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Issue #727 
Aug 1, 2021 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Indexes give signals that the rally is over and that a correction has started.
DOW Friday closing price - 34935
All indexes generated a negative reversal week, having made a new all-time intraweek high but then closing red. This is the second negative reversal week out of the last 3 weeks but likely more indicative given that all the big reports for the quarter are now out, which suggests the bulls will not have any new ammunition with which to generate further upside. The last negative reversal week (which occurred 3 weeks ago), was negated in a big way 2 weeks ago with a positive reversal week the following week, which included the biggest trading range (from low to high) seen in 4 months. Such a positive reversal should have generated big follow through to the upside but it was less than .06% across the board and this in spite of breakout earnings from GOOGL and better than expected on AAPL and FB. The lack of follow through after those reports was disappointing but then on Thursday evening, AMZN reported disappointing earnings and the stock tanked over 7% in value on Friday, erasing all the small gains made earlier in the week and talking away any ammunition that the bulls had garnered. As such, a negative reversal week occurred that is likely to be indicative, even though on Friday the bears failed to make any kind of a statement (other than the negative reversal week) as there were no supports broken or failure signals given.
The week ended with more questions than answers but given that this coming week the 2 biggest economic reports for the month come out (ISM Index and Jobs), it is highly likely that some clear decisions for the next few months will be revealed. The reality is that the bulls do have a very difficult task ahead in keeping the index market heading higher. The one positive the bulls have is that for at least a year, all dips have been bought and the traders are now inured to that pattern and have been doing that by rote. On the other hand though, there is a strong "seasonal" tendency for a correction of consequence to occur in August/September and with the indexes overbought, a very disappointing earnings report from AMZN (the stock that has basically represented the best in the market for the past 18 months) a pandemic that is seeing a resurgence, and inflation likely to continue high (or go higher), it is very unlikely that the bulls will be able to pull off further upside at this time.
This scenario still has to be proven on the chart, meaning that the traders will be watching the charts as well as the reports this coming week. It is highly unlikely that either of the reports (ISM or Jobs) will have any major surprises. Nonetheless, unless the reports are negative the bulls will try to use them to rally the market. The ISM Index report comes out on Monday at 10:00am and expected to be 60.7 (last month was 60.6). A few months ago it came out at 65, meaning that it likely will take that kind of a number to generate new buying interest. If that number comes out as expected (or lower), it will likely cause selling to come in immediately. A higher than expected number (above 61) will likely mean the traders will wait for Friday's Jobs report before making any decisions.
On a chart basis, the daily close levels to watch are these: In the DOW at 34777. In the SPX at 4384. In the NASDAQ at 14871. These are the previous all-time high daily closes and under the present scenario, a close below those levels would tip the scales in favor of the bears. There are no close-by intraweek support levels that can be used to determine where a break occurs.
To the upside and evidently so, a new intraweek all-time high in any of the indexes will give the bulls some new ammunition. In the DOW it is 35171, in the SPX it is 4429 and in the NASDAQ it is 15142.
Probabilities favor the bears.
SILVER generated a positive reversal week, having made a new 18-week intraweek low but then going above the previous week's high and closing green and near the high of the week, suggesting further upside above last week's high at 25.87 will be seen this week. The green weekly close also means that the previous week's close at 25.23 has now become a successful retest of the pivotal weekly close support at 24.97, which in turn means the bulls continue with the midterm edge. Pivotal daily close resistance is at 26.53 and on the opposite side, at 24.97. Whichever gets broken first, will generate further movement (perhaps trend) in that direction. Probabilities favor the bulls.
OIL has had a wide $9 trading range over the past 2 weeks and has visited (on an intraweek basis) both levels of important weekly close support and resistance at 66.09 and at 74.34 (high and low for the past 2 weeks has been 65.21 and 74.23). Oil did close near the high of the week, suggesting further upside above last week's high at 74.23 will be seen this week. In addition, the 12% appreciation in price seen in the past 9 days is indicative of the bulls having more strength than the bears at this time. Having said that, this coming week is highly pivotal for the short-term. There is minor (but possibly short-term indicative) resistance on the daily closing chart at 74.01 (closed on Friday at 73.95). Further and more pivotal daily close resistance is found at 74.97, that if broken would suggest this last correction is not only over but that the low seen at 65.21 is now major pivotal support and that the uptrend up to the $80 has likely resumed. By the same token, a red close on Monday would begin to weaken the chart and a red weekly close next Friday would be a decent negative. Any daily close below 72.20 would now shift the edge back to the bears and any weekly close below 71.81 would suggest that the $65 level of support will be revisited. Probabilities slightly favor the bulls but the fact Oil broke a very pivotal weekly close resistance at 74.34 a few weeks ago and then failed to follow through (and dropped to $65) does suggest that the bulls do not have as much strength as previously thought. As such, this is the reason this week is so pivotal.
DOLLAR gave up 4 weeks of rally this past week and closed in the lower half of the week's trading range, suggesting further downside below last week's low at 91.78 will be seen this week. Nonetheless, the bulls were able to rally the Dollar back enough on Friday to prevent the weekly close support between 91.85 and 92.23 from being broken (closed on Friday at 92.17). The Dollar is now showing a successful retest of the important and pivotal weekly close resistance at 93.02, meaning that the long term trend still remains down or at least sideways. On a daily closing basis, resistance is found at 92.32 and then at 92.75. Pivotal resistance is found at 92.97. On the other side, short-term pivotal support is found at 91.76 and a bit more at 91.42. It is very difficult at this time to give either side a clear edge as what the Fed does (and when it does it) to address the increasing inflation is the fundamental factor that is impossible to evaluate at this time. Due to the failure to break resistance over the past 2 weeks, the bears remain with a slight edge as it is evident that this is more of a fundamental factor than a chart factor.
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Stock Analysis/Evaluation
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CHART Outlooks
The odds now favor a correction in the market beginning for the following reasons: 1) No new and possibly positively catalytic earnings reports due out for another 8 weeks, 2) Pandemic resuming, 3) Overbought condition, 4) High Inflation, 5) Seasonal tendency for a strong correction in August/September and 6) The keynote company in the past 18 months (AMZN) showing disappointing results and giving both a sell signal and a failure signal on Friday. As such, I have two short mentions this week.
LONG Friday Closing Price - 84.93
Let me begin by saying that LONG reports earnings on Thursday AM. As such, getting into a mention before a report is always risky. On the other hand, the stock made a new all-time high 4 months ago (above 71.03) and has traded as much as 23% above that previous high and closed on Friday still 20% above the previous all-time high, meaning the stock is certainly overbought and at levels where a correction to test the previous all-time high is highly probable. In addition, the stock has already generated a sell signal on the daily closing chart over the past few weeks, meaning that it is already showing signs of a top having been formed. In addition, I read an article today that states that on this earnings report (which is expected to be better than expected) there is a high chance that it could disappoint and give the bears' new ammunition. As it is, the stock is at a high price and even if the earnings comes out better than expected, the probabilities are not high that a new high will be made, such as was seen this past week with AAPL and FB reporting better than expected earnings and yet heading lower after the report.
The all-time high in LONG was made 7 weeks ago in the first week of June at 90.00. Since then, the stock is showing 1 successful retest of the all-time high on the weekly chart and 2 successful retests of the high on the daily chart. In addition, a sell signal was given on July 19th when the stock closed below the previous low daily close at 83.25 (closed at 80.83). As such and on a chart basis, viable signals that a top has been formed have occurred.
LONG generated a green weekly close on Friday but closed slightly in the lower half of the week's trading range, suggesting a slightly higher probability of heading below last week's low at 83.12 than above last week's high at 87.16.
To the downside, LONG shows pivotal intraweek support at 80.06 that if broken shows totally open air until 71.90 is reached. The 200-day MA is currently at 70.44 and that is a viable downside target that will not only be a magnet (due to the lack of built support below 80.00) but also where the previous all-time high weekly close at 69.50 is found.
To the upside and on an intraweek basis, LONG shows resistance at 87.16, at 88.82 and at 90.00. A break above 88.82 would give an edge to the bulls, meaning that will be the resistance used for the stop loss.
Sales of LONG at Friday's closing price at 84.93 and using a stop loss at 88.92 and having a 70.00 objective will offer a 3.7-1 risk/reward ratio. My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
AKAM Friday Closing Price - 119.92
AKAM is a technology company that is one of the industries that is at prime risk of having a correction of magnitude if a correction is to occur. In addition, this stock has been going higher consistently over the past 22 weeks but compared to action seen over the previous 5 years, the action to the upside has been highly labored, suggesting that it has been carried up by the other Tech companies, rather than going up on its own fundamentals.
AKAM made a new all-time intraweek high January at 124.91 and then proceeded to fall 26% (to 92.64) in a matter of only 5 weeks. Since then, the stock has moved up consistently for 15 weeks (all green weekly closes) to make a new all-time high weekly close 7 weeks ago at 118.45 (above the previous one at 115.93) but the all-time intraweek high remained (remains) unbroken. Over the next 5 weeks, the stock traded sideways and over the past 2 weeks the bulls came back in to make yet another new all-time high weekly close on Friday at 119.92 (120.68 intraweek) but the all-time intraweek high still remains unbroken. In recapping the action, the stock has moved up for a period of 22 weeks in a bull market where the indexes have consistently made new all-time intraweek highs and yet the stock itself has not been able to do it. As such, the statement I made above about the upside action being labored with the indexes likely carrying the stock higher is a valid statement. This means that if a top to this rally in the index market has been found, this stock could be one of the stocks that receives the most selling interest. In addition, there is a clear resistance level above from which the bears can sell against with confidence.
AKAM reports earnings on Tuesday after the close and the expectation is for earnings to be exactly the same as 1-year ago, which compared to other tech companies is a very disappointing earnings outlook for a company that was trading at $84 a year ago.
To the downside and on an intraweek basis, AKAM shows some minor but short-term pivotal support at 114.48. Below that, there is minor support at 104.08 and again minor at 100.70. Decent intraweek support is found between 92.64 and 94.12. As such, this is the mentions objective.
To the upside and on an intraweek basis, AKAM only has 1 level of resistance at 124.91 that is considered strong to perhaps major.
AKAM did close on the high of the week on Friday and further upside above last week's high at 120.68. As such, I cannot pinpoint any specific desired entry point as there is no resistance between 120.68 and 124.91. Any level within that range is a "desired" entry point.
Sales of AKAM above 120.68 and using a stop loss at 125.35 and having a downside objective of 94.12 will offer a risk/reward ratio of 5-1 (or higher, depending on the entry point). My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
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Updates
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| Monthly & Yearly Portfolio Results
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Closed Trades, Open Positions and Stop Loss Changes
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Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted.
Status of account for 2020: Loss of $16,684 per 100 shares after losses and commissions were subtracted. Status of account for 2020, as of 7/1 Profit of $27,023 using 100 shares per mention (after commissions & losses) Closed out profitable trades for July per 100 shares per mention (after commission)
ZLAB (long) $728 (3 day trades long) ZLAB (long) $7838 QQQ (short) $458 AAPL (short) $107 (2 day trades short) Closed positions with increase in equity above last months close minus commissions. NONE Total Profit for July, per 100 shares and after commissions $9132 Closed out losing trades for July per 100 shares of each mention (including commission)
AAPL (short) $188 (2 day trades short)
QQQ (whort) $40 ZLAB (long) $3017 Closed positions with decrease in equity below last months close plus commissions.
STWD (long) $27 Total Loss for July, per 100 shares, including commissions $5224 Open positions in profit per 100 shares per mention as of 7/31
NONE
Open positions with increase in equity above last months close.
BTZI (long) $360
AU (long) $450 Total $810 Open positions in loss per 100 shares per mention as of 7/31
DCTH (long) $60
Open positions with decrease in equity below last months close.
PGEN (long) $291 Total $11,179 Status of trades for month of July per 100 shares on each mention after losses and commission subtracted.
Loss of $6,461
Status of account/portfolio for 2021, as of 7/31
Profit of $20,562 per 100 shares.
AU generated a failure signal against the bears, having closed on Friday above the 19.96 level that was a previous pivotal support that when broken brought on all the weakness seen the last 7 weeks. The stock closed in the upper half of the weeks' trading range, suggesting further upside above last week's high at 20.56 will be seen this week. Very minor intraweek resistance is found at 21.16 but above that, there is open air up until 22.93 is reached. The 200-day MA is currently at 22.30 and that line will be a magnet to be reached within the next 1-3 weeks. Intraweek support is now found at 19.03. Nonetheless and on a daily and weekly closing basis, the stock should not close below 19.96 any more. Probabilities favor the bulls.
BTZI generated a failure signal against the bears, having closed on Friday above the .0545 level that was decent and pivotal resistance for several years and then when broken to the upside, generated a rally to .37 and became support. For the past 5 weeks the stock has traded below that level but now that is has broken back above, new buying interest is likely to be seen. The chart is showing a bullish flag formation on the daily chart with the top of the flag being at .0627 (stock closed on Friday at .06). A break of that level offers an objective of .09. There is intraweek resistance at .075 and the 200-week MA is currently at .0764 and that line is likely the target for this week. The next level of pivotal resistance on the weekly chart is at .082. A confirmed close above that level will open the door for a rally up to the $.12 cent level. Intraweek support is now found at .05, which is now short-term pivotal. Probabilities favor the bulls. CNX reported earnings and they were worse than expected and the stock made a new 7-month intraweek and weekly closing low and the stock did close in the lower half of the week's trading range, suggesting further downside below last week's low at 11.77 is expected to be seen this week. Nonetheless and importantly, the 200-week MA, currently at 11.64 was not broken and that suggests that though the earnings report was less than expected, it was not a trend breaker, given that since January the stock has been in a midterm uptrend. As such, this move down will likely bring buying interest rather than selling interest. I will likely purchase additional shares around the 11.70 level. Intraweek support is now found between 10.86 and 11.69, meaning that if a purchase is done, the stop loss should be at 10.65. Upside objective based on the chart is now 15.00-15.75. Nonetheless, if the fundamentals were to change to positive over the next few months (likely, due to inflation and the move to commodities like ore in the not too distant future), a move up to at least the 17.41 level (100-week MA) would likely happen and if that occurs, the upside could open up for a lot more. Probabilities favor the bulls this week, at least for a green weekly close next Friday. CRON generated a green weekly close for the first time in the last 5 weeks. The stock closed in the upper half of the week's trading range, suggesting further upside above last week's high at 7.76 will be seen this week. The stock did close on the low of the day on Friday, suggesting the first course of business for the week on Monday will be to go below Friday's low at 7.36. Nonetheless, if the double low at 6.95/7.02 is not broken, this move down will likely be seen as a needed/required retest of that double low and that would bring in new buying if successful. Upside target for the week is 8.16 as that is a spike high seen in June of last year. A break above that level would make the 200-week MA, currently at 8.96 into a magnet. Intraweek resistance above 8.16 is found at 9.00. The stock reports earnings on Friday AM and that could be an important catalyst. Probabilities now slightly favor the bulls. DCTH made a new 13-day intraweek high and did close in the upper half of the week's trading range, suggesting further upside above last week's high at 10.63 will be seen this week. In addition, the stock gave a new buy signal, having closed above a previous high daily close at 9.87 and a failure-against-the-bears signal having closed above a previous pivotal low daily close at 9.84. On a daily closing basis, there is no resistance above until 10.85 is reached but that resistance is considered minor. On an intraweek basis, there is open air above until 12.11-12.62 level is reached. Intraweek support is now found at 9.42. Probabilities favor the bulls. ENG generated a totally uneventful inside week with a close in the middle of the week's trading range, meaning that there is no clear chart outlook for this week. The company reports earnings on August 12 (2 weeks) and it is likely the stock will continue to idle around this price for this period of time. By the same token, intraweek support is found at 2.28 and intraweek resistance at 2.79. Whichever gets broken will likely generate an additional 10% move in the direction broken. MRGE generated a new 1-year weekly closing low and closed on the low of the week, suggesting further downside below last week's low at .1385 will be seen this week. The stock has lost 72% in value over the past 4 months but there has not been any news to support the fall. There is important weekly close support at .129 and the .153 level is now pivotal resistance. There is no news scheduled to be released at this time. NEM generated a green weekly close and in the process, the bulls were able to negate the break of pivotal support on the daily closing chart when the stock broke the inverted flag formation support at 62.30 (closed on Friday at 62.82). The negation of that break was important as it totally erased all the weakness seen the past 10-days. The bulls still need to do more to give themselves any kind of an edge given that the stock closed on Friday at the 200-day MA, currently at 62.80. Intraweek support is now found at 61.53 and again at 60.85 and pivotal intraweek resistance is found at 64.71. A break of either (60.85 to the downside) would generate new and likely indicative movement in the direction broken. If 64.71 is broken, the immediate objective would be 66.90. Probabilities slightly favor the bulls. PGEN generated an uneventful inside week with a close in the middle of the week's trading range, meaning that there is no clear outlook for direction this week. By the same token, the green weekly close does mean that the previous week's drop down to pivotal support at $5 demilitarized zone is now considered successful, suggesting the sell interest has waned. It is important to note that in September of last year, the stock traded sideways between 4.92 and 6.22 and the action seen last week does suggest that the same thing might be occurring now. The company reports earning a week from Tomorrow (Aug 9) and that could be a catalyst. The daily chart does suggest there will be a slight bias to the upside this week with the 6.20 level as the objective. Intraweek support is now found at 5.42 and pivotal at 5.04. Probabilities very slightly favor the bulls this week. SNDL generated a positive reversal week, having made a new 11-week intraweek low and then closing green. The stock closed in the middle of the week's trading range, suggesting equal chance of going below last week's low at .767 than above last week's high at .889. Nonetheless and on a positive note, the stock now shows a double low at .78/.77, as well as an 11-day period in which the stock has straddled the 200-day MA, currently at .8391, meaning that the bears have been unable to make a statement in spite of repeated opportunities to do so. The company reports earnings in 2 weeks on August 12 and that report could be the catalyst to get the stock moving higher or lower. Both last week's high and low are now short-term pivotal, meaning that this coming week, the traders are likely to let us know which way they are leaning. SRUTF generated positive reversal week, having made a new 4-month intraweek low and then closing green and on the high of the week, suggesting further upside above last week's high at .447 will be seen this week. The intraweek support level is very well established at .038, meaning that it is unlikely to be broken without negative fundamental news. Resistance at this time is also well established at the 200-day MA, currently at .0485. Pivotal intraweek resistance is found at .0558. For the time being and until some news on the industry or the company comes out, the probabilities favor the stock trading sideways. ZLAB generated a wild week in which the stock dropped 26.5% from the previous week's close to last week's intraweek low. In addition, it made a new 8-month intraweek and daily closing low. Nonetheless, in the end, the stock did not confirm the break, having closed near the high of the week and above the 8-month weekly closing low at 128.42, suggesting further upside above last week's high at 150.44 will be seen this week. There was no news this week to support the break, in fact the small amount of news that did come out was positive (not negative), suggesting the action this past week can be ignored. One thing that can be determined by the action though, is that the stock is likely to be trading in a channel with a slight downward bias (until new news comes out), meaning that the potential top to any rally from here is $177 and there is certainly no assurance that level will be reached at this time. The 200-day MA is currently at 143.06 and the stock did close above that level on Friday. As such, and on a daily closing basis, that line will be the determining factor over the next week or two as to whether the bulls of the bears have the short-term edge. For this week, the upside objective is likely to be around the $162 level. A daily close above 162.02 though, will give the bulls added ammunition. On a daily closing basis, support will be found at 129.52. Nonetheless, that support will only be "in play" if the bears are able to generate 2 daily closes in a row below the 200-day MA. Probabilities favor the bulls this week.
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1) SNDL - Purchased at .87. Averaged long at .905 (2 mentions). No stop loss at present. Stock closed on Friday at .825. 2) PGEN - Averaged long at 7.506 (3 mentions). Stop close only at 6.45. Stock closed on Friday at 5.49. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .0446. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .060. 5) DCTH - Purchased at 10.93 and at 10.07. Averaged long at 10.50 (2 mentions). Stop loss at 9.32. Stock closed on Friday at 10.20. 6) ZLAB - Averaged long at 134.64 (3 mentions). No stop loss at present. Stock closed on Friday at 144.61. 7) AU - Averaged long at 26.106 (6 mentions). No stop loss at present. Stock closed on Friday at 20.05. 8) NEM - Averaged long at 61.31 (3 mentions). No stop loss at present. Stock closed on Friday at 62.82. 9) CNX - Averaged long at 10.876 (3 mentions). Stop loss now at 12.69 (weekly. Stock closed on Friday at 12.10 10) STWD - Liquidated at 25.90. Purchased at 26.10. Loss of $20 per 100 shares. 11 ENG - Averaged long at 4.92 (2 mentions). No stop loss at present. Stock closed on Friday at 2.53. 12) QQQ - Purchased at 354.08. Liquidated at 358.67. Profit on the trade of $459 per 100 shares. 13) CRON - Averaged long at 9.146 (3 mentions). No stop loss at present. Stock closed on Friday at 7.37. 14) MRGE - Purchased at .28. No stop loss at present. Stock closed at .14 on Friday. 15) AAPL - Daytraded short 3 times. Profit on the trades of $51 per 100 shares. 16) ZLAB - Purchased at 139.69 and at 130.67. Liquidated at 119.67. Loss of $3071 per 100 shares (2 mentions). 17) ZLAB - Purchased at 110.73 and at 110.73. Liquidated at 149.92. Profit on the trade of $7838 per 100 shares (2 mentions).
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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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