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Issue #771 
Jul 03, 2022 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bears back in Control. Dowtrend in Effect.
DOW Friday closing price - 31097
The indexes generated a negative reversal week, having made a new 3-week high but then closing red and in the lower half of the week's trading range. This does suggest that further downside below last week's lows (DOW below 30431, SPX below 3738, NASDAQ below 11322 and RUT below 1680) will be seen this week. The key issue about the negative reversal is that the previous week's action suggested that further upside (on a weekly closing basis) would be seen last week but that did not occur. This unexpected action suggests that the indexes remain under bear control, even for the immediate term.
By the same token, the action seen was not as decisive as it could have been given that the SPX, and the trend change signals that were given 3 weeks ago on both the daily and weekly closing charts, which were both negated the previous week, were not both negated back on Friday. On the daily chart, the level of negation was 3838 and on the weekly chart, the level of negation is 3812 and with Friday's close at 3825, the daily chart did negate the negation but not on the weekly chart. The weekly chart is always the most important.
The likely reason for the above happening is that the traders are likely waiting to see what the Jobs reports says on Friday before making a firmer decision on the idea that the trend has changed, at least as far as the SPX in concerned. The probabilities favor the bears given that the NASDAQ generated a trend change signal 9 weeks ago and that has not yet been negated even for 1 day.
The indexes did generate a rally on Friday and a close near (or on) the high of the day's trading range, suggesting the first course of action for the week on Tuesday will be to the upside. There is no close by resistance in the SPX (on the daily chart) but on the DOW and the NASDAQ there is daily "close" resistance at 31261 and at 11769 (respectively). This means that in the NASDAQ, a rally of as much as 1.5% above Friday's close could be seen any day this week.
On the other side of the coin, last week's lows (see above) are pivotal this week as they are now seen as potential successful retests of the lows made 3 weeks ago and if broken, the lows (from 3 weeks ago) will be tested and likely broken. Overall, it does mean that both the lows and highs from last week are pivotal this week. High in the DOW was 31885, in the SPX it was 3945, in the NASDAQ it was 12175 and in the RUT it was 1792.
The probabilities do favor the bears given that the bulls have not been able to do any confirmed recovery moves to suggest that this move down is over. Case in point is that there is still one huge downside magnet in place (200-week MA's) that will not be displaced/removed without a positive change of fundamentals, which at this time are not on the horizon. In the DOW that line is presently at 29373, in the SPX it is at 3512, and in the NASDAQ it is at 10839.
OIL mostly had an uneventful week, having generated a green weekly close but only by $.81 cents (not meaningful) but closing in the lower half of the week's trading range, suggesting a slightly higher chance of going below last week's low at 104.56 than above last week's high at 114.05. Oil did go above the previous week's high, meaning that it is possible that last week's high will become the successful retest of the high at 123,68 seen 4 weeks ago. A move below 104.56 will increase that possibility and a break of the recent low at 101.53 will confirm it as such. If the latter occurs, the uptrend will be broken and a drop below $100 will become a high probability given that there is only minor support until the 92.93 is reached. The chart is not all that clear as to what will happen this week but the fundamentals continue to support the bulls. Nonetheless, there is a high probability of Oil getting up to 112.17 this week as well as it getting down to 105.13, meaning it could be an uneventful inside week.
DOLLAR generated a new 20-year high weekly close and closed near the high of the week, suggesting further upside above last week's high at 105.64 will be seen this week. There is some minor intraweek resistance at 105.79 (the high seen 3 weeks ago) but above that there is mostly open air (on an intraweek basis) until the 109.67 level is reached. On an intraweek basis, there is short-term intraweek support at 103.42, which if broken, would likely cause at least a 3-6 week corrective phase. Probabilities favor the bulls.
BITCOIN has paused the downtrend but the bulls have been unable to generate enough buying to suggest that no further downside will be seen. On a weekly closing basis, Bitcoin now shows important and pivotal weekly close support at 18978 and as of right now (Sunday 11:00 am), it is trading at 19103, meaning that the weekly close remains a flip of a coin. On a daily closing basis, pivotal daily close resistance is now found at 21485, which if broken would suggest the worst is over. Probabilities continue to favor the bears.
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Stock Analysis/Evaluation
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CHART Outlooks
SHOP is the Canadian equivalent of the American AMZN and it has dropped 83% in price over the past 9 months (from 176.29 to 29.76). The stock started trading in 2015 but began to get momentum to the upside in 2019 when it broke above a 1-year established resistance at 17.53 and ran up to 40.96 level. For a period of 10 months, the stock got up as high as 59.39 and as low as 28.21, which became a strong support level given that the level (28.21 to 30.52) was tested on 4 different occasions and was never broken. This means that this area is dependable support.
SHOP got down to 30.81 9 weeks ago and then to 29.76 4 weeks ago and has bounced up to 41.37, suggesting that the stock is likely to be in the same trading range as was seen in 2019 when it traded between 28.21 and 40.96. It does suggest that fundamentally negative news needs to come out for this strongly established support to be broken.
SHOP generated a negative reversal last week, having gone up above the previous week's high at 38.79 (got up to 39.50) and then turning down to go below the previous week's low at 32.16 (low last week was 30.71) and closing at 31.41, strongly suggesting that last week's low will be broken this week. As such, further downside is likely to be seen with even potential for a drop down to 28.21.
Nonetheless, SHOP now has multiple tops around the $40 level that will be targeted for breakage if the bulls are able to keep the stock from making a new 3-year low. Above the $41 level there is open air up to the $60 (more specifically 59.36), which is the objective of this mention.
The desired entry point into a purchase of SHOP is between 28.61 and 30.54, using a stop loss at 28.01 and having a 59.36 objective. It is an 11-1 risk/reward ratio even if the stock is entered around the 30.50 level. My rating on the trade is 3.75 (on a scale of 1-5 with 5 being the highest).
LI Friday Closing Price - 37.70
LI is the Chinese equivalent of TSLA. It is a new company that started trading just 23 months ago at $15 and has already established itself as a favorite among Chinese stocks given that it made its all-time high just 18-weeks later at 47.20. In spite of all the weakness and selling of stocks over the past 6 months (most everywhere in the world), the stock got back up to 41.49 just 2 weeks ago, after having rallied 225% in value over the previous 7 weeks, strongly suggesting that further upside is likely to come, perhaps even a new all-time high.
LI has built a breakaway/runaway gap in the weekly chart (most indicative of breakaway/runaway formations), which offers an upside objective of 59.78, to be reached within the next 7 weeks. In addition, this formation also gives a viable and dependable support area as the runaway gap down at 34.00 should not be closed.
LI generated an inside week last week and a red close and slightly in the lower half of the week's trading range, suggesting further downside below last week's low at 36.15 will be seen this week. Such a move would likely become a retest of the breakaway/runaway formation, which if successful would likely bring another round of strong buying.
Purchases of LI below 36.15 and using a 34.00 stop loss and having a 59.78 objective will offer a 6-1 risk/reward ratio. My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest). Chart-wise, this action seen the last 6 weeks, the formation in place, and the fact that Chinese stocks have been outperforming U.S. stocks the past few weeks and likely will continue to outperform them until the interest rate hikes stop, makes this trade very viable and attractive.
I also want to mention (not officially though) that consideration to adding positions in PLNHF should be done. Fundamentally, the stock is way overdone to the downside. I have no clearly defined "chart" level where a stop loss can be placed at this time and the stock has given no notice that it is ready to move up, but fundamental analysts have a average 3.30 upside objective for the next 12 months (presently at 1.25). If that comes true, just about any purchase at any price near this present level will offer a much better than a 4-1 risk/reward ratio.
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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 2022, as of 7/1 Profit of $5,189 using 100 shares per mention (after commissions & losses) Closed out profitable trades for June per 100 shares per mention (after commission)
CAT (short) $53 CAT (short) $549 SCCO (long) $23 AAPL (short) $26 FIX (short) $975 Closed positions with increase in equity above last months close minus commissions. FSLR (long) $762 Total Profit for June, per 100 shares and after commissions $2,388 Closed out losing trades for June per 100 shares of each mention (including commission)
FSLR (long) $114
AAPL (short) $88 QQQ (short) $79 Closed positions with decrease in equity below last months close plus commissions.
AM (long) $121 Total Loss for June, per 100 shares, including commissions $1,488 Open positions in profit per 100 shares per mention as of 6/30
IDCC (short) $509
Open positions with increase in equity above last months close.
VNET (long) $78
ZLAB (long) $3048 Total $10,087 Open positions in loss per 100 shares per mention as of 6/30
NONE
Open positions with decrease in equity below last months close.
PRTS (long) $126 Total $3,518 Status of trades for month of June per 100 shares on each mention after losses subtracted.
Profit of $7,469
Status of account/portfolio for 2022, as of 6/30
Profit of $12,659 per 100 shares.
AAPL generated a negative reversal week, having made a new 3-week high but then closing red. Nonetheless, the stock closed very slightly in the upper half of the week's trading range, meaning a very slightly higher possibility of going above last week's high at 143.49 than below last week's low at 133. 77. The short-term chart is not clear, meaning that last week's trading range is short-term pivotal. Probabilities favor the bears simply because the stock is in a corrective (or downtrend) scenario but the chart is unclear as to what to expect this week.
AU mimicked Gold this week, inasmuch as the uptrend has ended and a sideways trend is likely to be in place. The stock did break the intraweek support at 14.57 by a slight margin (low last week was 14.42) but when it came to confirming the break, the bears were unable to do so, having closed on Friday above the pivotal weekly close support at 14.78 (closed at 15.19). On a potential positive note, the stock is now showing a double low on the daily closing chart at 14.78/14.79 and if that gets confirmed (a daily close above 15.94) it will likely stimulate a recovery rally back up to at least $18 but likely up to the 200-day MA, currently at 19.76. The chart suggests that the stock will be trading between $15 and $20 for at least the next 3-6 weeks or until new fundamental news comes out. CAT generated a new 18-month intraweek and weekly closing low and closed near the low of the week, suggesting further downside below last week's low at 173.72 will be seen this week. The chart of this stock is the most short-term bearish of all the short-held stocks and among some of the most short-term bearish of all stocks. The 200-week MA is currently at 165.39 and that line is now a magnet to be reached. The bulls were able to generate a 9% rally at the beginning of last week but then gave it all up, having dropped 10% from the high of the week by Friday. That high at 193.10 is now pivotal resistance, which if broken, would suggest that a dependable support low has been built. Probabilities favor the bears. ENG generated an outside week (higher high and lower low than the previous week) but in the end, nothing on either side was broken. On a daily closing basis, there is short-term pivotal resistance at 1.06 and short-term pivotal support at .94. Whichever gets broken will generate further movement in that direction. The probabilities actually favor the bulls as the $1 level has been strong psychological support for an entire decade+. IDCC generated a negative reversal week, having made a new 3-week intraweek high but then going and closing below the previous week's low and making a new 6-week closing low. The stock closed on the low of the week, suggesting further downside below last week's low at 60.01 will be seen this week. The action seen this past week generated two chart events of note. The first one being that the previous week's close has now become a successful retest of the 5-month high weekly close at 66.03 as well as a successful retest of the 200-week MA, currently at 63.77, but also a new sell signal, having broken the 6-week low at 60.78 (closed on Friday at 60.55. On an intraweek basis, there is support at 59.13, at 57.08 and pivotal at 56.13. If those supports get broken, the objective would be the $47 level. On a daily closing basis, short-term pivotal resistance is now found at 61.44. A confirmed close above that level would take the selling pressure off. NEM made a new 6-month intraweek low but the bulls were able to generate enough buying interest to close in the middle of the week's trading range, suggesting equal chances of going above last week's high at 64.40 than going below last week's low at 58.08. The stock has now fallen 32.8% from the all-time high but now finds itself at a copious and decent support level at $60 that started back in 2010 and that is unlikely to be broken at this time unless Gold collapses indicatively below the $1800 level, which was the same level that was seen at that time. By the same token and with Gold now likely to be in a sideways trend, the upside is now limited to the $70-$75 level, with $70 likely to be seen within the next 4-6 weeks. If the stock does go above last week's high at 64.40, last week's low at 58.08 will become a decent to perhaps strong intraweek support. If 58.08 is broken, a drop down to $55 is likely to occur. Probabilities slightly favor the bulls. PLNHF made yet another new 24-month intraweek and weekly closing low and closed near the low of the week, suggesting further downside below last week's low at 1.12 will be seen this week. Support is found between 1.00 and 1.10, suggesting that some buying interest is likely to be found soon. The 12-month average projections for the stock is for a rally back up to the 3.30 level. This means that the stock is a good buy in this area. In reading quite a few statistics about this stock, it is stated that the stock is way overdone to the downside and is a stock that has a better chance of rallying than 63% of all stocks. At this time and with 5 weeks in a row of lower highs than the previous week, it seems likely that when a previous week's high is broken, that it will be a valid sign that a bottom has been found. Last week's high is 1.32. Probabilities are now starting to favor the bulls. PRTS generated a failure signal this past week, given that the previous week the stock had broken out on the weekly closing chart and the breakout was negated last week and a new sell signal given, having closed below the most recent low weekly close at 7.55 (closed at 7.26). The stock closed near the low of the week, suggesting further downside below last week's low at 6.84 will be seen. Short-term pivotal support is found at 6.79. Below that, there is no support until 6.49 is reached. Nonetheless, the stock did generate a green daily close on Friday and further upside is expected to be seen on Tuesday, with an upside objective of 7.70/7.75 and perhaps even a small chance of getting up to the 8.10 level. This coming week is likely to be pivotal for the stock for the longer term as a rounded bottom seems to have been built over the past 4+ months and rounded bottoms are considered to be the strongest support formation available. A break below 6.79 would begin to destroy the rounded bottom, meaning that the bulls need to hold this area this week. Probabilities slightly favor the bulls but with the overall market under sell pressure, it is almost a "flip of a coin". VNET had a totally uneventful week, having generated an inside and a close within the same weekly closing range it has been in for the past 16 weeks. The stock remains with the same positive leaning chart that has been in place for the past few months. Intraweek resistance remains copious between 6.63 and 6.92, meaning that further upside will remain laborious but if the bulls can get above 6.92, there is mostly open air to 7.94 and if that level gets broken, the $10 level would then be the objective. Support remains at 5.23. This week's action did nothing to change that outlook. Probabilities favor the bulls. ZLAB had a very eventful week, having made a new 7-week intraweek and weekly closing high and closing on the high of the week, suggesting further upside above last week's high at 39.39 will be seen this week. This was the first time in the last 24 months that a previous established high has been broken. It is also a strong sign that the downtrend is over and a strong bottom has been established at 22.51. As of right now, the 24.50 level is now a support level unlikely to be broken. Nonetheless, if follow through to the upside is seen, the $37 level will become a new support level. There is open air above up until the 47.00 level is reached. Pivotal resistance is now found at the $50 demilitarized zone, which if broken would suggest the 200-day MA, currently at 59.68, will be targeted. One reason for this rally in the stock is that the Chinese market has been outperforming the U.S. market for the past 5 weeks and that is likely to continue. Interest rate hikes in the U.S., which are expected to be seen over the next couple of months, are contrary to what is happening in China and will continue to be supportive to Chinese stocks traded in the U.S. Probabilities favor the bulls.
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1) SNDL - Averaged long at .905 (2 mentions). No stop loss at present. Stock closed on Friday at .3327. 2) PRTS - Averaged long at 7.29 (2 mentions). Stop loss now at 5.65. Stock closed on Friday at 7.26. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .016. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .004. 5) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 38.54. 6) AU - Averaged long at 26.184 (4 mentions). No stop loss at present. Stock closed on Friday at 15.19 7) NEM - Averaged long at 72.133 (3 mentions). No stop loss at present. Stock closed on Friday at 61.17. 8) ENG - Averaged long at 3.378 (5 mentions). No stop loss at present. Stock closed on Friday at 1.01. 9) VNET - Averaged long at 5.32 (2 mentions). No stop loss now at 4.98. Stock closed on Friday at 6.01. 10) AAPL - Shorted at 150.38. Stop loss now at 143.59. Stock closed on Friday at 138.93 11) IDCC - Shorted at 65.89. Stop loss at 67.35. Stock closed on Friday at 63.57. 12) CAT - Shorted at 229.67. Stop loss now at 193.35. Stock closed on Friday at 178.29. 13) FIX - Liquidated at 82.80. Shorted at 92.55. Profit on the trade of $975 per 100 shares. 14) CAT - Shorted at 189.65. Covered shorts at 190.35. Loss on the trade of $70 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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