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Issue #763 
May 1, 2022 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bears now in Control. NASDAQ and RUT now officially in a Bear Trend!
DOW Friday closing price - 32977
The indexes had a bad week and a bad month given that all indexes gave up between 5.2% (DOW to 13.4% NASDAQ) in value from last month to this month. The SPX gave up 10.8% and the RUT gave up 10%. On the monthly chart, the DOW and the SPX both gave new sell signals and the NASDAQ and the RUT added to their downtrend. New sell signals were also given on the weekly closing chart with the exception of the DOW, which closed only 28 points away from it too, generating a new sell signal on the weekly chart. The fact that the DOW has actually stood up the best to this selling onslaught confirms the negativity in the market as traders are keying their few purchases to the safety of DOW stocks.
It is now official that the "speculative" buying trend in the market that started 13 years ago is now officially over, given that the NASDAQ has dropped 22% from the all-time high and the RUT has dropped 23.4%. The DOW has dropped 10.7% and the SPX has dropped 13.4% from its highs. I mention all these numbers because of the discrepancy in the indexes as to what is the overall outlook for the market. It is evident that under "these present fundamental conditions", the bull trend is not necessarily over for two of the four indexes and that is something that does need to be followed as it may give a view of how much lower the market could fall without it going into a "full blast" bear market.
Evidently the DOW and the SPX are the keys, with the latter being the one to follow now. The SPX has dropped 13.6% in value and as such, and if the overall market is not in a full bear trend, no more than an additional more 6.3% drop is to ensue. That would put the index somewhere around the 3836 level (or higher). The probabilities do not favor either of these indexes giving an official bear market signal, at least not at this time and under these fundamental conditions. This possible downside objective is not a short-term objective. It is a midterm objective to be reached within the next 3-6 months. At that time, the fundamental picture will be clearer and a decision on whether a full-blast downtrend is in effect or not, will be known.
This coming week is quite important as there are 3 economic reports of consequence (ISM Index - Monday, Fed Rate decision - Wednesday and JOBS - Friday) due out. The following week on Wednesday, the CPI number comes out. These reports can all be catalytic and therefore the traders will be keeping a close eye on them. The problem that does exist for the bulls is that if the reports all come out as expected (or worse), the chart signals will be confirmed as the bears are presently in control. The bulls need positive surprises of consequence to overturn what happened this week. It is unlikely that surprises will happen.
As far as the charts and the short-term is concerned, and considering that the reports will all come out as expected, this is what is then likely to be seen over the next few weeks. It also needs to be kept in mind that May has a clear tendency to be a down month, meaning that too will be on the minds of the traders.
Using the NASDAQ as the key index to watch this week, there is weekly close support at 12668. As far as resistance levels, there are two (13301 and at 13807). The former is a level that is likely to be seen in the next 1-3 weeks if the reports are not surprising. The latter may be seen if the bulls can get some kind of a recovery rally occurring (unlikely but potentially possible). As such, you are looking at 632 point trading range being seen (on the weekly closing chart). The index closed at 12854 on Friday, meaning that the drop could be another 200 points lower and the rally could be as much as 440 points higher. On an intraweek basis though, the index could fall all the way down to the 12208 level and rally as high as 13504.
As far as the DOW is concerned, there is important and pivotal intraweek support at 32272. If that level breaks, there is open air below until the 30000-31000 level is reached. As such, the index will be closely watched as well. The bulls will try strongly to not create another chart negative to add to the negatives that have already happened.
As far as the reports this week are concerned, if the Fed surprisingly decided to raise interest rates by only 25 points, that would give the bulls added ammunition. By the same token, if they decide to raise interest rates by 75 points, that would do the exact opposite. It is doubtful that either the ISM or Jobs reports will have a strong effect in either direction. After that, it is the CPI number the following week what will have some catalytic importance. Nonetheless and like with the ISM and Jobs reports, it is unlikely to be surprising in either direction. Having said all of that, probabilities favor the charts being used in a big way over the next month or two.
OIL generated a positive reversal week, having gone below the previous week's low and then closing green and in the upper half of the week's trading range, suggesting further upside above last week's high at 106.92 will be seen this week. If that does occur, last weeks' low at 95.31 will become a successful retest of the 92.93 low seen 4 weeks ago. On an intraweek basis, pivotal resistance is found at 109.81. If that level is broken and the bulls are able to close next Friday above 106.95, a short-term breakout will have occurred that would suggest the 130.50 multi-year high will be tested. The chart is favoring the bulls at this time but more backing and filling on a short-term basis is the probability for this week.
DOLLAR generated a new all-time intraweek and weekly closing high and closed in the upper half of the week's trading range, suggesting further upside above last week's high at 103.93 will be seen this week. By the same token, this new high is based on the Fed taking on an aggressive interest rate high approach. If at any time their actions disappoint (likely with a lower interest rate hike than expected on Wednesday of this coming week), a failure signal will be given. On a weekly closing basis, the 102.82 level will now be pivotal support. Probabilities favor the bulls.
BITCOIN did very little all week, having traded all week in a sideways manner between the high of the week at 40800 and the low of the week at 37762, with both of these levels seen on Monday. Nothing happened the rest of the week. Bitcoin is presently trading at 38404 (Saturday afternoon) and if a weekly close occurs tomorrow night below 38816, a short term sell signal will be generated that will likely target a move down to around the 36000-36500 level. The chart seems to suggest this is the most likely scenario. A rally above last week's high at 40800 will change the chart outlook and give the bulls a small edge.
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Stock Analysis/Evaluation
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CHART Outlooks
The bears are now in control and that means that rallies should now be sold. Mentions this week will be sales. By the same token, many stocks have already fallen quite a bit and chasing them at these levels is not yet a good strategy given that the risk/reward ratios using proven resistance areas close by are not available. As such, the two mentions given today are not the most profitable shorts likely available but they are stocks that offer dependable resistance areas nearby that do offer at least respectable risk/reward ratios.
SALES
CALM Friday Closing Price - 53.73
CALM is a food retailed that over the past 5 months generated at 58.5% rally (from 35.10 to 59.95) but ran into the all-time high area of monthly close resistance between 54.61 and 56.65, having closed the previous month at 55.22. The stock generated a negative reversal month in April, having made a new 7-year intra-month high and then generating a red monthly close and near the low of the month, suggesting further downside below last month's low at 52.80 will be seen this month. In addition and using the weekly chart, the stock made the multi-year high weekly close 5 weeks ago and then proceeded to test the high successfully and generate a sell signal on Friday, having broken the 5-week weekly closing low at 54.36. Putting all of these factors together and adding the seasonal tendency for stocks to drop in price in May, this trade seems to be a good one.
The downside objective of the trade is the $46 level as that was the level that got broken to the upside that created this retest of the all-time highs. A retest of that breakout level is not a bearish sign as that often happens in bull markets. Nonetheless, if the indexes are now in a bear market, the stock could offer even further downside below $46.
To the upside, CALM now has a clear daily close resistance at 55.22, which if broken at this time would tend to negate the short-term bearish picture, meaning that the risk/reward ratio and probability rating on this trade are very beneficial to the bears.
Sales of CALM at Friday's closing price and using an intraweek stop loss at 55.53 (or preferably a daily close stop loss at 55.33) and having a 46.50 downside objective, offers a 4-1 risk/reward ratio. My rating on the trade is a 3.75 (on a scale of 1-5 with 5 being the highest).
DOW Friday Closing Price - 66.50
The DOW is not representative of the DOW index as it is a company that provides materials, science solutions for packaging, infrastructure, mobility and consumer applications in the U.S., Canada, Europe, the Middle East, Africa, India, the Asia Pacific and Latin America.
The DOW made a new all-time intraweek high the previous week (got up to 71.28 and above the previous high at 71.38) but the bulls were unable to confirm the breakout, having closed out the week at 68.50 and below the previous all-time weekly closing high at 70.37. Last week, a red weekly close occurred, meaning that the 70.37 high has now been tested successfully. The stock closed in the lower half of the week's trading range, suggesting further downside below last week's low at 65.53 will be seen this week. With the failure having now happened, the traders will likely be taking the stock down to the support level below, which means a "minimum" drop down to 60.40. By the same token and considering what has happened in the index market, the viable and potential drop of the stock could be all the way down to the $56 level.
To the upside and on an intraweek basis, the DOW now shows minor to decent but likely-to-hold-up resistance between 68.72 and 68.98, meaning that the stop loss will be at 69.08.
The DOW closed at 66.48 but the intraday chart suggests it could get up as high 66.98-67.24 before heading lower, meaning that area will be the desired entry point.
As such, sales of the DOW at 66.98 and using a stop loss at 69.08 and having a 60.40 objective will offer a 3-1 risk/reward ratio. If the 60.40 support is broken and the stock heads down to the $56 level, the risk/reward ratio will climb to 4.5-1. My rating on the trade is a 3.5 (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 2022, as of 3/31 Profit of $13,635 using 100 shares per mention (after commissions & losses) Closed out profitable trades for April per 100 shares per mention (after commission)
AAPL (short) $1780 AAPL (long) $739 QQQ (short) $2424 Closed positions with increase in equity above last months close minus commissions. NONE Total Profit for March, per 100 shares and after commissions $4,243 Closed out losing trades for April per 100 shares of each mention (including commission)
RBLX (long) $1188
Closed positions with decrease in equity below last months close plus commissions.
FSLR $552 AU (long) Total Loss for April, per 100 shares, including commissions $1860 Open positions in profit per 100 shares per mention as of 4/30
VET (long) $80
Open positions with increase in equity above last months close.
SRUTF (long) $62
Total $685 Open positions in loss per 100 shares per mention as of 3/31
PLNHF (long) $39
PRTS (long) $32 Open positions with decrease in equity below last months close.
AU (long) $981 Total $5,250 Status of trades for month of April per 100 shares on each mention after losses subtracted.
Loss of $2,1821
Status of account/portfolio for 2022, as of 3/31
Profit of $11,183 per 100 shares.
AU generated a failure signal, having closed below the breakout weekly close level at 20.98. The failure signal does diminish the upside recovery potential but it is not a game changer. Nonetheless and with the stock closing in the lower half of the week's trading range, the 200-week MA, currently at 19.16 beckons and if the minor to perhaps decent intraweek support at 19.55 is broken, that line will be seen. It is highly unlikely the MA line will be broken at this time, meaning that the downside is now limited. By the same token, the 22.47 level on an intraweek basis has now become pivotal resistance. If broken though, a rally up to 23.95 could occur. As such, the stock is likely to be trading between 19.55 and 23.95 for the nearby foreseeable future. Fundamental changes will need to happen to get out of that trading range.
ENG generated a "mini" breakout of sorts, having given a short-term buy signal when it closed above the most recent daily closing high at 1.25 and then closing $.01 cent above a decent (but old) weekly closing resistance at 1.28 (closed at 1.29). The stock did close in the upper half of the week's trading range, suggesting further upside above last week's high at 1.39 will be seen this week. Upside target area for the short term is the 200-week MA, currently at 1.61. There is pivotal intraweek resistance at 1.60 that does strengthen the resistance at that area but also makes it more explosive if broken. Intraweek support is now found between 1.12 and 1.15. It does seem that the stock has now built a solid bottom and from which the bulls can start keying on attacking resistance rather than defending support. Key support on a daily closing basis is now found at 1.10. Target for the upside to be reached within the next 3-6 weeks is the 200-day MA, currently at 1.77. Based on the price, the fundamentals of the company, the problems in the overall market and the chart picture, ENG is a stock that the bulls are likely to key on for a 37% profit over the next 3-6 weeks. FSLR generated a positive reversal week, having made a new 9-week low and then closing green and in the upper half of the week's trading range, suggesting further upside above last week's high at 74.98 will be seen this week. In addition, the green weekly close means that the previous week's close at 72.37 has now likely become the required/necessary retest of the 17-month low weekly close at 68.57 that occurred in February. If follow through and another green weekly close occurs this week, it could be said that the chart is now fulfilled in favor of the bulls. Nonetheless and at this time, none of this will be totally confirmed until the stock generates a daily close above 79.70. To the downside, a daily close below 71.44 will weaken the chart and confuse the outlook. Probabilities favor the bulls. NEM generated a failure signal against the bulls, having closed on Friday below the previous all-time high weekly close at 73.53 (closed at 72.58). The stock closed in the middle of the week's trading range, suggesting equal chances of going above last week's high at 74.99 than below the previous week's low at 70.92. On a positive note, the stock did not follow through (had an inside week) to the downside after an 18.3% drop in value the previous week, suggesting that the drop in price was overdone. Short-term pivotal resistance is found at 75.31 (74.38 on a daily closing basis) and then open air to 80.75. As far as support is concerned, there is now a double low at 70.60/70.91 that if broken would be a strong negative to the stock. Probabilities slightly favor the bulls. PLNHF continued to move lower, having made a new 23-month intraweek and weekly closing low. The stock closed on the low of the week, suggesting further downside below last week's low at 1.77 will be seen this week. The stock finds itself at a very important level of weekly close support between 1.79 and 1.80, given that level was support during 3 months back in 2019 and was the pivotal resistance in June 2020 and from which the rally to 8.67 occurred when broken. As such, it is imperative that a green weekly close occur next Friday. On an intraweek basis, the 1.75 level is support. Intraweek resistance is now found between 2.50 and 2.70. There has been absolutely no negative news on the company, meaning that at this price it is highly unlikely any further downside will be seen. By the same token, the 2.70 resistance level is unlikely to be broken until some positive news for the Cannabis Industry occurs. PRTS made a new 6-week intraweek low and a new 105-week weekly closing low and did close on the low of the week, suggesting further downside below last week's low at 5.97 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 this coming week given that any break below 5.90 would be one additional negative to the stock. There is some old but likely important intraweek support at 5.70 but below that, there is open air to the 4.40 level. On a potentially positive note, the stock traded between 5.70 and 10.00 level for 17 months back in 2010-2011 and given that the stock has dropped 75% in value over the past 15 months, it seems likely that scenario could be in place at this time. As such, I am lowering the stop loss to the 5.65 level (instead of 4.80). Probabilities do favor a positive reversal occurring this week. SCCO made a new 16 week intraweek and weekly closing low and closed near the low of the week, suggesting further downside below last week's low at 61.26 will be seen this week. The stock did generate a gap down on the weekly chart (between 65.53 and 65.16) but there was no negative news to the company (drop commodity related), suggesting this gap is a magnet to be closed soon. This is especially true given that there is a mountain of support between the $60 and $61 level. The 200-day MA is currently at 64.63 and given that the high for last week was 65.16, it does mean that the line (and last week's intraweek high) are now pivotal resistance that as long as the commodity market does not once again get in favor of the trades, is unlikely to be broken. Potential trading range for this coming week is 60.33 to 64.18. The report that the traders will be waiting for is the CPI number that comes out on Wednesday 5/11. That number (in conjunction with what the Fed rate hike is this week) will be the deciding factor on what the stock is going to do for the next 2-3 months. Any daily close below 60.79 would give the bears additional ammunition. VET made a new 10-week intraweek and weekly closing low but the bulls were able to rally the stock to close slightly in the upper half of the week's trading range, suggesting a slightly higher probability of going above last week's high at 20.84 than below last week's low at 18.08. Nonetheless, the stock did generate a new sell signal on the weekly chart that will be a tangible negative if not negated this next Friday with a close above 19.93 (closed on Friday at 19.48). The same thing (sell signal given) occurred on the daily chart but that was negated the following day. Unfortunately, the negation was not confirmed on Friday (red close), meaning that things are still "up in the air" and the traders are hoping those doubts will be cleared up this week. Evidently, a rally above last week's high or below last week's low will clarify the chart but on a shorter term basis, any daily close above 20.28 or below 19.24 will give an indication of direction. With Oil being support and both the stock and oil still in a long-term uptrend, the probabilities favor the bulls. VNET generated a positive reversal week, having made a new 6-week intraweek low but then closing green and near the high of the week, suggesting further upside above last week's high at 6.53 will be seen. Nonetheless and in using both the daily and weekly closing chart, the stock has done nothing indicative over the past 6 weeks (trading mostly sideways). On the other side of the coin, for the past 5 weeks, all the action has been mostly about building a new support base and testing the bullish island formation in place. Enough has now been done (on both fronts) that if the stock is able to generate a weekly closing above 6.59 or a daily close above 7.00, all that (base building and retest of the island) will be confirmed as successful. Probabilities favor the bulls. ZLAB made a new 5-week intraweek and weekly closing low on Friday and closed near the low of the week, suggesting further downside below last week's low at 37.92 will be seen this week. The action broke the tenuous weekly close support at 43.32 that had been holding up. The reason for the break of the tenuous support is the Covid-19 outbreak that is being seen in China and that is forcing closures of businesses once again. As such, the reason for the weakness is not company related but government related. The overall recovery outlook for the stock has not changed much even though the close below 43.32 not only makes that level resistance once again but it also means that further recovery will need additional base building action. There is no established intraweek support at 32.96 and even then, the support there is minor. There is an open gap between 30.14 and 32.96 that will be a magnet for closure "if" the bears can get the stock down near the 32.96 level. Nonetheless, that is not a "gimme" as the fundamentals of the company remain strong and the gap continues to be a possible indication of a strong recovery rally to come soon (if another gap to the upside is generated). Nonetheless, there are no levels of support on the chart until those lower levels are reached, meaning that the bulls must generate some upward movement this week to negate the potential for a drop down to those levels. As such, the bulls need to get above 44.18 intraweek and/or generate a daily close above 43.39, and if that happens, the potential downside objectives will be negated. There is no way now to evaluate the probabilities of any of this happening this week, especially since it strongly depends on the Covid outbreak in China and what the government does about it.
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1) SNDL - Averaged long at .905 (2 mentions). No stop loss at present. Stock closed on Friday at .4694. 2) PRTS - Purchased at 7.02. Stop loss now at 5.65. Stock closed on Friday at 5.99. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .031. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .018. 5) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 33.96. 6) AU - Averaged long at 28.423 (3 mentions). No stop loss at present. Stock closed on Friday at 23.68. 7) NEM - Averaged long at 72.133 (3 mentions). No stop loss at present. Stock closed on Friday at 72.85. 8) ENG - Averaged long at 3.378 (5 mentions). No stop loss at present. Stock closed on Friday at 1.29. 9) VET - Purchased at 18.81. Averaged long at 19.08 (2 mentions). No stop loss at present. Stock closed on Friday at 19.48. 10) VNET - Purchased at 5.20 and at 5.44. Averaged short at 5.32. No stop loss at present. Stock closed on Friday at 5.97. 11) AAPL - Liquidated at 160.24. Shorted at 178.04. Profit on the trade of $1780. 12) FSLR - Purchased at 69.93. No stop loss at present. Stock closed on Friday at 73.03. 13) SCCO - Purchased at 63.48. No stop loss at present. Stock closed on Friday at 62.27.
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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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