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Issue #13 
April 1, 2007 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Friday March 30, 2007 - Daily Closing Update |
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Portfolio Results |
Stock Indexes Update |
Stock Picks for Next Week | |
| Results of mentions for the last 3 months
Closed out profitable trades (including commission)
UTSI (short) $49
ACOR (short) $101
RADN (short) $51
MMC (short) $53
Profit of $722 using 100 shares per trade (after commissions)
1) JDSU - Shorted at 15.36. Stop loss at 15.70. Stock closed Friday at 15.23.
2) MOT - Shorted MOT at 17.87 with stop at 18.31. Stock closed at 17.67
2) TRAD - Liquidated long purchased at 12.04 at 12.56 for a profit of $38 per 100 shares (commissions included).
3) MMC - Short at an average price of 28.84. Original stop loss order rescinded. Stop loss order now at 30.37. Stock closed Friday at 29.29.
4) JNPR - Shorted at 19.28. Stop loss order at 20.24. Stock closed Friday at 19.67
5) RADN - Holding short position shorted at 9.63. Stop loss order now at 9.54. Stock closed Friday at 9.12.
6) FTEK - Shorted at an average price of 26.755. Stop loss order now at 26.32. Stock closed Friday at 24.65
7) NDAQ - Shorted at 29.23. Stopped out at 29.54 for a $45 loss (including commissions).
8) NDAQ - Shorted at 29.76 with a stop loss order at 30.85 stop close only. Stock closed Friday at 29.41.
View Mar 04, 2007 Newsletter View Mar 11, 2007 Newsletter View Mar 18, 2007 Newsletter View Mar 25, 2007 Newsletter |
Chart Analysis Indexes - Week of Pause?
DOW Friday close at 12354
The DOW this week traded between the 20 and 50 day MA's. On Friday it broke below the 20 day MA but was unable to close below the line and ended up with a mini reversal day (higher highs, lower lows, and a close in the green). If the pattern of trading between the MA's is repeated this week it will mean a trading range between 12470 and 12267.
If the DOW continues to mirror 2004 it will mean the close this coming week is likely to be higher than Friday's close (12354) but lower than last weeks close (12481). If the pattern then holds true, mirroring 2004, that means that starting next week a down trend will begin which would take the DOW into breaking the recent low at 11939.
In looking at the weekly charts the DOW has the 20-week MA coming in around 12416 and the 50-week coming in around 11800. Weekly charts show the possibility of a flag formation being in the process of being built. As a matter of reference any close in the DOW below 12110 on a weekly closing basis (Friday's) will strongly weaken the chart and give an objective of testing the 7-year high close at 11577 which was made the week of May 05, 2006.
Intra-day support/resistance levels for Monday are as follows: Support at 12335 and 12287 and resistance at 12301 and 12416.
This week, the probabilities favor a choppy market with an upward bias and trading between the ranges I outlined above.
NASDAQ Friday Close at 2421
The NASDAQ, after being able to confirm a close above the 50 day MA on Monday, failed to follow through and subsequently dropped down to the major support at 2401 as well as the 20-day MA at 2396-2401. On the recent move down it left a mini gap between 2434 and 2435. Closing that mini gap is likely to be an objective of the traders this week. A rally up to that level will take it to previous low resistances at 2435 as well as another test of the 20 day MA it failed to hold above this past week.
If the NASDAQ is able to close above the 2435 level (intra-day, daily, and weekly resistance) it will likely test the 2470 major resistance level.
A close below 2401 will be considered very negative and is likely to generate strong follow through to the downside with a 2340 objective.
Many analysts have predicted that the Stock Market is in a corrective phase and that more downward movement will be seen. The charts certainly seem to show that the indexes are now at major pivotal levels and therefore should be treated accordingly.
The NASDAQ shows intra-day support at 2413-2416 and resistance at 2435.
Due to the fact that the NASDAQ has closer and more clearly defined levels of support and resistance it should be used as the main indicator for the stock market during the next few weeks.
S&Poors 500 Friday close at 1420
The SPX had been acting as the "strong sister" during this correction as two weeks ago it was able to establish a beachhead above the 20-day MA. Nonetheless on Wednesday of this week it fell below the 20-day MA and confirmed the breakdown with two subsequent closings below it. That move negated the previous breakout.
On Friday the SPX also had a reversal day, as the DOW did, but since it closed in the red the reversal day will not be considered positive. Intra-day it was able to test the 50-day MA and major support at 1409 as well as a rally above the 20-day MA. The close on Friday at 1420 was at an importing pivot point thus leaving the near term direction unclear.
A break below the 1409 support level will once again turn the chart negative and likely generate a move down to the 1373 support.
Strong resistance, intra-day, now at 1429-1430 and then at 1440. Support at 1413-1416 and then very strong at 1409.
With the positive reversal day in the DOW on Friday the week should start on an up note but since the support/resistance levels for all three indexes are clearly defined it is likely that the indexes will be generally subdued this week and trade between the ranges mentioned above.
Due to the weakness shown in the indexes intra-day on Friday it will be difficult for the indexes to maintain strong upside rallies as the buyers will feel jittery keeping long positions. If anything out of the ordinary happens it is more likely to be to the downside than the upside.
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Stocks CHART Outlooks
With the indexes likely to be close to their second top in their corrective phase this week should be one of taking profits on long positions and shorting stock that have weak charts.
WIND (Friday Close at 9.94)
After WIND saw its high made in July 2005 it has been in a consistent weekly downtrend with the strongest drop occurring last year between March and July. During that time WIND dropped 50% in value from 15.01 to 7.86. Since that low was made a short covering correction occurred with took it back up to 11.94.
After the 11.94 weekly high was made WIND had a drop to 9.65 as well as a subsequent rally up to 11.28, which can be considered a successful re-test of the 11.94 level.
Subsequently WIND dropped below the 9.65 support level and made a new low at 9.52. It is now trading below both the 20 and 50-week MA and looking like it wants to break again.
A few weeks ago WIND tested the 50-day MA with a rally up to 10.26 but was unable to get above it. For the last 7 trading days it has been closing just above the 20-day MA but showing weakness.
What makes this short trade so attractive is a small and well-defined risk factor as well as a downtrend that offers a very probable objective. The objective is a 4-year support level at 8.09-8.21
A sale of WIND at Friday's closing price of 9.94 using a stop-loss order at 10.34 (above the most recent high as well as above the 50-day MA) with an objective of 8.21 will offer a risk/reward ratio of 4-1.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
ANGO (Friday close at 16.89)
ANGO is a stock that has been hit with as much negative news as it could be found. Just last week the company suffered a legal loss as Diomed won its lawsuit against ANGO for patent infringement. That judgement will likely mean that ANGO will have to pay between $4 to $12 million to Diomed. In addition last week they also revised downward their previous earnings report from a plus $.09 cent to a negative $.55 cents.
In anticipation of the lawsuit ANGO had come down from a high of 27.28 to 20.68 and after the earnings report came out it went down to last weeks low at 16.31. ANGO has now come down almost 40% from its highs and all the news should now be reflected in the price.
Fundamentally speaking (not my strength) ANGO seems to have now absorbed all the possible bad news that could have come and is nearing major levels of weekly chart support where long trades can be explored.
ANGO shows two weekly support levels of consequence at 16.04-16.16 and 15.22. On a weekly closing price the 16.16 level seems to be the most important and with the oversold condition that now exists it is probable that dips to that level will not only be supported but that rallies will be seen.
A rally up to a previous (Sept 1, 2006) resistance level at 18.00-18.42 is highly probable. A rally up to the previous island gap areas at 19.16-19.34 could also easily be seen.
Purchases in ANGO between 16.04-16.18 should be attempted and a sensitive stop at 15.96 should be placed. If a longer-term position is desired then the stop should be placed at 15.16 (below the major support at 15.22). A purchase at 16.18 with a stop at 15.96 and a first objective of 18.00 will offer a risk/reward ratio of 9-1. If a stop at 15.16 is placed and the objective is 19.34 then the risk/reward ratio would drop down to 3-1.
My rating on the trade is a 6 (on a scale of 1-10 with the strongest probability rating being 10).
MWA MWA (Friday closing price 13.81)
MWA is a venue pick as this stock has been a very evident trading range stock. Friday's low at 13.56 tested a previous weekly low successfully.
MWA is a stock that has only been trading for 9 months. Even though the stock has shown a very moderate weekly downtrend it has been a chart that has also shown various well-defined rallies and a tendency to work itself into consistent peaks and valleys within its slight downtrend. In essence, a stock that seems tradable from both sides of the coin (sell rallies, buy dips).
Recently MWA has been dropping and is now nearing a good support level at 13.60. Major support on MWA is at 13.02.
From June06 through November06 the chart valleys, using the weekly charts, were always lower than the previous ones but since the Nov06 low at 13.02 the next valley failed to break that low and generated a $3 rally after. Now MWA is on another valley that is now testing the last one at 13.49 and should the sideways to moderately lower pattern continue a rally of $2-$3, after the low has been set, should be expected.
A drop back down to test the 13.56 level is likely and should present a buying opportunity. Purchases in MWA between 13.40 and 13.60 using a "mental" stop loss order at 12.94 and looking for a rally back up to 15.75 will offer a 5-1 risk/reward ratio.
My rating on the trade is a 6.5 (on a scale of 1-10 with the strongest probability rating being 10).
COGT (Friday closing price 13.45)
COGT is a stock that has been in a major short-term up-trend and though it is reaching a major resistance level the risk/reward ratio on this trade as well as the very well-defined chart levels makes this trade an attractive one to consider. COGT has rallied over the last 8 weeks from a low of 10.18 to a recent high (Thursday) of 13.95.
COGT did break above the 20-week MA 4 weeks ago and above the 50-week MA two weeks ago and is now facing a strong resistance level at 14.74 but a strong support level at 13.00-13.10 (both from the 50-week MA as well as three daily and weekly lows at those prices.
A break above 14.74 could vault the COGT to the $17 level and an attempt at $20. Purchases between 13.00-13.10 can be attempted with a sensitive stop at 12.92 or, if a longer term position is being taken, a stop at 12.46 (below the previous weekly high close at 12.52).
Risk/reward ratio using a sensitive stop-loss order at 12.92 and a near-term objective at 14.74 would offer a risk/reward ratio of 9-1. If the 12.46 stop price is used the risk/reward ratio would drop down to 3-1. Keep in mind, though, that if the 14.74 level is taken out (ultimately a high probability) the risk/reward ratios would rise substantially.
My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).
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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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