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Issue #631 
Sep 22, 2019 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls Fail to take Control. Bears now have the Edge!
DOW Friday closing price - 26935
The indexes all generated red weekly closes on Friday, meaning that the recent rally is likely over and more importantly for the bears that the all-time intraweek and weekly closing highs now show a successful retest of them. The indexes all closed on or near the lows of the week and further downside below last week's lows are anticipated to be seen this coming week (DOW below 26899, SPX below 2978 and NASDAQ below 8086). The reasons for the weakness were 1) Interest rates were cut as expected but no sign of further cuts coming was given (expectations failed), 2) China cancelled the trade meeting scheduled for October. Both of these items had been the reason for the rally and now because of the disappointment of not being "more than expected", the reason for the weakness.
The bulls ended up having an inside week (lower highs and higher lows than the previous week) but did trade green and above last week's closes for most of the week and the SPX and the NASDAQ for the first 3 hours of trading on Friday. Nonetheless, the bulls failed to generate a green weekly close and given that they were committed to making new all-time high when the inverted bearish flag formation was negated 4 weeks ago does make the end result even more indicative. There are no possibly positive catalytic economic reports due out this week, meaning the bulls will not have any new ammunition to negate Friday's bearish action.
On a positive note for the bears, there are magnets below that are likely to draw the traders down and cause what could be a domino-like effect to the downside. The DOW and the SPX show a breakaway/runaway gap formation that will now be targeted for closure given that the expectations that built the formation in the first place are now gone. Those gaps in the DOW are between 26362 and 26603 and between 26198 and 26244 and in the SPX between 2938 and 2957 and between 2914 and 2921 and closure of those gaps will mean a correction of 4.6% and 4.2% respectively. The NASDAQ is also showing a breakaway gap between 7891 and 8001 that will also show a 4.3% correction if closed. Such a drop at a time where it was expected that new all-time highs would be made, as it happened the previous 2 times over the past 18 months when the bulls were committed to making new highs, is a chart negative that will require both further rate cuts and a trade agreement between the U.S. and China to occur and turn the indexes back to the upside and at this moment, both seem to be highly improbable.
As stated last week, the fundamental facts in place at this moment actually favor the bears for the simple reason that 1) resolution of the trade war is not likely to happen until a new administration is in place. 2) The economy remains positive but slowing down (not supporting new highs). 3) Economic statistics remain positive enough as to not give the Fed strong reasons to ease much more at this time. 4) Indexes have rallied over 7% in the past 7 weeks without any tangible catalyst. 5) Indexes are now overbought. These factors are not supportive of the bulls getting any ammunition with which to attempt to make new highs.
To the upside and on an intraweek basis, the DOW now shows resistance at 27272, at 27306 and at the all-time high at 27398, the SPX now shows a double high at 3020 and at the all-time high at 3028 and the NASDAQ now shows resistance at 8237 at 8244 and at the all-time high at 8339.
To the downside and on an intraweek basis, the DOW now shows short-term pivotal support at 26899 and then nothing until minor at 26717 and minor again at 26465. Below that, it is a straight line to the 26,000 demilitarized zone. The SPX shows short-term pivotal support between 2973 and 2978 and then even more pivotal at 2957. Below that there is no support until the 2900 demilitarized zone is reached. The b>NASDAQ shows short-term pivotal support at 8176 and then again at 8001. Below that, there is no support found until 7879.
Last week was an important battle where the result was uncertain until the very end of Friday. Nonetheless, battles do decide short-term advantages and those now belong to the bears. This coming week the following economic reports are due out: 1) on Tuesday the 20-city Case/Schiller report and Consumer Confidence numbers are due out. The former is not a catalytic report and the latter is already near all-time highs and more likely to come in lower than higher (expected at 135.1). 2) on Thursday, the 3rd estimate of GDP comes out but given that it is the 3rd estimate, it is unlikely to be out of line and move the market. 3) on Friday, Durable Goods and Personal Income and Spending come out. Nonetheless, Durable goods is expected to be negative (-1.3%) and Personal Income and Spending have not been catalytic in the past. As such, this economic calendar is bereft of catalysts, especially in assistance to the bulls.
It is important to note that using the weekly chart, there is no established support below until the bottom of the flag formation is reached. The indexes have had higher lows every week for the past 6 weeks and that opens the door wide for the bears to be in control and targeting the bottom of the flag (DOW at 25339, SPX at 2822 and NASDAQ at 7662) if the break of the top of the flag is broken any day this week (DOW at 26378, SPX at 2938 and NASDAQ at 8039). It is safe to assume that these levels (top of the flag) will be the targets this week, meaning that further downside of about 2% will be seen this week.
Probabilities strongly favor the bears this week.
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Stock Analysis/Evaluation
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CHART Outlooks
The action this past week gave a clear edge to the bulls for at least the next 4 weeks. As such, short positions are the ones to consider. The first mention does have one additional factor to support a short sale, inasmuch as it is in the natural gas industry and there is a seasonal bias for a down movement starting in September and lasting approximately 2 months.
LNG Friday Closing Price - 66.92
LNG is a natural gas company in the energy sector that has for the past 17 months traded sideways between 55.09 and 71.03. Nonetheless, over the past 5 years has been as high as 85.00 and as low as 28.00 and that does open the door for a dependable short with potential for more.
LNG got down to 57.90 5 weeks ago but the bulls have enjoyed 4 green weeks in a row after having suffered through 6 red weeks in a row before that, all of this happening between 70.49 and 57.90. The stock got up to 67.49 this past week and closed near the high of the week, suggesting further upside above that high will be seen this week. Nonetheless, resistance of some consequence begins to be found between 67.43 and 68.33 that should find traders willing to sell due to a 17-month history of resistance. Just as important is the fact that the stock is now overbought and has not built any support on the way up, meaning that if strong selling is found, the stock could give up all the gains seen recently. It is also expected that natural gas supplies will increase 7.1% over what they were 1-year ago, giving the bears some decent ammunition.
LNG has seen 11 high daily closes since February between 66.91 and 68.33 and 4 weekly closes between 66.93 and 67.87 during this period of time. There have also been 4 high weekly closes seen during the same period of time above those levels with the highest weekly close during the entire 17 month being at 69.50, suggesting there is a mountain of chart resistance within $2.68 cents of Friday's close. On the other side of the coin, there is less support found at $64, at $62 and at $59, meaning that any way you look at the chart, there is more downside than upside based on the 17 month trading range and there is stronger resistance than support. With the stock closing near the high of the week and likely to get up to or near the $68 level, the door is wide open with a higher probability of success than not, as well as a decent risk/reward ratio that suggests this is a trade that needs to be done.
To the upside and on an intraweek basis, LNG is expected to get up to the 68.00-68.33 level this week. The closest but minor support is found at 63.11. Below that, there is quite a bit of support between 62.65 and 60.01, with the latter being decent.
I read that the United States has enough natural gas stored to last 90 years and that suggests that there is a much higher probability of the stock breaking the bottom of the sideways trend than above the top of it.
The 200-day MA is currently at 64.90 and that got broken to the upside 6 day ago and at the very least likely to be tested even if the bulls can maintain the recent strength.
Sales of LNG up around the 68.00 level and using a stop loss at 70.55 and having at least a 60.00 objective offers and 3-1 risk/reward ratio.
My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest).
DD Friday Closing Price - 71.60
DD has been on a major downtrend for the past 20 months from a high at 109.17. The stock found a bottom to the downtrend in May at 63.62, about the same time that the indexes began to launch their rally. The stock rallied back up to 77.03 from that low but then proceeded to break that low with a low at 63.28 but that low also coincided with the last rally in the index market that started about 5 weeks ago. The 2 lows at 63.62 and 63.28 were seen as a double bottom and should have resulted in a rally above 77.03 but the best the bulls could do is a rally up to 73.77 and from which a negative reversal occurred this past week.
It must be mentioned that the $75-$77 level was a long established and strong level of support and yet it was broken easily, suggesting that DD will continue the downtrend until the next level of decent support is reached down at the $60 level, meaning that the bears will keep on shorting the stock on rallies, especially since it has been proven through the chart action that this stock is still in a long term downtrend.
It is important to note that DD got up a week ago Friday to not only an established resistance level on the intraweek chart at between 73.72 and 74.37 with a high at 73.77 but also very close to the 200-day MA, currently at 74.23. That line has not been broken for the past 52 weeks and now that the index market is likely to head lower, the probabilities of the bulls having any ammunition to break that resistance and MA line is close to nil.
To the downside and on an intraweek basis, DD shows minor to perhaps decent support at 69.15 but below that level there is no support 65.53. Below that level, the double bottom at 63.62/63.28 is the only support level left before the $60 is reached. That double bottom will become a magnet for the bears to break to generate the next and more important magnet at the $60 level. To the upside, the resistance between 73.72 and 74.37 that is strengthened by the 200-day MA have become pivotal resistance but unlikely to be broken without a catalyst.
Sales of DD between Friday's closing price at 71.55 (and above) and using a stop loss at 74.47 and having a $60 objective offers a 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.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| AAPL generated a red weekly close on Friday (the first in 4 weeks) and closed on the low of the week, suggesting further downside below last week's low at 217.47 will be seen this week. The red weekly close, if confirmed next week with another red weekly close, will be seen as a successful retest of the all-time high weekly close at 227.63 and like with the indexes, new selling interest will be seen. The stock did generate a sell signal on the daily closing chart, having closed on Friday below the low daily close for the past 9 days at 218.75 (closed at 217.73). The stock is showing 3 gaps below with the first one being at 216.78. With the stock showing a short-term pivotal intraweek support at 217.02, closure of that gap is likely to push the stock down to at least test the breakaway/runaway gap formation at 206.98/207.32 and at 209.48/211.07. Whether that gap formation is closed or not is not clear at this time but a drop down near 211.07 has a high probability of occurring, especially since there is no support between 217.02 and 211.07. It is important to note that just like with the indexes, the stock has gone straight up with higher lows each week for the past 7 weeks, suggesting that if the bears gain short-term control there is no intraweek support on the weekly chart until 198.41 is reached and even then that is minor support. Evidently with the bears seemingly having gained short-term control, a rally above last week's high at 223.76 would change the picture back to bull control, meaning that a stop loss should now be placed at 223.86. Probabilities strongly favor the bulls this week. ARNA generated the 5th red weekly close in a row but the bulls have been able to keep the stock from giving a failure signal given that the previous multi-year high weekly close at 50.93 has not been broken even though the stock has traded intraweek below that level the last 3 weeks. On Friday, the stock got down as low as 49.95 but the bulls managed to rally the stock at the end of the day (in spite of strong end of the day weakness in the index market) to close above 50.93 and even in the upper half of the day's trading range, suggesting the first course of action for the week will be to the upside above Friday's high at 51.84. The stock did close slightly in the lower half of the week's trading range, suggesting a slightly higher probability of going below last week's low at 49.95 than above last week's high at 52.73 but the fact the close of the week was only $.28 cents below the midpoint, suggests either a very small drop below 49.95 or a statement week for the bulls by going above 52.73. If the stock does get above Friday's high at 51.83 on Monday, it will make Friday's low into a second successful retest of the 200-day MA, currently at 50.37, and that should give the bulls new ammunition. Any daily close below 50.18 would now be seen as a decent negative. Any intraweek rally above 53.95 or daily close above 53.28 would be a signal that the bulls have regained short-term control. Probabilities favor the bulls. AU generated a positive reversal week, having made a new 7-week low and then closing green and on the high of the week, suggesting further upside above last week's high at 20.28 will be seen this week. If that occurs, a double low will be established at 18.58/18.55 and that will be seen as the 2nd and needed/required established support level (the first one being at 16.82) from which a new attempt to resume the uptrend will occur. Using the weekly chart, there is no intraweek resistance above until 21.74 is reached. That level has quite a bit of meaning given that 21.91 is the previous 6-year high weekly close. If the bulls fail to close above that level over the next 2 weeks, it would likely mean that the gold run has run its course. A weekly close above 21.92 combined with a break of the previous intraweek high at 22.91 seen in August 2016, would suggest the recent high at 23.85 will be tested and probably broken. Evidently, a drop back down to the 18.55/18.58 area would be seen as a negative, at least a short-term one. Probabilities favor the bulls for at least a rally up to 21.74. COF generated a negative reversal week, having made a new 7-week high and then closing red and on the low of the week, suggesting further downside below last week's low at 92.51 will be seen this week. There is short-term pivotal support at last week's low and then nothing until minor to perhaps decent at 90.12. A bit stronger support is found at 88.75, 88.00 and at 86.79. Last week's high at 94.73 is now pivotal resistance. Probabilities favor the bears this week. CRON generated the 7th red weekly close out of the last 8 weeks and closed near the low of the week, suggesting further downside below last week's low at 10.04 will be seen this week. On a possible positive note, the bulls were able to rally enough at the end of the day on Friday to close above the pivotal weekly close support at 10.21 to generate a positive reversal on the daily chart and a close in the upper half of Friday's trading day, suggesting the first course of action for the week on Monday will be to the upside. The $10 demilitarized zone is a very important and indicative area and if the bulls are going to accomplish anything, it has to be this week. Pivotal intraweek support is found at 9.56 and resistance at 11.77. Probabilities slightly favor the bulls this week, as far as generating a green weekly close next Friday. DIS generated a down week and a close on the low of the week, suggesting further downside below last week's low at 131.61 will be seen this week. The stock has continued to be the "weak sister" among the index affected stocks given that the stock also shows a negative inverted shoulders formation that was not negated when the indexes negated theirs. With the stock now only $1.25 (.02% from the close on Friday) from the bottom of the flag that if broken would give a 123.95 objective, the probabilities strongly favor the bears winning this battle. There is further and decent support 130.55 but if that level is broken, there is absolutely no support found until the 200-day MA, currently at 126.02 is reached. On an intraweek basis though, there is no support found until the previous all-time high weekly close 118.90 is reached. Minor but possibly pivotal resistance is found at 137.36 and longer term pivotal at 140.08. Probabilities favor the bears. ENG generated a positive reversal week, having made a new 7-week low but then closing green and in the upper half of the week's trading range, suggesting further upside above last week's high at 1.08 will be seen this week. Nonetheless, the action was not decisive given that the new low was only by 2 points and the green close was also only by 1 point, meaning that it was not the kind of action that is convincing enough to bring in a lot of new buying interest. By the same token, the stock got down to .99 and that is an important intraweek support, suggesting that the worst of the correction is over and that the stock will now be moving back up toward the 200-week MA at 1.16. Probabilities favor the bulls. FNV bears failed to follow through on the previous week's close on the lows of the week to generate a green weekly close and a close on the high of the week, suggesting further upside above last week's high at 95.02 will be seen this week. The stock shows daily close resistance at 94.95 and minor to decent intraweek resistance between 96.20 and 96.49. If all of those are broken, there is no resistance above until minor at 99.14 and then decent at the all-time high at 101.19. With the indexes looking to head lower, the probabilities favor the stock heading higher with the most likely upside objective of 99.14. Nonetheless, at that point questions regarding Gold continuing higher will begin to be asked and that means that consideration to taking profits above 99.00 should be given. Intraweek support is now pivotal and indicative at the previous week's low at 98.49. Probabilities favor the bulls. MDT made a new all-time weekly closing high this past week and closed near the high of the week, suggesting further upside above last week's high at 111.60 will be seen this week. The all-time intraweek high seen 3 weeks ago is at 111.75 so if that high is broken in spite of the indexes heading lower, it does mean that the stock has a lot more strength than anything associated with the index market. It is evident that the bulls are in full control at this time and a new all-time high this coming week would be reason to cover the shorts and take the loss. Short-term pivotal support is found at 108.83 that is broken would open the door for more downside. Probabilities favor the bulls. SNAP made a new 7-week high and closed on the high of the week, suggesting further upside above last week's high at 17.14 will be seen this week. The rally was not unexpected after the previous week's reversal from a new 6-week low. Nonetheless, the stock remains below an established weekly close resistance area between 17.89 and 18.01 and if the indexes head lower (likely), the probabilities do not favor the bulls being able to break that resistance level at this time. For this week though, the probabilities favor the bulls for a rally up close to the $18 level. Short-term pivotal support is found at 16.23 that if broken would likely push the stock down to the 15.00 level. Longer term pivotal support is found at $14. SRUTF generated the 6th red weekly close in a row but the last 3 weekly closes have all been in a very narrow $.016 trading range, suggesting the bears are having trouble making further strides to the downside. The 9-month intraweek low at .274 has not been broken for the past 4 weeks in spite of the red weekly closes and it seems that this week it will be the bulls attempting to see if they can turn this around. Pivotal resistance is found at .342 and pivotal support at .274. Probabilities slightly favor the bulls. |
1) ENG - Averaged long at 1.616 (6 mentions). No stop loss at present. Stock closed on Friday at 1.05. 2) ARNA - Averaged long at 3.725 (4 mentions). No stop loss at present. Stock closed on Friday at 5.12 (new price (51.07). 3) MCIG - Averaged long at .215 (2 mentions). No stop loss at present. Stock closed on Friday at .035. 4) AAPL - Shorted at 223.38. Stop loss at 223.86. Stock closed on Friday at 217.73. 5) DIS - Shorted at 137.25. Stop loss at 137.46. Stock closed on Friday at 132.27. 6) SNAP - Shorted at 16.89. Stop loss at 18.46. Stock closed on Friday at 17.04. 7) FNV - Averaged long at 90.15 (4 mentions). No stop loss at present. Stock closed on Friday at 94.83. 8) CRON - Averaged long at 14.033 (3 mentions). No stop loss at present. Stock closed on Friday at 10.29. 9) AU - Averaged long at 19.205 (4 mentions). No stop loss at present. Stock closed on Friday at 20.22. 10) MDT - Shorted at 102.35. No stop loss at present. Stock closed on Friday at 111.18. 11) COF - Averaged short at 85.285 (2 mentions). No stop loss at present. Stock closed on Friday at 92.74. 12) ARNA - Averaged long at 50.19 (2 mentions). Stock closed on Friday at 51.07.
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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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