 |
 |
 |
 |
 |
 |
Issue #815 
June 4, 2023 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
|
| Debt Ceiling Resolved. Market Rally in Effect.
DOW Friday closing price - 33762
The SPX and the NASDAQ continued the uptrend that started in October 2022, having made a new 14-month high and a new 10-month high (respectively). The RUT made a new 3-month high but the DOW was not even able to get above last month's high. The dichotomy between the indexes continued in May but it must be noted that on Friday (June 2nd), after the Jobs report came out, it was the DOW leading the way with a 2.1% rally on, while the NASDAQ only went up .72%
All indexes did close on the highs of the week, suggesting further upside above last week's highs (DOW at 33805, SPX at 4290, NAZ at 14595, and RUT at 1831) will be seen this week.
It does need to be mentioned that May was supposed to be a seasonal up month, but the only indexes that actually went up were the NASDQ, which rallied 10.8% and the SPX that went up a measly .3%. The DOW dropped 4.1% and the RUT dropped 1.1%. Generally speaking though, and taking the Tech sector out of the picture, May was not a truly up month. On the other side of the coin, June is usually a seasonal down month, though not usually a big down month as seasonally it has shown a decline of .5%. Nonetheless and for the past 6 months, it has been thought that a recession would be seen this year and that it would begin in June. Keeping that in mind and seeing that May was nowhere near as good an up month as in the past, the probabilities do favor June being an even stronger down month than the average.
As far as the chart's are concerned, all the indexes have now gone above last month's high and that suggests that if June is to be a down month, it will be a negative reversal month. The Jobs and ISM Index reports have now come out and they were better than expected and that means that the inflation report (on Tuesday 6/13) and the FOMC rate decision the following day are going to be pivotal. Up until last week, the probabilities favored the Fed not raising rates in June. Nonetheless and with the reports that came out this week, that mindset is changing. If the Fed does continue to raise rates in June, it will be a negative to the market and likely cause the negative reversal month to occur.
The SPX did close on Friday at a short-term pivotal weekly close resistance at 4280 (closed at 4282). On an intraweek basis, resistance is at 4325. This does suggest that this coming Friday, the index will close red, given that confirmation of a break of that resistance would offer an upside objective 4537. As such and for the bears, it behooves them to generate enough selling at the end of the week to cause that to happen. The NASDAQ is also close to a pivotal level of weekly close resistance at 14861 (300 points higher than Friday's close). Nonetheless and looking at the daily chart, there is resistance at 14549 and with the index having closed on Friday at 14546, it does suggest that the possibilities are decent that Monday will be a red close day and that no further upside (on a daily closing basis) will be seen. It is important to note that the DOW started outperforming the other indexes on Friday and that is likely to continue this week, starting on Monday. There is no resistance above on the chart until the 34098 level is reached. The index closed on Friday at 33762, meaning there is some room to the upside compared to the other indexes. It does suggest that the dichotomy in favor of the DOW could continue as it was seen on Friday.
Bottom line is that the indexes are facing a couple of important weeks ahead that will likely define what is to happen in June. It could start happening this week.
OIL made a new 4-week low but then turned around to close near the high of the week, suggesting further upside above last week's high at 73.55 will be seen this week. If that does occur, last week's low at 67.06 will become the required/needed retest of the 21-month low at 63.64. Such action would mean that the decent support level built over the past 24 months (between $62 and $64) has once again been found to be a bottom to all the short-term downtrends (3) seen over that period of time. If Oil gets above 74.73, it will have open air up to the 80.94 level. If all of this occurs, the $70 level will become the new support base. The probabilities support this scenario.
DOLLAR generated a negative reversal week, having made a new 14-week high but then closing red. The Dollar closed in the middle of the week's trading range, suggesting equal probabilities of going above last week's high at 104.70, as going below last week's low at 103.38. One thing that does need to be mentioned is that if last week's low is broken this week, it will give the bears some "extra" ammunition, given that the Dollar had open air to 105.00 but the bulls were unable to take advantage of it. The Dollar did generate a positive reversal day on Friday and did close on the high of the day, suggesting the first course of action for the week will be to the upside and above Friday's high at 104.09. If that does occur (likely), a rally up to 104.42 will likely be seen and it is at that level and on that day the level is reached, where some decisions might be made. It is evident though, that the traders are likely to wait to see what the Fed does the following week before making "any" decisions, suggesting this week could be an inside week. A rally above 104.70 though, will likely mean 105.00 will be seen. A drop below 103.38 would offer a 102.59 objective.
|
Stock Analysis/Evaluation
|
CHART Outlooks
Now that the debt ceiling issue has been resolved and a rally likely to be seen at the beginning of the week, as well as the seasonal tendency of the market to go down in June, it seems like a good time to consider some short positions.
SALES
TOL - Friday Closing Price - 71.35
TOL is a finance company for commercial buildings and has been trading for over 36 years, meaning it is established and chart worthy. *It is a stock that has been in a long term for most of its life. Nonetheless and with the present fundamental situation that suggests that not only the long term uptrend of the market is over for now but that we are about to enter into some form of recession, this recent uptrend is likely to fail to make a new all-time high above 75.61. In fact, this is a company that is covered and rated by the big firms and just last week after the better than expected earnings report that caused the late week rally to occur, Goldman Sachs maintained it's sell rating with a $57 price target. Even those companies (such as Raymond James) that increased their price targets, all were targets that were below the established all-time high. This suggests this sell mention has a high degree of probability of being successful, if and when the desired entry point is reached.
TOL has moved up 20.5% over the past 8 weeks and has done it with the past 5 weeks being all green and with each low being higher than the previous week. The stock is now close to an intraweek resistance level of consequence at 72.75, which if broken would likely mean the all-time high at 75.61 would at least be tested (if not broken as well). With the index market being in the same scenario, this is a stock that should be shorted this week, given that the risk/reward ratio is too good to pass up and the fundamental scenario not supportive of new all-time highs being made. In addition, it is a stock with no close-by support, making it risky for new buying to come in.
TOL did generate a failure signal against the bears on Friday and also clearly confirmed the break of an important weekly close resistance area at 67.65, which did occur the previous week. Those factors are a negative to the short position and do lower the probability rating on the trade. Nonetheless and given that the stock did report better than expected earnings the week before and the DOW did have a big week this past week, the failure signal and break of resistance is not as indicative as it might be under other circumstances. This is especially true considering that the risk/reward ratio on the short trade has increased from 4-1 to over 15-1.
To the downside, TOL shows no established intraweek support until the 65.56 level is reached. After the better than expected earnings report came out, Goldman Sachs gave a downside objective of $57, and that objective is very viable as below 65.56, there is no established support until 57.09 is reached. In addition, the support at 65.56 is considered minor to decent at best and if there is a recession coming, it is not likely to hold up.
The probabilities do favor TOL making a new rally high this week, with the 71.70 to 72.30 as the probable objective. As such, sales in that area and using a stop loss at 72.85 and having a 57.09 objective, offers a minimum 13-1 risk/reward ratio. My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest). It would be smart to use a mental stop loss at that level because above 72.85 there is still major resistance at 75.61 and shorting the stock at 71.70 and using a stop loss at 75.71 and having a 57.09 objective, will still offer a 3.6-1 risk/reward ratio.
AMZN - Friday Closing Price - 124.25
AMZN has moved up 20.04% over the past 4 weeks but is now getting up to established resistance levels that will require further positive fundamental news to break. The stock shows a previous intraweek high of consequence at 128.99, made in June of last year and that then took 8 weeks before it was broken to the upside. The 200-week MA is currently at 132.29 and that is a line that the stock has traded below since April 2022 and that has only been broken for a period of 7 weeks (back in August of last year). This means that to break above those two levels of resistance, the bulls need further positive fundamental news and that is not likely to happen at this time.
AMZN had a high last week at 126.39 and further upside is expected to be seen this week. This means that getting up to the resistance at 128.99 is a good possibility. Nonetheless, in spite of the 20% rally seen the past 4 weeks (which by the way, has been straight up and no support since 101.15 has been built), does suggest there will be much more selling interest at these levels, rather than buying interest. Keeping in mind that June is a seasonal down month, the market is expected to enter into a recession this month, and there is no support below, this trade has a high probability of being successful.
As far as support is concerned, the downside objective for AMZN is quite clear as the stock started this recent rally from 101.15. Prior to that and all the way back to June of last year, the stock showed 4 intraweek lows at 102.41, at 101,26, at 101.43, and at 102.52 before a rally back up to 128.99 occurred. Simply stated, support is found around $101/$102 and resistance between $129 and $132. For a chart trader, and not even considering the possibility of a recession, trading this range is the thing to do.
As far as resistance is concerned, there is pivotal and chart changing resistance at 136.49, which is the level that will be used (at this time) to get out of the trade, if broken.
Sales of AMZN between 128,88 and 132.29, using a stop loss at 136.59 and having a 101.00 objective, offers at 3.6-1 risk/reward ratio. My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest).
TNC Friday Closing Price - 77.35
TNC is an international company that offers floor cleaning equipment. It is a stock that has been trading for 15 years. It is a stock though, that has mostly been a tradeable stock, given that for the past 5-years, it has traded mostly between $50 and $85, with the stock having been up to the highs of that range a total of 5 different times and near the low of that trading range, 5 times as well. Simply stated, it is a "trading" stock and not a buy and hold stock.
This was a mention I gave on the May 7th newsletter and in it I stated that this mention was valid until filled or deleted. I do believe this stock will get up to a desired entry point to short this week, though not to the original desired entry point.
TNC reported better than expected earnings 5 weeks ago and on that note, the stock rallied from 66.59 to 80.52. Nonetheless and since then, there has been no follow through to the upside above that price. In fact, the stock proceeded to drop back down to 72.60, which is the low made last week. The stock did generate a positive reversal last week, having made that 4 week low and then closing green and on the high of the week, suggesting further upside above last week's high at 77.35 will be seen this week.
On a negative note for the bulls, TNC gapped up on Friday from 74.25 and 74.88 and yet, there was no new news to support the gap, meaning the gap is a magnet. The high made 5 weeks ago at 80.52 has gained strength, given that on July 30th 2021, the stock made an intraweek high at 80.47, meaning that that level is now established resistance of some note. As such, that level is now short-term pivotal and is only likely to be broken if the index market also breaks its established resistance levels mentioned above. The original downside objective given in the first mention was 70.40 and that objective remains the same.
TNC is likely to get up to the 78.59 level this week and that will be the desired entry point. The stop loss will be at 80.62 and with the objective being 70.40, the risk reward ratio is 4-1. My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the highest). If stopped out, consideration can be given to re-enter the short position above 83.12, using an 85.42 stop loss and having the same downside objective. Such a trade would also offer a 4-1 risk/reward ratio. This latter trade was what I originally gave on the May 7th newsletter mention. Nonetheless and due to the action the last 4 weeks, a lower desired entry point is now what is sought.
I will also be considering shorting
|
Updates
|
| Monthly & Yearly Portfolio Results
|
Closed Trades, Open Positions and Stop Loss Changes
|
|
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 5/1 Profit of $14,586 using 100 shares per mention (after commissions & losses) Closed out profitable trades for May per 100 shares per mention (after commission)
NONE
Closed positions with increase in equity above last months close minus commissions.
LI (long) $474 Total Profit for May, per 100 shares and after commissions $617 Closed out losing trades for May per 100 shares of each mention (including commission)
SHOP (short) $49
Closed positions with decrease in equity below last months close plus commissions.
AMRX (long) $20 Total Loss for May, per 100 shares, including commissions $1873 Open positions in profit per 100 shares per mention as of 6/1
ANTI (long) $125
Open positions with increase in equity above last months close.
ENG (long) $45
Total $45 Open positions in loss per 100 shares per mention as of 6/1
LXRX (long) $8
CLF (long) $81 VWDRY (long) $17 Open positions with decrease in equity below last months close.
VET (long) $540 Total $2,697 Status of trades for month of May per 100 shares on each mention after losses subtracted.
Loss of $3893
Status of account/portfolio for 2023, as of 5/31
Profit of $10,678 per 100 shares.
ATNI generated a positive reversal week, having gone below the previous week's low and then closing green and above the previous week's high. The stock closed near the high of the week, suggesting further upside above last week's high at 39.33 will be seen this week. The stock did generate a failure signal against the bears, having closed above a previous low weekly close at 38.74 on Friday (closed at 38.87). As such, the stock shows open air above until the mentions objective at $41 is reached. It should be mentioned that the 200-day MA is currently at 42.73. The 3+-month intraweek high is at 43.05, so on an intraweek basis, getting to 42.73 is certainly possible (if not probable). I would consider taking profits on the trade anywhere between 41.14 and 42.72. Support should now be found at 37.85.
CLF generated a key reversal week, having made a new 7-month intraweek low and then closing green and above the previous week's high. The stock closed on the high of the week and further upside above last week's high at 15.17 is expected to be seen this week. An additional positive that occurred is that the stock closed on Friday above the 200-week MA, currently at 14.97, and if another green close next Friday occurs, it will give the bulls extra ammunition for more upside. There is no intraweek resistance above until 16.46 is reached. It does need to be mentioned that there is a fair amount of weekly close resistance around the 15.00 level with 4 previous closed (2 to the downside and 2 to the upside) at 14.99, at 15.34, at 15.11 and at 15.13. As such, next Friday's close is very important for the short-term. The same thing is seen on the daily closing chart but at the 16.26, at 16.34, at 16.42 and at 16.11. The 200-day MA is currently at 16.87. This does mean that consideration can be given to taking profits if the stock gets above the $16 level. ENG continued the uptrend this past week with another green weekly close. The stock did close on the high of the week, suggesting further upside above last week's high at .51 will be seen this week. Nonetheless, the stock finds itself at a weekly close resistance area between .49 and .51 that represents the two low weekly closes seen in on April 2019 and in March 2020 that when broken, caused the stock to fall to test the all-time low at .30, meaning that this level is highly pivotal to the stock. A green weekly close next week above .51 would give a failure signal against the bears of importance, which would suggest a minimum rally up to the .74 level would occur. Pivotal daily close support is now found at .40. If broken, it would negate the gains seen recently. LXRX had a wild week in which a new 4-week high and a new 4-week low was made at the same time. The stock made the new high at the beginning of the week but then the company reported that they were offering $125 million new shares at a pricing of $2.60, and the stock immediately fell to 2.60. The stock offering is actually a longer term positive as it gives the company the funds they need to promote their product on a stronger basis, meaning that this negative reversal week is not a game changer. The offering should be done by Monday and the stock is likely to recover what was lost during the week. As it is, the stock should have closed at 2.60 but closed at 2.75, meaning that a purchase at 2.60 is considered a "good buy". Once again, the 3.17 level remains resistance on a daily and weekly closing basis and 2.60 should now be support, unless the offering is not filled (unlikely). On a daily closing basis, resistance is highly pivotal at 3.49. A confirmed daily close above the latter, will offer a rally objective up to the $5 level. Any daily close below 2.69, would be now be a negative. PLNHF generated another green weekly close (3rd out of the last 4 weeks) but the bulls have not yet been able to generate a failure to follow through signal against the bears, given that they need a weekly close above .60 to accomplish that, and the stock closed at .58 on Friday. The stock did 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 .625 than going below last week's low at .525. There is no establishded intraweek resistance until .78 is reached, meaning that at this time it is all about the .60 level and whether the bulls can generate a failure signal against the bears or not. If they are able to do so, a rally up to .72 is likely to occur. There is some intraday support at .565, which is where the 200 10-minute MA is currently at. If the bulls can stay above that level, it is probable the will end up winning this "battle". TCEHY generated a positive reversal week, having made a new 25-week intraweek low but then closing green and near the high of the week, suggesting further upside above last week's high at 43.20 will be seen this week. In looking at the weekly closing chart, the bulls avoided a big negative as a close below 41.42 would have generated a failure signal against the bulls and a close below 40.26 would have generated a new sell signal and the stock did get down as low as 38.88 this past week. In fact, the opposite occurred as the stock gave a new (but small) buy signal, having closed above the most recent high daily close at 42.48 and also gave a failure signal against the bears, having closed above a previous low weekly close at 42.55 (closed at 42.80). With the stock having rallied 10% from the low of the week, without any new news, does suggest this recent correction is over. As it is, the stock is in the same industry as NVDA and you saw what happened to that stock this week. Short-term pivotal resistance is found at 44.80. A break of that resistance will open the door for a rally to 48.88. Some support should now be found at 41.08. VET generated a positive reversal week, having made a new 18-month intraweek low but then turning around and closing green, and on the high of the week, suggesting further upside above last week's high at 11.78 will be seen this week. Unfortunately, the bulls still need to do more in order for the traders to believe that a bottom to this down move has been found. On the positive side though, it is possible that could happen this week. On Friday, he stock did generate a small failure signal against the bears on the daily closing chart, having closed above the low daily close for the past 4 weeks at 11.38 (closed at 11.72). If this failure signal can be confirmed with a rally above 12.32, in addition to a daily close above 12.13 and a weekly close above 12.10, it will be a viable signal that a bottom to the downtrend has been found. As it is, the stock turned around at a level where there was no previous established support (week's low was 10.75 and there is no support until the $10 demilitarized zone is reached). That, in and of itself, is a small positive that signals that further downside may not occur. VWDRY generated a positive reversal week, having made a new 4 week low and then turning around to close green, and on the high of the week, suggesting further upside above last week's high at 9.79 will be seen this week. Nonetheless and at this time, none of this is consequential as the stock has been trading sideways for the past 26-weeks and this level is still within that sideways trading area. One small thing that could be meaningful is that last week's low at 9.37 only broke he 200-week MA, currently at 9.46, by only $.09 cents. The four previous intraweek breaks of the line have been by $.25 to $.35 cents, suggesting that the bulls are getting a bit more support now than they got for the past 12 weeks. Nonetheless, the resistance levels remain the same, with intraweek resistance being found between 10.15 and 10.47, which if the latter is broken, would be a breakout. If the stock gets above last week's high at 9.79, last week's low at 9.37 will become a new support level that should not be broken unless the uptrend is over. ZLAB generated a key reversal week, having made a new 22-week low and then closing above the previous week's high and in the upper half of the week's trading range, suggesting further upside above last week's high at 37.92 will be seen this week. Over the past 15 months, the $30 level has been established as major support and with the Chinese index having gotten down to the same kind of support and bounced up strongly from it, it does suggest that the bulls may now be getting the edge (or even control) from which a rally of consequence is to occur. For that to become more of a reality, the bulls need to generate a daily and weekly close above 37.65. If that does occur, the doors will open for a rally up to at least the $47 level. Any daily close above 51.69 would be a major breakout. Daily close support is now found at 32.55, which should no longer be broken.
|
1) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 35.70. 2) ENG - Averaged long at 2.876 (6 mentions). No stop loss at present. Stock closed on Friday at .507. 3) VWDRY - Purchased at 9.72. Averaged long at 9.565 (2 mentions). Stop loss at 8.67. Stock closed on Friday at 9.77. 4) 5) ANTI - Purchased at 36.29. Stop loss at 34.95. Stock closed on Friday at 38.87.
6) VET - Averaged long at 14.956 (3 mentions). No stop loss at present. Stock closed on Friday at 11.72.
7) CLF - Purchased at 14.69. Stop loss at 14.14. Stock closed on Friday at 15.05.
8) TCEHY - Purchased at 43.23. No stop loss at present. Stock closed on Friday at 42.80.
Previous Newsletters
|
Encyclopedia of Chart Patterns. A must have for chart aficionados! |
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. |
|
|
|