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Issue #717 
May 3, 2021 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls Got Good News but the Market Yawned!
DOW Friday closing price - 33874
The bulls were unable to take advantage of the much better (even great) earnings reports in GOOGL, AAPL, AMZN and FB, having generated red weekly closes in the DOW and NASDAQ and only a 1 point green close in the SPX. The NASDAQ actually generated a negative reversal week, having made a new all-time intraweek high but then closing red. This is actually very indicative as 48.3% of the companies in the NAZ are Technology and all of the mentioned above are in the top 10 of the index. When blowout earnings reports fail to move the index, and in fact generate red, it is a sign that further upside is not likely to occur. All indexes closed on or near the lows of the week, suggesting further downside below last week's lows will be seen this week (DOW below 33744, SPX below 4174 and NAZ below 13836).
The 2 most important economic reports of the month are due out this week, with the ISM Index report coming out on Monday am and the Jobs report on Friday am. These are the last reports the traders are waiting for to make decisions for the next 2 months. The ISM Index is expected to come out at 66 (last month was 65) and if it comes out as expected, it will be the highest number since 1995. The nonfarm payroll number in the Jobs report is expected to be 1.1m and last month it was 1.0m and that means that once again, the reports are expected to be better than expected. Recently, better than expected reports have not had an effect on the market as no new buying of consequence has come of it. With the chart action becoming negative, it is difficult to visualize anything that could bring about new buying interest and further upside.
As explained over the past few newsletters, the chart action and the overbought oscillators are at levels that in the past generated corrections and with the adage of "sell in May and go away" now in play, the probabilities now highly favor such a correction occurring. The minimum correction likely to occur is 5%, which in the SPX would suggest a 215 point drop down to the 3975 level. Nonetheless, 2 previous corrections under similar circumstances were in the 10% area, meaning the index could drop down to the 3750 area. Keeping in mind that this recent move up has been straight up, and there has been no support built below until the 3723 level is reached, it does suggest the latter size correction is the most probable one.
All the indexes have been trading mostly sideways for the last 9 trading days and have built a short-term pivotal support that if broken, would suggest the correction is "on". In the DOW the 9-day low is at 33687, in the SPX it is at 4118, and in the NASDAQ it is at 13717. That pivotal support in the DOW is only 207 points lower (.56%). In the SPX it is 63 points lower (1.6%) and in the NASDAQ it is 143 points lower (1.04%). This does mean that the DOW is the weakest of the indexes and the one most likely to break support first.
To the upside and based on fact that both the SPX and NASDAQ made new all-time highs last Thursday (SPX at 4218 and NAZ at 14073), a rally above those levels this week would negate the correction outlook. This is what the bulls must do given that right now (after the positive earnings reports), they have some fundamental power that will continue to fade as the days progress. With the still possible uncertainty of what the Jobs Report will bring to the table on Friday, the bulls have to accomplish new highs this week or face a strong profit taking selling binge. The probabilities do not favor that happening. Probabilities favor the bears.
SILVER generated a red week but then it was only by $.20 cents, meaning that it was not a statement of any kind. Silver closed near the low of the week, suggesting further downside below last week's low at 25.74 will be seen this week. Short term pivotal support is found at 25.67 and at 25.42. Nonetheless, the chart is not suggestive of anything of consequence occurring. The parameters are clearly defined with 28.29 as the high level that if broken would generate further buying and 23.74 to the downside that would do the opposite. Traders await news that is likely to be available by the end of the week, Probabilities slightly favor the bulls for the longer term but for this week, probabilities slightly favor the bears.
OIL generated a green weekly close and above the most recent high weekly close at 63.13, suggesting the bulls have a clear short-term edge. Oil closed in the upper half of the week's trading range, suggesting further upside above last week's high at 65.46 will be seen this week. There is plenty of intraweek resistance between 65.65 and 67.98 and the fact that the bulls had total control midweek but then sold off at the end of the week, suggests that the resistances above are not going to be easily broken, if broken at all. Pivotal support is found at 60.61, which if broken would deflate the bull strength. At this moment, the probabilities favor the bulls but the action at the end of the week has taken something out of the momentum, meaning that it is more likely Oil will trade sideways than trend in either direction.
DOLLAR generated a positive reversal week, having made a new 10-week low and then closing green and on the high of the week, suggesting further upside above last week's high at 91.32 will be seen. The weekly close at 91.30 means that the failure signal given the previous week has been negated. If it goes above last week's high this week, it will also mean that a 2nd successful retest of the low at 89.21 will have occurred, suggesting that a strong bottom has been built. Nonetheless and on a possible short-term negative note, the sell signal and failure signal given on the daily chart remains in place, meaning that the bulls must do more to establish that the Dollar is continuing higher, rather than being in a sideways trading range. The Dollar needs to stimulate a confirmed daily close above 91.53 to accomplish that. As such, it will be the daily closes this week that will get all the attention. At this time, the probabilities still slightly favor the bears, at least for a sideways trading range.
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Stock Analysis/Evaluation
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CHART Outlooks
The probabilities now favor a correction occurring though the correction is only likely to occur in overbought stocks that have outpaced their value prices. As such, the mentions this week are all sales. Purchasing of stocks that are oversold and at depressed prices (such as some of the held stocks) can be done but it is easier to find stocks that are ready to correct than stocks that are ready to rally, especially under the current conditions.
I have included one of the mentions from last week that did not get to the desired entry point and one new mention.
PEP Friday Closing Price - 144.16
PEP is a stock that has been in a consistent uptrend for the past 36 years but never during this period of time has it stayed at a price level for over a year. On February 2020 it got up to 147.20 and then dropped because of the pandemic. In December 2020, the stock made a new all-time high at 148.72 and then dropped down to 128.32 and just 2 weeks ago, the stock got back up to 147.80 and then dropped back this week to generate a red weekly close that has made the previous week's close at 145.83 into a successful retest of the all-time high weekly close at 148.30. Though this successful retest has not yet been confirmed, the probabilities now favor the edge going back to the bears. This has now been 14 months that the stock has been around the $147-$148 level and that shows a measure of price exhaustion, especially since the stock made a new all-time high just 4 months ago but failed to follow through in spite of the fact that the indexes have continued higher with a 10% appreciation in price.
PEP saw a correction of 31% during the start of the pandemic and that type of a correction can be explained away but then in December the stock corrected 15% and that was more technical in nature and if the stock fails to make a new high on this run (considered a failure), a bigger correction is likely to occur.
PEP reported earnings 11 days ago and they were slightly better than expected and the stock rallied 4.2% off of the report but it evidently was not good enough to make new highs as the stock fell short by $.92 cents of accomplishing the feat. The stock closed in the upper half of the week's trading range, suggesting further upside above last week's high at 145.77 will be seen this week. Nonetheless and using the daily chart, resistance starts to be found at 144.96 and then nothing until 146.26. Given the negative action seen last week, chasing the stock is now a thing to consider, especially if the bulls cannot get above 144.96. By the same token, if they are able to get above that level, the stock should not be shorted until above 146.00. That is a decision that will need to be made by each person. The stop loss mentioned last week at 148.82 has now been changed to 147.90 meaning that a lower entry point will keep the risk/reward ratio the same. The objective to the downside of PEP has to be the 200-week MA, currently at 124.86.
Sales of PEP at 144.90 or higher (preferably above 146.00) and using a mental stop loss at 147.70 and having a 125.00 objective will offer a 7-1 risk/reward ratio. My rating on this trade is a 3.5 (on a scale of 1-5 with 5 being the highest).
GPS Friday Closing Price - 33.10
GPS is a stock I shorted recently that ended up at a small loss but now there are stronger reasons for shorting the stock given that this past week it got close to a 6-year high and ended up generating a negative reversal, suggesting that no further upside above the clearly defined resistance area will occur without a correction occurring first, especially if the index market is to have a correction as well. It also needs to be mentioned that the stock has appreciated in price close to 700% from last year's pandemic lows and has gone up 60% in just the past 11 weeks. It is way overdue for a correction.
GPS got up to a high of 34.87 last week and the 6-year high is at 35.68, which was made in January 2018 and from which a drop 15.22 occurred, which was then exacerbated by the Pandemic and causing the stock to drop all the way down to 5.26. The stock generated a negative reversal and a close on the low of the week, suggesting further downside below last week's low at 33.00 will be seen. Hopefully for this trade, the bulls will attempt to negate the drop early in the week so that a desired entry point can be achieved but the chances are 50-50 given that there is no support below until 30.77 is reached. If the stock continues lower without an early week rally to the desired entry point, it should not be chased. The desired entry point could be reached again in a couple of weeks.
Other than the minor intraweek support at 30.77, there is no support found until 26.61 and that is actually the objective of this mention. As such, if the desired entry point is not obtained this week or before the 30.77 level is broken, the trade will not be done.
There is a small chance (but certainly a possibility) of GPS dropping all the way down to the 22.99 level where the 200-week MA is currently at but that would require a 35% correction and that is not likely to happen at this time. By the same token, the long term chart does suggest that at some point in the next 12-24 months, a drop down to that level (or even down to $22) will occur unless the pivotal resistance at 35.68 gets broken and a rally up to the all-time high at 46.85 occurs. The probabilities though, strongly favor the bears at this time.
It must be mentioned that the 200 10-minute MA is currently at 33.96, and given the outlook for the stock and the indexes, it is not likely that line will be broken to the upside, though it could be reached this week.
Sales of GPS above 33.77 and using a mental stop loss at 34.97 and having a downside target of 27.00 will offer a 5-1 risk/reward ratio. My rating on the trade is a 3.25 using the 34.97 stop loss but a rating of 4.25 using a stop loss at 35.78.
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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 3/1 Profit of $19,431 using 100 shares per mention (after commissions & losses) Closed out profitable trades for April per 100 shares per mention (after commission)
ZLAB (long) $2898
Closed positions with increase in equity above last months close minus commissions.
AAPL (long) $3100 Total Profit for March, per 100 shares and after commissions $8,055 Closed out losing trades for April per 100 shares of each mention (including commission)
ZLAB (long) $190
ZLAB (long) $31 ZOM (long) $10 CRON (long) $16 Closed positions with decrease in equity below last months close plus commissions. NONE Total Loss for March, per 100 shares, including commissions $247 Open positions in profit per 100 shares per mention as of 4/30
SCU (short) $7
Open positions with increase in equity above last months close.
PGEN (long) $256
NEM (long) $642 Total $905 Open positions in loss per 100 shares per mention as of 4/30
SNDL (long) $8
Open positions with decrease in equity below last months close.
AU (long) $834 Total $2059 Status of trades for month of April per 100 shares on each mention after losses and commission subtracted.
Profit of $6,654
Status of account/portfolio for 2021, as of 4/30
Profit of $26,085 per 100 shares.
AU bears continued to have the edge, with the stock having generated another red close and breaking a minor but short-term pivotal support at 20.77. The stock closed near the low of the week and further downside below last week's low at 20.31 is expected to be seen. Nonetheless and on a potential positive note, the chart suggests that a drop down to 20.15 will occur this week but if that area holds up and the stock rallies thereafter and gets above the pivotal intraweek resistance at 23.45, a stronger bottom formation will have been built that would give the bulls' strong ammunition to generate a rally. By the same token, the double bottom intraweek low at 19.55/19.64 gets touched and especially if broken, the chart will turn strongly bearish. As such, the stock finds itself at an important and pivotal level of support. Probabilities favor the bulls.
BTZI generated a new 11-week weekly closing low on Friday and closed on the low of the week, suggesting further downside below last week's low at .101 will be seen this week. Nonetheless, the important and pivotal weekly close support at .105 was not broken (closed at .1067) and that means that this coming week is pivotal. A retest of the intraweek double bottom at .070/071 has not yet occurred on the weekly chart and a drop below last week's low this week (likely) will open the door for this week's low becoming that successful retest. As such, the action seen this past week can be considered a needed/required action to build a new and confirmed bottom. What is needed for that to happen is for a positive reversal week to occur (a drop below .101 and a green close next Friday). The .149 level remains pivotal resistance that if broken, would suggest a new support level of consequence will have been built. Probabilities favor the bulls. CNX generated a negative reversal week, having made a new 3-week high and then closing red and near the low of the week, suggesting further downside below last week's low at 13.39 will be seen this week. It was a disappointing week for the bulls, given that a failure signal against the bears was given and confirmed on Tuesday and Wednesday and then negated and the negation confirmed on Thursday and Friday. The action was all due to the earnings report that came out on Thursday but it was surprising given that the earnings report came out better than expected and the stock should not have sold off. There is important and short-term pivotal intraweek support at 13.13 that if broken would weaken the chart substantially for the short-term. Nonetheless, there is intraweek support at 13.33 that if seen but not broken and a positive reversal occurs thereafter, would tend to strengthen the chart substantially for the short-term. There seems to be no fundamental reason for the stock to head down from here, meaning that the action seen this past week is likely to be all chart oriented. On a weekly closing basis, the 13.83 level remains pivotal resistance. On a daily closing basis, the pivotal resistance is at 14.03 and also at last week's high daily close at 14.40. I believe the probabilities favor the bulls this week. CRON generated an uneventful inside week but the bears remained in short-term control, having generated yet another red weekly close and below the 200-week MA, currently at 8.52. This is now the 3rd weekly close below the MA line and that suggests the bulls need some positive news to occur so the selling interest ebbs. The company does report earnings this week on Friday am and that will likely be the catalyst for action. From a chart point of view, no new negatives (or positives) occurred this past week, suggesting the traders will wait for the report before making any decisions. Chart-wise, the recent intraweek low at 7.57 has not yet been clearly tested so the probabilities do favor the stock heading down to the 7.70 level this week and turning around. As far as resistance is concerned, pivotal resistance is found at 8.51 (last week's high), which if broken, would be a signal that no further downside is to be seen. The earnings report is already expected to be worse than last year (expected at -$.11 vs last year at +$.20) and that means that the onus for further downside is on the shoulders of the bears. Probabilities are 50-50 for this week. ENG generated a new 17-week weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 3.42 will be seen this week. Nonetheless and in spite of the new multi-week weekly closing low, the recent intraweek low at 3.19 was not broken, meaning that this coming week could be a retest of that low and from which a new and more concentrated rally can occur if the retest is successful. After such a big drop from the highs and not having yet reached and previously established support (closest is at 2.88, based on a weekly close), a successful retest of any low made at this time needs to occur before traders start coming back aboard. This means that a drop below 3.42 but not below 3.19, followed by a green weekly close and a rally above next week's high the following week, needs to occur. Pivotal intraweek resistance is found at 3.93 that if broken would clearly suggest the correction/downtrend is over. The 3.19 and 3.93 levels are short-term pivotal this week. Probabilities slightly favor the bulls for a positive reversal week. MRGE is a fundamental buy and hold play waiting for news to occur, the date of which is not known. That news is supposed to cause the stock to move up to the $2 level. As such, chart analysis is not all that useful. Nonetheless, I will say that the stock has had a habit of trading between .30 and .45 cents for much of the last 6 months and this past week, the stock got down to the bottom of that trading range with an intraweek low at $.28 and a close at the 200-day MA, currently at .319. As such, it is expected that the bulls will come back aboard this week and generate a green weekly close next week. There are no levels close by that would cause a major breakdown or breakout at this time. NEM generated a red week and a close in the lower half of the week's trading range, suggesting further downside below last week's low at 60.85 will be seen this week. The stock did generate a daily and weekly close below a previous daily/weekly close resistance at 62.79 that when broken to the upside, generated the recent rally, meaning that if confirmed next Friday, some of the strength seen in this rally will be negated. By the same token, neither the daily or weekly failure signals were clear or strong enough to cause new selling interest to appear, meaning that the traders are waiting to see what happens to Gold this week before making any strong decision. As it is, this move down was somewhat expected to occur given the 19% appreciation in price that did occur over the previous 8 weeks. By the same token, the red weekly close means that the stock is now showing 2 successful retest of the all-time high weekly close at 69.20 and that puts an additional onus on the bulls to generate further upside, needing some fundamental support to do it. There are 3 daily closes that are important and even pivotal, at least on a short-term basis. The first one is above at 62.97. If the bulls can close any day this week above that level 2 days in a row, the failure signal against the bears will be negated. The next level of pivotal support is at 59.88. A close below that level will erase all the gains seen recently. The next level of importance is at 56.87, which if broken would give the bears control again. For the time being and until new news comes out, the probabilities favor the stock trading between $60 and $63. PGEN failed to confirm the failure signal against the bears that occurred last week, having closed on Friday below the previous low weekly close at 7.81 (closed on Friday at 7.74). The stock closed on the low of the week, suggesting further downside below last week's low at 7.66 will be seen this week. Nonetheless, the stock generated an inside week that was not all that indicative of anything other than to state that the bulls still need more ammunition (news) to take the stock higher. There is no official earnings date set but based on previous dates, it is expected that the company will report earnings this week on Wednesday May 5th. That report could be a catalyst. Chart-wise, intraweek support is found between 7.55 and 7.64 and resistance is at 8.53. Whichever of those levels gets broken, would likely stimulate further movement in that direction. Probabilities favor the bulls. SCU continued to move higher, having generated another green weekly close (the 7th in the last 9 weeks). The stock did close in the upper half of the week's trading range, suggesting further upside above last week's high at 22.97 will be seen this week. Pivotal intraweek resistance is found at 23.19 that if broken, would suggest a rally up to at least the 24.35 level. Adding to all of this in favor of the bulls, the stock has now generated 2 weeks in a row above the 200-week MA, currently at 22.37. Nonetheless and on a negative note, the stock has now closed for the past 5 weeks in a narrow band between 22.29 and Friday's close at 22.74, meaning that the strength being seen is limited. The company reports earnings the following week on May 12th and that suggests that this week will be more of the same as seen the past 5 weeks. Short-term pivotal resistance is found at 23.19 and short-term pivotal support is found at 21.19. Neither is likely to be broken this week. SNDL generated an uneventful inside week. Nonetheless, the stock closed on the low of the week, suggesting further downside below last week's low at .846 will be seen this week. If that occurs but the recent low at .76 is not broken and the bulls are able to generate a rally the following week above this coming's weeks high, a successful retest of the low will have occurred. It is important to note that the 200-day MA is currently at .69 cents, meaning that even if the .76 level is broken, it is unlikely that much further downside will be seen. The MA is highly unlikely to be broken given that when the stock broke the resistance at 1.24 in February, it caused the stock to triple in price and movement such as that is not going to be totally negated without some negative fundamental change occurring. None has occurred. As such, this area where the stock is trading at is more likely to generate buying interest than selling interest with the only question being when the stock will turn around and start heading back up. Pivotal intraweek resistance is found at 1.03. Probabilities slightly favor the bulls this week. SRUTF remains mired in this trading range between .048 to .56, which is where it has now been in for the past 4 weeks as the traders await new news. It is evident that some news for the company or for the Cannabis industry is needed in order to break out of this range. A daily and weekly close above .0585 will be a breakout, while a daily or weekly close below .045 will be a breakdown. Probabilities favor more of the same this week, though some of the other Cannabis stocks did begin to show some movement that could mean the worst is over. If that is the case, the bulls are most likely to be the winners when that happens. ZLAB generated a negative reversal week, having made a new 10-week intraweek week high and then turning down to close red and near the low of the week, suggesting further downside below last week's low at 164.05 will be seen this week. The stock had appreciated 45% in value over the past 5 weeks and a correction to that rally was to be anticipated to happen. There is clear and minor to decent intraweek support at 154.17 but the fundamental news that has come out over the past few weeks does not suggest the bears have enough ammunition to take the stock down that far. In fact, the stock generated a new buy signal on the daily closing chart when it closed above a previous high daily close at 164.83 and the bears had the opportunity on Friday to negate that buy signal, having taken the stock down to 164.05. Nonetheless, at the end of the day, the stock closed at 166.21 and no failure signal was given. Chart-wise, the stock should continue lower this week and down near the 155.42 level where an island formation is found (between 155.42 and 153.50) to test the validity of that "rare" formation. Nonetheless, the fundamental picture suggests the bulls now have a decided edge and the bears be unable to accomplish much downside movement. If Friday's high at 170.50 is broken on Monday, additional buying interest will be seen. For the short term, this is a classic battle between the fundamentals and the charts. In this case, I believe the fundamentals will win.
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1) SNDL - Purchased at .94. No stop loss at present. Stock closed on Friday at .863. 2) PGEN - Averaged long at 7.506 (3 mentions). Stop close only at 6.45. Stock closed on Friday at 7.74. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .0467. 4) BTZI - Averaged long at .1054 (3 mentions). No stop loss at present. Stock closed on Friday at .1067. 5) AAPL - Liquidated at 134.82 and at 136.12. Profit on the trade of $3100 per 100 shares (2 mentions). 6) ZLAB - Averaged long at 134.64 (3 mentions). No stop loss at present. Stock closed on Friday at 166.21. 7) AU - Averaged long at 26.106 (6 mentions). No stop loss at present. Stock closed on Friday at 20.58. 8) NEM - Averaged long at 61.31 (3 mentions). No stop loss at present. Stock closed on Friday at 62.41. 9) CNX - Averaged long at 10.876 (3 mentions). Stop loss now at 12.69 (weekly. Stock closed on Friday at 13.57. 10) SCU - Shorted at 22.87. Stop loss at 23.26. Stock closed on Friday at 22.72. 11) ENG - Averaged long at 4.92 (2 mentions). No stop loss at present. Stock closed on Friday at 3.42.
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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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