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Issue #762 
April 24, 2022 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Pivotal 8 Trading Days Ahead. Bears have the Edge but it all depends on the reports due out.
DOW Friday closing price - 33811
All indexes generated a negative reversal week, having gone above the previous week's highs and then closing below the previous week's lows. In addition, the moves were dramatic as the indexes gave up (from the high of the week to the low of the week) anywhere from a low 5% (DOW) to a high of 6.5% (NASDAQ in value. Negative reversal weeks are always a negative but when they happen in an already established downtrend and giving up that much value in one week, it does suggest that the underlying fundamental problems are serious and can only be fixed with positive fundamental news. It is unlikely that anything positive is on the horizon.
Nonetheless and having said all of that, the pivotal (and highly indicative) levels of support were not broken, meaning that this past week was more about "setting the table" for a major decision to be made than actually making a statement. The next two weeks are absolutely critical and pivotal. This coming week, GOOGL reports on Tuesday PM and AAPL and AMZN report on Thursday PM and the following week, the ISM Index reports on Tuesday, the FOMC rate decision comes out on Wednesday and the JOBS report comes out on Friday. After all of these reports are out, the traders will likely make decisions that will last at least 3 months (if not more).
The problem that the bulls are facing at this time is that is that "none" of these reports are likely to be positive-to-the-bulls enough to help them stage a significant or lasting rally. The most important report is the Fed Rate decision on May 4th. Expectations are already high that the Fed will raise interest rates by 50 points at this meeting. If the raise is less, that would give the bulls some new ammunition. Nonetheless, that is looking higher unlikely to occur.
This week, GOOGL reports on Tuesday PM. The expectations are for $25.68 in earnings. In February, the expectations were for $26.61 and it came in at $30.52 and the stock rallied 10% but 7 days later, it was back at the same price previous to the report. As such, the better than expected earnings did not help maintain a rally. On Thursday PM, AAPL and AMZN report. In the case of AAPL, it is expected to be $1.43. In January, the expectations were for $1.89 but it came in at $2.10 (also 11% better), it too rallied 10% in value but that gain was also given up 17 days later. In this case, the expected number is substantially lower than what it was 3 months ago (1.43 vs 1.89) and yet the stock is trading above where it was trading at before the previous earning report, meaning that it is unlikely this report will put any additional value on the stock even if better than expected. In the case of AMZN, the expected number is $8.43. On February 3rd, the expected number was $3.89 and it came in at $27.75 and yet the stock rallied only 7% and 11 days later it was back as the same price as prior to the report. With the expected numbers of all of these stocks coming in better during the last earnings quarter and yet none of them generating a lasting rally, it is not expected that the numbers now will be of much help for a lasting rally, even if better than expected. Imagine if they come in lower. As such, it does suggest that none of these reports are going to be of much help to the NASDAQ, or at least for maintaining a rally.
Having explained that, these earnings reports "might" give the bulls some ammunition this week, if they come in better than expected. Nonetheless, just imagine if they don't. It does need to be mentioned that when these better-than-expected earnings reports come out the last earnings quarter, the NASDAQ generated a 7% rally (from 14172 to 15198) but 10 days later, it was trading below the price seen before the reports came out. With the index presently at 13356, a 7% rally would put the index right back to where it was this past week (at 14277). This scenario looks bearish for the index.
Next thing on the calendar is the ISM index report on the following Monday. They have not released the expectations yet but 6 out of the last 8 months, the index has been lower than the previous month and last month was an uptick. As such, it is unlikely the ISM index report will be of much help. The Fed rate decision is the "big one" but expectations are for 50% points and there is a much higher possibility of it being higher (rather than lower) than that and that means that the bulls are not in a good position, especially with May being a seasonal down month.
As I have pointed out all week, the 13258 level in the NASDAQ (on a weekly closing basis) if a major pivotal level given that it represents at 20% drop from the all-time high and that is a sign of a trend change from a bull to bear market. On an intraweek basis though, there is absolutely no support below until the 13129 level is reached. Pivotal intraweek support is found at 13020, which if broken, would show open air below to 12208 (minor support compared to 13020). In the SPX, there is no intraweek support until 4222 and pivotal at 4114 and in the DOW it is at 33150 and pivotal at 32272.
As such and given that the indexes closed on the lows of the week, the first two days of the week (until GOOGL reports on Tuesday PM) should be down to those support levels. After that, and if the earnings reports are positive, a bounce up the rest of the week and for the first 2 days of the following week, the indexes would likely generate some rally. By the same token, if the earnings reports are negative, the traders are not likely to wait for the economic reports the following week as none of them are likely to be surprising enough to the positive as to give the bulls enough ammunition to stage "and maintain" a rally.
Simply stated, the probabilities do favor the bears.
OIL generated a negative reversal week, having made a new 3-week intraweek high at 109.19 and then turning down to close red and near the low of the week, suggesting further downside below last week's low at 99.89 will be seen this week. The downside target is 97.79 (98.24-99.27 on a daily closing basis). Oil has built a triangle formation that offers a strong outcome on whatever direction the triangle is broken. To the downside, a daily close below 94.29 would suggest that a drop down the $76 level would occur, while a break to the upside (a close above 108.21) would suggest the $134 level would be the upside objective. Any weekly close below 98.26 would now open the door for a bear drop. Probabilities still favor the bulls but with so many important reports due out over the next 2 and a half weeks, it is evident that the decision on what direction is to be seen will be dependent on the news and not the chart.
DOLLAR made a new 26-month intraweek and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at 101.33 will be seen this week. All resistance levels except the all-time high have been broken and now it is all about whether a new all-time high (above 102.99 intraweek -102.92 on a weekly closing basis) will be made or not. It is clearly evident that the Fed rate decision on May 4th will be impactful in one way or another. As such and for the next 7 and a half trading days, the Dollar is likely to have an upside bias with reaching (but not breaking) the all-time high. To the downside, the 100.00-101.00 level should be support.
BITCOIN is likely to generate the 3rd red weekly close in a row as it is presently trading at 39827 and last week's close was 40408. Nonetheless, no new signals have been given on either chart as short-term pivotal daily close support on the daily chart is at 39565 and on the weekly chart, it is at 38818. By the same token, the chart is definitely leaning in favor of the bears, meaning that unless something fundamentally positive comes out over the next 2 weeks, further downside is likely to be seen. By the same token, the support in this area is only "short-term" pivotal and not something that will indicate any new changes to the long term. A daily close above 41516 would give the bulls a short-term edge.
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Stock Analysis/Evaluation
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CHART Outlooks
The bears presently have the edge and it is unlikely to change much at this time. Nonetheless, the door is still open for some recovery rally starting this week and for the next 8 trading days.
By the same token, the mentions given today are not index-sensitive, meaning that even if the indexes head lower and get into a downtrend, some stocks will still move higher. This is a market that will favor the "stock pickers" rather than the market followers.
PURCHASES
FSLR Friday Closing Price - 72.37
FSLR was a mention that was liquidated 3 weeks ago at 82.72. The stock has now fallen 13% in value and is nearing a new desired entry point, which could be reached this week. The reason the stock fell was because the company received a downgrade by a well-known rating company. The rating company gave a downside target of $65-$75. The desired entry point into this trade is at $68, suggesting it is a good price for the stock.
FSLR closed last week on the low of the week and further downside below last week low at 72.14 is likely to be seen this week. In looking at the weekly chart, there is intraweek support at 70.52, at 67.71 and long term pivotal at 61.24. The 200-week MA is currently at 67.61 and highly unlikely to get broken on a weekly closing basis.
From a fundamental point of view, FSLR has overall strong support due to the high cost of Oil and the strong demand for green energy products. In addition, the company is #1 in the industry and has a well-established track record of success. As such, dips as is being seen now, are highly purchaseable.
From a chart point of view, FSLR made a new 16-month low at 61.24 in February of this year and then promptly rallied back up to 86.31, which was in effect a 41% rally (meaning an official end to the downtrend). Nonetheless, during this rally there was only one successful retest of the low when a drop below the previous week's low occurred (the time it dropped down to 70.52. Then again, the retest of the low was not the kind of a retest that established convincingly a successful retest as it came on a week that was a positive reversal week, likely due to short-covering. As such, a stronger retest of the low based on weakness being met with clear support buying area is needed.
Using the weekly closing chart, a drop down to the $70 demilitarized zone is now highly likely to occur as there is no other support nearby. Nonetheless and considering what happened to the index market this past week and what is expected to be seen this week, it is likely that the stock will drop down to the decent intraweek support area 68.07-67.77, which also included the 200-week MA, currently at 67.61. This area is now a magnet and likely to be seen before any new buying interest is seen. As such, the desired entry point into this trade is the $68 level.
The upside objective remains the $89-$90 level. That was the objective on the previous mention and it remains highly viable. Nonetheless, on the previous mention the $110 level was a possibility, whereas right now that objective is not likely to be seen unless the fundamental picture changes.
The stop loss for this trade will be at 65.65 based on a daily close. Meaning that purchasing the stock around the 68.00 level and using the 65.65 dailu close stop loss and having a $90 objective, offers a 9-1 risk/reward ratio. My rating on the trade is a high one at 4.25 (on a scale of 1-5 with 5 being the highest).
SCCO Friday Closing Price - 66.14
SCCO is also a previously successful mention given in which the stock was purchased at an average price of 72.51 and liquidated at a profit at 75.40. The stock has fallen 12.3% since it was liquidated and the stock is now once again reaching a level of support that has a good chance to hold. In addition, this stock is more tied in to the commodity market than to the indexes, meaning it could go up in price even if the index market heads lower.
SCCO did make a new all-time weekly closing high at 75.90 just 3 weeks ago but did generate a failure signal the following week and that failure signal was confirmed this week with another red close. What this suggests is that the bull-run is over for now but the stock remains in at least a sideways-trading pattern that will continue to have an upward bias overall (dips will still be bought). Certainly, inflation is still with us and that should not change anytime soon and inflation is what drives this commodity stock.
The pivotal area of intraweek support for SCCO is at 54.92. A break of that area would turn the chart around totally. Nonetheless and at this time, breaking that area is almost an impossibility. As such, the stock has two potential intraweek downside objectives, the first is at 63.95 and the second is at 58.45. The first is likely to be seen this week. Nonetheless, the second is not all that likely to be visited at this time given that a weekly close at 60.72 would generate an official 20% correction from the high and give a trend change signal, which under the present fundamental picture is not likely to happen or even close to happen. As such, the desired entry point into the trade will be around the $64 level. It does need to be mentioned that the 200-day MA is currently at 64.57, meaning that the area is a magnet but also a decent support level.
To the upside and on an intraweek basis, SCCO is likely to generate a rally back up to test the all-time high weekly close at 75.90. The all-time intraweek high is at 83.29 and last week's high was 79.32, meaning that getting up to 75.90 is a highly probably objective as it does not require any change in the fundamental picture.
For this trade, the desired entry point into SCCO will be at 64.00. Stop loss level will be at 61.20. With a 75.90 objective, the trade offers a risk factor of about $280 for a potential profit of $1190 per 100 shares, meaning a 4-1 risk/reward ratio. My rating on the trade is a high one at 4.25 (on a scale of 1-5 with 5 being the highest).
VNET Friday Closing Price - 5.50
VNET is a mention that I have had for several weeks but one that has not yet reached the desired entry point. Last week, the probabilities favored the stock getting to the desired entry point but the company received a non-binding offer at $8 a share and the stock rallied to 7.28. Evidently the offer was not accepted and the stock has sold off since then to the area where previous-tp-the-offer, the stock was trading at.
VNET is the second-largest Chinese carrier-neutral and Cloud-neutral data center provider. The stock got to an all-time high at 44.45 in February of last year and then has dropped 92% in value to the all-time low at 3.51 that was seen a few weeks ago. Nonetheless, the stock generated a key reversal 3 weeks ago, having made the new all-time low and then going above the previous week's high and closing green and near the high of the week, suggesting that a bottom has been found.
Nonetheless and for the past 3 weeks, the stock has been mostly languishing without direction and last week, it closed on the low of the week, suggesting further downside below last week's low at 5.39 will be seen this week. The stock is showing and island formation on the daily chart, given that it gapped down 4 weeks ago on Monday from 4.67 to 4.29 and then gapped up on Wednesday of that same week from 3.95 to 4.73. The weekly reversal and island formation (not yet confirmed) do strongly suggest that the stock has found a bottom.
VNET has no resistance of consequence above until 9.36 and a bit stronger and definitely midterm pivotal at 10.29. Above that level, there is open air to the 200-week MA, currently at 15.29, which is the mentions objective. By the same token, the company did receive an offer to purchase the stock at $8 per share, suggesting that level is a highly likely to be reached at some point in the not too distance future.
Island formations are extremely rare and most often closed. Nonetheless, when not closed, they portend not only a major bottom but also a strong recovery rally. The island formation is likely to be tested this week, especially given that there was no specific positive news for the company and the formation is begging to be tested. As such, a test of the island is likely to be seen, which in turn would give a very favorable entry point to the trade with small risk potential and a large profit potential.
Purchases of VNET around the $5 level (preferably just below $5) and using a stop loss at 3.41 and having at 15.29 objective will offer a 6-1 risk/reward ratio. Nonetheless, even if the rally high only turns out to be up to the $8 level, the risk/reward ratio is still 2-1. My rating on the trade is a 3/5 (on a scale of 1-5 with 5 being the highest). The rating I gave the trade earlier was a 3 but I have raised it due to the offer to buy at $8, which makes the probability of success on this trade higher.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| AAPL generated a negative reversal week, having gone above last week's high but then closing below the previous week's low and on the low of the week, suggesting further downside below last week's low at 161.50 will be seen this week. All nearby support levels have been broken and there is open air below until the 157.80 level (minor) is reached. Below that, there is intraweek support at 156.36 and 154.70, at 152.00 and pivotal at 150.10. The 200-day MA is currently at 158.97, but that support is only available on a daily closing basis, meaning that intraweek, the stock could reach the mention's objective at 154.70. Nonetheless, the NASDAQ is clearly below the 200-day MA, meaning the line is not all that strong of a support. The stock reports earnings on Thursday PM, meaning that if the objective of the mention is reached, consideration to taking profits should be given. AU generated a negative reversal week, having made a new 4-week intraweek high but then closing red, below last week's low and on the low of the week, suggesting further downside below last week's low at 20.90 is expected to be seen this week. In spite of the strong negative week, no daily or weekly close support levels were broken, meaning that it was not an indicative week. There is decent previous weekly closing high breakout support at 20.98 and given that the stock closed on Friday at 21.17, it does suggest that even if intraweek follow through to the downside is seen, the probabilities favor a green weekly close next Friday. Nonetheless, the stock has lost 22.5% in value over the past 5 weeks and that suggests that for now, the high seen at 26.95 is a top, until new news comes about inflation comes out. The 200-week MA is at 19.10 but there is no fundamental reason at this time for that line to be reached. There is minor to decent intraweek support between 19.55 and 20.15 that could be reached. Resistance is now found at 23.75 on a weekly closing basis. Probabilities do favor the bulls for a green close next Friday. Nonetheless, the stock is likely to be in a trading range for the next few weeks between $20/$21 and $24. ENG generated a negative reversal week, having gone above the previous week's high but then closing below the previous week's low and on the low of the week, suggesting further downside below last week's low at 1.08 will be seen this week. The bulls tried to rally but when they couldn't generate enough buying interest to break a resistance level, they turned around and sold. The original daily close breakout point that pushed the stock up to 2.53 is at 1.06 and that is likely to be the downside objective this coming week. There has been no news on the company for the past 8 weeks so there are no changes in the fundamental picture, suggesting that the stock is likely to find buying interest at this level and generate a turn around. Any daily close below .94 would further weaken the chart. Probabilities favor the bulls this week. NEM generated a negative reversal week of consequence, having made a new all-time high at 86.37 and then dropping 18.3% in value to 70.60 and closing in the lower part of the week's trading range, suggesting further downside below that level will be seen this week. It was stated that the reason for the huge drop is that a "whale" investor came in and shorted the stock and causing the short interest to rise from about the 15% mark to 22.3%. Chart-wise, the drop does mean that for the time being a top has been built that will require positive fundamental news to overcome. On the other hand, the previous all-time high weekly close at 73.48 (made in May of last year) was not broken given that the stock rallied from 70.60 to close on Friday at 74.52. This does suggest that this move down was exaggerated and not indicative of a trend change and that some recovery is likely to occur. To the upside and on a daily closing basis, there are 3 upside resistance level to watch. The first one is at 77.85, the second one is at 79.54 and the last one is at 82.78. The first one should be seen this week at some point but if seen first (before a new intraweek low is made) and not broken, it will suggest that no further upside will occur the rest of the week and that the stock will move lower to get intraweek below 70.60. If the week's low is broken first and then the rally occurs, the 79.54 level will become the objective. That level was the weekly closing level that got broken that pushed the stock down to $70. The latter resistance level is going to be an objective for some time in the next 4-12 weeks to be reached as a retest of the all-time high. On a daily closing basis, support is at 72.61. If broken, it would be a bit of a game changer. PLNHF made a new 23-month weekly closing low, having broken the previous one made a few weeks ago at 2.07 (closed on Friday at 2.04). The stock closed on the low of the week, suggesting further downside below last week's low at 2.02 will be seen this week. Then again, the stock is still trading above the intraweek low that was made a few weeks ago at 1.88, suggesting that this new multi-month weekly closing low is not yet indicative. Originally and back in December 2019, the stock generated a breakout from the 1.96 level that took the stock up to 8.67 and as such, it is unlikely that without any additional negative catalysts that the bears will be able to break that support level, especially considering that area (1.96-2.03) was resistance (now considered support) over a period of 3 months. As such, I do expect to see some new buying interest starting to come into the stock this week. This is a Cannabis stock that has been said has a great future and there has been no negative news that has come out. I will be considering adding positions around that level. Any daily close above 2.29 would suggest the downside is over. PRTS made a new 5-week intraweek low and a new 104-week weekly closing low and did close on the low of the week, suggesting further downside below last week's low at 6.22 will be seen this week. Nonetheless and in spite of the continuing downtrend on the weekly closing chart, the intraweek low made 6 weeks ago at 5.90 was not broken and that remains the hope of the bulls to generate some new buying interest. It is evident that being so close to that low that either the bulls will break that support and the stock continue lower, or that some buying interest will be seen this week. Unfortunately for the bulls, this stock is tied in to what the index market does, meaning if the indexes break, the stock will likely to the same. Short-term pivotal daily close resistance is now found at 7.28. Nonetheless and in order to generate a true signal that a recovery rally might be occurring, a weekly close above the 200-week MA (currently at 7.50) needs to occur. Probabilities slightly favor the bears. QQQ generated a negative reversal week, having gone above the previous week's high and then closing red below the previous week's low and on the low of the week, suggesting further downside below last week's low at 324.96. Daily close support is found at 323.35 and pivotal at 318.17. On a weekly closing basis, pivotal support is found at 324.40. Having closed on Friday at 325.40, this week is pivotal. Minor but possibly indicative intraweek resistance is found at 336.38, which if broken would suggest some recovery will occur. Probabilities favor the bears. VET generated a negative reversal week, having made 4-week high but then going below the previous week's low and closing on the low, suggesting further downside below last week's low at 19.84 will be seen this week. Nonetheless and on an intraweek basis, the stock has been in a clear sideways trading range between 18.55 and 23.93 for the past 7 weeks and within that trading range, there is no clarity as to what is to happen for the longer term. Then again, the uptrend is basically intact, so the probabilities continue to favor the bulls. On a weekly closing basis, the 19.93 level is short-term pivotal support and on the opposite side, it is the 23.44 level. The stock closed on Friday at 20.04, meaning that if the bulls want to remain with the edge, a green close next Friday needs to occur. On a daily closing basis, the support is at 19.78. As such, both of these levels have to hold this week because if broken, the bears will get a short-term edge. ZLAB, compared to just about everything else, generated a totally uneventful week. The stock went above the high made the previous week (as expected) but no additional follow through was seen and then it closed in the middle of the week's trading range, meaning that neither the bulls nor the bears could claim any kind of victory. In addition, the stock closed on Friday at 43.39 and the 43.42 level has been somewhat pivotal for the past few weeks as it was the previous low weekly close that when broken, caused the stock to drop down to the $25 level. The stock has now traded above that level for the past 4 weeks, suggesting that some recovery is to come. Nonetheless, neither the bulls nor the bears have been able to make any further statement. With everything that is to happen over the next 8 trading days, it is highly likely that something will happen with the stock. Nonetheless, it is not clear what needs to happen elsewhere to make the stock rally or drop. On a daily closing basis, pivotal support is found at 41.32 and pivotal resistance at 45.47. Whichever level gets broken first, will generate movement in that direction.
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1) SNDL - Averaged long at .905 (2 mentions). No stop loss at present. Stock closed on Friday at .5205. 2) PRTS - Purchased at 7.02. Stop loss at 5.80. Stock closed on Friday at 6.27. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .036. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .021. 5) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 43.49. 6) AU - Averaged long at 28.423 (3 mentions). No stop loss at present. Stock closed on Friday at 23.68. 7) NEM - Purchased at 71.16. Averaged long at 72.133 (3 mentions). No stop loss at present. Stock closed on Friday at 74.54. 8) ENG - Averaged long at 3.378 (5 mentions). No stop loss at present. Stock closed on Friday at 1.18. 9) VET - Purchased at 20.35. Stop loss now at 18.68. Stock closed on Friday at 20.17. 10) RBLX - Purchased at 39.90 and at 36.21. Averaged long at 39.343. Liquidated at 35.38. Loss on the trade of $1188 per 100 shares (3 mentions). 11) AAPL - Shorted at 178.04. Stop loss now at 171.27. Stock closed on Friday at 161.79. 12) QQQ - Shorted at 347.55. No stop loss at present. Stock closed on Friday at 325.40.
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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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