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Issue #842 
December 31, 2023 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bulls enjoy Xmas but New Year ahead and that could be an end to the feast.
DOW Friday Closing Price - 37689 For the 2nd week in a row, the 3 main indexes continued higher but the gains were once again minimal, with all 3 main indexes gaining less than 1% in value. The RUT did generate a negative reversal week with a new 20-month intraweek high but then closing with a red weekly close but then only by 3 points and still above the weekly close resistance breakout at 2021 (meaning the breakout was confirmed). Nonetheless and with the exception of the DOW, the indexes closed in the lower half of the week's trading range, suggesting that the first course of business for the year will be to the downside and below last week's lows. Evidently and with it being the last week of the year and the volume and participation being minimal, it is difficult to put much importance to the action seen. On the other side of the coin though, the 3 main indexes have now generated 8 weeks in a row of green weekly closes and appreciation in value of anywhere from 14.5% (SPX) to 17.4% (NAZ). Simply stated, the indexes are overbought and due for a corrective phase. In addition, November and December are by nature seasonal up months, while January has been a "flip of a coin" over the past 30 years, depending on the fundamental outlook for the market. It does need to be mentioned that much of the rally was driven by expectations of the Fed lowering interest rates this year, and doing so a total of 7 times, and the probabilities do not favor it being more than 7 times but easily could be less. This means that the probabilities favor the bulls having overdone the rally. The year will start with 2 important economic reports, with the ISM index report on Wednesday and the JOBS report on Friday. The former is supposed to come in slightly better than last month (expectations are 47.1 vs last month at 46.7) and the latter is supposed to come in worse than last month (166k vs last month at 199k). Neither of these numbers are likely to be catalytic if they come in as expected but in both cases, if they come in lower than expected, it will be a negative to the market. The week after on the 11th of January, the Inflation report comes out, as well as the FOMC minutes from the last meeting. On Friday the 12th, the earnings reports come out with the financial companies reporting first. They are all expected to come in lower than last year. Having said all of that, these reports will give the traders tangible information as to what can be expected to be seen this year. From what I have been generally been hearing from the analysts on Bloomberg TV, is that the economy is likely to slow down in 2024 and it that is the case, it is going to be very difficult to maintain the levels achieved during the past 2 months. As far as the charts are concerned, the SPX remains the key index. The DOW and the NASDAQ made new all-time highs over the past 2 weeks but not the SPX and given that it is the index that is seen as the pillar/anchor of the market, it does suggest that the bulls are unable to make a new all-time high in the first 2 weeks of 2024, the bears will have control of the market to begin the year and probably for at least the next 3-6 months. The SPX did make a new all-time high weekly and monthly high on Friday, having closed at 4769 and the previous high (in both cases) was 4766. Nonetheless, a 3 point break is not indicative and especially when no new all-time intraweek and daily closing highs were made. Such a scenario could end up being a very indicative double top, which would give the bears some powerful ammunition for months to come. The all-time intraweek high in the SPX is at 4818 and the all-time daily closing high is at 4796. If neither of those are broken by Friday's close, the bears will jump in and sell. The bulls tried repeatedly to accomplish that feat this week but the best they could do was a 4793 intraweek high and a 4783 daily closing high. To the downside, the SPX shows indicative and likely pivotal intraweek and daily close support between 4698 and 4699. If those get broken, there is open air below to 4588. As such, this week will be all about 4697 and 4818. Whichever gets broken, will likely paint the picture for at least the next 6 months, if not for the full year. At this time, the probabilities do favor the bears, both fundamentally and chart-wise.
OIL generated a negative reversal week, having made a new 4-week intraweek high and then closing red and on the low of the week, suggesting further downside below last week's low at 71.25 will be seen this week. This negative reversal week does put the bulls in jeopardy of the downtrend continuing. By the same token, it could end up being the required/needed retest of the 67.72 low seen the 2nd week of December. There is some intraweek support at the $70 demilitarized zone (69.70-70.30) that should hold up "if" this is to be a retest of the low. A drop below 69.70 would put the bulls at risk of Oil continuing lower to the 67.72 level and even perhaps lower. At this time, neither scenario has a high probability of occurring but things are likely to be clearer by the end of the week. To the upside, there is once again resistance at 74.73 and now pivotal resistance at 75.38. The negative seen is that the bulls did break the 74.73 resistance 2 weeks ago and that should have given them ammunition for a rally up to the $77/$78 level. Nonetheless, the bulls were unable to make that happen, which in turn suggests that the fundamental picture does not support the bulls at this time.
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Stock Analysis/Evaluation
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CHART Outlooks
MENTIONS
I do believe that the probabilities favor the downside. Nonetheless, no sell signals or even indications have yet been given, meaning the probability numbers on the mentions will generally be low.
TOL Friday Closing price - 102.79
TOL is a stock I shorted in September at the $80 level and covered (with a profit) in October at the $70 level. Since then, the stock has appreciated over $35 in value (up over 30%). The company is a builder in the Real Estate market and as such, is likely to be sensitive to what the stock market does.
Having said that, TOL made a new all-time high at 105.91 3 weeks ago and that high may have been tested successfully last week, as the stock went above the previous week's high at 104.48 (got up to 104.55) and then turned around to close red and near the low of the week suggesting further downside below last week's low at 102.52 will be seen this week. If that occurs, the high will have been tested successfully and the traders will likely be looking to retest the previous all-time high at 83.83. No retest of that level has yet occurred. In fact, the stock has gone straight up since the $70 low was made and no support levels have been built, meaning it is highly sensitive to any weakness occurring.
It is expected that the index market (and probably TOL as well) will rally on Tuesday, meaning that a decent entry point will be seen where the stock can be shorted and that offers a viable risk/reward ratio. Such a desired entry point will be anything above the 103,20 level. The downside objective is clearly defined at the previous all-time high at 83.83.
As such, a short on TOL above 103.20 and using a stop loss at 106.35 and having an 83.83 objective offers a 7-1 risk/reward ratio. My rating on the trade is 2.75 (on a scale of 1-5 with 5 being the highest).
DD Friday Closing Price - 76.93
DD is a DOW stock that has not been able to accomplish anything like the index has accomplished, meaning that it is likely to be one of the first stocks that the bears will climb aboard on when the index falters. The best the stock has been able to accomplish is a 16-week high, which was made last week. Nonetheless, there is established and decent to strong resistance between 78.06 and 78.98 that goes all the way back to February 2022 (22 months) and that is made up of a total 4 different highs made during that period of time.
Since November 2022, DD has traded (and closed) above the 200-week MA (currently at 67.77) every week except 2. Then again, during that same period of time, the line has been visited a total of 5 occasions, meaning that if the stock is to head lower, that line is the prefect and clear objective.
DD closed near the high of the week last week and further upside above last week's high at 77.41 is expected to be seen this week, meaning that the established resistance area is likely to be seen one more time. This offers a good opportunity to short the stock, giving an attractive risk/reward ratio as well as decent probability rating.
Shorting DD anywhere close to the $78 level and using a stop loss at 79.25 and having a 67.77 objective will offer an 8-1 risk/reward ratio. My probability rating on the trade is 3.50 (on a scale of 1-5 with 5 being the highest).
MMM Friday Closing High - 109.32
MMM is another DOW stock that did not gain or participate in the rally like the index did. The stock did make a new 21-week high last week but is still facing an established intraweek resistance level of note at 113.14, which is the 10-month spike high (made in July 2023) and from which the stock went down to make a new 11-year low at 85.35. The very fact that the stock was making a new 11-year low at 85.35, which was a drop of 61.2% from its all-time high, at the same time that the index was making a new 7-month low and only 12.4% from its previous all-time high is a strong sign that there are some innate and fundamentally negative issues with the company itself, which would make the traders choose to short this stock over some of the others in the index. In addition and of importance, the 85.35 low has not yet had a retest of it and having shown so much weakness over the past 3 years, a retest of that low is almost a must situation.
MMM did close near the high of the week, suggesting further upside above last week's high at 110.18 will be seen this week. In addition, the stock did generate a break of a lower but also established intraweek high at 108.80, meaning the bulls will start the week with some short-term strength. Last but not least, Wells Fargo did upgrade their upside objective to $112, meaning that level has a good chance of being reached this week. Having said that, the stock did close on Friday near an area of weekly and monthly closing resistance of consequence between 110.50 and 111.88, which should not be broken without either good fundamental news on the company, or the indexes continuing higher.
As such, the probabilities do favor MMM heading back down to test the 85.35 low sometime over the next 4-8 weeks. On a weekly closing basis, there is minor to decent support between 96.94 and 97.29. On a daily closing basis, that support is at 93.96. The 200-day MA is currently at 100.24 and that line will certainly be a magnet if the stock and index market start to falter. Whether the line holds up or not, is not something clear right now but that is a clear target. To the upside, it is evident that the 113.14 level is resistance that should not be broken if the stock is to correct. As such, the stop loss will be at 113.35.
Sales of MMM around the 112.00 level and using a stop loss at 113.35 and having a minimum objective of 100.24, offers an 8-1 risk/reward ratio. If the stock heads down to the established support mentioned above, the risk/reward ratio could be as high as 13-1. My rating on the trade is 2.75 (on a scale of 1-5 with 5 being the highest). The rating is on the low side due to the fact that this is a big and established company that has taken a big fall in price and could outperform the index. Having said that, the risk/reward ratio is too good to pass up.
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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 2023, as of 12/1 Profit of $10,168 using 100 shares per mention (after commissions & losses) Closed out profitable trades for December per 100 shares per mention (after commission)
NONE
Closed positions with increase in equity above last months close minus commissions.
MRNA (long)$3,434 Total Profit for December, per 100 shares and after commissions $3,576 Closed out losing trades for December per 100 shares of each mention (including commission)
XOM (long) $32
Closed positions with decrease in equity below last months close plus commissions. NONE Total Loss for December, per 100 shares, including commissions $32 Open positions in profit per 100 shares per mention as of 1/1
ZLAB (long) $53
Open positions with increase in equity above last months close.
VWDRY (long) $399 Total $1,759 Open positions in loss per 100 shares per mention as of 1/1
NONE
Open positions with decrease in equity below last months close.
CPRT (long) $120 Total $162 Status of trades for month of December per 100 shares on each mention after losses subtracted.
Profit of $5,141
Status of account/portfolio for 2023, as of 12/31
Profit of $20,877 per 100 shares.
Ending Results for 2023
Yearly totals:
Total amount of months showing profit = 8
BORR got up to the 11-week established intraweek resistance at 7.61 with a high this past week at 7.61. Nonetheless, the bulls were unable to break that level and in turn, the stock closed near the low of the week, suggesting further downside below last week's low at 7.34 will be seen this week. If that does happen, it will suggest the recent December rally has ended and a retest of the 11-month low at 5.70 is to occur. Having said that and realizing that the break that occurred the first week of December, should have caused further downside to occur but did not happen, it does seem that the stock will continue to trade sideways and get into a trading range for the next 4-6 weeks, between 6.40 and 7.40. Overall, the bears do have a slight edge but then only if Oil breaks down (unlikely but possible). Evidently, the stop loss 7.66 is now a must and should be a hard stop and not a mental one. In looking at the daily chart, the 7.13/7.15 level is pivotal. It should be seen this week but a break of that level "this week" is likely to depend on what Oil and the overall index market do.
CPRT generated a highly uneventful inside week with a mini trading range of $.49 cents (usually has a $2-$3 trading range). It did end up on the higher side of the week's trading range but that is meaningless this week. One thing that does need to be mentioned is that the bears have tried over the past 14 trading days to close the gap down at 47.39 but the lowest they could get to was 47.89. That gap should have been closed as there was no news to support it, but the fact that the bears have failed and that the stock closed on the high of the day on Friday, does suggest that on Tuesday there is a decent possibility of another gap occurring (which would be seen as a runaway gap) and that would give the bulls ammunition to try to continue the breakout and make another new all-time high. On the negative side, if the indexes do head lower by the end of the week and the bulls fail to rally, the opposite could happen. That 47.89 low is now seen as a potential pivotal support level.
ENG Nothing new to report here but the stock did close on the low of the week and further downside below 1.66 would offer a 1.56 objective.
GCI failed to follow through to the upside after last week's close on the high of the week and did generate a red week with a close on the low of the week, suggesting further downside below last week's low at 2.29 will be seen this week. On the other side of the coin, the stock got down to the 200-day MA, currently at 2.31 (closed at 2.30) and a retest of that line was expected. The stock is showing a supported-by-news breakaway/runaway gap formation with the runaway gap at 2.26, meaning that if closed it could weaken the chart. As such, Tuesday's action could be indicative. There is quite a bit of support around the 2.25-2.30 level, suggesting the bears will be unsuccessful and that the stock will continue to rally up to the objective of the mention at 3.25. Pivotal resistance for that to happen is the high made the previous week at 2.62.
INTC received positive news on the 26th and made a new 20-mont intraweek and weekly closing high. The stock closed in the upper half of the week's trading range, suggesting further upside above last week's high at 51.28 will be seen this week. There is no resistance above until the 52.51 level is reached (51.83 on a weekly closing basis). The breakout level between 44.28 and 45.05 is highly likely to be retested before the stock can get above 52.51, meaning that if the stock gets up to (or close to) the 51.83 level, consideration should be given to taking profits and re-buying around the $45 level a few weeks from now. The chart does suggest that ultimately, the stock is likely to get up to at least $55 with potential for even getting up as high as $63, sometime in the next 6-12 months. Argus did raise its objective for the stock up to the $60 level.
LXRX generated a new 15-week 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 1.64 will be seen this week. The bulls were able to break a very pivotal intraweek resistance at 1.51 and that is a short-term bull statement. The upside objective of this breakout is the 1.90 level, which is where the 200-day MA is currently at, as well as another intraweek resistance area at 1.93 (minor overall). This breakout also generated a failure to follow through signal against the bears, given that the stock had a major weekly close support level at 1.46 (from June 2022), which when broken did cause the stock to make the new all-time low at .92. The overall upside objective of this breakout is likely to be the 2.80-2.90 level, to be reached sometime over the next 6 months. The 1.46 level on a weekly closing basis (1.31 on a daily closing basis), is now important and indicative support.
PLNH generated a new 2-month weekly closing low and closed near the low of the week, suggesting further downside below last week's low at .614 will be seen this week. There is well-established daily and weekly closing support at .60 that should hold up. Having said that, the bulls have been on the defensive in spite of the small cap industry rallying and that suggests that the bulls do need some form of good news to turn it around. No news of any kind (good or bad) is expected anytime soon. As such, it is likely that the stock will continue to trade between .60 and .72 for the near future. Rallies back up near the .72 level can be considered for liquidation with a small loss, with the money being put to use somewhere else until the Cannabis industry starts to move higher.
VWDRY made a new 19-month intraweek and weekly closing high and closed near the high of the week, suggesting further upside above 10.62 will be seen this week. The stock has now moved 41.4% in value over the past 9 weeks and does have open air above for an additional appreciation of 13% more (up to the $12 level) before any new chart selling interest comes in. Having said that, the bulls need to generate another close above 10.36 on Tuesday and keep the stock above that level for the rest of the week, to prevent a failure signal being given. Having said all of that, the stock will run into daily close resistance starting at 11.28 and going up to 11.65, which at this time does not seem to be breakable, at least not before retesting the breakout level. This does mean that the on a daily closing basis, the trading range for January is likely to be between 10.36 and 11.65. On an intraweek basis, it might be between 10.30 and 12.00.
ZLAB generated a positive reversal week, having made a new 8-week intraweek low but then closing green and near the high of the week, suggesting further upside above last week's high at 27.29 will be seen this week. The green close does confirm that the retest of the important and established weekly close support at 25.30 was successful, having closed at 25.30 the previous week. The green close also continues to establish successfully the rounded bottom that has been in the building stage for the past 22 months. In fact, it can be said that the bottom is now fully built and retested completely. To confirm that scenario, a weekly close above 29.99 would be needed. If that happens, the formation would give an upside objective of at least the $45 level. In order for that to happen, there are still 3 daily close resistance levels that need to be broken. The first one is at 28.64, the second one is at 30.01 and the third and highly pivotal one is at 30.54. The 200-day MA, currently at 28.81, is also an obstacle the bulls face. The is now daily close support at 26.40 that should hold up. Pivotal support is now found at 25.30. I do see the stock getting up to the MA line this week.
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1) ZLAB - Purchased at 26.80. Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 27.33. 2) ENG - Averaged long at 18.30. No stop loss at present. Stock closed on Friday at 1.69. 3) VWDRY - Averaged long at 8.67 (3 mentions). Stop loss now at 9.26. Stock closed on Friday at 10.49. 4) LXRX - Averaged long at 1.495 (2 mentions). No stop loss at present. Stock closed on Friday at 1.53. 5) GCI - Purchased at 1.93. Stop loss at 1.60. Stock closed on Friday at 2.30. 6) PLNH - Averaged long at 1.526 (3 mentions). No stop loss at present. Stock closed on Friday at .643. 8) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed on Friday at 1.63. 9) BORR - Shorted at 1.37. Stop loss at 1.66. Stock closed on Friday at 7.36. 10) CPRT - Purchased at 48.68. No stop loss at present. Stock closed on Friday at 49.00. 11) INTC - Averaged long at 38.78 (2 mentions). Stop loss now at 37.97. Stock closed on Friday at 50.25.
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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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