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Issue #730 
Aug 22, 2021 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls Playing Defensively. Next 2 Week's action will decide Whether Seasonal Correction is to Happen or Not.
DOW Friday closing price - 35120
All the indexes generated new 4-week intraweek lows on Thursday and in the process generated failure signals across the board, having closed below the previous all-time high daily closes. Nonetheless, there was no follow through to the downside seen and then on Friday, the bulls were able to negate the failure signals, having closed above the previous all-time high daily closes, meaning that all the weakness seen during the week was for naught, as far as the bears are concerned. The bulls remain in full control.
The fundamental news that came out last week was not positive as Retail Sales came in lower than expected, the Chinese market fell as their economy is not growing as much as expected and the expectations of the Fed starting cut back on their easing program sooner (rather than later) continued to grow. In addition, the Delta strain of the Virus is not yet giving any signals of ebbing. None of this supports the rally, suggesting the rally seen at the end of the week was more from the inurement of the traders to buying all dips than to any thoughts of things getting better. As such, the action last week was more reactive than informative or meaningful. The desire to sell (take profits) or short the indexes has been punished all year and that means that the bears will not come out of hibernation until something more tangible comes out.
By the same token, the market is nearing what has been a dependable seasonal tendency to correct that has more often than not (over the last 10 years) started in the latter part of August or beginning of September. The traders are aware of this and therefore the probabilities favor it happening this year as it is unlikely that anything catalytically positive occurs during the next month. This coming week does have an increase of economic reports due out with Durable Goods, Home Sales, 2nd estimate of GDP and Personal Income and Spending. None of these reports are catalytic but if the trend seen recently for lower than expected reports continues, it may be the "tipping" point to the correction beginning. The following week, the ISM Index and Jobs reports come out and if all of these (and those) show the same trend, the bulls will not have a choice other than to accept a correction occurring.
One thing that did "not" occur this week and that allowed the bulls to recover (in spite of the intraweek weakness seen) is that no sell signals were given on the closing charts (daily or weekly) in the DOW or in the SPX. The intraweek supports were broken but no follow through occurred as the bulls immediately stepped up and prevented any momentum down occurring. The NASDAQ did generate a break of daily close support but with the other two indexes not following through, the traders did not actively move to sell. At the end of the day(s), the fact that none of the previous low daily closes in those two indexes were broken is what gave the bulls enough ammunition to rally the market on Friday. As such, that is going to be what the traders key on this week. In the DOW, a daily close below 34792, in the SPX a daily close below 4387, and in the NASDAQ a daily close below 14857. To the upside, the all-time high daily closes is now pivotal. Those are at 35625, at 4479, and at 15181 respectively.
This week the bulls will be mostly in a defensive posture as the only way they can keep the rally going is with catalytic good news and that does not seem to be in the cards right now. As such, the big question this week is whether the correction will start this week or the following week after the ISM and Jobs reports come out. That answer cannot be determined at this time.
SILVER has been under short-term bear control for the past 10 weeks but has reached a level of support of consequence around the $22.50-23.00 that will likely require some negative fundamental news to break. As such, the probabilities favor some upside being seen the next few weeks with a trading range based on a daily close between 23.00 and 24.80. Pivotal daily, weekly and monthly close support is found at 22.66/22.71 that if broken and confirmed would open the door for the bears to take full control. With Silver having closed on Friday at 23.11, the probabilities favor the bulls for now.
OIL made a new 4-month weekly closing low and did close on the low of the week, suggesting further downside below last week's low at 61.84 will be seen this week. Oil generated a failure signal against the bulls, having closed below the previous low weekly close at 66.09 that was pivotal support. The chart now shows no support of consequence below until 59.32 (57.25 on an intraweek basis) is reached. Nonetheless, there is quite a bit of support built in the area between 59.32 and 62.05 (based on a daily close) that will generate some buying interest, meaning that the selling pressure is likely to diminish or abate unless there is some negative fundamental news that gives the bears added ammunition. For this week, the 62.05 level (on a daily closing basis) is short term key. If a confirmed close below that level occurs, the $60 demilitarized zone (59.70-60.30) will likely be visited. To the upside, the 63.15 level (on a daily closing basis) is short-term pivotal as a close above that level will open the door for a rally to what is now decent and pivotal resistance at 66.09. Chart suggests that Oil will trade between $59 and $66 for the next 4-6 weeks. A weekly close below 59.32, will open the door for a drop down to the $50-$52 level. Probabilities favor the bears this week but the downside is now likely limited.
DOLLAR generated a new 10-month intraweek and weekly closing high and closed near the high of the week, suggesting further upside above last week's high at 93.73 will be seen this week. This move is a breakout of consequence as the 93.07 level based on the weekly closing chart (93.30 based on the daily closing chart) was pivotal resistance that the bulls had not been able to get above for the past 10 months. This breakout is based on the fundamental idea that the Fed will cut their asset buying program soon and that the raising of interest rates is also likely to be done sooner than what was expected before. The breakout was a game changer that is likely to generate enough buying to get up close to the $95 level before the bears get some new strength. On a daily closing basis, the 92.77 level is now support (93.07 on a weekly closing basis). For this week, the Dollar is likely to test the breakout level at 93.07-93.30 level and then move up to likely the 94.00 level (93.86 on a daily closing basis). Probabilities now favor the bulls.
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Stock Analysis/Evaluation
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CHART Outlooks
There are no clear indications at this time of what the overall market is going to do this week. Probabilities are now slightly favoring the bears but until the following week when the ISM Index and Jobs reports come out, the traders are not likely to do anything of consequence. The same thing, but in the opposite direction, has been happening to small cap stocks, meaning that even though small cap stocks are strongly oversold, there are no indications that this week that will change. As such, I have no new mentions this week.
One of the mentions given last week did get to the desired entry point and was bought, but then the stop loss was hit soon thereafter and the positions liquidated. Nonetheless, the fundamental and chart reasons for the purchase remain strong and as such, a new desired entry point will be offered in this newsletter. In addition and with the other mention that was also bought, additional shares should be bought if the new desired entry point is reached (see the details on this in the Held Stock Update area.
ENB Friday Closing Price - 37.84
ENB is a multinational pipeline company headquartered in Canada. It focuses on the transportation of crude oil and natural gas, primarily in North America.
ENB broke above the 200-week MA, currently at 34.79. 24 weeks ago. For the past 16 weeks the stock traded sideways between a high at 41.13 and a low of 37.34 but that sideways trading range was broken this week, suggesting that the traders now are likely to expected the MA to be tested before buying anew. With Oil having broken its support this past week and likely to move lower, the same is likely to happen to the stock. Nonetheless, the longer-term trend in both remains positive, meaning that purchases can be made at support and liquidations to be done at resistance. Such a trading range, is tradeable.
In looking at the chart of ENB, there is decent support at 34.02 and with the MA being at 34.48, a drop down to somewhere in that area is likely to be seen sometime in the near future. The probabilities do not favor it happening this week but this mention will remain viable until that level is reached or the mention cancelled. To the upside, the 40.30 objective given last week remains viable.
Purchased of ENB around the 34.48 level and using a stop loss at 33.65 and having a 40.30 objective, offers a 7-1 risk/reward ratio. The probability rating on this trade (if the desired entry level is reached) is 3.75 (on a scale of 1-5 with 5 being the highest).
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| AMC generated a second green weekly close but it was uneventful as the bulls were not able to accomplish anything new that was not accomplished the previous week. The stock did close in the lower half of the week's trading range, suggesting further downside below last week's low at 32.20 will be seen this week. Given that the recent low at 12-week low at 28.91 has not yet been tested successfully (and needs to be retested successfully before the bulls climb back aboard in a bigger way), it is likely that is the plan this week. Pivotal intraweek resistance is now found at last week's high at 38.78. Intraweek support is found at 31.15 and that is the level the traders will be watching closely this week. It is a level where consideration can be given to adding positions. Probabilities slightly favor the bears this week. AU generated another red weekly close and a close in the lower half of the week's trading range, suggesting further downside below last week's low at 15.50 will be seen this week. Nonetheless, it was an inside week and the close was only $.01 cents below last week's close, meaning it was an uneventful week. By the same token, the chart is now set up that if the stock does go below last week's low but not below the previous week's low at 15.28, it would likely be seen as the required/needed retest of that multi-month low and would then suggest a short-term rally will ensue. This is the most probable scenario for this week. It this scenario occurs, a rally back up to the 200-day MA, currently at 17.26 would probably be seen the following week. Probabilities slightly favor the bulls this week. BTZI generated a new 12-week intraweek high and did close near the high of the week, suggesting further upside above .083 will be seen this week. Nonetheless, the bulls had several opportunities to make a clear short-term bull statement but in the end failed to do so, meaning that this coming week is likely pivotal. The stock closed on Friday at .078 and there is some minor weekly close resistance there. In addition, the 200-day MA is also at .078 and the stock did close above the line 2 days in a row and then on Friday closed back at that line. As such, the bulls have a slight edge and they are able to generate a daily close above .08 any day this coming week, the edge will get stronger. The same and more so can be said about a green close next Friday above .08. This level has become short-term pivotal. Short-term pivotal intraweek support is now found at .07, which if broken would re-weaken the chart. The Bitcoin chart is short-term positive, suggesting the week will be positive for the bulls. A confirmed daily close above .08 will open the door for a rally at least up to .10 and perhaps even to .12. CNX confirmed the break of the 200-week MA with a 2nd close below the line. The stock has now generated 6 weeks in a row of red closes and that has not happened for the past 4+ years. By the same token, all supporting intraweek bull-trend support levels have broken and that means the bulls are playing a 100% defensive game right now. The fundamentally bullish picture for the company has not changed much as it is expected that the company will continue to grow during the next few years and it is one of the main companies in the industry. For now though, a drop down to the $10 level is highly likely to occur. By the same token, that is a psychological support level that even though does not have a history of being strong support, the fundamental picture in place means that it is unlikely the break, especially after so much weakness has been seen recently (stock has dropped 31.3% over the past 11 weeks). The chart suggests that when the selling interest stops (or ebbs), a rally back up to the 200-week MA (currently at 11.60) will occur. Intraweek resistance is now found at 12.00. As such, I would be willing to say that the probabilities favor the stock trading between $10 and $12 for the next 4-6 weeks. I do believe a green weekly close will be seen next Friday. CRON made another new 9-month intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 6.13 will be seen this week. Nonetheless, the stock has now reached a well-established level of support between 6.00 and 6.28 that goes back 3 years and shows 4 previous weekly close level of support that are unlikely to be broken at this time. The stock has been on an 11-week run to the downside and has given up 35% in value, having shown 9 red weekly closes and only 2 green closes. This fall is industry oriented and not company oriented as there has been no new negative fundamental news regarding the company. The Cannabis industry is expected to continue to be under some sell pressure the rest of the year but it is expected to triple in value over the next 4 years and this price level has shown to be strongly supported. Chart suggests that the 8.13 level will be resistance for the rest of the year, meaning that the stock is likely to trade between $6 and $8 during this period of time unless Congress passes the legalization of Marijuana for the entire nation. A bill that is presently in Congress right now. I do expect a green weekly close next Friday. ENG made a new 9-month intraweek, daily and weekly closing low and closed near the low of the week, suggesting further downside below last week's low at 1.74 will be seen this week. This break does weaken the chart short-term as the important (but old - from 2012) weekly close support at 2.11 was broken. By the same token, the fundamental picture remains decent-to-good, meaning that there is little reason to consider liquidation of the positions as the possible downside objectives are much less than the viable upside objectives, both chart-wise and fundamentally. Intraweek support is found at 1.63 and then nothing until the 200-week MA, currently at 1.48. If the bulls can rally and close next Friday above 2.11, the break will be negated. If they cannot do that, a sideways trend at these same prices will likely ensue for the next 4-6 weeks. MRGE continued lower but reached a major psychological and well-established support level at the .10 cent mark, suggesting that no further downside is likely to be seen. By the same token, this is not a chart-driven stock and the bulls are still depending on the expected-sometime-in-the-future change of fundamentals to drive the stock higher. As such, the drop down to this level mostly means that the downside may be over but it does not mean that any upside of consequence is likely to be seen at this time. Pivotal resistance on all charts (intraweek, daily close and weekly close) is now found at .176. Closes above that level will bring in new buying interest. Pivotal intraweek support is found at .10 (.11 on a weekly closing basis). Stock closed at .12 on Friday. Probabilities slightly favor the bulls this week. NEM broke a minor to perhaps decent intraweek support at 56.55 this past week, having gotten down to 56.15. The stock closed on the low of the week, suggesting further downside below 56.15 is expected to be seen this week. Strong to possibly major weekly close support is found at the double bottom at 54.76/54.38 with pivotal intraweek support at 54.13. Nonetheless, there is somewhat copious support around the 56.00 level that is expected to hold up given that Gold is supported. There is some minor intraweek resistance between 57.39 and 58.13, that if broken would suggest the stock would rally up to the 59.27-59.90 level where there is some short-term pivotal resistance. Probabilities favor the bulls for a green weekly close next Friday. PGEN generated a red weekly close, making the previous week's weekly close at 6.14 into a successful retest of the short-term pivotal weekly close resistance at 6.20. The stock closed in the lower half of the week's trading range, suggesting further downside below last week's low at 5.44 will be seen this week. Nonetheless and with the fact that the stock made a new 9-week intraweek low at 5.04 a few weeks ago, this move down is likely to be the required/needed retest of that area. If successful, new buying is likely to be seen given that the stock reported better than expected earnings 2 weeks ago. Pivotal intraweek resistance is found at 6.29 and pivotal intraweek support is found at 5.04. Probabilities slightly favor the bulls. SNDL generated a new 3-month intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at .686 is expected to be seen this week. The stock has now generated 7 red weekly closes out of the last 9 weeks and given the Cannabis industry has been under pressure, it doesn't seem that any rally of consequence will occur the rest of the year. There is pivotal intraweek support at .65 that if broken would suggest the .50 level will be visited. Nonetheless, the .65 level is the low seen over the past 6 months and without some new fundamental negative, it is likely to hold up. The 200-day MA, currently at .88, is now decent resistance. The chart suggests that the stock will trade between .65 to .88 during the rest of the year unless the Cannabis bill to legalize Marijuana is passed by Congress. SRUTF generated an uneventful inside week but did close near the high of the week, suggesting further upside above last week's high at .0442 will be seen this week. Short-term pivotal resistance is found at .047 that is further strengthened by the 200-day MA, currently at .048. A break above .05 would be a short-term bull sign but unlikely to happen anytime soon. Intraweek support is found at .03 and pivotal at .025. Probabilities slightly favor the bulls this week. ZLAB made a new 3-week intraweek and weekly closing low but the bulls were able to prevent a major sell signal being given as the stock closed on Friday at 134.17 and above the pivotal weekly close support at 128.42. The break of support was clearly in play as Thursday's low was 125.71 and the low on Friday was 125.79. The stock did close on the high of the day on Friday, suggesting further upside above Friday's high at 135.698 is expected to be seen on Monday. Then again and on the weekly chart, the stock did close in the lower half of the week's trading range, suggesting that further downside below 125.17 will be seen this week. By the same token, this particular stock has not shown a propensity to follow that guideline of going below a previous week's low when closing in the lower half of the week's trading range. In fact, on the previous 11 times that has happened, the stock went below the previous week's low on 6 of those 11 times, meaning that on 5 occasions that general guideline did not happen with this stock. There was no news to generate the weakness other than general weakness in the Chinese Market. If the bulls are able to rally the stock above last week's high at 150.73, the low seen this week will become the necessary/required retest of the 8-month intraweek low at 110.37 and as such, the correction considered over and the chart fulfilled to the downside. Probabilities slightly favor the bulls given that the fundamental picture of the company is positively strong.
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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 .697. 2) PGEN - Averaged long at 7.506 (3 mentions). Stop close only at 6.45. Stock closed on Friday at 5.60. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .0414. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .078. 5) DCTH - Liquidated at 8.51. Averaged long at 10.50. Loss on the trade of $398 per 100 shares (2 mentions). 6) ZLAB - Averaged long at 134.64 (3 mentions). No stop loss at present. Stock closed on Friday at 134.17. 7) AU - Averaged long at 26.106 (6 mentions). No stop loss at present. Stock closed on Friday at 15.90. 8) NEM - Purchased at 56.62. Averaged long at 60.137 (4 mentions). No stop loss at present. Stock closed on Friday at 56.35. 9) CNX - Averaged long at 10.876 (3 mentions). No stop loss at present. Stock closed on Friday at 10.58. 10) AMC - Purchased at 32.80. Stop loss at 28.65. Stock closed on Friday at 34.41. 11 ENG - Averaged long at 4.92 (2 mentions). No stop loss at present. Stock closed on Friday at 1.80. 12) AMC - Purchased at 34.82. Liquidated at 34.44. Loss on the trade of $38 per 100 shares. 13) CRON - Averaged long at 9.146 (3 mentions). No stop loss at present. Stock closed on Friday at 6.17. 14) MRGE - Purchased at .28. No stop loss at present. Stock closed at .12 on Friday. 15) CNX - Purchased at 11.59. Liquidated at 11.49. Loss on the trade of $10 per 100 shares. 16) ZLAB - Day traded twice on the long side. Profit of $516 per 100 shares.
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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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