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Issue #795 
January 1, 2023 , 2022 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Xmas Rally did not occur. Bulls on defensive!
DOW Friday closing price - 33147
The year (2022) was a down year for the indexes across the board. The DOW dropped 8.8% in value, the SPX fell 19.5% in value, the NASDAQ fell 33% in value, and the RUT fell 22% in value. Nonetheless, the dichotomy between the DOW and the NASDAQ was the most telling thing about the year, given that it was the "speculative" tech sector that was hit the hardest and fell 24.2% more that the "meat and potatoes" index (the DOW). It is evident that between 2009 and 2020, everything was "honky dory" and feelings about "purchasing" ran rampant, but the pandemic brought that mentality to a stop and caused the speculative feelings to depart and the hard core of the market to emerge. It does suggest that 2023 will be more of the same. It is a welcome occurrence as it suggests that more "normal than crazy" actions will be seen this year.
With the exception of the RUT all indexes generated a negative reversal month, having gone above the previous month's close and closing red and near the lows of the month, suggesting further downside below last month's lows (DOW at 32573, SPX at 3764, NAZ at 10671, and RUT at 1722) will be seen this month. The negative reversal action does suggest that at the very least the lows for 2022 (seen in July) will be tested (DOW at 28715, SPX at 3491, NAZ at 10440, and RUT at 1641). Nonetheless, breaking those lows is not a given as there have been 2 other occasions (out of 3) in the last 20 years where the indexes closed red for the year and near the lows of the year, where follow through did not occur the following year. Nonetheless, in 2008 (when there was a recession occurring), follow through was seen, suggesting that whether a recession occurs or not is what will make the difference in 2023. It should be mentioned that the consensus is that a recession will occur this year. By the same token, it is a majority opinion but not shared by all economists.
It is likely though, that the dichotomy seen in 2022 will continue at the beginning of the year as the DOW chart strongly suggest that the index will continue to find fundamental buying support, especially given that it closed out the year 4422 points above the year's weekly closing low. That amount of selling interest is not likely to be found. On the other hand, the NASDAQ chart does suggest (almost as strongly) that the index will make a new low, given that it closed only 247 points from the year's weekly closing low and closed near the low of the year and fundamental selling interest remains.
Considering the chart differences between the indexes, the charts do give clear downside objectives that are likely to be reached as early as January. In the DOW, the 32272 level of intraweek support is a magnet right now and that is about 1000 points lower than Friday's close. In the SPX the 3636 level (203 points lower) is the target, though it does need to be mentioned that the 200-week MA is currently at 3668. In the NASDAQ, the 9718 level (on a daily or weekly closing basis) is the target (1221 points below). As you can see by these objectives, it would mean that neither the DOW or the SPX would break last year's low but the NAZ would.
Either way, the charts do suggest that the beginning of the year will be negative to the market. It does need to be mentioned though, that the ISM Index and JOBS report come out next week on Friday and the CPI the following Tuesday, meaning the traders may think differently if the reports are out of line (unlikely). There will no FOMC rate decision until February 1, suggesting these economic reports will not be much of a factor. As such, January should be a negative month.
OIL generated a new 3-week intraweek high and closed near the high of the week, suggesting further upside above last week's high at 81.17 will be seen this week. The bulls were able to prevent a new sell signal from occurring on the weekly chart, given that Oil closed above the minor-but-short-term-indicative support level at 79.29 even though most of the week it traded below that level. Oil did generate a red weekly close (the 6th out of the last 7 weeks) but it was only by $.12 cents and having closed near the high of the week, suggests that next week will be a green weekly close. Oil did give a small buy signal, having closed above the most recent high weekly close at 80.30 (closed at 80.47) and that suggests that at least for now, the downtrend has stopped. Nonetheless, Oil did generate a negative reversal year and a close near the low of the year, suggesting that at some point this year, it is likely to go below last year's low at 70.11. There are two levels of intraweek resistance above, at 83.33 and at 85.41. If the first level is broken, it suggests the bulls will stay above the lows of the year for at least the first quarter of 2023. If the second level is broken, it would open the door for last years' low to "not" be broken this year. The 85.41 level is pivotal for Oil at this time. As far as the downside is concerned, the 76.26 level is now intraweek support. I do believe the 83.33 level will be broken but not the 85.41, meaning that Oil will maintain a measure of short-term strength for the first quarter of 2023. A trading range between $76 and $85 is likely to be seen the first 3 months of the year.
DOLLAR generated a new 7-month intraweek low and closed on the low of the week, suggesting further downside below last week's low at 103.39 will be seen this week. It also needs to be mentioned that the Dollar closed in the lower half of the year's trading range, suggesting further downside below last year's low at 94.63 will be seen at some point this year. It also means that the year's high at 114.78 is now the top to this uptrend that started in July 2021. For time being (likely for the first quarter of 2023), intraweek support is likely to be found at 101.30 (101.67 on a weekly closing basis). To the upside, intraweek resistance is likely to be found between 104.67 and 105.79. As such, the chart suggests that a trading range between 101.60 and 105.00 will be seen for the next 3 months.
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Stock Analysis/Evaluation
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CHART Outlooks
I believe that the indexes will be heading lower to begin the New Year but only with selected stocks. I believe traders will key on shorting the type of stocks where big and fast profits can be made over a short period of time and maybe even hedge themselves by buying already depresessed small cap stocks, given that there is still quite a bit of uncertainty as to what is to happen with inflation and recession in 2023.
SHORTS
DOW Friday Closing Price - 50.39
DOW is a chemical company that has underperformed the indexes over the past 6 months and is likely to continue doing the same for now. It reports earnings on January 26th.
The DOW started trading in April 2019 and is showing an all-time high at 71.86 and an all-time low of 21.95. Having closed on Friday at 50.39, it is presently still trading in the upper half of that trading range. Between March 2020 and May 21, the stock went straight up with no corrections of any consequence. Nonetheless, upon getting up to 71.38, the stock saw selling come in and a drop down to 52.07 occurred. That correction was then followed by a new rally and the all-time high, which was actually only $.48 above the high seen in 2021. Since then, the stock has been heading lower and in June of this past year, it broke the 50.27 level of established support, meaning the uptrend was over.
For the past 6 months, the DOW has been trading mostly sideways between a low of 42.91 and a high of 56.43 but at no time has it been able to negate the break of support on the monthly chart that occurred when the stock broke down. Like most stocks and indexes, the stock did generate a rally from September to December from $43 to $53 but the bulls were unable to negate the 53.07 low weekly close from November 2021, and from which the drop down to 42.91 occurred. This means that the bears remain in overall control.
With the index market likely heading lower in January and the 42.91 low not showing any kind of a retest of it having occurred, it is highly likely that such a retest is the least expected at this time. By the same token, the inability of the bulls to do anything concrete during the recent rally, the probabilities are high that a new leg down will be seen, meaning a break of 42.91. It is important to note that below 42.91 there is some established intraweek support at 40.44, which was the first low seen after the stock started trading. Nonetheless, below 40.44 there is no support below until the all-time low at 21.95 is reached, meaning that if the $40 level is broken, a drop down to below $30 could occur. For now though, 40.44 is the objective of this mention.
As far as resistance is concerned, the DOW shows some resistance at the previous week's high at 51.37, which in reality is now an established resistance given that it closed near that level the previous week but last week it failed to follow through (was an inside week) and the stock closed red and in the lower half of the week's trading range, suggesting further downside below last week's low at 48.76 will be seen this week. This was a sign of weakness and therefore, a stop loss can be placed at 51.47 with a fair degree of confidence. Nonetheless, on a daily and weekly closing basis, there is decent to perhaps even strong resistance between 52.90 and 53.07, meaning that the stop loss at 51.47 can be mental. Either way, the chart suggests the stock is heading lower and a good profit can be made shorting the stock around Friday's close.
A short position in the DOW at Friday's close at 50.39 and using a 51.47 stop loss and having a 40.44 objective offers a 9-1 risk/reward ratio. My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest.
TXT Friday Closing Price - 70.80
TXT operates in the aircraft, defense, industrial, and finance businesses. It is an established company that has been around since 1985. One thing about the stock that needs to be mentioned right from the start and that is that it is a volatile stock that has shown a high tendency to trade up and down in big waves, In 1999, stock went from $46 to $13 in 3 years, it then went up to $74 over the next 4 years, it then dropped down to 3.57 over the next 2 years, it then rallied to $73 over the next 7 years, it then dropped down to $20 over the next 2 years, and 2 years later is made an all-time high at 79.45. The stock is presently trading at $70 but just last month, it generated a negative reversal month from a intramonth high at 75.97 and closed out the month generating a failure signal of quite a bit of consequence when it closed below the 2 previous all-time high monthly closes at 71.30 and at 71.47, which were both broken in July 2021, The close in November was at 71.38 and the close last week was at 70.80. This type of chart action suggests that the stock is heading back down and given that its moves down in the past have always been somewhat dramatic, it could mean that a big drop down has begun.
TXT is in the same situation as a couple of the indexes and many stocks are at, inasmuch as the July lows (at 58.26 on a weekly closing basis) do not yet show any retest of them. In addition, there is a dearth of support between here and $60, meaning that if the market is heading lower in January, this stock has a clear downside objective of getting down to at least the $60-$62 level.
TXT did close in the upper half of the week's trading range, suggesting further upside above last week's high at 71.40 will be seen this week. The stock shows clearly defined intraweek resistance 72.05 and 72.63 that should not be broken if and when the market is heading lower in January. As such, the stop loss will be placed at 72.75. Desired entry point will be anywhere between 71.40 and 72.05, meaning that the risk factor is at most $135 per 100 shares. I will be conservative with the downside objective being 61.85, meaning that the risk/reward ratio on this trade is about 7-1. Nonetheless and in looking at the overall chart and considering its volatile history, it is possible the stock could get down as low as 54.82.
My rating on the trade is a 3.5 (on a scale of 1-5 with 5 being the highest).
PURCHASES
As stated on the message board and below in the Held Stocks comments section, I am looking to purchase additional shares of PLNHF. See below or on the message board for detailed information.
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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 12/1 Profit of $6,171 using 100 shares per mention (after commissions & losses) Closed out profitable trades for December per 100 shares per mention (after commission)
SHOP (short) $701
Closed positions with increase in equity above last months close minus commissions.
AAPL (short) $3284 Total Profit for December, per 100 shares and after commissions $7,284 Closed out losing trades for December per 100 shares of each mention (including commission)
NONE
Closed positions with decrease in equity below last months close plus commissions. NONE Total Loss for November, per 100 shares, including commissions $0 Open positions in profit per 100 shares per mention as of 1/1
NONE
Open positions with increase in equity above last months close.
VNET (long) $102
Total $102 Open positions in loss per 100 shares per mention as of 12/1
NONE
Open positions with decrease in equity below last months close.
SNDL (long) $124 Total $7,337ont> Status of trades for month of December per 100 shares on each mention after losses subtracted.
loss of $53
Status of account/portfolio for 2022, as of 12/31
Profit of $6,126 per 100 shares.
Ending Results for 2022
Yearly totals:
Total amount of trades for the year = 107
CAT generated a negative reversal week, having made a new 19-month intraweek high and then closing red and in the lower half of the week's trading range, suggesting a slightly higher probability of going below last week's low at 237.70 than above last week's high at 245.05. Nonetheless and in spite of the negative reversal, the breakout above the bullish flag formation (237.26 on a daily closing basis and 236.49 on a weekly closing basis) was confirmed as the stock closed on Friday at 239.56, meaning the bulls are still in short-term control. The all-time intraweek high at 246.69 (244.02 on a weekly closing basis) was not broken, meaning that the bulls still have a meaningful obstacle to overcome for the bull flag formation objective of $304 to be a viable goal. Nonetheless, the bulls find themselves in a "swim or sink" scenario as any failure of the flag formation (confirmed daily close below 237.26, as well as a weekly close below 236.49) will have the opposite reaction to the breakout and give the bears new ammunition and the bulls a strong reason to take profits. As such, the parameters of the chart are clearly defined for this coming week, given that one of the other are likely to be the only choices available. Any weekly close below 227.29 will give a downside objective of $197-$200 and open the door for a possible drop as low as $180. Any weekly close above 244.02 will open the door for a rally to the $300 level. ENG generated a new 43-month low weekly close and closed on the low of the week/month, suggesting further downside below last week's/month's low at .75 will be seen this week/month. Nonetheless, the stock finds itself in a weekly close support area between .78 and .82 that has proven to be strong support area on both of those charts since 2017, meaning that the bears need a fundamental negative to break it convincingly. The fundamental outlook for the company "at these prices" do not support further downside as the company is already supported by existing contracts as well as continuing to bid on new ones. Nonetheless, if the .75 level of intraweek support does break, there is no support below until the .68 level is reached. Pivotal intraweek resistance is found at .87. LI generated a positive 4-week low and then closing green and on the high of the week, suggesting further upside above last week's high at 20.45 will be seen this week. The green weekly close also means that the previous week's close at 18.77 has now become a successful retest of the high weekly close resistance at 18.97, which when broken gave a signal that the downtrend was over. On a daily closing basis, there is short-term pivotal resistance at 20.80 and then nothing until 24.10. A break above 24.10 would suggest a rally up to the 200-day MA, currently at 25.72, would likely occur. It is important to note that TSLA gave a sign this past week that the downtrend might be over and that the electric car industry might be beginning a recovery period, which would be of help to LI. On a daily closing basis, the 18.43 level is now pivotal support. NEM has traded sideways between 45.57 and 48.67 for the past 5 weeks. With the stock closing on Friday at 47.20 and the recent short-term uptrend that begun in the first week of November and that was confirmed 2-week later when the stock closed above the established resistance at 44.80 still in place, the bulls remain with the short-term edge. With the Gold chart showing a bullish bias at this time, the probabilities of further upside are high. Any daily close above 48.67 would give an objective of 53.89, which is where the 200-week MA is currently at. Any daily close below 44.80 would be a bearish statement. PLNHF made a new 51-month weekly closing low on Friday and closed on the low of the week, suggesting further downside below last week's low at .603 will be seen this week. There has been no negative news come out (actually the news has been positive) but the trader sentiment has been negative due to failure signals given 6 weeks ago when the stock broke out to the upside and rallied to 1.70. The repeated failure signals have brought on a wave of selling that has likely caused a drop down to this extreme low price. The company has no debt and is trading near book value, strongly suggesting that the stock is likely to find buying interest at the all-time low weekly close at .576. As such, this is a stock that can be considered a purchase at these levels. The stock has been red for the past 12 trading days and has dropped 41% in value since it broke the established support at 1.03. Once again, there has been no negative news, meaning the drop has all been chart oriented. Purchases below .60 and using a stop loss at .46 and having "at the very least" a rally back up to 1.03, offers a 3-1 risk/reward ratio with the probability rating likely to be 4.75 (on a scale of 1-5 with 5 being the highest). When a bottom is found, there is absolutely no resistance above until 1.03 is reached, meaning that it is possible that such a rally could occur in a 1-2 week period. The chart suggests that a rally back up to the 1.40 level could occur in the first quarter of 2023. VET bulls have been able to prevent the stock from breaking the pivotal intraweek support at 16.60 during the past 4 weeks, having had weekly lows at 17.04. 16.92, 16.79 and last week at 17.01. The stock did close slightly in the upper half of the week's trading range, suggesting that perhaps the high seen the last 3 weeks at 18.28 (which was last week's high) will be broken this week and some recovery rally is to occur. Above 18.28, there is nothing until 20.25 is reached and if that is broken, there is open space until 21.55, which is where the 200-day MA is located. Nonetheless and looking at last month's chart, the high for the month is 20.25 and unless Oil gets above 85.45, the chart suggests that this month's trading range could mimic last months and be something like 16.60 to 20.00. What I am saying is that if the stock gets back up near the $20 level, consideration should be given to liquidating the positions and taking the small loss. The downside objective of $13 remains viable for some time in the next 3-6 months. Then again, if Oil gets above 85.45 (not a high possibility), this outlook would change. VNET generated another green weekly close (the 5th in a row) and did close near the high of the wee, suggesting further upside above last week's high at 5.95 will be seen this week. Nonetheless, the reality is that the bulls have not yet been able to do enough to generate a tangible breakout as the 6.43 intraweek level needs to get broken for that to happen. The reality is that the chart is of no help at this time as everything depends on whether the merger (at a price of $8) occurs or not. Until that gets decided, the same type of action (sideways) as seen since May is likely to continue. As such, the decision to continue holding the positions is not chart oriented but fundamentally oriented. If you do not have a desire to wait for the resolution of the merger and want to get out with a small profit, this coming week is likely to give you the best opportunity at the best price (based on what has happened the last 7 months). Presently, support remains at 4.50. ZLAB generated a totally uneventful inside week but did close in the upper half of the week's trading range, suggesting further upside above last week's high at 31.78 will be seen this week. It is now clearly evident that the $30 level (on a weekly closing basis) is a pivotal level for the stock given that since May of last year, this level (give or take a $1 or each side) has been support and resistance 5 times during this period of time. This means that to break this level convincingly, a fundamental negative needs to occur. At this time and with the recovery seen in the Chinese market, the probabilities favor the bulls and a recovery rally occurring. The 200-day MA, currently at 36.88, has been consistent resistance since August 2021. Nonetheless, that line has now been seen and tested 4 times since September of this year and given the action seen this past week, it is likely to be the objective to be reached over the next week or two. If broken and a daily close above 38.56 occurs, it will be seen as a breakout of consequence, which in turn would offer a rally to at least the $45-$47 level. Pivotal intraweek support is found at 28.19.
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1) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed on Friday at 2.09. 2) SRUTF - Averaged long at .0738 (3 mentions). No stop loss at moment. Stock closed on Friday at .004. . 3) BTZI - Averaged long at .0935 (4 mentions). No stop loss at present. Stock closed on Friday at .004. . 4) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 30.70. 5) NEM - Averaged long at 61.492 (5 mentions). No stop loss at present. Stock closed on Friday at 47.20. 6) ENG - Averaged long at 3.378 (5 mentions). No stop loss at present. Stock closed on Friday at .77. 7) VNET - Averaged long at 5.32 (2 mentions). No stop loss at present. Stock closed on Friday at 5.67. 8) AAPL Covered shorts at 131.61. Averaged short at 147.90. Profit on the trade of $3268 per 100 shares (2 mentions). 9) CAT - Averaged short at 211.9675 (4 mentions). No stop loss at present. Stock closed on Friday at 239.56. 10) LI - Averaged long at 31.942 (4 mentions. No stop loss at present. Stock closed on Friday at 20.40. 11) QQQ - Covered shorts at 259.56. Shorted at 282.51. Profit on the trade of $2295 per 100 shares. 12) VET - Purchased at 20.38. No Stop loss at present. Stock closed on Friday at 17.70. 13) SHOP - Covered shorts at 37.96. Shorted at 44.97. Profit on the trade of $701 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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