotal support at 26918. Below that, there is minor but more pivotal support at 27714 and then nothing until 26139 is reached. The SPX now shows minor but short term pivotal support at 3023. Below that, there is minor but even more pivotal suppor8036 and then nothing until 7823.
It is interesting to note that in April, when the NASDAQ made a new all-time high and closed on the high of the week, it was only by 43 points above the previous high and immediately the week after it was made, it opened lower the following week and proceeded to drop 884 points over the subsequent 4 weeks. This drop came immediately after the first 3 weeks of the earnings report finished (last week was the 3rd week of this earnings quarter) and that suggests that if the indexes open lower on Monday and do not generate any follow through to the upside above last week's highs (as expected), that the April drop could be mimicked this time around as well. It is also interesting to note that the previous all-time high was 8339 and the high on Friday was 8386, which is 47 points above. In April, the index rallied 43 points above the previous high before going into that correction mentioned above. As such, traders will be closely monitoring the opening as well as the action during the first hour of trading.
The last few weeks the bulls have been trying to make new highs but consistently failing. By the same token, the bears have not been successful in making a statement either, meaning that the index market was set for either a positive or negative catalyst to trigger a rally or a fall. The news last week as well as the fact that earnings generally did not disappoint this quarter (but were not all that positive either) set up the market for what happened last week in which the bears found themselves in a situation they could not win, at least on a short-term basis. Nonetheless, the economy is slowing down and there is nothing in the immediate horizon that will further stimulate growth and given that further upside of consequence is unlikely to be seen and the end of the year approaches, meaning that traders are likely to look to take whatever profits have been made and look to reenter at lower prices in the new year, the probabilities now favor a correction occurring during the next few weeks. In addition, it would mimic what has happened 3 times before over the past 22 months, making it the probability rather than the exception.
In my opinion, the probabilities favor the bears this week, with the only question being whether further upside of small consequence is seen first or not.
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Stock Analysis/Evaluation
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CHART Outlooks
I have no new mentions on the newsletter today but if the possible outlook mentioned above for the beginning of the week does occur, I will have mentions on the message board before Monday's close. By the same token, this coming week is important as the bulls need to confirm last week's breakout next Friday, meaning that new mentions could occur at any time this week. Short positions continue to be the preferred way to do given the risk/reward ratio and the fact the probability rating favors the bears based on the history of the indexes seen the past 21 months.
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Updates
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| Monthly & Yearly Portfolio Results
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Closed Trades, Open Positions and Stop Loss Changes
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Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted.
Status of account for 2019, as of 10/1 Profit of $9487 using 100 shares per mention (after commissions & losses) Closed out profitable trades for October per 100 shares per mention (after commission)
CRON (short) $615
Closed positions with increase in equity above last months close minus commissions.
SNAP (short) $271 Total Profit for October, per 100 shares and after commissions $1503 Closed out losing trades for October per 100 shares of each mention (including commission)
AAPL (short) $63
COF (short) $111 Closed positions with decrease in equity below last months close plus commissions. NONE Total Loss for October, per 100 shares, including commissions $174 Open positions in profit per 100 shares per mention as of 10/31
DIS (short) $167
Open positions with increase in equity above last months close.
DIS (short) $140
DD (short) $540 FNV (long) $2324 AU (long) $1521 ARNA (long) $885 ARNA (long) $88 Total $5872 Open positions in loss per 100 shares per mention as of 10/31
COF (short) $476
CRON (long) $86 Open positions with decrease in equity below last months close.
CRON (long) $252 Total $899 Status of trades for month of October per 100 shares on each mention after losses and commission subtractions.
Profit of $6302
Status of account/portfolio for 2019, as of 10/31Profit of $15789 using 100 shares traded per mention.
ARNA, based on the weekly close, continued its recovery having made another green weekly close (5th in a row) and closing near the highs of the week, suggesting further upside above last week's high at 50.31 will be seen this week. The upside objective on an intraweek basis is the 200-day MA, currently at 51.43, as well as the previous multi-year high weekly close at 50.93, both of these being important on a closing basis. A close above 50.93 next Friday would give control back to the bulls. Company reports earnings on Thursday after the close. Support on a daily closing basis will now be found between 46.70 and 47.00. Probabilities favor the bulls this week.
AU generated a red weekly close, making last week's close into a successful retest of the 6-year high weekly close at 22.75. The red weekly close does open the door for further downside below the recent low weekly close at 18.84. This does suggest that like the indexes, the action this coming week is pivotal as another red weekly close would confirm the successful retest and likely bring in new selling. If the stock is able to close next Friday above last week's close at 22.14, it will re-energize the bulls. On a possible positive note, Gold was able to close on Friday above the pivotal weekly close resistance/support at $1499, meaning the bulls have a slight edge this week. Pivotal daily close support is found at 20.01 that if not broken would keep the bulls in the stock with a slight edge. Any daily close above 22.14 would be a bullish sign. Probabilities slightly favor the bulls this week. COF made a new 10-week weekly closing high on Friday and closed on the highs of the week, suggesting further upside above last week's high at 95.64 will be seen this week. The upside objective at this time is closure of the gap at 96.59 that was created at the previous earnings report. The company reported earnings on October 24th and they were slightly better than expected but lower than expected on Revenue. With the help of the index market, the stock has moved up 5.5% in price since the report but the high after the report was on Tuesday and for the last 3 days no further upside has been seen. This does suggest the stock will be tied in to what the indexes do this week. Pivotal intraweek support is found at Thursday's low at 92.48, which was also last week's low. A break of that level this week would suggest the rally is over. On a daily closing basis, there is decent resistance at 96.12 that if broken would give the bulls additional ammunition. Probabilities favor the bulls but the stock is totally tied in to what the indexes do, especially since the earnings report has come out and was somewhat uneventful. CRON generated a red weekly close, making the previous weeks close at 8.96 into a new pivotal weekly close resistance level. The stock closed near the lows of the week and further downside below last week's low at 7.93 is expected to be seen this week. Nonetheless, the stock seems to have found a bottom to this 9-month downtrend and this move down could be the required/needed retest of the recent intraweek low at 7.40 and the weekly closing low at 7.85. If that is the case, a short-covering rally of some consequence could then ensue. Intraweek support is found at 7.40 and short-term resistance is found at 9.37, midterm at 10.56, and long term at 11.90. Company reports earnings a week from this coming Tuesday and that could be pivotal. Probabilities favor a relatively uneventful week but with a slight upward bias. DD generated another green weekly close (the 3rd in a row) and closed on the highs of the week, suggesting further upside above last week's high at 69.78 will be seen this week. Nonetheless, the longer term trend is still down and this rally is likely being helped short-term by the index rally but with no resistance levels of consequence having been broken, the bears remain in control longer term. The stock did break a double high on the daily chart at 68.60/68.70 and shows no resistance above at 71.15, meaning the probabilities favor that level being reached this week. Nonetheless, this stock is also index dependent and if the indexes fail to follow through, the probabilities would also favor the same for the stock. If desired, a drop back to 68.60-68.70 is likely to be seen at the beginning of the week and could be used to cover shorts (take profits) and re-short above 71.00 with a stop loss at 73.87. Downside objective remains $56-$60. Probabilities favor the bulls this week. DIS generated a failure signal against the bears, having closed above the weekly close breakdown point at 131.67. The stock closed on the high of the week, suggesting further upside above last week's high at 132.80 will be seen this week. Pivotal intraweek resistance is found at 133.68 that if broken would open the door for further upside with no resistance of consequence found until the $140 level is reached. The stock is sensitive to the index market and therefore will likely react to what the indexes do this week. The stock once again successfully tested the 200-day MA, currently at 129.10, and is part of the reason that the stock rallied on Friday. Nonetheless, the stock gapped up on Friday between 130.15 and 130.51 and there was no new news to support the gap other than renewed expectations that the company will star in the streaming video market. The company reports earnings of Thursday after the close and that suggests that the stock will be in a trading range between $130 and $133 until that report comes out. Probabilities favor a sideways trading range until Friday when the earnings report will be a catalyst. Either way, a stop loss at 133.78 should be used this week. ENG generated an inside week but did make a new 14-week weekly closing low, suggesting a slow deterioration of the previous uptrend continues. The company does report earnings on the 14th of November, suggesting this coming week is likely to be a non-eventful week. By the same token, the stock has now generated a weekly closing low below 1.00 for 2 weeks in a row and that suggests that the bulls will need a better than expected earnings report to regenerate buying interest. On a possible positive note, this same "identical" type of short-term weakness as seen for the past 12 weeks was also seen in September 2016 just prior to a strong rally from 1.20 to 3.10, meaning that the earnings report next week could be the positive catalyst that the bulls are waiting for. The stock has been straddling the 200-day MA, currently at .88, for the past 7 days but has yet to break the line on a daily closing basis, meaning that the bulls still remain with the edge. As has been the case for the past few weeks, the 1.10 level remains pivotal resistance. The 200-day MA, on a daily closing basis, remains support. Probabilities slightly favor the bulls this week for a rally and perhaps a close above 1.00. FNV confirmed with another green weekly close, last week's buy signal of the break above the 94.83, which had been resistance for 6 weeks in a row. The stock closed in the upper half of the week's trading range, suggesting further upside above last week's high at 97.73 will be seen this week. The previous all-time high weekly close at 97.66 is resistance that if broken would likely bring about a retest (and likely break above) the all-time intraweek high at 101.19. Likely pivotal support is found at 92.85. Probabilities favor the bulls. MDT made a new 6-week high and closed in the upper half of the week's trading range, suggesting further upside above last week's high at 110.20 will be seen this week. Nonetheless and using the daily chart, the stock generated a negative reversal day on Friday, having made the new 6-week high but then closing red and on the low of the day, suggesting the first course of action for the week will be to the downside below Friday's low at 108.41 will be seen on Monday. This negative reversal in spite of the indexes being green could be indicative that no further upside will be seen and that last week's rally was the necessary/required retest of the all-time high made on September 24th at 112.05. Very minor support is found at 107.31 and then slightly stronger at 106.00. With the indexes possibly not following through on their close on the highs of the week, the same scenario is facing the stock. Resistance is found at 112.05 and as long as that is not broken, the bears will remain with the door open for that being a major high. The company reports earnings on November 19th and unless the indexes continue higher, the probabilities slightly favor the bears. SRUTF continued its downtrend, having made a new 49 week low and now having the only support being the all-time low at .1891. One thing that was a magnet but did get closed this past week was the gap that was created on November 28th of last year between .22 and .224. The all-time low daily close is at .2066 and it is unlikely that level will be broken at this time without negative fundamental news. The company announced financial results on Wednesday that stated that a needed license for sale of Cannabis flower was granted on October 16th that would allow them to increase sales and that the future of the company was bright. The announcement did not bring about any new buying interest but with the gap closed and the all-time low close by, the probabilities do favor the bulls at this time. Evidently, a drop below .1891, followed by a daily close below .206 would be seen as a negative signal. Short-term pivotal resistance is found at .2629 that if broken would suggest a double bottom has been built. Probabilities still favor the bears this week but given that there is no more room to the downside on the chart without long term damage done and there is no negative news on the company, it does mean that it is likely that something of importance will occur this week.
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1) ENG - Averaged long at 1.616 (6 mentions). No stop loss at present. Stock closed on Friday at .96. 2) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 4.98 (new price (49.82). 3) MCIG - Averaged long at .215 (2 mentions). No stop loss at present. Stock closed on Friday at .0315. 4) COF - Averaged short at 90.87 (2 mentions). No stop loss at present. Stock closed on Friday at 95.25. 5) DIS - Averaged short at 134.42 (2 mentions) No stop loss at present. Stock closed on Friday at 132.75. 6) FNV - Averaged long at 90.15 (4 mentions). No stop loss at present. Stock closed on Friday at 96.45. 7) CRON - Averaged long at 12.80 (4 mentions). No stop loss at present. Stock closed on Friday at 8.22. 8) AU - Averaged long at 19.205 (4 mentions). No stop loss at present. Stock closed on Friday at 21.61. 9) MDT - Shorted at 102.35. No stop loss at present. Stock closed on Friday at 108.57. 10) ARNA - Averaged long at 48.36 (3 mentions). No stop loss at present. Stock closed on Friday at 49.82. 11) DD - Shorted at 67.98. Averaged short at 69.77 (2 mentions). Stop loss at 73.87. Stock closed on Friday at 69.64. 12) SRUTF - Purchased at .36. No stop loss at moment. Stock closed on Friday at .216. 13) CRON - Shorted at 10.52. Covered shorts at 8.47. Profit on the trade of $615 per 100 shares (3 mentions) minus 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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