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Issue #756 
Mar 13, 2022 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Continuing Weakness being seen. Ukraine Invasion Having a Negative Impact!
DOW Friday closing price - 32964
It turned out to be a bad week for the bulls given that the DOW generated another (and important) sell signal, having broken the "last" established daily close support for the past 52 weeks at 33290 and the NASDAQ confirming the failure signal given the previous week with another red weekly close. In addition, the NAZ also gave a new sell signal, having broken the weekly close support at 13393. All indexes closed red and in the lower half of the weeks' trading range, suggesting further downside below last week's lows (DOW at 32578, SPX at 4157, NAZ at 13129 and RUT at 1951) will be seen this week. This does put the recent intraweek spike low supports at risk of being broken this week, especially in the NASDAQ, which closed only 236 points above its spike low support at 13065.
The bulls do have an almost insurmountable problem facing them, inasmuch as the war with Ukraine (and the sanctions being levied against Russia) are generating new and rapidly rising worldwide economic problems that, on a short-term basis, do not seem to have any resolution. With the NASDAQ having closed on Friday at 13301 and a daily close at 13248 (53 points below) causing a 20% drop from the all-time high (thus making it "official" that a bear market has begun), the bulls are facing a computer and algorithm crisis that would require fundamentally positive news (not likely to be available) to negate. Simply stated, the bulls have their backs against the wall and the "execution" now seems likely to occur.
There is a potential positive catalyst this week in the form of the Fed rate decision on Wednesday. It is fully expected that the Feds will raise interest rates by 25 basis points but just prior to the Russian invasion, many analysts were expecting a 50 point raise. This does mean that the lower raise might give the bulls some ammunition for a rally. This is not clear at this time, but it is a possibility (though somewhat slim).
As far as the charts are concerned, the bulls in the NASDAQ need to stay above 13065 this week and need to stay away from closing at (or below) 13248. There is no room in the index chart for further downside without damage being done. This means that the weakness seen on Friday needs to "go away" this coming week (unlikely to happen).
As far as the downside is concerned, if the 13065 level in the NASDAQ is broken by more than 100 points (below 12970), there is no support below until 12208 is reached and even then, that support is considered minor to perhaps decent at best. Below that, there is nothing until the 11000 level is reached.
The reality is that the market is under pressure from a lot of different sides, with inflation on one side, the war on another side, the pandemic on yet another side, the world economy on also yet another side, and the negativity of the charts on the last side. All of these sides bring negatives and there are few positives to the market currently. Evidently, the war is the main issue at this time and if that gets cleared up then the bulls will get some ammunition to mount a rally and prevent a breakdown of some consequence. Otherwise, it looks like the bulls will fail.
Then again and keying on the word "failure", at this time it is the Tech and small cap industries that are being targeted for a breakdown of trend as it is the NASDAQ and the RUT that are facing the chart abyss. The NASDAQ has fallen 19.8% and the RUT has fallen 18.8%. The DOW has only fallen 10.4% from the high, the SPX has only fallen 11.2% from the high and that means that even if the other two indexes generate a change of trend, the downside action is not likely to get into a panic-liquidation mode until the other indexes do the same. This clearly means that the market is presently a stock pickers market with some stocks (like commodities) being bought.
This coming week is quite pivotal as the Fed rate decision will be used by the traders to gauge how much the economy is going to be (or can be) supported by them. As such, much more will be known after Wednesday. Keep in mind that even if the two indexes at risk of generating a change of trend signal do breakdown, all signals have to be confirmed and therefore even if a negative signal is given on Monday or Tuesday, it could be negated on Wednesday.
The probabilities favor the bears but the picture is not very clear at this time.
OIL generated a negative reversal week, having gotten as high as 130.33 but then reversing to close red and in the lower half of the week's trading range, suggesting further downside below last week's low at 101.27 will be seen this week. On a positive note, the bears had the chance to make a statement with a close on Friday below 107.26 (the first and most pivotal of 4 weekly close breakout levels) but they failed even though Oil did trade below that level for most of the morning session. In the end though, the weekly close was at 109.20 and that prevented the pivotal failure signal from being given. On a slightly negative note though, Oil did generate a breakout the previous week, having closed at 115.68 (above the high weekly close at 113.93 that was made on April 2011), meaning that the probabilities now favor Oil being in a consolidation phase between 115.68 and 107.26 (based on weekly closes) for at least the next couple of weeks. On a daily closing basis, any close below 91.59 would mean the upside run is over and on the opposite side, any daily close above 123.70 would mean that the all-time intraweek high at 147.27 would be targeted. Probabilities slightly favor the bulls but only for some limited upside.
DOLLAR generated yet another green weekly close and closed near the high of the week, suggesting further upside above last week's high at 99.42 will be seen this week. Nonetheless, the Dollar now finds itself at the next "and highly pivotal" resistance level that is unlikely to be broken at this time. On a weekly closing basis, resistance is found between 99.11 and 99.26 and having closed on Friday at 99.12, the probabilities favor a negative reversal this coming week. On an intraweek basis, resistance is found between 99.69 and 99.81. The Fed rate decision is going to make some fundamental difference, given that a 50 point rate increase will further strengthen the Dollar but a 25 point increase is already totally factored into the price. Probabilities favor the bears this week for a red weekly close.
BITCOIN has so far seen an inside week with a red weekly close. I say "so far" because Bitcoin closes out the week tomorrow (Sunday) at 12:00 pm and therefore there is still some 31 hours of trading where things could change. At this time though, it is trading 300 points below the previous week's close and has been unable to go above or below last week's trading range. This action does suggest that the traders are awaiting further news before making any new decisions. Bitcoin is presently about 4000 points above weekly close support and about 3500 points below weekly close resistance, suggesting that at this time there is nothing of consequence to report or that something is about to happen. As such, I have no new comment at this time.
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Stock Analysis/Evaluation
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CHART Outlooks
I have no mentions for this week. For now, this market is not chart dependable in either direction or in any industry.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| This week the chart updates on held stocks will be brief and with only general suggestions as to whether to keep the stocks or look to liquidate them. AU is looking positive and due to inflation continuing, it should be considered a keeper. ENG generated failure signals this week and has lost the upside momentum it previously had. Nonetheless, this is a clean energy company and one with no debt and near book value. As such, it should be considered a keeper. CVE is on a breakout and is an oil company and for now it is still looking positive. As such, it should be considered a keeper. DVN is on a breakout and is an oil company and for now, it is still looking positive. As such, it should be considered a keeper. FSLR is a clean energy company that is the #1 in the industry and has found a bottom and is still considered oversold. As such, it should be considered a keeper. PLNHF has broken down and even though it is one of the Cannabis industry's most promising stocks, at present it has not shown any buying interest. There is no dependable support until the 1.50 level. As such, consideration can be given to liquidating the held positions. SCCO is a commodity company and due to inflation remaining high, can be considered as a keeper for the midterm. Nonetheless, the stock reached a resistance level at $77 that it was unable to break, meaning that a drop down to the $70 might be seen before a new attempt to go higher occurs. As a trader of the stock, consideration can be given to liquidating the positions and hopefully purchasing them back at a lower price. ZLAB is totally in control of the bears but is hugely oversold and at rock bottom prices. The upside is limited for the short term but some appreciation should be seen from here, and for the longer term, much more appreciation is expected. As such, it should be considered a keeper.
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1) SNDL - Averaged long at .905 (2 mentions). No stop loss at present. Stock closed on Friday at .4750. 2) CVE - Purchased at 16.28 and at 15.88. Averaged long at 16.08 (2 mentions). Stop loss at 15.40. Stock closed on Friday at 16.13. 3) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .021. 4) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .033. 5) ZLAB - Purchased at 32.40. Averaged long at 107.186. No stop loss at present. Stock closed on Friday at 29.78. 6) AU - Averaged long at 28.423 (3 mentions). No stop loss at present. Stock closed on Friday at 25.53. 7) NEM - Purchased at 72.97. No stop loss at present. Stock closed on Friday at 76.89. 8) ENG - Averaged long at 3.378 (5 mentions). No stop loss at present. Stock closed on Friday at 1.29. 9) DVN - Purchased at 60.25. Stop loss at 55.91. Stock closed on Friday at 58.64.. 10) FSLR - Averaged long at 69.99 (5 mentions). No stop loss at present. Stock closed on Friday at 75.39. 11) SCCO - Purchased at 75.69 and at 74.35. Averaged long at 75.02 (2 mentions). No stop loss at present. Stock closed on Friday at 74.07. 12) PLNHF - Purchased at 2.92. No stop loss at present. Stock closed on Friday at 2.235. 13) QQQ - Purchased at 320.27. Liquidated at 332.98. Profit on the trade of $1271 per 100 shares. 14) QQQ - Purchased at 335.02. Liquidated at 335.46. Loss on the trade of $44 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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