 |
 |
 |
 |
 |
 |
Issue #733 
Sep 26, 2021 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
|
| Seasonal Correction Likely Over!
DOW Friday closing price - 34798
The DOW and the SPX both generated positive reversal weeks, having made a new 13 week and 10 week intraweek lows (respectively) and then closing green. The NASDAQ failed to do the same but then only by 4 points. All indexes closed on the high of the week and further upside above last week's highs are expected to be seen this week. The action seen does strongly suggest that the September seasonal correction is now over. The indexes all saw between a 5.3% (SPX) and a 5.7% (DOW and NAZ)correction based on the recent high and last week's low. The fundamental catalyst for the correction ending was the Fed confirming on Wednesday that the Dovish path chosen will continue, meaning that economic help to the economy will not falter.
The DOW was the index that was the most indicative of all given that the failure signal given 4 weeks ago (closure below the previous all-time high at 34777) was negated on Friday with the 34798 close. The index had been the weakest of all during this past month and "it" negated the bear signal is a clear indication that the bears have lost the short-term edge they had gained.
The end of the corrective phase does suggest the uptrend is to resume but the news of the Fed continuing its Dovish stand is not a "new" news and there are still a lot of questions regarding the economic recovery (given the Delta variant phase of the virus continues to cause economic malaise) that have yet to be answered clearly. This does mean that the pathways for resumption of the uptrend is not yet clear and defined at this time. In addition, the employment figures from the last two reports have not continued to rise and inflation remains high meaning that there are still questions as to whether it will continue to improve or if there is more pain (and negative repercussions) to come. All of those questions will be addressed over the next 2.1 weeks with the ISM Index report coming out Friday 10/1, the Jobs report coming out Friday 10/8 and the CPI report coming out Monday 10/13. This does suggest that during the next two weeks, the indexes will trade sideways and during that period, some retest of last week's lows will occur. Volatility is likely to continue to be high, which slightly favors the bears.
To the upside and on an intraweek basis, the DOW will find resistance between 35019 and 35192. The SPX will find some minor resistance at 4480 and then a bit stronger at 4501. The NASDAQ will find minor resistance at 15404 and a bit stronger at 15620. If the top resistance levels get broken, the bulls will be committed to making a new all-time high or face a potential double top that could be a negative chart omen. These resistance levels do mean that the upside objectives for the week are limited and near, while to the downside, there is quite a bit of open air before reaching indicative pivotal levels of support.
To the downside and on an intraweek basis, the DOW will find support between 34100 and 33700. The SPX will find support between 4373 and 4397 and the NASDAQ will find support around the 15000 level.
As you can see by the numbers, the indexes could still be facing more downside than upside over the next 2 weeks. By the same token, in neither case should the recent highs and lows in the indexes be broken (DOW at 35631 and 33613, SPX at 4545 and 4305, and the NASDAQ at 35701 and at 14821 unless one of the reports is negatively way out of line.
The thrust/momentum remains with the bulls, meaning that if any break of those levels occur, it is likely to be the resistance levels and not support. Nonetheless, it is also evident that the recent news has not been bullish for the market and that there is confusion among traders as to whether this rally can continue. This is especially true given that the rally has not been an overall market rally but a big cap rally (most stocks remain at multi-month lows). As such, the probabilities are high that the traders will be playing the market off of charts over the next 2 weeks while the economic reports come out. There are no reports due out this week (Durable Goods on Monday, Consumer Confidence on Tuesday and 3rd estimate of GDP on Thursday) that can be considered catalytic until Friday's ISM report.
As such, the indexes are likely to begin the week higher but then fail to break resistance levels above and head lower.
SILVER generated a positive reversal week, having made a new 10-month intraweek low but then closing green. Nonetheless, it was not an indicative week as it closed just $.09 cents higher than the previous week and the break of the weekly close support at $22.71 that occurred the previous week was not negated (closed on Friday at $22.42. Nonetheless, the week has to be considered a win (though small) for the bulls as the break of support the previous week was supposed to generate a lot of new selling but didn't given that the intraweek support at 22.06 was only broken by $.04 cents. The same thing occurred in November 2020 when the September low at $22.12 got broken and then followed by a rally up to $30. Key intraweek resistance is found at 23.15, which if broken would generate new buying interest. If last week's low at 22.02 is broken, the downside objective would be $21.77 or even $21.39. Probabilities favor the bulls.
OIL generated the 5th green weekly close in a row and slightly above a short term pivotal resistance at 73.95 (closed at 73.98). If the break of resistance gets confirmed next week with another green weekly close, the probabilities will strongly rise that a new 7-year intraweek high above the double top at 76.90/76.98 will occur. If that happens, the $80-$82 level will become the target. The fundamental picture is bullish at this time so the probabilities do favor this scenario happening at this time. It is important to note that the same resistance at 73.95 is found on the daily chart, meaning that the bulls need to generate a green close on Monday and stay above the 73.95 level (on a daily closing basis) every day of the week. A daily close below 70.60 will deflate the rally. Probabilities favor the bulls.
DOLLAR had an uneventful week, having generated a red weekly close but only by $.05 cents (93.28 vs last week's close at 93.33. The bulls were able to maintain themselves above the weekly close resistance at 93.02 and also above the daily close resistance at 93.30, meaning the bulls remain with the edge. Nonetheless, every day this week will be important as the bulls need to maintain themselves above the 93.30 level on a daily closing basis to keep the rally heading higher. Pivotal intraweek resistance is found at 93.73. It is evident that the recent correction/sell interest is over and with no economic reports that can affect the Dollar due out for another 3 weeks, the big question is whether the bulls can generate a new breakout or not. It is unlikely though, that any weakness of consequence will be seen during this period of time. On a daily closing basis, support will be found between 92.82 and 92.97. Any daily close below 92.82 would deflate the rally. Any weekly close below 93.02 would deflate the rally as well. The bulls have the edge but the question is whether they "have enough to break resistance or just maintain the strength until the big economic reports come out at the beginning of next month". The probabilities now favor them doing so.
|
Stock Analysis/Evaluation
|
CHART Outlooks
As I stated in Friday's closing comment, it is very difficult at this time to find any stocks to trade with confidence, Big cap stocks that offer further upside are risky plays and offer negative risk/reward ratios and small cap stocks that offer excellent risk/reward ratios offer no dependability of moving higher. Shorting stocks has also not proving to be profitable either. As such, the only plays that can be considered are those in industries that are presently moving based on their own fundamentals (not on market action). Right now, the industry that has some bullish fundamentals is oil. As such, the mention today is in that industry.
XOM Friday Closing Price - 57.59
XOM has been as high as 104.76 and as low as 30.11 over the past 7 years with the high being made in 2014 and the low being made in 2020. The stock is presently trading about 25% below the midpoint of that trading range and yet Oil is actually trading about 25% above that same 7-year trading range, meaning that the stock has some catching up to do. The fundamental (and chart) picture of Oil suggests further upside is to be seen over the next 3-6 months. The chart picture of the stock suggests that the stock has now found a bottom to the correction that started 14 weeks ago from the rally seen the previous 8 months that began at 31.11 and ended at 64.93.
The correction seen in XOM over the past 14 weeks was 19.8%. Nonetheless, that correction seems now to be over as the stock has now rallied 14% from the August low at 52.10. The stock generated a positive reversal week last week and a close on the high of the week, meaning that if the stock goes above last week's high at 57.82, last week's low at 52.96 will become a successful retest of the low seen in August at 52.10. With the fundamentals, the rally and the chart action mentioned above seemingly in agreement, it would suggest the stock will continue higher with at least the recent high as the objective. By the same token, with Oil likely to make a new multi-year high, the stock is likely to do the same.
The big problem with this trade is going to be the entry point given that XOM seems to be "running" and chasing stocks in this environment is not a good idea. Hopefully a bit of a pullback will occur this week where a decent entry point can be obtained. I do want to mention that the stop loss on this trade will be using the intraday charts and not the daily or weekly chart given that the stock has already moved 12% above last week's low.
The desired entry point into XOM will be between 55.80 and 56.40 and the stop loss will be 53.54 (based on a daily close). The upside objective is a minimum of 64.93 but it is quite likely that the stock will get up to at least 67.49 if Oil does not falter. As such, the risk/reward ratio is anywhere from a low of 3-1 to a high of 4-1. My probability number is 3.75 (on a scale of 1-5 with 5 being the highest).
|
Updates
|
| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| AU had an uneventful inside week but did close green and in the upper half of the week's trading range, suggesting further upside above last week's high at 15.86 will be seen this week. The action seen on the daily chart does suggest that a temporary low has been found and that a rally back up to test the 200-week MA, currently at 17.41, is on the horizon. The green weekly close has made the previous week's close at 14.78 into a successful retest of the breakout that occurred in June 2019 from the weekly close at 14.85 as well as a successful retest of the low weekly close seen in March 2020 (when the market fell because of the pandemic). This scenario is strongly supportive of a bottom to this correction having been found and that requires more negative fundamental news to break. Probabilities favor the bulls. BTZI continued to languish without any sign of a positive on the horizon. By the same token, the bears seems to have also run out of ammunition as the stock generated a green weekly close. It was only by $.005 cents but it does seem that news is now needed by each side to generate movement in one direction or the other. The .05 level remains important and pivotal weekly close support and if the bulls are able to rally above last week's high at .057, it will likely mean the worst is over. Nonetheless, Bitcoin was able to stop the recent move down and generated a green weekly close and that brings a measure of support to the stock. If the bulls are able to rally intraweek above .06 and/or generate a weekly close above .0585, some recovery will likely occur. Probabilities slightly favor the bulls this week. CNX generated another red weekly close (3rd in a row) but then only by $.11 cents and not indicative given that it closed at the 200-week MA, currently at 11.64 (closed at 11.63), meaning that the breakout/failure-signal-against-the-bears given 4 weeks ago remains in place. Intraweek support is not found until the 10.78 level is reached but the chart does suggest that the bulls are likely to generate a green weekly close next Friday. Last week's low at 11.42 is short term pivotal. If not broken, the bulls will see that as a sign of strength. Probabilities favor the bulls for a green close next Friday. CRON continue to move lower, having generated another new 10-month intraweek and weekly closing low. The stock closed near the low of the week and further downside below last week's low at 5.59 is expected to be seen this week. The weekly close support at 6.00 has now been broken and the next level of weekly close support is found at 5.29. The outlook for the Cannabis industry is positive for the future but short term (2021) it is not, especially for the Canadian companies that over expanded and find themselves cutting back. As such, more downside pressure is likely to be seen. Daily close resistance is found at 6.16. If the bulls can close above that level any day this week, the selling pressure will ebb. On a possible positive note, the time spent in the past below the $6 level has usually been short, meaning that sometime over the next few weeks, some recovery is expected to be seen. For this week though, the probabilities continue to favor the bears for further downside but limited. ENB bears failed to generate downside follow through but the bulls also failed to generate a positive chart signal, meaning the traders continue to wait for more news or information before deciding what to do. The stock closed at the weekly close resistance at 40.03, meaning that a green or red weekly close next week will help decide the short-term direction. Pivotal daily close resistance is found at 40.41, which if broken would give the bulls new ammunition. The opposite will occur if the bears can close the stock below 38.87. Nonetheless, the probabilities do favor the bulls. ENG generated a green weekly close but then only by $.07 cents and the bulls failed to close above the weekly close resistance at 2.35 (closed at 2.28). Nonetheless and on the daily closing chart, the bulls were able to generate a new 7-week daily closing high (above 2.21) and that does give the bulls a bit of an edge for this week. Nonetheless, it was sad to see the stock trading above 2.35 for most of the day on Friday but then give it up 2 hours before the close, suggesting that the bulls do not yet officially have a clear edge. The 2.21 level on a daily closing basis is support and 2.41 is resistance. Any daily close above or below those levels will generate new buying or selling interest. Probabilities slightly favor the bulls. MRGE did not do anything indicative this week. Nonetheless, what it did do is clear up the daily close resistance and support levels (at .07 and at .045). Any daily close above or below those levels this week will likely generate follow through in that direction. Above .07, there is intraweek resistance at .09, at .10 and stronger at .115. Below $.045 there is no support until $.03 cents. The friend of mine that originally recommended this stock to me stated this past week that the outlook for the future has not changed and that a $2 upside objective is likely to be reached if the pipeline deals is done. I am not a fundamentalist so I cannot give you an opinion on that but based on this past week's action, I may add (average down) this week. The stock will now show decent support at $.05 cents. NEM generated a new 7-month low weekly close and closed near the low of the week, suggesting further downside below last week's low at 53.52 will be seen this week. There is only one support level below and it is on an intraweek basis at 52.33. Nonetheless, Gold and the other gold stock held (AU) seem to be leaning toward a rally and green weekly close this week and if that occurs, NEM should also generate a green weekly close. It is important to note that in February, the stock broke the weekly close support built on June 2020 (closed at 54.38 vs 54.76). That break did not generate follow through to the downside as the stock then rallied over the next 12 weeks to a new multi-year high. As such and if that scenario is mimicked, it would mean the stock will generate a green weekly close this week and go ahead into a multi-week rally. I see that as a likely scenario. Pivotal intraweek resistance is now found at 55.64. If broken, new buying interest is likely to be seen. I have to believe the probabilities favor the bulls this week. PGEN made a new 11-month weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 5.28 will be seen this week. Intraweek support is found at 5.04 and then pivotal at 4.90. Short term pivotal intraweek resistance is found at 5.66. Probabilities favor the bears this week. Nonetheless, the trading ranges and action have been reduced to the point where little interest is being seen by either side. Traders likely awaiting some catalyst. SNDL generated a new 5-month intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at .067 will be seen this week. Intraweek support is found at .065, which if broken would generate further downside, likely to .05 level. Same problem and scenario facing the other Cannabis stocks is being seen here. The .72 level is pivotal resistance. If broken, it is likely the worst is over. Probabilities favor the bears. SRUTF generated an uneventful inside week after seeing the week before, the biggest trading range seen in the past 12 weeks. This does means that the action seen the week before was meaningless. Nonetheless, the stock did generate a green weekly close and in the upper half of the week's trading range, meaning that the bulls will begin the week with the edge. Both previous week's high at .0505 and last week's low at .0305 continue to be pivotal. Probabilities favor more of the same. ZLAB made a new 8-week intraweek low and a new 9-month weekly closing low. The stock closed in the lower half of the week's trading range, suggesting further downside below last week's low at 116.22 will be seen this week. Nonetheless and on a possible positive note, the stock generated a red daily close on 116.22 on Wednesday, which was followed by two higher closes on Thursday and Friday and that means that the 9-month daily close support at 116.00 was tested successfully. In addition and using the weekly closing highs seen this past year at 182.57, at 177.66 and at 175.90, a parallel channel line can be drawn using the previous low weekly close at 128.42 that connects with the close seen on Friday. If that is the case, a green weekly close should occur this week. If that channel is confirmed, a rally as high as the $170 level could be seen over the next few months. Fundamentally, the company is very strong but the recent problems in China between the government and private enterprise has put sell pressure on all Chinese stocks. Any daily close below 116.00 would further weaken the chart. Any daily close above 130.00 would suggest the correction is over. Probabilities slightly favor the bulls.
|
1) SNDL - Averaged long at .905 (2 mentions). No stop loss at present. Stock closed on Friday at .673. 2) PGEN - Averaged long at 7.506 (3 mentions). Stop close only at 6.45. Stock closed on Friday at 5.29. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .0398. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .0512. 5) ZLAB - Averaged long at 134.64 (3 mentions). No stop loss at present. Stock closed on Friday at 119.87. 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 53.87. 8) CNX - Averaged long at 10.876 (3 mentions). No stop loss at present. Stock closed on Friday at 11.64. 9) AAPL - Covered shorts at 142.34. Shorted at 148.47. Profit on the trade of $613 per 100 shares. 10 ENG - Averaged long at 4.92 (2 mentions). No stop loss at present. Stock closed on Friday at 2.28. 11) CRON - Averaged long at 9.146 (3 mentions). No stop loss at present. Stock closed on Friday at 5.70. 12) MRGE - Purchased at .28. No stop loss at present. Stock closed at .06 on Friday. 13) ENB - Shorted at 40.34. Stop loss at 40.59. Stock closed on Friday at 40.03. 14) LNG - Covered shorts at 94.37. Averaged short at 90.95. Loss on the trade of $684 per 100 shares (2 mentions). 15) ZLAB - Purchased at 123.81. Liquidated at 122.00. Loss on the trade of $181.00 per 100 shares.
Previous Newsletters
|
Encyclopedia of Chart Patterns. A must have for chart aficionados! |
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. |
|
|
|