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Issue #677 
Jul 19, 2020 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Tech Sector Seems to have Found a Top!
DOW Friday closing price - 26671
The indexes have all continued higher during the last 2 weeks, having appreciated across the board around 3% during this time. Nonetheless, we are now into the earnings quarter and some of the speculation regarding the market will now be proven or disproven according to the reports that come out that show the actual economic ramifications of the virus during the past 3 months. This past week the financial industry started to report and so far all the reports have come out better than expected. Then again, better than expected is not necessarily good as in most cases they came out lower than last year. There are still another 3 weeks before all of the important reports are out and in that period of time, the next ISM Index and Jobs reports will also be seen. At the end of this period, a much better picture of the actual conditions of the economic impact of the virus will be seen, especially when the ISM Index and Jobs Reports come out the first week of August as those numbers are likely to show some of the ramifications of the recent spike up in virus infections and deaths.
This past 2 weeks though, one thing did change and that is that the Tech Industry is no longer leading the parade as it had done the previous 10 weeks. The NASDAQ went up the same percentage amount (around 3%) that the DOW and SPX did, likely meaning that some form of temporary top has been reached when new news is required to stimulate new buying. The NASDAQ generated a key negative reversal, having made a new all-time high and then going below the previous week's low and closing red and in the lower half of the week's trading range, meaning that the pattern of buying seen since March has now gone away. This can normally be explained away as a shifting of interest among the industries but in reality and in this case, that is unlikely given that because of the social distancing guidelines in place, the Tech Industry remains the best fundamental industry to buy. As such, the probabilities do favor some sideways trading during the next 3 weeks while the earnings reports come out that show exactly what the fundamental picture is at this time.
One problem that the bulls may have is that these earnings reports will not fully show the ramifications of the recent spike in infections and deaths that started less than 1 month ago. Infection have reached new all-time highs and deaths have not gone down as expected, meaning that closures of some business that had reopened has occurred. With this situation continuing to get worse (not better), the consequences of it are not going to be clear for some time, meaning that the bulls in the market have to by nature be wary and conservative, suggesting that further upside will not occur even if the earnings reports continue to come in better than expected. With the fact that chart-wise the indexes are not showing a healthy and supported chart pattern, the probabilities give the edge to the bears until such a time that the infection and death rate of the virus starts to once again decrease. As of yesterday, the opposite is true as "record numbers" of infections were seen on Friday throughout the United States.
From a purely chart point of view and under these conditions, building of dependable support levels is a must and since most of the rally has been straight up with only minor 1-2 day corrections occurring, no such dependable support levels have been built.
By the simple nature of the basics of this pandemic, the Tech Industry (and the NASDAQ) should remain the leader. The economic ills of the pandemic have not hurt the Tech Industry and in fact have helped. Until the time that the virus is controlled and full opening of the economy occurs, that will not change. As such, attention will continue to be placed on the NAZ index. The NASDAQ generated a key reversal week and a close in the lower half of the week's trading range, suggesting that further downside below last week's low at 10182 is likely to be seen this week. The index has moved above the previous all-time high at 9838 by a whopping 10+% and that is far more than usual as normally new highs are made by about 3% before some form of correction occurs. This does suggest that if a correction has started (likely) that a drop back down to the 9838 level will be seen. Having closed on Friday at 10503, it means that at least a 6+% correction is likely to occur. A 6% correction already occurred 6 weeks ago on a 1-week basis, so another 6% correction is much more likely than not.
The DOW and the SPX both closed in the upper half of the week's trading range, suggesting further upside above 27071 and 3238 (respectively) will be seen this week. The DOW has some resistance at 27398 and decent at 27580 and the SPX at 3329 and at 3398 (all-time high). One thing that does need to be mentioned about the SPX is that the original gap down on the weekly chart seen in March is between 3259 and 3328 and the gap area is going to be difficult to get into and much less close. This does suggest the index could get up as much as 35 points above Friday's close but should see some decent to even perhaps strong selling there. To the downside and in the SPX, the 3115 level continues to be pivotal. It was pivotal this past week and the index did get down to 3127, but it remains pivotal again for this coming week.
This coming week, attention will be mostly in the DOW as most of the earnings reports are in that index. IBM, Microsoft, Intel, AXP and others are reporting. None of these reports are due out Monday morning, so the action at the beginning of the week is likely to be supported and quite possibly the highs for the week made then. By the same token, the earnings reports on DOW stocks could be disappointing given that the industries in that index are among the most damaged by the virus. It is possible and perhaps even probable that more red than green will be seen this week. In the index, the 200-day MA is currently at 26233 and two closes in a row below that line would give the edge back to the bears. Pivotal support is found at 25706, so keep that in the back of your mind.
Probabilities favor the bears this week, at least at the end of the week for a red weekly close.
OIL generated a new 11-day intraweek high at 41.08 (previous multi-month high remains at 41.63) and did close near the high of the week, suggesting further upside above that level will be seen this week. By the same token, oil seems to be stuck at this level with the weekly closes the past 3 weeks all being within $.10 of each other at 40.65, 40.55 and this past Friday at 40.59. It is evident that until some type of catalyst occurs, that the bulls will have trouble keeping the rally going higher. Oil did get up to the $40 level on June 6th with a high at 40.44 and has now seen a total of 26 trading sessions without being able to go much above that level. By the same token and during this period of time the lows have continued to be higher than the previous one and the formation (pyramid flag) does favor the bulls with a 48.90 objective if the high at 41.63 is broken. By the same token, the formation will be negated if the most recent low at 38.54 (last week's low) is broken. For this week though, more of the same as has been seen recently is likely to be seen again, with perhaps a rally above 41.08 but still below 41.63 being seen and a low for the week around the $39 level. The probabilities very slightly favor the bulls.
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Stock Analysis/Evaluation
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CHART Outlooks
There are no mentions this week given that the direction for the next few weeks is still undecided. In addition, the earnings quarter has started and so far the earnings have been better than expected but on the other side of the coin, the virus problems have returned and the traders are awaiting more information that will not likely be available until all the big economic and earnings reports of importance come out the first week of August. What this suggests is that any trade put on at this time is unlikely to offer much profit. By the same token, volatility and uncertainty have been high, which makes short-term and overnight trades the way to go. I will put those mentions out on the message board as the trading action suggests one of those can be done with the trading parameters I use available.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| AU made yet another new 7-year intraweek and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at 32.45 will be seen this week. There is no intraweek resistance above until 34.97/35.38 (minor). The same is true with the weekly closes as the nearest weekly close resistance is found at 34.76 and that is also considered minor in nature. Pivotal intraweek support is found at 29.80, meaning that a stop loss can now be raised to 29.65. On an weekly closing basis, some minor support will now be found at 31.77. Probabilities favor the bulls until such a time that the resistance levels are reached. AXP generated an inside week but a green weekly close and very slightly (by $,14 cents) in the upper half of the week's trading range, suggesting a slightly higher probability of going above last week's high at 97.29 than below last week's low at 92.29. On a weekly closing basis, the bulls were able to "technically" negate the failure signal given a few week ago when the stock closed below 94.82; (closed at 95.18) but the negation still needs to be confirmed with another green close next Friday and it also needs to be mentioned that the negation by only $.36 cents is not all the dependable either. With the stock reporting earnings next Friday morning, it is likely that will be the determining factor. The stock has continued to underperform the indexes, meaning the bears remain with the edge. Minor but likely pivotal resistance is found at 97.90 and the 200-week MA is currently at 98.75. In addition, the $100 demilitarized zone also shows some decent resistance both from a prior high at 99.69 but also psychologically. It seems evident that some positive catalyst, such as the indexes going up or a positive earnings report, is needed to negate the general bearish outlook of the chart. Probabilities favor the bears. CAT made a new 6-month intraweek high at 140.99 (above the previous one at 140.50. The stock closed in the upper half of the week's trading range, suggesting further upside above that level will be seen this week. In addition and using the weekly closing chart, the bulls were able to break a decent weekly close resistance level at 135.12 that does give the bulls a clear edge at this time. The company does not report earnings until the following week so the action will depend on what the indexes do. Nonetheless, there is a "mountain" of weekly close resistance around the 138.36 level and up to the 143.36 level that is highly unlikely to be broken without some fundamental help. On an intraweek basis, the resistance is found at 144.77 that at this time looks unbreakable. The stock did generate a negative day on Friday and a close on the low of the day, suggesting the first course of action for the week will be to the downside. Very minor intraweek support is found at 132.78 and minor to perhaps decent at 129.30. With the stock having had a $12.14 trading range last week, it is possible that a trading range this week could be as much as 144.77 down to 132.78 or even a 129.30 t0 141.50 or a mixture of both. The bulls do have the short-term edge but this coming week is likely to be a complete chart/technical trading week. With these kind of a trading range, day trades or overnight trades are suggested. CNX generated a positive reversal week, having made a new 14-week low but then closing green and near the high of the week, suggesting further upside above last week's high at 9.00 will be seen this week. The most important thing that happened is that the stock got down to the 200-day MA, currently at 8.21, with a low this past week at 7.97 and a daily close at 8.14 on Monday that has now been confirmed with 4 daily closes in a row above that level. The bulls still need to do more to confirm that a low to the correction is found, with a confirmed daily/weekly close above 9.37. Nonetheless, with the 200-day MA now successfully tested, it does mean the uptrend remains intact and with rating companies still with buy ratings on the stock with $13-$15 objectives, probabilities favor the bulls doing what is needed this week. Support will now be found at 8.18 and pivotal at 7.97. Probabilities favor the bulls. CRON made a new 5-week high and closed in the upper half of the week's trading range, suggesting further upside above last week's high at 7.19 will be seen this week. Another positive is that the stock generated a new 5-month high weekly close, above the previous one at 6.70 (closed on Friday at 6.75). Nonetheless, there are still a few decent obstacles the bulls have to get above to confirm that the correction is over and that at least a short-term uptrend has begun. The stock got up to the 200-day MA, currently at 6.77, with a 7.02 close on Wednesday, followed by two red closes thereafter. The stock remains above the MA but only by $.02 cents so the MA remains without having been broken clearly. In addition, the 200-week MA is currently at 7.24 and this means that the bulls have more work to do this week to make a statement. Evidently if the stock can stay above 6.77 on a daily closing basis and then close next Friday above 7.24, a short-term bullish statement will be made. The stock did generate a negative reversal day on Friday and a close on the low of the day, suggesting the first course of business for the week will be to the downside. On a daily closing basis, semi important support is found at 6.44. On an intraweek basis, support is at 6.24. It is likely that one of those two will be seen this week. This week will be mostly technical in nature as the company does not report earnings for another 2+ weeks. As such, traders will be watching the action closely. Probabilities slightly favor the bulls. ENG traded in a very narrow $.07 cent trading range that did nothing to clear up the short-term chart picture. Nonetheless, the stock remains sitting at the very pivotal 1.11/1.13 level that if broken on a weekly closing basis, would be a strong bullish statement. The action strongly suggests that it is only a matter of time for the breakout to occur. The stock has now established itself strongly above the 200-day MA, having stayed above the line for the past 12 weeks and having tested it successfully repeatedly, suggesting the bulls will now have another attempt a breaking the 200-week MA that they have been at for the past 10 weeks and under the line for the past 4 years. If (probably when) a breakout occurs, minimum upside target is 1.33 and up to 1.48. The 4-point 10-year downtrend line on an intraweek basis is presently at 1.66 and at some point within the next 3-6 weeks that line is likely to be tested. A confirmed break of that trendline will open up the door for a rally up to the $5 level and a trading range between $4 and $5 thereafter. Support remains pivotal at .96. Probabilities favor the bulls. MCIG continues to trade in the .0225 and .035 area that it has been in for the past 17 weeks. The trading ranges are minute as there seems to be no interest in selling or buying at this time. There is no sign yet that the traders are ready to break above or below that trading range at this time. Nonetheless, if CRON does breakout, the stock is likely to follow. MRNA made a new all-time intraweek and weekly closing having, having appreciated 33% in value this past week (weekly close to weekly close). The stock closed on the high of the week, suggesting further upside above last week's high at 95.21 will be seen this week. The fundamental picture continues to be rosy as their promise to come up with a vaccine for the virus remains strongly and positively anchored in the Phase 111 The stock did gap up on Wednesday between 76.95 and 78.01 and given that the stock closed on the high of the week, if another gap occurs this week, a breakaway/runaway gap formation will be formed which will offer substantially higher prices. By the same token, if no runaway gap is created, the breakaway gap area would be targeted for closure and likely become a new support level. On a daily closing basis, the 80.00 level is pivotal as a confirmed close below that level would generate a failure signal as that was the previous all-time high daily close. The $100 level may provide some psychological resistance but that is less likely than with other established product companies that don't possess the positive speculative action being seen on this one. The probabilities strongly favor the bulls given the importance of the vaccine and the successful path the testing has shown. NEM generated a positive reversal week, having made a new 2-week low and then closing in the green and near the high of the week, suggesting further upside above last week's high at 63.16 will be seen this week. The reversal week also served as a mini correction week to establish a new support level, given that no support below had been established until 53.16 was reached. As such, the new support level is now at 59.05, which is a level the traders will now use for their stop losses when purchasing new positions. Resistance is found at the previous week's high at 64.54 and at 64.65, which was a previous high made before the multi-year high at 69.13 occurred. A break above 64.65 would open the door for a retest of 69.13. Probabilities favor the bulls. QQQ, like the NASDAQ, generated a key negative reversal week, having made a new all-time intraweek high and then going below the previous week's low and closing red and in the lower half of the week's trading range, suggesting further downside below last week's low at 252.76 will be seen this week. One note of possible importance is that the stock had been outperforming the index for the past few months and in this case the opposite occurred, suggesting the negative reversal has a higher probability of being indicative than at other times before. Like with the index, the previous all-time weekly closing high at 234.64 is the viable objective off of what seems to be an evident beginning of a correction to retest the breakout level. The stock did generate a successful retest of the all-time high with Wednesday's rally to 262.69, meaning that is resistance for this week. With the stock having generated a trading range last week of $17.03, it is possible that a trading range this week between $262 and $245 could be seen. Probabilities favor the bears this week. SCCO once again showed unexplained strength, having generated another green week and appreciated 12% since closing above the 200-week MA, currently at 38.34, 3 weeks ago. The stock closed on the high of the week, suggesting further upside above last week's high at 43.83 will be seen this week. Nonetheless, the stock is facing a strong obstacle close by as the 23-month intraweek high is at 44.83 and the weekly closing high for that same period of time is at 43.93, strongly suggesting that either a break of resistance or a successful retest of resistance will occur this coming week. The company does not report earnings for another 10 days (July 29) and there has been no new news to support the rally. In fact, the stock was downgraded in June to a downside target price of $25, meaning that the rating companies did not see this rally coming. The probabilities do not favor the stock breaking resistance this week. The probabilities do favor the stock testing the breakout of the 200-week MA, which has not yet been tested since the breakout and technically speaking should be tested before further upside can occur, at least before the earnings report comes out. As such, the probabilities favor a negative reversal week being seen this week. W generated a red close this week but no supports were broken and the trend remains positive. 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' low at 205.80 than above last week's high at 226.95. If the occurs, there is no support below until 193.69. Any daily close below 210.80 would generate a sell signal on the daily chart, which is something that has not happened since February. Any daily close below 190.27 would generate a failure signal as well. Company does not report earnings for another 2 and a half weeks. Any daily close above 228.93 would keep the uptrend intact. Probabilities favor the bears 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 1.10. 2) MCIG - Averaged long at .215 (2 mentions). No stop loss at present. Stock closed on Friday at .027a5. 3) CRON - Averaged long at 10.4275 (4 mentions). No stop loss at present. Stock closed on Friday at 6.75. 4) SRUTF - Purchased at .36. No stop loss at moment. Stock closed on Friday at .043. 5) W - Averaged short at 97.47 (3 mentions). No stop loss at present. Stock closed on Friday at 215.83. 6) CAT - Averaged short at 109.616 (3 mentions). No stop loss at present. Stock closed on Friday at 136.90 7) QQQ - Averaged short at 192.995 (2 mentions). No stop loss at present. Stock closed on Friday at 259.42. 8) AXP - Averged short at 93.953 (3 mentions). No stop loss at present. Stock closed on Friday at 95.18. 9) AU - Averaged long at 23.79 (3 mentions). Stop loss at 26.48. Stock closed on Friday at 32.37. 10) NEM - Averaged long at 60.0125 (4 mentions). No stop loss at present. Stock closed on Friday at 62.92. 11) MRNA - Averaged long at 56.783 (3 mentions). No stop loss at present. Stock closed on Friday at 94.85. 12) QQQ - Day Traded 9 times at different prices. End result of all those trades after commisions subtracted - Profit of $592. 13) CNX - Purchased at 8.01. No stop loss at present. Stock closed on Friday at 8.69. 14) CNX>/b> - Purchased at 8.88. Liquidated at 8.59. Loss on the trade of $29 per 100 shares plus commissions. 15) CAT - Shorted at 139.57. Covered shorts at 139.95. Loss on the trade of $38 per 100 shares plus 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.
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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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