Issue #673 ![]() Jun 14, 2020 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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Indexes Generate Negative Reversals. Top Found?
DOW Friday closing price - 25605
The DOW and the SPX generated a negative reversal week, having made new 15-week highs and then turning down, going below last week's low and closing near the low of the week, suggesting further downside below last week's lows DOW at 25078, SPX at 2984 will be seen this week. The NASDAQ generated a key reversal, having made a new all-time high and then going below the previous week's low and closing red. The reversal came close to being a classic key reversal week, having only failed to close below the previous week's low at 9462. If that had occurred, it might have meant that a new downtrend had begun. Nonetheless, since that did not happen, the negative reversal means that some form of correction to this 12 week rally is occurring but that a downtrend below the March lows is not likely to occur. By the same token, the close below the previous all-time high weekly close at 9731 does suggest that the uptrend is over for now and that a further downside is likely to come for the next 3 weeks (until new economic reports come out and the start of the next earnings quarter), which will be a correction of consequence to the rally.
With no possibly catalytic reports scheduled to come out for the next 3 weeks and no close by support levels built during this recent rally, drops down the previously established support levels below is likely to occur. In the DOW the next support level of consequence is found between 23300 and 24000, in the SPX between 2800 and 2855 and in the NASDAQ between 8135 and 8335. This would suggest further downside in the first 2 indexes of about 7% and about 15% in the NAZ. With the NAZ being the strong index and this being simply a correction without new fundamentals being seen, the drop in the index is only likely to be down to the 8900-9000 level.
With the Fed stimulus program now fully factored into the market and no new additional stimulus expected, there is little that can be done economically to help the market. In addition, with the country reopening but causing new spikes in infections to occur, there is nothing positive expected to happen until perhaps the next important economic reports due out the first week of July in the form of the ISM Index and Jobs Report. After that and if no negative surprises are seen, the traders will likely wait for the next earnings quarter to begin on July 13th. Earnings reports will be very important this time around for the simple fact that they will show the full brunt of the economic impact of the virus on earnings and income. As such, the probabilities of the indexes continuing lower for the next 3 weeks is high. As it is, the 12-week rally from the lows was straight up and no new support levels have been built yet, meaning that now that a top to this rally has been found, the traders will be anxious to find/locate and then build a new support level from where they can launch a new attempt to continue the 11-year uptrend, if and when the measures taken to overcome the negatives of the virus have been successful enough to generate new highs made. None of this is known at this time, meaning that is likely what the traders will be working on for the next 3 weeks.
To the upside and on an intraweek basis, the DOW will show decent resistance near the 27,000 level, the SPX near the 3154 level and the NASDAQ near the previous all-time high at 9838.
This coming week is likely to show continued volatility on both sides of the coin but with a bearish bias as new lows below last week's lows are seen. The bulls might attempt a rally at the beginning of the week and likely fail, meaning that selling should increase as the week progresses. Retail Sales, Capacity Utilization and Industrial production are due out Tuesday morning. If there are no surprises (unlikely to be), the rest of the week should be mostly down. Probabilities favor the bears this week.
OIL generated a negative reversal week, having made a new 3-month high and then closing red and near the low of the week, suggesting further downside below last week's low at 34.48 will be seen this week. On an bearish note, the bulls were unable to close the gap from February at 41.05, having seen a high this past week of 40.44 and the failure to close the gap leaves oil still in a bear trend, There is no intraweek support below until 31.10 is reached and with no weekly close support found until 33.87 is reached, the probabilities of further downside to those levels is high. The intraweek support down at 31.10 and at 30.72 is recent and somewhat dependable but on the weekly chart, there is no support until 19.46, meaning that a break below 30.72 could bring in some new selling interest. By the same token and on the weekly closing chart, the low seen in January 2016 at 29.42 could be the magnet and the downside objective based on the chart. Intraweek resistance is now found at 38.18 that looks minor to decent in nature. Probabilities favor the bears.
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Stock Analysis/Evaluation
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CHART Outlooks
I have no mentions this week though in reality the traders seem to be getting back to chart trading given that a top to this rally seems to have been found. Nonetheless, under this condition, shorts are the preferred trades and presently the portfolio is already overwhelmed with existing short held stocks, meaning I was not looking to add any new ones.
By the same token, this is a week where some day or overnight short trades can be added and as such, I will mentioning those on the message board. When they become available.
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Updates
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Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
AU generally had an uneventful week given that Gold did the same. By the same token, the stock generated a green weekly close, making last week's close at 23.82 into a successful retest of the previous 7-year breakout weekly close at 22.75 and suggesting this recent correction is likely over. The stock did close in the lower half of the week's trading range, suggesting further downside below last week's low at 23.34 will be seen this week. As long as the previous week's low at 22.83 is not broken, this move down will only be trading and building the new support level from which to launch a resumption of the uptrend. In looking at the Gold chart, the same move down is expected to be seen with a possible move down to $1701 (closed at $1738 on Friday). The chart remains bullish overall and a breakout is likely to occur sometime over the next 2-4 weeks. Probabilities favor the bears for an initial move down at the beginning of the week but then the bulls for another green weekly close next Friday. AXP did not follow through to the upside this past week (as expected) and ended up having an inside week but with a close near the low of the week, suggesting further downside below last week's low at 98.08 will be seen this week. Support is found between 94.82 (previous high weekly close breakout that stimulated the rally to 115.93) and 95.65 (previous minor to perhaps decent intraweek low). The 200-week MA is currently at 97.99 that will also be seen as support on a weekly closing basis. That is the present downside target of this correction. Nonetheless, a weekly close below 94.82 would open the door wide for a drop down to the 87.50-89.00 level where stronger intraweek support is found. Intraweek resistance is found at 103.64 but if broken, a rally back up as high as the 200-day MA, currently at 111.02, could occur. Probabilities favor the bears. CAT generated a negative reversal week, having made a new 17-week intraweek high but then closing red and near the low of the week, suggesting further downside below last week's low at 119.35 will be seen this week. On a negative note, the close on Friday generated a failure signal on the weekly closing chart given that the previous week's close above the 200-week MA, currently at 125.19, was not confirmed, meaning the stock remains in an overall bear trend. Downside target of this correction is likely to be the previous and decent intraweek support between 111.75 and 112.06. By the same token, there is an open gap down at 110.77 that might be targeted for closure given the proximity to it if the support levels are reached. The company on Thursday reported unexpectedly low product sales and did receive a downgrade but still with a $130 price tag. The support around the $112 level is decent and consideration should be given to covering short positions around that price if reached. Nonetheless, if broken there is no support until the $100 level is reached. Resistance is found at the 200-day MA, currently at 128.57. Important to note that the stock is showing an island formation to the downside, having gapped up on Thursday 6/4 between 129.03 and 133.39 and then gapping down on Wednesday between 130.56 and 126.84. Island gaps are very rare but strong indicators if confirmed and with resistance being clearly found at the 200-day MA, closure or non-closure of the island gap will be meaningful. Probabilities favor the bears. CNX generated an intraweek break of short-term resistance at 11.27 that carried the stock to test the 200-week MA, currently at 12.27, with a high last week at 12.13 (it is important to note that 12.27 was the mention's objective and it was reached). Nonetheless, the bulls failed to confirm the mini breakout when the stock fell back at the end of the week to close near the low of the week and below the daily close breakout level at 10.76, suggesting the rally was all technical in nature and that things remain exactly where they were prior to last week, which is in limbo. The stock did generate a green daily close on Friday, which is a small positive given that the failure to maintain the breakout did not bring in new selling interest. The chart is now showing a possible bullish flag formation with the bottom of the flag being the low seen on May 14 at 9.20. With the stock likely to go below last week's low at 9.91 at some point this week, the most recent low at 9.67 is now short-term pivotal and unlikely to be broken. Any daily close above 10.76 will once again give the bulls the edge. For right now, the chart suggests a bit more sideways trading will be seen. CRON generated a negative reversal week, having made a new 20-week high and then turning around to close red and on the low of the week, suggesting further downside below last week's low at 6.35 will be seen. The action was disappointing inasmuch as the intraweek breakout and closure of the gap at 7.13 suggested the bulls had gained a decided edge, only to be proven wrong at the end of the week. Nonetheless and using the weekly closing chart, the negative reversal only means that the bulls are not yet ready to gain control but having still closed above the weekly close breakout at 6.26 on Friday, in spite of being so close to that level, suggests that this move down is only temporary and is not likely to last long. In addition, the selloff might have been more because of the selloff in the index market than anything having to do with the stock itself. The chart remains overall positive for the bulls as long as no support levels are broken. Important intraweek support is found at 6.20 and on a daily closing basis, at 6.43. The stock did generate a positive reversal day on Friday, having made the week's low that day but then closing green. Evidently and from a support basis, this coming week is very important. The bulls must hold on to support levels. To the upside, the 200-day MA is currently at 7.29 and a confirmed close above that line will give the bulls back the control they seemed to have before the selloff occurred. There was no fundamental news released last week, meaning the action was all technical in nature. Probabilities favor the bulls. DD ran out of steam, having received a downgrade from buy to hold after having doubled in price from 28.33 to 58.67 over the past 3 months. The stock closed near the low of the week and further downside below last week's low at 49.14 is expected to be seen this week. There is no recent intraweek support found until 41.83 is reached but going back 7-8 years, support is found at 45.05, at 42.42 and at the $40 demilitarized zone. By the same token, the $50 demilitarized zone on a weekly closing basis has proven to be a pivot point area, meaning that a clear close below that area next week would suggest further downside to those support levels mentioned above being seen. Like with a few other stocks, an island formation has been formed with a gap up between 42.65 and 53.26 seen the 3rd of June and a gap down between 53.62 and 52.24 seen on Thursday. If the island formation is not closed, it will weigh heavily on the stock. Probabilities favor the bears. ENG had a wild week on an intraweek basis, having made a new 3+-year high at 1.55 and then dropping all the way back down to 1.01 and a close on the low of the week, suggesting further downside below last week's low will be seen this week. The rally was caused by news that the company had received key licenses allowing the certification of modular certification buildings. Evidently, the news itself was initially thought to be a positive only to be found non-important the day after. Using the weekly closing price, the stock continues to be mired between .96/1.00 and 1.11/1.13. Overall, the chart leans in favor of the bulls but as long as the stock remains below the 200-week MA, currently at 1.13, the bulls will not accomplish any further gains. Using the daily closing chart, there is now a double top at 1.24/1.23 that looms ominous, suggesting further base building and holding of support levels between .95 and 1.00 needs to be accomplished before another attempt at a breakout occurs. Probability favor further sideways trading with the possibility of a surprise favoring the bulls. MCIG continues to trade in the .0225 and .035 area that it has been in for the past 13 weeks. There is no sign yet that the traders are ready to break above or below that trading range at this time. MRNA generated a green weekly close and a rally above the previous week's high, suggesting the correction is over and a new support level has been built at 58.18, based on a weekly closing basis (46.13 intraweek). The stock closed very slightly in the upper half of the week's trading range, suggesting a higher probability of going above last week's high at 66.69 than below last week's low at 56.72. Another green weekly close next Friday would confirm the correction is over. With the Corona virus continuing to occur in significant numbers and the vaccine they are working on and promising to have before the end of the year showing positive results and Phase 111 starting in July, further appreciation in price is expected to be seen from here on in. Minor intraweek resistance is found at 68.79 and then open air to the all-time high at 87.00 seen 5 weeks ago. Probabilities favor the bulls. NEM generated and inside week and a green weekly close, which suggests the correction may be over. Nonetheless, the stock closed in the lower half of the week's trading range and further downside below last week's low at 53.50 is expected to be seen this week. As long as the recent intraweek low at 52.33 is not broken, the probabilities remain in favor of the bulls. If the stock does go below last week's low but not below 52.33, a retest of the low will have occurred, suggesting the uptrend is about to resume. This is the same situation as with Gold and a drop down to $1701 being seen this week but not below $1670. The bulls need to generate another green weekly close next Friday, above this Friday's close at 55.45. If this scenario as mentioned above occurs, the bulls are likely to climb aboard in a big way and attempt to test (and break) above the recent high at 69.12. Probabilities favor the bulls this week. QQQ generated a key reversal week, having made new all-time highs and then going below the previous week's low and closing red and near the lows of the week, suggesting further downside below last week's low at 231.74 will be seen this week. By the same token and using the weekly closing chart, the negative reversal week was not confirmed yet as a strong sign of further downside to come, given that the stock still closed above the previous all-time weekly closing high at 234.64 (closed on Friday at 235.88). The stock has outperformed its parent index (the NAZ), which did generate a failure signal, having closed on Friday below its previous all-time high weekly close, meaning that this coming week is important as one or the other will confirm its signals (a failure or a successful retest of the previous high) based on the closes next Friday. The index should ultimately be the one that prevails so I would say the probabilities favor the bears. Pivotal support is found at 223.94. Like with some stocks, QQQ is showing a clear island formation that is classic, given that it is at the all-time high. The stock gapped up on Tuesday between 244.18 and 244.51 and gapped down on Thursday between 244.51 and 243.59. If the island formation is confirmed (a drop below support at 223.94), it will be a strong sign that the stock has found a major top and that a downtrend is to begin. Island tops are extremely rare but also extremely indicative. Probabilities favor the bears. SCCO generated a failure signal, given that the stock did not go above the previous week's high in spite of closing near the high of the week and then going below the previous week's low and closing red and near the low of the week, suggesting further downside below last week's low at 35.91 will be seen this week. In addition, the stock had closed the previous week above the 200-week MA, currently at 38.04, but on Friday closed below the line, suggesting the bear trend continues. There is no close by support as the nearest support is found at 32.61 and it is considered at best, minor to perhaps decent. Stronger support is found between 31.89 and 32.05and then at 28.57 and 29.44, which do seem like the potential downside targets. Using the daily chart, there is pivotal support at 34.87 which includes the 200-day MA, currently at 35.60, which if both are broken would suggest the $32 level would be seen. Minor but possibly indicative resistance is found at 38.82. Probabilities favor the bears. W did not get affected by the weakness in the index market, having generated a green weekly close and near the high of the week, suggesting further upside above last week's high at 189.00 will be seen this week. The stock closed just 1.8% from its all-time high weekly close at 188.05 (closed at 184.76), meaning that the close next Friday (red or green) will be highly indicative. Evidently a red weekly close will become a successful retest of the all-time high and generate a strong round of profit taking given that the stock has appreciated almost 9 times in value since March. If a red close occurs, the recent low at 144.51 will be tested and perhaps broken. The intraweek chart shows minor to decent resistance at the $190 demilitarized zone that if not broken, would likely mean a drop down this week to $160 or even perhaps $150. Probabilities very slightly favor the bears. p> |
1) ENG - Averaged long at 1.616 (6 mentions). No stop loss at present. Stock closed on Friday at 1.03. 2) MCIG - Averaged long at .215 (2 mentions). No stop loss at present. Stock closed on Friday at .0279. 3) CRON - Averaged long at 10.4275 (4 mentions). No stop loss at present. Stock closed on Friday at 6.47. 4) SRUTF - Purchased at .36. No stop loss at moment. Stock closed on Friday at .0477. 5) W - Averaged short at 97.47 (3 mentions). No stop loss at present. Stock closed on Friday at 184.76. 6) CAT - Averaged short at 109.616 (3 mentions). No stop loss at present. Stock closed on Friday at 123.15. 7) QQQ - Shorted at 236.38. Averaged short at 207.456 (3 mentions). No stop loss at present. Stock closed on Friday at 235.88. 8) AXP - Averged short at 93.953 (3 mentions). No stop loss at present. Stock closed on Friday at 101.68. 9) AU - Purchased at 23.35. Stop loss at 23.03. Stock closed on Friday at 24.34. 10) NEM - Averaged long at 60.0125 (4 mentions). No stop loss at present. Stock closed on Friday at 55.45. 11) MRNA - Averaged long at 55.395. Stop loss now at 51.69 on a daily stop close only. Stock closed on Friday at 62.00. 12) DD - Averaged short at 48.643 (3 mentions). No stop loss at present. Stock closed on Friday at 51.01.
Previous Newsletters
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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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