 |
 |
 |
 |
 |
 |
Issue #695 
Nov 22, 2020 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
|
| Traders at a loss on Direction, Awaiting a catalyst or a chart signal!
DOW Friday closing price - 29263
The indexes generated a mixed week in which DOW and the SPX generated red weekly closes and on the lows of the week, suggesting further downside below last week's low (DOW at 29228 and SPX at 3543) but the NASDAQ outperformed the other two indexes, having generated a green weekly close and a close in the middle of the week's trading range, suggesting equal chances of going above last week's high at 11950 or below last week's low at 11760. The mixed action with the Tech companies being the beneficiaries is actually an overall negative as it means that there is going to be more economic pain because of the pandemic increase in infections and deaths bringing on renewed closures of companies and the money being spent going to internet sales.
Nonetheless, the action seen last week was far from what was expected to be seen (based on the previous week's action and closes across the board on new all-time weekly closing highs). It was expected that the new leg of the 11-year uptrend had begun and across the board the bulls failed to make that happen. The DOW generated a negative reversal week, in addition to generating a failure signal, having made a new all-time intraweek high but then closing red and below the previous all-time high weekly closing high at 29398. The SPX had an inside week and a red close on the low of the week, unable to follow through to the upside, and the NASDAQ, which had confirmed the break of the all-time high weekly close with 2 weeks in a row closing above that level, ended up having an inside week and a non-eventful green close above the previous week's high but still below the weekly closing high made 3 weeks ago. Simply stated, the bulls failed to make a case for further upside. This is especially meaningful given that further good fundamental news occurred when Moderna also announced their Phase 111 results of the corona virus vaccine being 94% effective and also showing a much better organized and larger distribution network for the vaccine as well as less problems in distributing it due to not having the same temperature restrictions that the Pfizer vaccine has of super low refrigeration needs. Good news equaling negative results is not a positive picture.
This coming week has no catalytical reports scheduled. On Tuesday, the Consumer Confidence number comes out but last month it was better than expected and no reaction occurred. This report is expected to be lower than last month (96.5 vs last month's 100.9) but neither of these numbers are catalytic. A report of over 120 or under 80 would be but that is unlikely to happen.
It does need to be mentioned again (was mentioned on the message board) that the NASDAQ has basically traded sideways for the past 6 weeks, with the index having generated a high daily close on October 12th at 11876 and subsequently it has had another 3 daily closes in that range (at 11895 on November 5th, at 11924 on November 16th, and at 11904 on Thursday of last week), meaning that in spite of the new all-time intraweek highs made in the indexes the previous week (and last week in the DOW), the key bull index (the NAZ) has been unable to do anything for 6 weeks in a row. This means that the bulls need some tangible positive news to get above this level and there is absolutely nothing on the immediate horizon (until the new administration takes over on January 20th) that could possibly come out that would be considered a positive catalyst. The vaccines have been announced, the election is over and a new president elected and all of that seems to have been already factored into the price. It is expected the pandemic numbers will stay high or even go higher during the next month or two until the vaccine starts to be distributed. As such, it is becoming very difficult for the bulls to maintain buying interest at this time.
The DOW and the SPX have a different scenario as the NASDAQ as both of them are still showing a breakaway/runaway gap formation, meaning that closure of the runaway gaps still have to occur before the breakaway gaps are targeted. Nonetheless and with the negative action seen this past week with the red closes and closes on the lows of the week, the runaway gaps are likely to be targeted for retesting, at least in the DOW, which has its runaway gap at 28902. In the SPX, the runaway gap is down at 3402 (far away) so it is not likely to be much of a magnet at this time. What is a magnet at this time in the SPX, especially with a failure signal having been given this past week with the break above the previous all-time daily closing high at 3580 and then followed by a close on Friday at 3557, is the previous all-time high weekly close at 3508. That level is a magnet, meaning that at some point this coming week, the index is likely to find itself down 50 points below Friday's close.
Each of the indexes has its "own" scenario, which does make it difficult for the traders to come up with an overall plan for trading. Nonetheless, it does seem likely that this coming week (and based on the action last week) that some weakness will be seen overall. How much weakness and which index will get the most is just a guess right now as there are different factors affecting each one. The DOW with the planned closure of some businesses likely occurring, is expected to continue to show the most weakness. The NASDAQ and for the same reason but with the opposite effect, is likely to continue to be the least affected. As such, it is likely to be the SPX that is the mediator between the two of them and the probabilities of the index getting down to at least the 3508 level this week is high. Probabilities favor the bears.
OIL gave a failure signal against the bears, having closed on Friday above the 3-month high weekly close at 41.11 (closed at 42.44). The stock closed on the high of the week, suggesting further upside above last week's high at 42.68 will be seen this week. Nonetheless, Oil generated an inside week, meaning the previous week's high at 43.06 was not broken, meaning that the failure signal given means that the downside is over for now but that the bulls have not yet been successful in stating that any further upside is to come (likely to be in a sideways trading range). Resistance this week will be found at 43.06 and then pivotal at the 9-month intraweek high at 43.78 (42.97 on a weekly closing basis). If both of those resistance levels are broken convincingly this week, there is no resistance above until the $47-$48 level is reached. As far as support is concerned, the 41.45 level on a daily closing basis is now short-term pivotal and the 40.13 level is midterm pivotal. A daily close below 40.13 would suggest the recent low daily close at 35.49 would be tested with a drop down to at least the $37 level. The bulls have a slight edge at this moment but have not yet obtained any form of control, meaning the bulls have to do more before new buying will come in. Probabilities favor oil being in an overall trading range between $37 and $43 but this is the week the bulls can make a statement given that all they need is for oil to close $.60 cents higher next Friday. I still have to give the probabilities to the bears though very slightly.
|
Stock Analysis/Evaluation
|
CHART Outlooks
I have one new mention this week but it is highly speculative. The outlook is not yet clear but leaning toward the bear side. As such, I still prefer shorts rather than purchases but with stocks generally being in well-defined trading ranges and probabilities not yet favoring them in a clear way, I have chosen a stock that has appreciated 960% over the past 5 months and is evidently extremely overbought and likely overdone to the upside in price valuation.
NIO Friday Closing Price - 49.25
NIO is a Chinese electric car maker (much like Tesla) that has appreciated from a 4.98 low seen on June 3, to a high of 54.20 seen on November 13. Nonetheless, the company reported earnings on Tuesday and they were better than expected but still showed the company losing money. Off of the earnings report, the stock the day before closed at 45.58 but after the report it traded as low as 42.50 but then recovered to make a high at 50.59 on Friday, meaning it closed out the week 10% above where the stock was before the report.
What needs to be considered is that NIO dropped 25.2% in price the same week it reached the all-time high at 54.20 (dropped down to 38.13) and that kind of a drop is indicative of a stock that may have reached a temporary high in the panic buying spree that occurred the past few months.
NIO closed near the high of the week on Friday and further upside above last week's high at 50.59 is expected to be seen this week. That means the stock is likely to be testing the all-time high at 54.20 but based on the big drop after the high was made and based on the reaction to the earnings report this past week that was better than expected but the trading results thereafter were muted in nature, it would suggest the high has been made at 54.10 and that some seeking a new support level and building a base there from which to launch new attempts at going further upside is likely to occur. As of this moment, there is only one level of support built at 38.13 but that is on the daily chart and as such, not dependable. On the weekly chart, there has been no support built yet as the stock has shown green weekly closes the past 4 weeks and on 7 of the last 8 weeks and all of this from a minor low built at 25.46 and another minor low at 16.75. Simply stated, there is no support below from which the bulls can buy with some limitation of risk being available.
On a daily closing basis, the all-time high was 48.30 made on November 12th. That all-time high was broken on Thursday with a close at 48.45 and confirmed on Friday with a close at 49.25. This does suggest further upside is to be seen this week, at least on a daily closing basis. Nonetheless, the $50 is always a decent to strong psychological resistance level and the intraweek all-time high is still 2% above Friday's close and those two factors are likely to prevent the bulls from continuing to run to the upside making new all-time highs.
There are 2 ways of trading this mention with the first way giving only about a 60-40 chance of success and the second way offering about an 80-20 chance of success. The first way is to short the stock above 50.59 using at 54.35 stop loss and having a 30.00 objective. If shorted at 50.60 (for example), the risk would be 5-1 (or better depending on the entry point). Given that no sell signal or failure signal will have been given, the chance of success is only 60-40. The second way of trading the stock is to wait until a failure signal is given (meaning a daily close below 48.30) and then using a stop loss 10 points above whatever high is made this week and still having the $30 level as the objective. The risk/reward ratio would likely be about the same but the probability of success would rise to 80-20. Or you could do both, short the stock above 50.69 and add positions when it closes below 48.30.
This is a speculative trade as no sell signals or clear negatives have yet occurred. Nonetheless, a stock that has rallied 960% in 5 months and in a speculative industry such as electric cars, is a trade that must be considered.
|
Updates
|
| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| AU made a new 7-month intraweek and weekly closing low and closed in the lower half of the week's trading range, suggesting further downside below last week's low at 21.83 will be seen this week. The stock gave a failure signal against the bulls, having closed below the previous 8-year high weekly close at 22.75 (closed at 22.56). It was not a decisive close as it was only by $.19 cents but it does mean the stock needs to generate a green close next Friday or the signal will be seen as a game changer. It is important to note that the stock generated a green day on Friday, meaning that the sell pressure eased at the end of the week. In addition, the bears failed to generate a new sell signal in Gold, having rallied over $20 from the lows to close above the established weekly close support at $1866, which does suggest that the bulls might be successful in generating a rally and green close next Friday in both Gold and in the stock. The 22.72/22.87 level on the daily closing chart is equally important as on the weekly chart and if the bulls can manage two daily closes in a row above that level, the selling pressure will abate. Pivotal resistance is found at 200-day MA, currently at 25.41. Two daily closes in a row above that level will give the bulls back the edge. To the downside, minor but likely pivotal support is found at 21.41. If broken, the bears are likely to gain control. Probabilities slightly favor the bulls. AXP generated a negative reversal week, having made a new 38-week intraweek high and then closing red and on the low of the week, suggesting further downside below last week's low at 111.90 will be seen this week. Nonetheless, the bulls remain in control as the stock still closed above the multi-month high weekly close at 109.73 that it broke 3 weeks ago and generated the rally up to the $120 level. It is highly likely the 109.73 level will be seen this week but there is pivotal intraweek support at 109.55 that if broken would make the major gap down at 98.64 a target for closure. On a daily closing basis, any daily close below 111.10 will generate a sell signal on the daily chart. It is evident that the 109.55 level in conjunction with a weekly close below 109.73 will negate all the gains seen recently and therefore that is what the traders will be keying on this week. To the upside, resistance will now be found at 115.93 and pivotal at 120.39. Probabilities still slightly favor the bulls but some major decision is likely to be made either this week or at the latest within 3 weeks. BTZI generated a 2nd red weekly close in a row and closed on the low of the week, suggesting further downside below last week's low at .038 will be seen this week. The stock did close $.005 cents below the previous high weekly close resistance at .040, meaning that another red close next Friday would negate the breakout. By the same token, a green close next Friday would mean the breakout was tested successfully and if that happen, new buying of some consequence will occur and the new uptrend likely extended. Likely pivotal intraweek support is found at .0355 that if broken would likely negate all the recent gains. Resistance is found at .05 and pivotal at .055. Probabilities continue to favor the stock trading between $.04 and $.05 for the next week or two. CAT generated an inside week but a green weekly close, confirming the breakout seen the previous week into new all-time highs across the board. The stock closed slightly in the lower half of the week's trading range, suggesting a slightly higher probability of going below last week's low at 170.19 than above last week's high at 175.38. The stock is likely to follow whatever the indexes do and if the SPX generates a failure signal, it is likely the stock will do the same. Nonetheless, the onus is on the shoulders of the bears to prove that this breakout is not going to stimulate new buying interest. The previous all-time high daily and weekly close is at 170.41 (on both) and therefore 2 closes in a row below that level on the daily chart and a close below that level next Friday on the weekly chart, will generate a failure signals that would suggest a new all-time intraweek high is now at 176.37. On a daily closing basis, it is at 173.19, meaning that 170.41 and 173.19 are the levels of importance this week on the daily closing chart. Any daily close below 169.46 will generate a new sell signal that would strongly suggest a top has been made and that a correction (or more) is to occur. The stock has spent 9 trading days without follow through to the upside after the new all-time high was made and that suggests the bulls do not have control of the stock even though no sell signal has been given yet. By the same token and until a sell signal is given (daily close below 169.46, the bears have no ammunition either. Probabilities slightly favor the bears this week. CNX generated an inside week but a red weekly close and in the lower half of the week's trading range, suggesting a higher probability of going below last week's low at 8.93 than above last week's high at 10.17. Nonetheless, the bulls were able to maintain the stock at the 9.37 level on the weekly closing chart on Friday (closed at 9.36) and that suggests that the bulls maintain a small edge right now. The stock did make a new 16-week low the previous week at 8.31, suggesting that if the stock gets below 8.93 but not below 8.31, that the move will be the required/needed retest of the recent low and if that is the case and the stock closes green on Friday, the bulls will come back and try to get back up to the 200-week MA, currently at 11.61, and resume the uptrend. Intraweek support will be found between 8.55 and 8.73 that could (maybe should) be seen this week but if it is seen and the stock then recovers to close above 9.36 next Friday, the bulls will gain a decided edge. The 200-day MA is currently also at 9.36, so that level is likely to be pivotal and indicative all week. Probabilities favor the bulls for a green close next Friday. CRON generated an uneventful inside week but did generate a green weekly close, meaning the bulls maintain the short-term edge. The stock closed slightly in the lower half of the week's trading range, suggesting a slightly higher probability of going below last week's low at 6.93 than above last week's high at 7.69. The 200-week MA, currently at 7.68, remains the big bone of contention as to the direction the stock is to follow next year. Short term support is found at 6.63 that if broken, would likely cause the stock to fall down to the 6.00 level. The 7.69 level is short-term pivotal resistance that if broken would likely take the stock up to the 8.13 level. The stock is presently supported by the probability that the Biden presidency will make Marijuana legal, meaning that right now the onus of proof is on the shoulders of the bears. Probabilities favor the bulls but only for a slight bias to the upside the next few weeks. ENG generated a 23% rally from the previous week's close to last week's close, suggesting that the correction and downslide is over. The stock closed on the high of the day, suggesting further upside above last week's high at 1.11 will be seen this week. There is no intraweek resistance until the 1.18-1.21 level is reached. The stock closed at a pivotal level on the weekly closing chart as the 1.10 level is where the 200-week MA is currently at. A green close next Friday would be a sign that the bulls have gotten short-to-midterm control back. The 1.10 level is also the most recent weekly closing high and as such, also a level that if broken would generate a new buy signal as well. On the daily closing chart, the bulls already accomplished making a statement as the 200-day MA, currently at .94, was broken on Wednesday, tested on Thursday, and strongly confirmed the break above on Friday. As such, the bulls now definitely have the edge back. Important intraweek support is now found at .93 and resistance is now found at 1.21. Any rally above 1.33 at this time would be a bull statement. Probabilities favor the bulls. MRNA generated a new all-time intraweek and weekly closing high and closed in the upper half of the week's trading range, suggesting further upside above last week's high at 103.20 will be seen this week. This breakout occurred because the company announced that their virus vaccine is showing at 95% success rate and that the distribution issue has been addressed previously and successfully. By the same token and after the announcement, the company was downgraded to a hold from a buy, suggesting that at these prices the stock is valued correctly and that further upside, additional positive news is required. As such, the probabilities favor the stock being in a $97-$103 trading range with an outside possibility of being in a $90-$110 trading range, meaning rallies should be sold and dips bought. Last week's low at 88.89 is now considered pivotal support that if broken, further downside of some consequence would be seen. Resistance is not clear other than last week's high at 103.20. Probabilities favor the bulls. NEM generated another red week and a red weekly close and near the low of the week, suggesting further downside below last week's low at 60.43 will be seen this week. Nonetheless, there were no supports of consequence broken and the long term chart formation remains bullish with a clearly defined flag formation that shows the flagpole being the rally from the 6-month low at 33.00 to 72.22 and the flag being 6-month drop back down to 52.22. A break above 72.22 would give an objective 92.42. On a shorter term basis, the stock has support at 59.28 and short-term pivotal at 58.29 and if broken would suggest a drop down near 52.22. Nonetheless, the chart does not suggest the latter will happen and though a drop below last week's low at 60.43 is a decent possibility for this week the stock will hold at or above 59.28. The 200-day MA, which is currently at 59.48, has not been broken on a daily closing basis for 18 months and is highly unlikely to break any time soon. Intraweek resistance is now found at 62.85 that if broken, would suggests the worst of this recent move down is over and that a new attempt to restart the long-term uptrend is to occur. The stock closed at weekly close support on Friday and it is expected that a green weekly close will occur next Friday. Any weekly close below 60.47 would be a negative sign. Probabilities favor the bulls. QQQ confirmed the failure signal against the bulls given the previous week with a second red weekly close in a row below the previous all-time high weekly close at 292.53. The stock closed in the lower half of the week's trading range, suggesting further downside below last week's low at 288.50 will be seen this week. The stock is at the midpoint of the two pivotal areas at 280.63 and at 299.14 (one of support and one of resistance) at 280.63 and 299.14 that whichever is broken will determine direction for the next few months. Nonetheless, being at the midpoint suggests the traders are waiting for some catalyst to "show them the way". There is some minor resistance above at 293.51 that will make it easier for the traders to rally to break the pivotal resistance if that level is broken. On the opposite side though, there is no support below until 280.63 is reached, suggesting the "traders" will have an easier time taking the index down this week (rather than up). Until one of those pivotal areas is broken, there is no clear direction seen. Probabilities slightly favor the bears this week. RIO bulls had a good week this week, having closed the down gap at 63.83 and also closing above a decent weekly close resistance at 62.78. The stock closed near the high of the week and further upside above last week's high at 63.94 is expected to be seen this week. Pivotal intraweek resistance is found at 66.55 but any weekly close above 64.42 or daily close above 65.43 would be a strong bullish statement. The 62.06/62.09 level on a daily or weekly closing basis would generate a negative sign if broken and as such, consideration should be given to liquidating the positions and taking profits if the stock closes 2 days in a row below 62.06 or a weekly close below 62.09. Intraweek support is found at 61.82 that should not be broken if the stock is to head higher as the action suggests it will. Probabilities favor the bulls. SRUTF generated a positive reversal week, having made a new 5-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 .0433 will be seen this week. There is intraweek support at .03 and pivotal at .025 and resistance is found at .049, at .0659 and long term pivotal at .080. For the past 30 weeks, with the exception of 2 weeks, the stock has been mainly stagnant in price. It is unlikely this will change until the new administration takes over and they push for Marijuana to be legal. Probabilities slightly favor the bulls. W generated a positive reversal week, having made a new 16-week intraweek low and then closing green and near the high of the week, suggesting further upside above last week's high at 259.08 will be seen this week. One of the reasons the rally occurred is because the increase in the pandemic infections and deaths (and new closures of businesses) has once again made purchasing products online attractive. Nonetheless, the bulls had the opportunity to generate a clear failure signal against the bears if they had closed on Friday above the 13-week low weekly close at 252.28 in a convincing way. The bulls did close above that level but only by $.30 cents and that is just not a convincing close, especially considering that the stock traded above that level all day on Friday until 2.40 pm. As such, next week's weekly close is now seen as pivotal with a green weekly closing bringing in new buying interest and a red weekly close just the opposite. The stock is showing a gap down between 288.61 and 266.50. It is likely that if the bulls are able to get above last week's high that a rally up to the gap (at 266.50) will occur. By the same token, there is some resistance at last week's high and if not broken, the bears will gain some new and possibly powerful ammunition. Intraweek support is found at 234.65. If that level is broken, the recent low at 221.09 will be targeted for breakage and the 200-day MA, currently at 196.17 likely to be reached. Probabilities favor the bulls but only slightly.
|
1) ENG - Averaged long at 1.616 (6 mentions). No stop loss at present. Stock closed on Friday at .110. 2) BTZI - Averaged long at .215 (2 mentions). No stop loss at present. Stock closed on Friday at .0433. 3) CRON - Averaged long at 10.4275 (4 mentions). No stop loss at present. Stock closed on Friday at 7.22. 4) SRUTF - Purchased at .36. No stop loss at moment. Stock closed on Friday at .040. 5) W - Averaged short at 86.61 (2 mentions). No stop loss at present. Stock closed on Friday at 252.54. 6) CAT - Averaged short at 109.616 (3 mentions). No stop loss at present. Stock closed on Friday at 172.23 7) QQQ - Averaged short at 192.995 (2 mentions). No stop loss at present. Stock closed on Friday at 290.38. 8) AXP - Averged short at 93.953 (3 mentions). No stop loss at present. Stock closed on Friday at 112.58. 9) AU - Averaged long at 26.106 (6 mentions). No stop loss at present. Stock closed on Friday at 22.56. 10) NEM - Averaged long at 60.742 (5 mentions). No stop loss at present. Stock closed on Friday at 61.65. 11) MRNA - Purchased at 49.11. No stop loss at present. Stock closed on Friday at 97.61. 12) RIO - Averaged long at 62.845 (2 mentions). No stop loss at present. Stock closed on Friday at 63.53. 13) CNX - Averaged long at 9.10 (2 mentions). No stop loss at present. Stock closed on Friday at 9.36. 14) ORCL - Covered shorts at 57.15. Shorted at 60.36. Profit on the trade of $321 per 100 shares minus commissions. 15) MRNA - Purchased at 61.68. Liquidated at 10031. Profit on the trade of $3863 per 100 shares minus commissions. 16) AXP - Shorted at 120.04. Covered shorts at 118.20. Profit on the trade of $184 per 100 shares minus commissions. 17) BIDU - Purchased at 141.36. Liquidated at 141.36. Profit on the trade of $110 per 100 shares minus commissions. 18) CAT - Day Traded short twice. Profit on the trades of $328 per 100 shares minus commissions.
Previous Newsletters
|
Encyclopedia of Chart Patterns. A must have for chart aficionados! |
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. |
|
|
|