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Issue #736 
Oct 17, 2021 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Correction Over! Uptrend Resuming?
DOW Friday closing price - 35294
This past week, the indexes rallied between 1.6% (DOW) and 2.1% (NASDAQ) and in the process broke weekly close resistance levels that strongly suggest the correction is over. The indexes all closed on the highs of the week and further upside above last week's highs (DOW at 35320, SPX at 4475 and NAZ at 15150) is expected to be seen this week. The news this past week was very positive for the bulls as Retail Sales came in substantially better than expected and all the second quarter earnings reports on the financial industry also coming in better than expected, especially with GS having 'blockbuster" results.
As such and with the September seasonal correction now over, the question is "whether the uptrend is to resume and new all-time highs made or sideways top building action will occur during the next few months". Chart history does suggest the uptrend is to resume but with this now being the longest bull trend ever seen (13 years) and the fundamental picture totally skewed because of the pandemic, this question is impossible to answer at this time. In fact, it was interesting to note that in this now 2-week recovery period, the totally skewed-for-the-past-10-year dichotomy in favor of the NASDAQ versus the DOW was not evident. The NASDAQ has rallied 5.3% and the DOW has rallied 5% and that small difference does not relate to past rallies when the NAZ always was outstripping the DOW by a mile. Then again, it is in the next 2 weeks that dichotomy will be put to the test as the big DOW stocks mostly report this coming week and the NAZ the week after. If that dichotomy does not return at the end of the next 2 weeks, the probabilities will not favor resumption of the uptrend.
From a chart perspective and on an intraweek basis, the DOW will find indicative resistance at 35510 (216 points higher from Friday's close). A break of that resistance will put the bulls in a scenario where new all-time highs will need to be made (above 35631) or the bears will gain an edge that will be difficult to overcome. This week, the DOW will be the index to watch given that many of the big stocks in the index are reporting this week (JNJ, PG, TRV, VZ, IBM, T, INTC and HON).
In the SPX, the intraweek resistance is at 4501 and in the NASDAQ, it is at 15356. All of these levels are reachable this week and if those levels are broken, the bulls will put themselves in a "sink or swim" scenario where new highs would need to be made or a failure signal of consequence would be generated.
All indexes gapped up this past week and in the SPX and NASDAQ they gapped up twice, meaning that there is a breakaway/runaway gap formation that also carries a lot of weight in favor of the bulls. Nonetheless, it also carries a magnet-to-the-downside pull that will draw the traders to it if the bulls falter at any time. In the SPX the gaps are between 4372 and 4386 and between 4439 and 4427 and in the NASDAQ the gaps are between 14800 and 14901 and between 15059 and 15064. Evidently, if the runaway gaps get closed, the breakaway gaps will be targeted for closure as well. Such action would make it difficult for the bulls to resume the uptrend (though not impossible). The one thing that can be said at this time that does carry quite a bit of weight (especially considering all the important earnings reports due out the next 2 weeks that the bulls are depending on them being better to help support resumption on the uptrend) is that last week's lows cannot be broken this week. In the DOW that is at 34115, in the SPX it is at 4329, and in the NASDAQ it is at 14636. Using the weekly chart and considering the importance of the next 2 weeks, any weakness right now would derail the ability of the bulls to resume the uptrend. The bulls need to continue to move straight up (using the weekly charts) or the resumption of the uptrend will not likely occur.
This coming week, there are no economic reports of consequence, meaning that it will all be about earnings. The first earnings reports of some importance start to come out on Tuesday. This does suggest that on Monday, the bulls will maintain control and the pivotal intraweek resistance levels mentioned above will be where the focus will be on.
Probabilities do favor the bulls and the uptrend resuming. There are not yet enough negatives to make the traders believe that the 13-year uptrend is over.
SILVER generated a failure signal against the bears, having closed above the 2 low weekly closes at 22.71 and 23.02 that got broken 5 weeks ago and caused it to get down to the 21.45 level. Silver closed at 23.30 on Friday and near the high of the week, suggesting further upside above last week's high at 23.55 will be seen this week. Silver has been the lagging metal between Gold and Silver and having been able to accomplish this failure signal suggests the metals are on a recovery phase. Pivotal resistance is found at 24.80 and short-term pivotal support at 22.24. Silver is in the middle of that trading range, suggesting the probabilities favor sideways trading until some new fundamental news comes out.
OIL generated a new 7-year intraweek and weekly closing high and closed onthe high of the week, suggesting further upside above last week's high at 82.28 will be seen this week. This was a "bull statement" as this resistance level goes all the way back to 2009 and has been "in play" on 5 different occasions and on each occasion it was confirmed and supported. This does mean that the rally is not only real but unlikely to change until the fundamental picture changes. The short term objective of this breakout is 86.20 where there is minor to decent resistance and a level that is likely to generate enough selling interest to cause Oil to retest this breakout level (between 79.20 and 79.67). All of this is likely to take the rest of the year to accomplish (both upside and downside). This breakout does open the door for oil to head up to the $98-$100 level next year, if and when the fundamental picture has not changed in favor of the bears. For this week, there is pivotal intraweek support at 78.78, which if broken, would put the breakout at risk of not being confirmed next Friday. Probabilities favor the bulls.
DOLLAR generated a negative reversal week, having made a new 13-month intraweek high at 94.64 and then closing red. The red weekly close made the previous week's close at 94.07 into a successful retest of the decent weekly close resistance at 94.04 that was made 13 months ago. In addition, the intraweek high made 13 months ago was at 94.74 and last week's high was 94.64, meaning that if the Dollar goes below last week's low at 93.78 this week, it will make this past week's high into a double top on the intraweek chart. The action this week was a surprise as there was no evident reason why a red weekly close occurred. Then again, it was only by $.11 cents so the red weekly close was not all that convincing and will need another red close next Friday. On the daily closing chart, any close below 93.72 will generate a new sell signal, meaning that this coming week has some short-term pivotal connotations. The probabilities slightly favor the bears.
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Stock Analysis/Evaluation
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CHART Outlooks
Though the correction has ended, there are still questions as to whether the uptrend will resume the same way it was for the past couple of years or whether the traders will shift from Tech and high powered stocks to the small cap stocks that remain underpriced. That will not be known for at least 2 more weeks. Nonetheless, it is safe to say that short positions at this time is not the way to go. I did find one stock that fits both parameters. It is a large established company but at underpriced levels and that is my mention this week.
CALM Friday Closing Price - 35.05
CALM is an egg manufacturer. It is a company that owns 25% of all eggs sold in the United States. The company finds itself trading at a weekly closing low that has been seen on 7 different occasions over the past 7 years. The first weekly closing low was seen at 34.99 in July 2014, the next 35.05 in January 2015, followed by 34.60 seen in August 2017, then 34.89, seen on February 2020 and then on May 2021 at 34.91, in August 2021 at 34.62 and the last one was the previous week at 34.71. It is evident that the bears have been gnawing at this level repeatedly for the past 5 months, given that there have been 3 closes in this area over this period of time. Nonetheless, the bears have failed repeatedly.
Over the past 2 weeks there have been 2 new pieces of news: 1) A previously successful sales manager was placed back into that position, replacing the recent sales manager that had not shown good results and 2) Last week, the company invested $18.5 billion into a new eggs products manufacturing company. It is evident by these 2 actions that the company is doing what it needs to do to re-stimulate interest and growth of the company itself. With the stock trading at an established major support level and the overall market not likely to head lower at this time, investing in this company offers a very low risk investment with decent possibilities of growth.
On a chart basis, CALM also generated a positive week, having made a new 10-week intraweek low but then closing green and near the high of the week, suggesting further upside above last week's high at 35.12 will be seen. The second positive is that with the green close, the previous week's close at 34.70 became a successful retest of the low weekly close made at the beginning of August at 34.62. The third positive is that last week's action was the 2nd successful retest of the intraweek low that was made in March at 30.74, which was a low that generated a rally up to 46.65 within 3 weeks. This chart action suggests that the stock has has built a solid bottom from which to launch a rally of consequence, likely above 46.65.
To the upside and on an intraweek basis, CALM shows minor resistance at 37.42 and slightly stronger at 38.89. Above that level, there is no resistance until 43.24, which is further strengthened by the 200-week MA, currently at 41.76. Above that level, there is nothing until 46.62 is reached. With the stock now having built a base from which to begin a new uptrend, a rally up to the $50 becomes a real possibility.
Purchases of CALM around Friday's closing price of 35.05 and using a stop loss at 33.65 and having at least a rally up to 43.24, offers a 5.7-1 risk/reward ratio. Nonetheless, there is a real chance the stock could rally as high as $50, meaning the risk/reward ratio could be as much as 10-1. My rating on the trade is a 4 (on a scale of 1-5 with the high being 5).
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
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AU extended is recent rally in which the stock has rallied 31% from the low seen 5 weeks ago. In addition, the stock confirmed the break above the 200-week MA (currently at 17.53) with a second close in a row above the line. The stock closed near the high of the week, suggesting further upside above last week's high at 19.23 will be seen this week. Nonetheless, on a weekly closing basis, this area between 18.77 and 18.84 (closed on Friday at 18.79) is an established resistance area using 3 previous low weekly closes at (18.77, at 18.84, and at 18.81) made over the past 2 years (of which the most recent break at 18.81 caused the stock to fall to 14.53). This does mean that next week's close (green or red) will be a short-term determining factor as to direction for the rest of the year. Using the daily closing chart, support is now found at 18.33 and resistance at 20.31, which does include the 200-day MA, currently at 20.40. Whichever of those two levels gets broken first, will determine what the stock does the rest of the year. The weekly resistance levels mentioned above are from previous low weekly closes, meaning not as dependable as previous high weekly closes. Nonetheless, the resistance levels above on the daily closing chart includes both previous high and previous low daily closes (at 19.87, at 19.86, at 20.25, at 20.31, and at 20.23) and that area is more meaningful. It does need to be mentioned that the negative fundamental news that caused the stock to fall to the $15 is no longer affecting the company (company will resume Gold operations in Ghana in October), meaning that what happens to the stock is likely to be dependent on what Gold does. The 17.08 level (based on a daily close) is now pivotal. A close below that level will severely impact the short-to-midterm picture. Probabilities favor the bulls for a run to the $20 level but thereafter, it does depend on Gold. BTZI made a new 5-month intraweek high and a new 6-week high weekly close. The stock closed near the high of the week and further upside above last week's high at .0849 is expected to be seen. This rally was all about Bitcoin, which made a new 6-month intraweek and weekly closing high on Friday. Bitcoin fell short of making a new all-time weekly closing high by 250 points but did close near the high of the week and it is expected more upside above last week's high at 62,897 will be seen this week. The all-time intraweek high is at 64.374. This .08 area is pivotal for the stock, given that it is a 5-month weekly closing resistance as well as where the 200-day MA is currently located. If broken, it would mean a breakout of consequence has occurred. Above this level, there is no intraweek resistance above until the .149 level is reached. The stock did spike up and with Bitcoin not likely to fundamentally fall back much (if any), the probabilities favor the bulls. Pivotal daily close support is now found between .058 and .06. CHUY made a new 10-month weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 30.25 will be seen this week. This weekly close is a negative for the stock, given that there was a double low (at 30.54/30.45) that was broken on Friday and such a break generally brings new selling interest. Nonetheless and using the daily closing chart, there is also a double low on that chart at 29.47/29.43 that will now be absolutely pivotal. All breaks have to be confirmed, meaning that if the stock generates a green weekly close next Friday, this break will be negated. Nonetheless, if the double low on the daily chart gets broken as well, it would be difficult to imagine any buying coming in this week so that the break could be negated. As such, the bulls need to maintain themselves above the bottom of the $30 demilitarized zone (at or above 29.70) in order for the bulls to have a chance to rally. For the past 14 trading days, every minor rally high has been lower than the previous one. Right now, the previous rally high is at 31.78, meaning that an intraweek rally above that level will suggest the sell pressure has eased. If the stock goes below last week's low on Monday, then Friday's high at 31.38 will be the new rally high. Any intraweek drop below 29.23 would now give the bears an added edge, meaning that the stop loss can now be raised to 29.13. I do believe the bulls will recover this week, meaning that the probabilities favor the bulls. CNX generated a negative reversal week, having made a new 13-week intraweek high and then closing red and in the lower half of the week's trading range, suggesting further downside below last week's low at 12.97 will be seen this week. Nonetheless and on a positive note, the stock broke above the 200-day MA (currently at 13.15) 7-trading days ago, that line has held though it has now been tested successfully on 2 occasions. This does suggest that the negative reversal is not all that meaningful (probably just a pause in the rally up to the resistance at 14.19. There is quite a bit of intraweek support between 12.70 and 12.97 that should not be broken. If it is broken, it probably means there is a new negative. Last week's high at 13.80 is now short-term resistance. Probabilities favor the bulls. CRON made a new 10-month intraweek low but then on Friday it closed at the same level as the previous week, meaning it was an uneventful week. The stock did generate an outside week with a 5.72 high and a 5.36 low (the previous week it was 5.70 and 5.41) and that means that high and low are now short-term support and resistance. On a weekly closing basis, there is support at 5.42 and again at 5.29 and resistance at 5.83. Probabilities favor the stock idling this week again. ENG generated follow through to the downside off of the big spike down seen the previous week. By the same token, the follow through was minimal as the trading range was $.32 cents (compared to the previous week's $1.20) and the weekly close was only lower by $16 cents. The stock did close on the low of the week and further downside below last week's low at 2.32 is expected to be seen this week. There is some minor intraweek support at 2.28 and then nothing until the 2.00 level. Given that the selling interest subsided this past week (small trading range), I do believe the 2.28 support level will hold up and a positive reversal week will occur. Intraweek resistance is found at 2.62 and at 2.71. If broken, the sellers will lose the short-term edge. Probabilities favor the bulls. MRGE generated and inside week but a red close and slightly in the lower half of the week's trading range, suggesting a slightly higher probability of going below last week's low at .08 than above last week's high at .12. Nonetheless, the action was not indicative of anything new occurring (just chart building). The recent low at .035 has not yet seen a retest of that level and if the stock does get below last week's low, that could end up being the required/needed retest. In addition, the fall back was not a surprise as there has been no new news and the stock did reach an intraweek resistance level of consequence at .13/.1375 with the previous week's high at .139. It is expected that some base building action is to be seen. NEM generated a failure signal against the bears on Friday, having closed above the 3 low weekly closes seen over the past 16 months at 54.76 and 54.38 and the most recent at 56.35 (closed at 57.03). This does negate all the recent weakness and suggests that a bottom is now in place and that a recovery rally is occurring. Daily close support should now be found at 56.35. If broken, then a drop all the way down to 54.67 could be seen. Nonetheless, for that to happen, Gold would need to weaken substantially (not likely). On a daily closing basis, the next resistance level is found between 59.67 and 60.00. Pivotal resistance is found at 62.82. In looking at the weekly closing chart and all the lows and highs made during the past 16 months, upside objective is the $67 level, to be reached over the next 3-6 months. First course of business for the week is likely to be to the downside and the 56.35 level (based on a daily close). Thereafter, the stock should rally with the $60 level objective to be reached either this week or next. Probabilities favor the bulls. RIO extended its recovery, having generated the 3rd green weekly close in a row. The stock closed near the high of the week and further upside above last week's high at 71.35 is expected to be seen this week. Minor weekly close resistance is found at 72.52 and then pivotal at 75.87. A break above 75.87 would suggest the $80-$81 level will be targeted. Intraweek support is now found at 68.05 that if broken, would slightly change the chart picture. The chart is pretty clear right now with 72.52 highly likely to be reached, the 75.87 level having a 60-40 chance of being broken and a 50-50 chance of $80/$81 reached. Probabilities favor the bulls. SNDL did absolutely nothing this past week. In fact, the stock has done very little for the past 9 weeks, suggesting there is very little interest from either side (bulls and bears) to even trade the stock. Minor but short-term important support is found at .61 and major support at .50. Minor but short-term pivotal resistance is found at .75 and decent at .95. As such, a .50-.95 cent trading range for the rest of the year is what is expected, with a small to decent possibility that it will be a .60 to .95 trading range. Probabilities do not favor either side this week. SRUTF made a new 3-week intraweek high and did close slightly in the upper half of the week's trading range, suggesting a high probability of going above last week's trading range at .041 than below last week's trading range at .036. Nonetheless, the high and low seen 6 weeks ago at .0505 and at .0305 remains the parameters for something happening. A break above or below the high and low seen that week will generate movement in that direction. Otherwise, the stock is likely to continue to trade within that range. ZLAB continued lower, having made a new 11-month intraweek and weekly closing low. On this occasion and 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 104.98 will be seen this week. The action and volatility seen in the stock has been greatly reduced (compared to the previous weeks) and that suggests that the bears are starting to run out of ammunition. With the stock having fallen 35% in value during the past 6 weeks (all of this without any specific negative news to the company), the probabilities of a recovery starting this week have increased. On a weekly closing basis, the 100-week MA, currently at 104.61, is a big key. A close above that level will suggest the worst is over. On an intraweek basis, pivotal resistance is found at 107.98. If broken, there is open air on the intraweek chart to 135.65/137.20 level. Probabilities slightly favor the bulls this week.
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1) SNDL - Averaged long at .905 (2 mentions). No stop loss at present. Stock closed on Friday at .656. 2) CHUY - Purchased at 30.49. Averaged long at 30.75. Stop loss now at 29.13. Stock closed on Friday at 30.28. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .038. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .08. 5) ZLAB - Purchased at 99.82. Averaged long at 125.935 (4 mentions). No stop loss at present. Stock closed on Friday at 102.00. 6) AU - Averaged long at 26.106 (6 mentions). No stop loss at present. Stock closed on Friday at 18.79. 7) NEM - Averaged long at 60.137 (4 mentions). No stop loss at present. Stock closed on Friday at 57.03. 8) CNX - Averaged long at 10.876 (3 mentions). No stop loss at present. Stock closed on Friday at 13.25. 9) RIO - Purchased at 66.97. Stop loss at 64.14. Stock closed on Friday at 70.43. 10 ENG - Averaged long at 4.0325 (4 mentions). No stop loss at present. Stock closed on Friday at 2.34. 11) CRON - Averaged long at 9.146 (3 mentions). No stop loss at present. Stock closed on Friday at 5.48. 12) MRGE - Purchased at .28. No stop loss at present. Stock closed at .095 on Friday. 13) LNG - Shorted at 102.47 and at 103.49. Covered shots at 104.63. Loss on the trade of $330 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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