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Issue #746 
Jan 2, 2021 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| New Year Starts. Probabilities Favor Investors Keying On Depressed Stocks.
DOW Friday closing price - 36338
RUT Friday closing price - 2245
The indexes generated a Christmas rally, with the SPX, the NASDAQ and the RUT all rallying around 3.3% and the DOW rallying 2.7% over the past 2 weeks. The DOW and the SPX did end up the year making new all-time weekly closing highs but not so the NASDAQ nor the RUT, which closed 1.6% and 7.9% below their respective all-time highs made in November. The dichotomy, especially between the DOW and the NASDAQ does suggest that the index might be entering the final phase of their 13-year bull trend.
January has seasonally been a positive month for stocks as investors usually take profits in December to take advantage of Capital Tax gains and re-buy stocks in January. On the other side of the coin and though historically it has been found that January is a strong month for stocks, it is usually the smaller companies with weaker performances the year before that get the most attention. This certainly was shown in December with the big stocks in the NASDAQ underperforming the DOW and especially the SPX.
By the same token and talking about Seasonalities, February is normally a negative month. Since 1945, the two months that have delivered and average negative return are February and September. The SPX has shown an average negative return in February of .56% over the past 76 years.
The year will start with the 2 most important monthly reports. On Tuesday, the ISM Index report comes out and on Friday, it is the Jobs Report. The ISM index report is expected to come in slightly lower than last month (60% vs last months at 61.1%) and the Jobs Report is expected to come in higher than last month (475k vs last month's 210k). Unless these reports are way out of line (unlikely), they probably will not have any impact on the market. On Wednesday January 12th, the inflation report (CPI) comes out. There is no expected number yet available but last month the Core number was .5%. The Fed will not be announcing their Fed rate decision for the month until January 26th but it is not expected that anything will be done to raise interest rates until September. As such, the January meeting is not likely to have much of an effect.
Evidently, if the economic reports the first week do not surprise, the seasonal tendency is likely to rule and the indexes go up in January. What the traders will be keying on are the NASDAQ and especially the RUT. It is there where any changes occurring will be seen. The RUT should start to outperform the other indexes, especially the NAZ. It is also "not" likely that the NAZ will be making new all-time highs (above 16764) as there should be a lack of interest in buying the big stocks in that index, much like was seen the previous 5 weeks when the DOW and NAZ outperformed it.
Given that the economic reports will be the guideline this week and that all indexes closed near the highs of the month and are likely to go above December's highs in January (DOW above 36679, SPX above 4808, NAZ above 16607, and RUT above 2276). The RUT bears close watching because if it gets above 2360, it will be telling.
Probabilities favor the bulls this week.
OIL had a positive reversal month, having gone below the previous month's low and then closing green and near the high of the month, suggesting further upside above last month's high at 77.44 will be seen this month. If that occurs, last month's low at 62.43 will become a successful retest of the 61.74 low seen in July and that will suggest the correction is over. Oil did get above intraweek resistance at 76.90 last week and that suggests the bulls have a small edge right now. By the same token, the sell off at the end of the week to close just $.19 cents above the weekly close resistance at 75.16 also suggests that this move this past month is "not" indicative of the bulls regaining the strength they had before and resuming the previous uptrend. It is suggestive of a market that is likely to trade sideways (between $72 and $79) for the next few months. On a daily closing basis, support will now be found at 72.05 and resistance at 78.81. Probabilities favor that trading range being in place until some new fundamental news occurs.
DOLLAR generated the second red weekly close in a row and closed on the low of the week, suggesting further downside below last week's low at 95.57 will be seen this week. There is short-term pivotal support at 95.52 and then nothing below until 95.03 and pivotal at 94.65. The only thing that was decided this past week is that further upside is going to require fundamental help that is not likely to be available in January. As such, the Dollar is likely to get into a trading range for the next month between 94.65/95.00 and 96.64 (based on intraweek trading). Nonetheless, for this coming week, the probabilities favor the bears.
BITCOIN made a new 3-month intraweek low and closed in the lower half of the month's trading range, suggesting further downside below last month's low at 42101 will be seen this month. Nonetheless, the weekly chart does not confirm that outlook as 42101 has now been confirmed to be a new intraweek support base and the weekly charts carry more weight than the monthly charts. By the same token, the chart does suggest that Bitcoin is not going to do much in January. A drop down to 43360 could be seen and a rally as high as 52888 could be seen as well. Nonetheless, that is likely to be the trading range for the month. For this week and for the short-term, the probabilities favor the bears over the bulls, meaning that the downside should be seen first before the upside is explored.
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Stock Analysis/Evaluation
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CHART Outlooks
As of this writing, I have no new mentions for this week. Nonetheless, if it is true that investors will be keying on small cap stocks starting at the beginning of the year, that will likely start to be seen this week. As such, the moment that I see some signs that this is happening, I will give mentions on the message board and/or with a mention via email. I do expect that will happen but I have no desire to speculate on it before signs of such action is seen. I do have several stocks already in mind to mention. These are stocks that have strong fundamentals but have fallen in price during the past few months.
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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 12/1 Loss of $1,146 using 100 shares per mention (after commissions & losses) Closed out profitable trades for December per 100 shares per mention (after commission)
RBLX (long) $54
Closed positions with increase in equity above last months close minus commissions.
QTWO (long) $254 Total Profit for December, per 100 shares and after commissions $600 Closed out losing trades for December per 100 shares of each mention (including commission)
QQQ (long) $48
Closed positions with decrease in equity below last months close plus commissions. NONE Total Loss for December, per 100 shares, including commissions $48 Open positions in profit per 100 shares per mention as of 12/31
ZLAB $129
Open positions with increase in equity above last months close.
AU (long) $24
NEM (long) $2130 CALM (long) $56 IDCC (long) $742 CHUY (long) $292 Total $3373 Open positions in loss per 100 shares per mention as of 12/31
NONE
Open positions with decrease in equity below last months close.
ENG (long) $112 Total $2252 Status of trades for month of December per 100 shares on each mention after losses and commission subtracted.
Profit of $1,673
Status of account/portfolio for 2021, as of 12/30
Profit of $527 per 100 shares.
Ending Results for 2021
Yearly totals:
Total amount of trades for the year = 116
BTZI generated an inside week but did close near the low of the week, suggesting that on an intraweek basis, further downside below last week's low at .035 will be seen this week. On a positive note, the stock has now established the .038-.04 leve as decent weekly close support that is unlikely to be broken without some new negative fundamentals coming out. With the high probabilities of traders/investors now leaning to purchase underpriced small cap stocks at the beginning of the year, it is likely the stock will begin to see some upward movement from this week on. Daily close and short-term pivotal resistance is found at .0585 and longer term pivotal at .08. Any daily close below .03 would now be a negative sign.
CALM generated a wild week positive reversal week, having generated the biggest trading range week in the past 16 weeks ($3.31 trading range and about a 9% move from low to high). The stock did report earnings and they were less than expected and the stock sold off to make a new 10-week intraweek low. Nonetheless, the stock turned around to close green, in the upper half of the week's trading range and above the previous week's high, suggesting further upside above last week's high at 38.41 will be seen this week. There is pivotal intraweek resistance at 38.89, which if broken would open the door for a rally up to the 200-day MA, currently at 41.41. Last week's intraweek low at 35.10 is now the new and pivotal support level. A break of that level would weaken the chart substantially. Probabilities favor the bulls.
CHUY made a new 4-week intraweek and weekly closing high on Friday and closed near the high of the week, suggesting further upside above last week's high at 30.54 will be seen this week. There is no intraweek resistance above until the 33.75 level is reached. The chart now shows a fulfilled chart to the downside, meaning that the bears will need new and negative fundamental news to push the stock lower. Last week's low at 28.27 is now short-term pivotal support that should not be broken without negative news. Probabilities favor the bulls this week.
ENG generated a new 56-week intraweek and weekly closing low and did close near the low of the week, suggesting further downside below last week's low at 1.28 is expected to be seen this week. Nonetheless, the breakout that took the stock up to the $9 level came from a daily closing high at 1.23 and from a weekly closing high at 1.28. Having closed on Friday at 1.32, the probabilities do support the stock starting to make some upward movement from here on out given that the fundamentals have not changed from what they were when the stock originally broke out. I do expect a green weekly close next Friday. Daily close resistance is found at 1.63 and at 1.78. On a weekly closing basis, a close above 1.70 would generate a failure signal against the bears as well as a close above the 200-week MA, currently at 1.60. Any daily close below 1.23 would now be a new negative.
IDCC generated a negative reversal week as the bulls were unable to get above the pivotal intraweek resistance at 74.26 (high last week was 73.56). The stock closed on the low of the week suggesting further downside below last week's low at 71.35 will be seen this week. On a positive note though, the stock got above the 200-day MA (currently a 70.60) 8 days ago and the probabilities favor that line being tested successfully before new buying interest comes in. Intraweek support is found at 70.13 and one or both of these levels are likely to be tested this week. If they hold up and a positive reversal occurs, it would give the bulls the necessary ammunition to test (and possibly break) the resistance at 74.26. Any break below 69.70 would now be a new negative. Probabilities favor the bulls.
NEM made a new 21-week intraweek high and a new 22-week weekly closing high. The stock closed on the high of the week and further upside above last week's high at 62.18 is expected to be seen this week. The stock closed above the 200-day MA, currently at 60.85, and that line will now be support on a daily closing basis. Daily close support is now found at 60.11, meaning that any daily close below 59.65 would now be a new negative. Minor weekly close resistance is found at 62.79. If broken, there is open air above until the 68.50 level is reached. Probabilities favor the bulls.
SNDL generated a red week and a close on the low of the week, suggesting further downside below last week's low at .577 is expected to be seen this week. Intraweek support is found at .525 that if broken will give the bears new ammunition. Daily and weekly close support is found at .56. Pivotal daily close resistance is found at .67. The outlook for the Cannabis industry is that this year it will start generating more profits and given that there is a strong possibility that the investors will come in this year to buy depressed stocks, this could be one of the ones they buy. As such, it is likely that a positive reversal week will occur this week.
SRUTF made another new all-time intraweek and weekly closing low at .0202 and at .0234. The stock closed in the lower half of the week's trading range and further downside below .0202 is expected to be seen this week. The only possible scenario that will change the outlook for further downside is that it is expected that the Cannabis industry will start to move up this year and that the investors will be looking to buy depressed stocks. Nonetheless and chart-wise, there is nothing at this time that is a positive. Pivotal intraweek short-term resistance that will mean the downtrend is over is found at .034 and pivotal mid-term resistance is at .0505.
ZLAB generated a 2nd red weekly close and did go below the previous week's low, meaning that if it begins to turn around this week, a required/needed retest of the low will have occurred, which in turn would bring in short-covering interest. The stock did close near the low of the week and further downside below last week's low at 62.00 is expected to be seen this week. Intraweek support is found at 60.57. I did provide last week a link where there were 6 analysts opinions that offered upside objectives as well as possible lows at this time. All of the analysts stated that the $60 level should now be support, suggesting this coming week could be a positive reversal week. At this price and considering the fundamental outlook for the stock, this is the perfect example of a stock that is likely to get considerable attention by traders looking to buy a strong fundamental company at depressed prices. The chart is showing a possible bullish inverted flag formation with the left shoulder being at 60.57, the head at 49.41 and the right shoulder on a formation basis. The neckline is found at 73.85 and a break of the neckline would offer a 98.29 objective. 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 .5783. 2) CHUY - Averaged long at 30.75. Stop loss now at 28.40. Stock closed on Friday at 30.12. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .0234. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .039. 5) ZLAB - Averaged long at 113.081 (5 mentions). No stop loss at present. Stock closed on Friday at 62.85. 6) AU - Averaged long at 26.106 (6 mentions). No stop loss at present. Stock closed on Friday at 21.98. 7) NEM - Averaged long at 60.137 (4 mentions). No stop loss at present. Stock closed on Friday at 62.02. 8) ENG - Averaged long at 4.0325 (4 mentions). No stop loss at present. Stock closed on Friday at 1.32. 9) MRGE - Purchased at .28. No stop loss at present. Stock closed at .0096 on Friday. 10) CALM - Purchased at 34.99. Stop loss at 33.65. Stock closed on Friday at 36.99. 11) IDCC - Averaged long at 69.475 (2 mentions). Stop loss at 65.69. Stock closed on Friday at 71.63.
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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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