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Issue #7 
February 19, 2007 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Thursday February 22, 2007 - Daily Closing Update |
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Market Humor |
Stock Indexes Update |
Stock Picks for Next Week | |
| Think about it!
15. Foam Rubber Toothpicks
Updates on last week's mentions and previous stock positions
2) NUAN - Holding long position at 12.25. - Stock closed Friday at 14.46.
3) SNDA - Liquidated half of my positions at 24.85. Profit on the trade was $328 (including commissions) per 100 shares. Holding the other half purchased at 21.43 (average). Stock closed on Friday at 24.59.
4) NENG - Holding stock purchased at 2.53. Long term Buy and Hold. Stop at 2.00. Stock closed Friday at 2.18.
5) ANGO - Liquidated all positions at 25.65. Profit on the trade of $321 (including commission) per 100 shares - Stock closed Friday at 25.02. New mention out on this newsletter.
6) CVS - Liquidated positions at 32.18. Loss on the trade of $223 (including commissions) per 100 shares.
7) PMCS - Initiated long at 6.73. Stop-loss order now at 6.56. Stock closed Friday at 6.93
8) KGC - Initiated short at 13.24. Stop-loss order at 13.66. Stock closed Friday at 13.26.
View Jan 29, 2007 Newsletter |
Chart Analysis Indexes - Signs of a top?
DOW Friday close at 12767
The DOW tacked on a 200 point rally this past week based on wording used by the Federal Reserve Chairman Bernecker and little else. Generally speaking the reports that came out this past week were, at best, neutral and yet the market seemed ready to pounce on the buy side and try to continue the 7-month up-trend. There were few signs, other than a lethargic Friday, to indicate that the DOW may be nearing a top.
At best the bears will be hoping that the DOW chart mirrors that of 2004 and that the top of the rally was seen last week, the 3rd week of February, much like in 2004.
It is important to note that the fundamental news that came out during the week did not have any surprises and the rally occurred mainly on anticipation of recovery rather than actual facts confirming recovery.
The DOW chart has few areas of immediate support and that means that any weakness that enters the market could generate a move down of close to 200 points before encountering any support of consequence. Strong support continues to be at 12460 - 12431 and last Monday's low of 12536 can also now be considered a support level as well.
On a very sensitive 10-minute chart, the DOW shows some support at 12744 and again at 12720. Keep in mind, though, that a 10-minute chart is simply a day indicator and not very good for longer term trading.
The previous weekly correctly low is 12431 which means that level continues to be critical to maintaining the up-trend. Any 10 point print below that level this week will indicate the DOW has found a mid-term top.
NASDAQ Friday Close at 2496
In contrast to the DOW the NASDAQ was unable to make new highs and the rally up to 2498 was only 2 ticks higher than last week's high. This in comparison with the DOW's 80 point scamper above last week's high.
In 2004 the NASDAQ also was the index that lagged and actually led the break on the way down. In Jan/04 the NASDAQ started to break on the 3rd week of Jan/04 and by the 3rd week of Feb/04, when the DOW began its break the NASDAQ had already dropped 115 points from its high. It seems that on that year the NASDAQ was the index that foretold the drop.
This year, the inability to rally, while the other indexes have, could also be foretelling what is to happen soon.
Same scenario as with the DOW the NASDAQ has not yet had a weekly low that is lower than a previous corrective weekly low. The previous corrective low in the NASDAQ is 2418. Any intra-day drop 5 or more points below 2418 will signal that the mid-term top in the NASDAQ has been seen.
The 20-week MA has also been steadily rising and is now just above 2414. In addition both the 20 and 50-day MA's have been closing in on each other and are now only about 15 points apart. Should the two cross a strong sell signal will be given.
Resistance in the NASDAQ will now be strong at 2498 and 2508. Support at 2454, 2434, and 2418-2422. There is a possible head & shoulders formation with the neckline at 2418. Should that level be broken the head & shoulders formation would give a downside objective of 2334.
S&Poors 500 Friday close at 1455
The SPX was almost a mirror image of the DOW this past week with a 26 point move from low to high (almost 2%).
Like the DOW the SPX also has moved up without much support being built and only the previous high close of 1450 can be used as a visual support level.
As with the DOW and the NASDAQ the SPX has also been able to maintain higher closing weekly corrective lows throughout the trend over the last 7 months. Any print 3 points or more below 1416 will break that trend and give a signal that the index has found a mid-term top.
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Stocks CHART Outlooks
Once again with the thought that the indexes may be at or near their mid-term top it seems right to be looking at short positions.
TRAD (Friday close 13.19)
On Thursday morning TRAD released their most recent earnings report and it was higher than anticipated. TRAD was able to rally above a previous resistance level at 13.30 and pierce, intra-day, the 50-day MA. By the end of the day TRAD was unable to confirm the breakout and closed below the MA line as well as below the previous 13.30 resistance level.
The 13.30-13.40 resistance level goes back quite a few months and was an important previous support level (for many weeks) and when it was broken generated the drop into the low 12's. It now must now be considered strong resistance and until broken to the upside and confirmed (two closes above) will continue to act as a potential top to any rallies.
Risk/reward ratio on this trade is very attractive. A short at Friday's closing price of 13.19 or higher, using a stop loss order at 13.48 and projecting an objective of 12.06 or 11.64 (previous weekly support levels) will offer a risk/reward ratio of 4-1 or higher.
TRAD has broken its weekly up-trend and looks to be in a sideways to short-term down mode with a possible trading range between 13.40 and 11.64.
My rating on the trade is a 6 (on a scale of 1-10 with the strongest probability rating being 10).
KGC (Friday Close at 13.26)
KGC has the potential of being a two-sided play. That means that if the stop-loss area gets hit it would likely be a good long.
After making a new 6 month low on 1/5/07 at 10.64 KGC rallied almost straight up to a major resistance level at 13.60 (rallied to 13.54) and failed to break through. After testing the 20-day MA with a drop down to 12.82 KGC rallied last week back up to 13.50 (re-test of resistance) and sold off on Friday to close only 1 tick higher than last week's close. This in spite of the strength of the DOW this past week.
In looking at both the daily chart and weekly chart, it seems that KGC is may be in a trading range between 13.60 and 10.60. With the probable correction in the indexes coming closer each day, it makes sense to believe KGC will once again be looking to drop down to the low side of the trading range.
The highest close on KGC for the past 4 months had been 13.30 and on Thursday it was able to generate a 4 month daily high close at 13.50. That close should have generated follow through on Friday and yet KGC reversed itself and closed once again below 13.30. That will be looked upon as a failure to follow through and will likely generate additional selling this coming week.
There is support at 12.82 from the previous low plus the 20-day MA and then down at 12.67 from another semi-important low. After that there is nothing of consequence until 11.27.
A short position can be instituted at the closing price of Friday at 13.26 using a stop-loss at 13.66.
Based on this history of this stock since Sep06 the probabilities of the stock going down from here are relatively strong. Add to that the index factor and this short position could be one to add to your portfolio.
My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).
ANGO (Friday close 25.02)
ANGO has been in a strong weekly up-trend since Sep06. The daily up-trend was interrupted this week with a break below the 20-day MA and positions previously purchased were liquidated at a profit.
ANGO seems to be in a corrective phase with potential for a move down to the 23.70-24.02 level of weekly support as well as the 50-day MA (around 23.60). Though the stock closed at 25.02 on Friday, ANGO has shown itself to be, on occasions, a fast moving and large intra-day range stock and therefore I am mentioning this trade at a time where ANGO is still quite a bit away from my desired entry point.
The weekly chart shows a very bullish scenario with strong probabilities of ANGO reaching the $27-$28 dollar level. A breakaway and runaway gap formation exists as well as an "island" bottom. This formation generally is seen with stocks that are getting into strong long-term trends.
Evidently, the gaps are important and should not be filled. The "runaway" gap is at 22.21-23.14 and already once ANGO dropped down to 23.49 to test the gap and it held firm. A second re-test of support would not be uncommon. Any drops down below 24.02 should be bought. Support at 23.70 and 24.02 should be considered strong. a stop-loss order can be placed at 23.39.
Considering an objective of 27.28 a purchase at 24.00 will yield a risk/reward ratio of 5-1
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
RADN (Friday close 9.56)
RADN is a stock that broke below the 20-day MA a week ago Friday and was downgraded last Tuesday causing a break of the 50-day MA as well. That day it dropped over $1 and not only broke but closed below the lowest weekly close since July/05 (9.65).
On Friday RADN had a short-covering rally back up to the broken weekly closing support with a move up to 9.69 but was unable to reverse the break and closed at 9.55.
With this break it is possible that RADN will get into a trading range for the next few months between a low of $6 and a high of $10. If the break is confirmed next Friday with another close below the 9.65 level it is likely RADN will get hit strongly thereafter.
There is some congestion support around 9.00-9.30 but the strong support doesn't start until the low 7's are seen.
RADN can be sold between 9.60-9.69 using a stop-loss price of 10.40 and an objective of 7.15 and perhaps longer term 6.00. The trade offers a 3-1 to 4-1 risk/reward ratio.
It is possible that intra-day RADN will attempt rallies up to the 10.00 but those rallies should be met with strong selling. Closes below 9.65 should be the norm.
Due to the fundamental downgrade of the stock and very evident break of long-term support this trade offers high probability percentages of success. Add to that the possibility of the stock indexes correcting makes shorting RADN a very attractive trade.
My rating on the trade is an 8 (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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