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Issue #732 
Sep 12, 2021 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Seasonal Correction Started? Probably!
DOW Friday closing price - 34607
The uptrend in the DOW has come to a halt given that the index made a new 7-week intraweek low and generated both a sell signal as well as a failure signal, having closed below the most recent low weekly close at 35120 as well as closing below the previous all-time weekly close at 34777. The index finds itself trading 3.0% below its all-time intraweek high made 4 weeks ago. The NASDAQ generated a negative key reversal week, having made a new all-time intraweek high at 15701 but then closing below the previous weeks low at 15459 (closed at 15440) and is now 1.7% below its intraweek high made 3 weeks ago. The SPX did not generate any sell signal or failure signal but it now trading 2.0% below its all-time high made 3 weeks ago. With all the indexes now trading anywhere from 1.7-3.0% gelow their all-time highs and this now being the 2nd week of September, it does seem likely that the seasonal correction has started. All indexes closed on the lows of the week, suggesting further downside is likely to be seen this week.
There is one possibly catalytic report due out this week in the form of CPI that comes out on Tuesday. The PPI came out on Friday and it was a little bit higher than expected and the indexes ended up lower at the end of the day. Probabilities favor the CPI also being high and therefore of no help to the bulls. The seasonal corrections seen in the past 10 years have run the gamut from a low of 3% to a high of 28% and therefore making a prediction on just how much of a correction could be seen is difficult at this time. Nonetheless, with no possibly positive catalytic reports due out for at least the next 3 weeks, it does suggest that there will be some correction occurring, up an above what has already occurred.
It has been evident so far during the past few months that the DOW is the index most likely to lead the way down given that the fundamental scenario most affects product stocks, which are the meat and potatoes of the index. The index has no support below until the 34000 level is reached and even then, that level is considered a very minor support. A drop down to that level from Friday's close, means another 2% drop. The big and pivotal support level is found at 33290.
The SPX is a key index, as far as the correction is concerned. The index has not broken a previous intraweek spike low since March 2020, which is when the uptrend began. There have been 11 spike lows during this period of time and none of them have been broken. The most recent intraweek spike low is at 4367, which means that to reach that level the index would need to drop an additional 2.1%. A break of that level would offer open air below until the 4211 level (4232 on a weekly closing basis - which is the previous all-time weekly closing high. As such, 4367 is a pivotal level.
The NASDAQ has been the strong index and the least likely to have a strong correction but the index has short-term pivotal intraweek support at 14773 that if broken, it would suggest the bottom of the now 3-point channel line, currently at 14000 would likely be visited. There is no support below until the 15000 level is reached, meaning the index could drop an additional 3.1% from Friday's close without generating and sell signal at all.
It is now likely that the seasonal correction has begun and that some further downside is to be seen. By the same token, there is only another 2-3% downside that can be given a decent probability of occurring just on the action and the charts. Further downside below that amount will likely require some negative news, such as the CPI reports could be this week.
With the NASDAQ being the leader and now showing a key negative reversal week as well as creating a 3-point up channel line, making a new all-time high above 15701 would suggest that the correction is over and that the uptrend continues.
At this time, the probabilities favor the bears for this week.
SILVER generated a red weekly close, meaning that the previous week's intraweek high at 24.98 has now become short-term pivotal resistance. Silver closed at a minor but established weekly close support at 23.90, meaning that if a green close occurs next Friday, followed by a rally and break of 24.98, the chart to the downside will be fulfilled and the bulls will be back with at least "the edge". Some minor but possibly indicative intraweek support is found at 23.74 that could hold up on Monday as the traders await Tuesday's CPI number. A break of that support would leave open air below down to 22.87.
OIL generated a 3rd green weekly close in a row but the gains seen the past two weeks have been minimal (closed at 68.78 3 weeks ago, the previous week at 69.29, and last week at 69.69). The volatility has increased though as every day during the last 4 trading days, the daily trading range has been around $2 from high to low. Oil traders seem to be waiting for news to give them reason to continue higher or drop down to test support. The action the past few weeks has not changed the overall outlook for Oil to trade between $65 and $73 for the rest of the year. The only question is whether the high or the low will be seen first. Tuesday's CPI number should have some effect in answering that question.
DOLLAR bulls were able to negate the sell signal given the previous week on the weekly chart by closing on Friday above 92.17 (closed at 92.64). The negation suggests that the traders need new fundamental information to decide where to go from here and they may get that on Tuesday with the CPI report. Intraweek resistance is found at 93.17 and stronger at 93.44. Intraweek support is found at 91.95 and pivotal at 91.78. The Dollar closed on Friday in the exact middle of that trading range, meaning the report is likely to be pivotal.
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Stock Analysis/Evaluation
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CHART Outlooks
It does seem like the seasonal correction has started as the indexes have already come down from the highs at least 1.7%. As such, the big question is whether this is going to be a small, medium, or large correction, with the probabilities favoring a small one. As such and especially since there is still a pivotal report to come out on Tuesday, I am going to lean on conservative shorts with small risk factors at this writing. If that changes after the report, I will mention other shorts on the message board.
ENB Friday Closing Price - 39.80.
ENB was given as a buy mention a few weeks ago and the trade turned into a small loss ($17 per 100 shares) as support broke. Nonetheless, the stock turned around and did reach the upside objective last week, meaning the purchase would have been profitable (as called) had the positions been kept. Having reached the upside objective, the stock generated a negative reversal last week, having made a new 10-week high but then turning down to close red and near the low of the week, suggesting further downside below last week's low will be seen this week.
ENB has been mostly trading sideways for the past 20 weeks between $37 and $41 in spite of the indexes continuing higher, suggesting that the stock is trading at a fair and established price but not likely to advance above the recent high at 41.13 unless some positive fundamental news comes out. On the other side of the coin, the stock did make a new 16-week low 4 weeks ago, suggesting the bears might have a slight edge overall and if the seasonal correction does continue (as expected), this stock might get a good chunk of selling interest. This means it could accomplish more than what I am giving as the objective on this mention.
ENB could see a bit of a rally on Monday and above the $40 level. Last week's high was 40.49 and given that it turned out to be a negative reversal week, it is unlikely it will get up that high. As such, any move above the 40.00 level (looking to get in around 40.13) should be seen as a shorting opportunity. To the downside, the objective is to at least test the recent 16-week low at 37.06. There is some intraweek support at 37.34 so that will be given as the objective of the trade. Nonetheless, if the 37.06 level is broken, there is basically open air down to the 35.00 level, which is a viable objective if the seasonal correction continues. The 200-week MA is currently at 34.88 and that will be a magnet if 37.06 is reached.
Sales of ENB around the 40.13 level and using a stop loss at 41.32 and having a 37.34 objective offers a 2.4-1 risk/reward ratio. Probability rating is a high 4.25 (on a scale of 1-5 with 5 being the highest). If the 37.06 level is broken and the 200-week MA is targeted, the risk/reward ratio would increase to 4.4-1.
LNG Friday Closing Price - 88.05
LNG is a natural gas company that just made a new all-time high last week at 92.12 but suffered a negative reversal week, having closed red and near the low of the week, suggesting further downside below last week's low at 87.00 will be seen this week. Natural gas has rallied over the past 15 months from 1.43 to last week's high at 5.06 but going back 12 years (to 2009), the $5 level has been a brick wall, having reached that level on 5 different occasions and always thereafter falling back to the $2 level. There is a shortage of natural gas at this time and there has been a shortage of it recently, which is the reason why Natural gas has gone from 3.41 to 5.06 over the past 15 weeks. Nonetheless, Gas has reached a level that is established resistance and as such, automatic selling is expected to come in this area and with the stock having made a new all-time high and reversing, it is evident that short traders are looking to take advantage of this situation.
LNG also has a history of big moves down once an area of resistance is found. In 2014 when it got up to 89.43, it dropped back down to 58.10 within 5 weeks and a year later was down to 22.80. In 2018, it got up to 71.03 and 10 weeks later was at 55.09 and a year later it got down to 27.06. This recent move has been mostly straight up from 44.65 over the past year and the stock is overbought as well as at new highs.
In looking at the chart, if this reversal is indicative, a drop down to the most recent (8 weeks ago) spike low at 80.06 is now possible. There is minor to perhaps decent intraweek support between 82.15 and 82.79 that has a high probability of being reached.
As far as a desired entry point, there is no reason to chase the stock down as there has been no negative news, meaning that waiting for a rally back up to test the recent high at 92.12 should be done. There is resistance at 90.00 and that should be the desired entry point area, using a stop loss at 92.35. Viable downside objective is 82.79, meaning that a sale around 90.00, using a stop loss at 92.35 and having an 82.79 objective will offer a 3-1 risk/reward ratio with the possibility of more, given than if the $80 level breaks, a drop down to the $70 level would highly likely occur. My rating on the trade is a 3.25 (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 8/1 Profit of $20,562 using 100 shares per mention (after commissions & losses) Closed out profitable trades for August per 100 shares per mention (after commission)
AMC (long) $1212 CAT (long) $62 QQQ (short) $35 ZLAB (long) $516 (2 day trades long) Closed positions with increase in equity above last months close minus commissions. NONE Total Profit for July, per 100 shares and after commissions $1825 Closed out losing trades for August per 100 shares of each mention (including commission)
LNG (short) $241
QQQ (short) $80 CNX (long) $10 AMC (long) $38 ENG (long) 17 AAPL (short) $15 Closed positions with decrease in equity below last months close plus commissions. DCTH (long) $338 Total Loss for July, per 100 shares, including commissions $739 Open positions in profit per 100 shares per mention as of 8/31
NEM (long) $137
Open positions with increase in equity above last months close.
PGEN (long) $168
BTZI (long) $452 Total $657 Open positions in loss per 100 shares per mention as of 8/31
NONE
Open positions with decrease in equity below last months close.
AU (long) $1782 Total $4601 Status of trades for month of August per 100 shares on each mention after losses and commission subtracted.
Loss of $3158
Status of account/portfolio for 2021, as of 7/31
Profit of $17,404 per 100 shares.
AU made a new 18-month weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 15.26 will be seen this week. The stock now shows a successful retest of the 200-week MA and that means that the bears having climbed in again. Intraweek support of great importance is found 12.66 but on an intraweek basis there is minor to decent support at 14.85 and strong at 14.05. There is no reason at this time that both of those supports will be broken, and maybe not even one of them if the CPI number suggests inflation continues to go higher. With the stock closing at 15.29 on Friday, the downside is extremely limited. On the other side of the coin and based on the news affecting the company and the break of the 200-week MA, the $22 level is now considered decent to perhaps even strong resistance for the foreseeable future. Probabilities favor the bears this week but Tuesday's report could change that.
BTZI generated a new 6-week intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at .0499 will be seen this week. In addition and on another negative note, the stock closed below the pivotal weekly close support at .0545, meaning that a failure signal was given as well. The reason for the weakness was about the fact that Bitcoin generated a red week and closed below a weekly close support of short-term importance at 46217 (closed at 45341), suggesting this recent rally is over and that the bulls are going to look to build a new support level. In the stock, there is copious intraweek support at .05 as well as it being a psychological support but if broken, there is no support below until the .04 level is reached. Other than the Bitcoin weakness, there is no new news for the company. Pivotal daily close resistance is found at .06. A daily close above that level will negate the weakness. CNX generated a red weekly close, making last week's close at 11.93 a successful retest of the decent and pivotal weekly close resistance at 12.00. On a possible positive note, the bulls were able to maintain the stock above the 200-week MA, currently at 11.58, and that is a line had traded below for the previous 3 weeks. The stock did close in the lower half of the week's trading range, suggesting further downside below last week's low at 11.63 will occur this week. Then again, the recent 3-week rally from the multi-month low at 10.41 had been straight up and no required/needed retest of that level has yet been seen, meaning that if the stock goes below last week's low, it could become that retest. If that occurs and the stock then turns around back to the upside, the chart will be fulfilled to the downside. . A move below last week's low will be seen as the potential retest of that low and if so, new buying will come in. Intraweek support is found at 11.50 and then nothing until 11.00. Both are minor supports. CRON generated a new 10-month intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 6.07 will be seen this week. On a daily closing basis, the 6.07-6.17 level is pivotal support. A close below that level would be bearish. As such, this coming week is highly pivotal. Pivotal intraweek resistance is found at 6.72. ENG generated a red close week and in the process, closed below the previous weekly close support at 2.02 that had been previously broken and then the break negated. The close at 1.94 has once again put the bulls on the defensive and with the probabilities against them. Then again, the recent low at 1.74 has not yet been tested and if this move down ends up being that required/needed retest, the negative action this past week will be forgotten. Unfortunately, the bulls are totally on the defensive. Short term pivotal intraweek resistance is found at 2.24 and the same for support at 1.74. MRGE continued lower and getting down close to an intraweek breakdown-of-great-consequence level at .025 with a low last week at .03. On a weekly closing basis, the .05 level has the same meaning as the intraweek level, meaning that any further red seen next Friday would be extremely negative for the stock. I asked the man that initially gave me the recommendation to buy this stock, asking him for the reasons behind this severe weakness and he did not have any explanation for it. Nonetheless, it is evident that the stock is now at a level where something likely definitive is going to happen this week. A green weekly close next Friday is a must for the bulls if they want a chance to recover any of the losses seen. NEM generated ae red week and a close on the low of the week, suggesting further downside below last week's low at 56.92 will be seen this week. Nonetheless, the week was uneventful and if the recent low at 56.15 is not broken and the stock does go below last week's low but then turns around and breaks above the recent high at 60.13 anytime in the next 2-3 weeks, a new and confirmed support level will have been built and from which a short-term uptrend can begin. A break below 56.15 will further weaken the chart and thrust the stock down to the next and more pivotal support level at 54.18. Evidently, Tuesday's CPI number will have some impact. PGEN continued to trade sideways at an important short term weekly close pivot point at 6.20, having closed on 4 of the last 5 weeks between 6.00 and 6.18. The fact that the bears have been unable to generate any movement to the downside in spite of not allowing the resistance level to be broken does strongly suggest that the probabilities of a breakout favor the bulls, if and when no negative news comes out. Intraweek support is found between 5.70 and 5.94 that as long as it is not broken, the bulls will remain with the probabilities of a breakout in their favor. SNDL, like so many other small cap held stocks, generated a red week and a drop below the previous week's low, suggesting that it will either end up being the required/needed retest of the recent low at .686 or continuation of the downtrend. Having done that, the stock is now in a .686 to .0899 trading range that whichever is broken first will give the edge to one side or the other. SRUTF was the only small cap held stock that actually did something positive this week. The stock made a new 8-week intraweek and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at .0479 will be seen this week. Weekly close resistance is found at .0519 and the pivotal and trend changing at .0585. The rally and new multi-week high means that a double bottom has now been built at .038/.0388 that would need negative fundamental news to break. ZLAB generated a negative reversal week, having made a new 4-week high but then turning down to close below the previous week's low and near the low of the week, suggesting further downside below last week's low at 134.70 will be seen this week. If that does occur, 152.82 will become a successful retest of the 7-week high at 155.77 and likely bring in "new" selling interest. Important and now longer term pivotal intraweek support is found at 125.71 that if broken, would be a midterm trend changer.
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1) SNDL - Averaged long at .905 (2 mentions). No stop loss at present. Stock closed on Friday at .722. 2) PGEN - Averaged long at 7.506 (3 mentions). Stop close only at 6.45. Stock closed on Friday at 6.18. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .0478. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .0515. 5) ZLAB - Averaged long at 134.64 (3 mentions). No stop loss at present. Stock closed on Friday at 137.34. 6) AU - Averaged long at 26.106 (6 mentions). No stop loss at present. Stock closed on Friday at 15.29. 7) NEM - Averaged long at 60.137 (4 mentions). No stop loss at present. Stock closed on Friday at 56.99. 8) CNX - Averaged long at 10.876 (3 mentions). No stop loss at present. Stock closed on Friday at 11.78. 9) AMC - Liquidated at 44.92. Purchased at 32.80. Profit of $1212 per 100 shares. 10 ENG - Averaged long at 4.92 (2 mentions). No stop loss at present. Stock closed on Friday at 1.94. 11) CRON - Averaged long at 9.146 (3 mentions). No stop loss at present. Stock closed on Friday at 6.13. 12) MRGE - Purchased at .28. No stop loss at present. Stock closed at .05 on Friday. 13) AAPL - Shorted at 155.39. Covered shorts at 155.54. Loss on the trade of $15 per 100 shares. 14) CAT - Shorted at 212.80. Covered shorts at 212.12. Profit on the trade of $62 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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