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Issue #816 
June 11, 2023 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Pivotal week ahead. Inflation and the Fed response to it at stake. Will decide what the Summer brings!
DOW Friday closing price - 33876
Last week turned out to be generally uneventful as the indexes generally appreciated very little in price, compared to the previous week's weekly close. In fact, the RUT continued to outperform all other indexes, having gone up 1.9% over the previous week's close, compared to the DOW and the SPX going up .04% and the NASDAQ going down .001%. By the same token, it was not expected that anything was going to happen last week and it didn't. It is what is going to happen "this" week that is important as the inflation report and the FOMC rate decision will come out (on Tuesday and Wednesday). Those reports are likely to cause a catalytic reaction as the traders are looking for the fundamental information that will help them decide if in fact a recession is to happen (or not), starting in June.
As such, the newsletter this week will be about the levels to watch (to the upside and the downside) that will trigger more buying or selling.
In the DOW, the levels to watch are at 34098 and at 32764. A break of either one of them (on a daily closing basis) will be indicative of direction for the summer. A close on Monday below 33562 will give an indication that the traders are expecting the reports to be negative to the market.
In the SPX, the index did break a pivotal weekly close resistance at 4280, having closed on Friday at 4298. This was a "win" for the bulls as that is the pivotal resistance that suggests that further upside is coming. Nonetheless, the intraweek high that represents that 4280 level is 4325 and the daily closing high that represents that same level is 4305 and neither of those got broken on Friday as the intraweek high was 4322 and the daily closing high was 4298. This means that the breakout on the weekly closing chart was not confirmed by any other means. It somewhat invalidates the breakout, at least for now (until the reports come out). By the same token, it is evident that right now that this is the index to watch as the important levels are very close by and this index does represent the overall market the best. It should be noted that if the index closes on Monday below 4267, it will suggest the traders are expecting negative action after the reports come out.
In the NASDAQ, the levels to watch (on a daily closing basis) are 15239 and 14003. Whichever level gets broken first will give the traders the necessary chart information to continue is whatever direction is broken. It does need to be mentioned though, that the previous Friday's daily close at 14556 and this past Wednesday's close at 14303 do have some importance on Monday's trading action, as a close above or below those levels will show what the traders are thinking that the reports will bring.
The big question at this time is whether the expectations of a recession occurring and starting this month were wrong. The earnings quarter that just finished did show that things are better than expected. The economic reports that were seen this past month also showed that the economy is not yet suffering the consequences of the higher interest rates that the Fed has been raising to fight inflation, meaning the economy is more resilient than the doom and gloom predictions that have come out this year. All of this will be a bit clearer after the reports come out this week as it will show whether inflation is slowly abating and if not, and if the Fed will continue to fight it. It should be noted that this past Thursday, the weekly claims report did show a bit higher unemployment than was expected and if that is supported with inflation being lower, it will give the bulls good reason to rally. If not and the Fed raises interests rates again this month, the bears will gain a strong foothold as the recession fears will surface again.
Everything will be a lot clearer by Wednesday at 2:00pm.
OIL generated a negative reversal week, having gone above last week's high and then closing red and on the low of the week, suggesting further downside below last week's low at 69.09 will be seen. The bulls were able to stay above the most recent low weekly close at 69.93 but the failure to close at (or above) 71.50 means the bears have the edge. On the other side of the coin, there is support on the daily chart at 70.04 that held up and that means that the traders will decide what to do "after" the reports this week. It does need to be mention that last week, OPEC decided to cut production again and by another 1 million barrels, meaning they are doing everything they can to hold Oil at these prices. On a daily closing basis, there is some support at 68.56, at 68.09 and pivotal at 66.74. A daily close below 66.74 would open the door for a drop down to the $62 level. A close above 72.53 would relieve the sell pressure.
DOLLAR generated a 2nd red weekly close in a row but the action for the week was quite limited and the red close was only by $.45 cents below the previous week's close. Nonetheless and having said that, the Dollar did generate a new sell signal on the daily closing chart, having closed on Thursday below the most recent 2-week low daily close at 103.56 (closed at 103.04) and then on Friday closing back as the mini breakdown point at 103.56. This means that if a red close occurs on Monday, it will give the bears a bit of an edge. By the same token and like with everything else, it is all about the reports on Tuesday and Wednesday. They will be the likely deciding factor on what the Dollar does for the summer. Any weekly close above 105.21 would be a breakout of note and any weekly close below 101.21, would be a breakdown of note.
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Stock Analysis/Evaluation
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CHART Outlooks
The same scenario as mentioned in the previous week's newsletter remains. Three of the four mentions given last week were filled but in 2 of them, the nearby stop losses were triggered and the short positions covered at a loss. Nonetheless, in all cases, there were secondary levels of resistance of greater importance and as such, if those desired entry point levels that apply to the secondary resistance levels are reached on Monday, the short positions should be re-instituted. In the case of AMZN, which did not reach its first desired entry point, there is a new entry point for this week.
SALES
AMZN - Friday Closing Price - 123.43
Sales of AMZN around the above 126.00 and using a stop loss at 127.50 and having the same 101.00 objective will offer a 16-1 risk/reward ratio. Nonetheless, the rating on the trade has gone down from a 4 to a 3 (on a scale of 1-5 with 5 being the highest) because the stop loss is not at an established resistance level.
TNC Friday Closing Price - 79.92
Sales of TNC above 83.00 and using a stop oss at 85.42 and having the same objetice of 70.40, will offer a risk/reward ratio of 5.5-1. On this one, the rating has gone up from 3.25 to 3.75 (on a scale of 1-5 with 5 being the highest.
CAT Friday Closing Price - 235.03
Sales of CAT above 245.00 and using a stop loss at 250.35 and having a 209.17 objective will offer a 6-1 risk/reward ratio. My rating on the trade is 2.75 (on a scale of 1-5 with 5 being the highest). The tradie has a low rating due to the stop loss not being at an established resistance level. If the stop loss is placed at 255.80 the risk/reward ratio drops to under 3.5-1 but the rating goes up to 3.5.
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
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ATNI generated a new 7-week high and did close in the upper half of the week's trading range, suggesting further upside above last week's high at 41.03 is expected to be seen. The stock has gotten up to the mention's minimum objective at 41.00 and therefore any rally above last week's high should be considered for liquidation of the positions. It should be mentioned that the 200-day MA is currently at 42.56 and it is unlikely that line will be broken without any additional positive news. Any drop below 39.09 can now be considered as the beginning of a down move. ENG had an uneventful week, given that the stock closed at the same price that it closed at the previous week. On an intraweek basis, the stock did go higher than the previous week and did close in the lower half of the week's trading range, suggesting further downside below last week's low 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 for both directions. Pivotal daily close support is now found at .40. If broken, it would negate the gains seen recently. LXRX had a wild week with the stock traded in a range that equals 30% of its value (from high to low - from 2.43-3.12 and a stock value of 2.82). Nonetheless and with the stock offering now done and over, the stock did close in the upper half of the week's trading range, suggesting further upside above last week's high at 3.12 is expected to happen. The 3.15 t0 3.18 area (on a weekly closing basis) remains short term pivotal resistance as that is where the 200-week MA is currently at, as well as 2 different high weekly closes. Weekly close support is now found at between 2.68 and 2.75. Like with everything else, the economic reports this week are likely to have some effect on the stock. PLNHF did absolutely nothing this week, having had an inside week with a trading range of only $.06 cents. It is evident the traders are waiting for some catalyst to generate movement from here. This week could give the traders that catalyst. The bulls need a daily close above .60 to generate new buying interest. Psychological support is found at the $.50 cent demilitarized zone. TCEHY generated a negative reversal week, having gone above the previous week's high and then closing red. Nonetheless, the stock had a very small trading range ($1.30 compared to the previous week's $4.32) and that means that the traders wait for new news to generate more movement. The stock closed near the midpoint of the week's trading range, suggesting equal chances of going above the previous week's high at 43.35 than below last week's low at 42.05. Intraweek support is found at 41.08 and resistance at 43.35. Whichever gets broken this week will likely see follow through of consequence. TOL continued to move higher, having made a new 7-month intraweek and weekly closing high. The stock closed near the high of the week, suggesting further upside above last week's high at 75.20 will be seen this week. Nonetheless, the stock is now within $.55 cents of the all-time intraweek high at 75.75 and $.31 cents of the all-time weekly closing high at 74.61, meaning that something is highly likely to happen this week. The stock has now generated 5 green weekly closes in a row and 8 of the last 9 weeks. It has appreciated in value 24.1% (based on the intraweek chart) and 22.2% based on the weekly close during this period of time. There has been no new news to support this rally since the upgrades of several rating companies came out 3 weeks ago. As such, this area is highly pivotal. Deutsche Bank did give a buy rating with a $94 objective but Goldman Sachs did give a sell rating with at $57 objective. Some minor intraweek support is found at 73.38 and the stock has an open gap down at 68.76. Something decisive will happen this week. VET made a new 4-week intraweek high and a new 5-week weekly closing high, and closed on the high of the week, suggesting further upside above last week's high at 12.53 will be seen this week. The bulls did accomplish a few things this past week, having closed on Friday above the 200-week MA, currently at 12.03 and having generated failure signals against the bears on both the daily and weekly closing charts, having closed above previous pivotal low daily and weekly close supports at 12.11 (closed on Friday at 12,.43). Short-term pivotal intraweek resistance is found at 12.96, which if broken would confirm the failure signals. Intraweek support is now found at 11.34. VWDRY generated a negative reversal week, having gone above the previous week's high and then turning around to close red and on the low of the week, suggesting further downside below last week's low at 9.48 will be seen this week. The stock did close at the 200-week MA, currently at 9.48, suggesting that next Friday's close is likely to be pivotal. There is some short-term pivotal support on the daily chart at 9.37 and the same to the upside as resistance at 9.92. With the reports on the economy coming out Tuesday and Wednesday, it is likely something will happen to the stock this week. ZLAB made a new 28-week intraweek and weekly closing low and closed near the low of the week, suggesting further downside below last week's low at 27.50 will be seen this week. There has been no new news to support this weakness, which suggests it is probably chart related, given that some well-established support levels have been broken, which automatically causes chart selling to occur. There are 3 previous spike low areas from a year ago (at 25.74, at 24.50 and at 22.51), meaning that any (and all) could be chart targets the traders might be aiming for. The former one does seem to be the target the traders might be going after this week. From the 25.74 low seen in March 2022, the stock rallied up to 50.05 just 4 weeks later. The same scenario could be seen now, given that the fundamental picture has not changed for the worse (in fact, it is better now than then). There is a gap between 32.92 and 31.20 that has no fundamental reason to stay unclosed. A rally at least up to 31.20 should be seen by the end of this week.
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1) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 28.16. 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 9.48. 4) 5) ANTI - Purchased at 36.29. Stop loss at 38.99 (mental). Stock closed on Friday at 40.03.
6) VET - Averaged long at 14.956 (3 mentions). No stop loss at present. Stock closed on Friday at 12.43.
7) CLF - Liquidated at 16.20. Purchased at 14.69. Profit on the trade of $151 per 100 shares.
8) TCEHY - Purchased at 43.23. No stop loss at present. Stock closed on Friday at 42.63.
9) TNC - Shorted at 79.54. Covered shorts at 80.67. Loss on the trade of $113 per 100 shares.
10) CAT - Shorted at 233.00. Covered shorts at 233.95. Loss on the trade of $95 per 100 shares.
11) TOL - Shorted at 72.25 and at 74.61. Averaged short at 73.43 (2 mentions. Stop loss at 75.71. Stock closed on Friday at 74.29.
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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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