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Issue #805 
March 19, 2023 , 2022 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Fed faced with important decision on Wednesday, which will likely be indicative for the market!
DOW Friday closing price - 31861
The indexes had a mixed week with the DOW closing .02% lower, the SPX closing 1.5% higher, the NASDAQ closing 5.9% higher, and the RUT closing 2.7% lower. The discrepancy/dichotomy of the indexes is confusing given that the NASDAQ closing higher and the RUT closing lower and both in higher percentages than the other indexes, is an oxymoron difficult to explain. Normally the NAZ and the RUT would move in the same direction and when up it is bullish and when down it is bearish. In the case this week, those two went in opposite directions, meaning that the probabilities favor it not being an indicative week but likely a week with good news for one specific sector (such as big Tech Stocks) where the money usually flows to when speculation is high. As far as news supporting the rally, there was none. The Fed rate decision was not a surprise in either direction and therefore not likely a reason for the action seen this week.
Overall though, nothing of great consequence was broken in either direction. The bulls did have a chance to make a bit of a statement had they closed the NASDAQ above 12573 on Friday, which the index had closed above on Thursday. Nonetheless, on Friday the index did close lower (than Thursday) and that "perhaps statement" disappeared. Now, this week the Fed will be announcing their Fed rate decision on Wednesday and that report is likely to be catalytic, especially with the news that came out late last week, in the form of 2 (one big) banks collapsing in the U.S. and 1 big bank in Europe having big problems as well. This type of problem is normally resolved (or dealt with) by lowering interest rates. Nonetheless, with inflation being a big problem and raising interest rates being the way to address that problem, the Fed is facing a losing situation anyway they go (raising or lowering interest rates). It is expected that they will raise the rate 25 points and if they do that, the reaction will likely be somewhat limited. By the same token, anything they do at this time will be criticized by one side or the other, meaning that it is highly probable that the indexes will end up the week with a clear direction for the next 2-3 weeks. The direction is more likely to be to the downside than the upside as any decision by the Fed (under these conditions) will have more ammunition for the bears than the bulls. Inflation versus possibility of economic collapse by the banks is a negative either way.
The NASDAQ did close near the high of the week, the SPX in the upper half of the week, the DOW very slightly in the lower half of the week's trading range and the RUT at the low of the week. With the Fed rate decision not due out until Wednesday, it is more likely than not that the indexes will trade in very small and narrow trading ranges on Monday and Tuesday, with the NAZ likely to go above last week's high at 12674 and the RUT likely to go below last week's low at 1716. Nonetheless, the NAZ has pivotal intraweek resistance at 12880 and the RUT has pivotal intraweek support at 1701. Neither of those are likely to get broken until Wednesday but whichever one gets broken thereafter, will be indicative.
Other than that, there is nothing else I can give you at this time that will be of help right now (before Wednesday's report). This week will be all about what the Fed decides to do but more importantly, how that decision is evaluated by the traders.
OIL made a new 16-month intraweek and weekly closing low and closed at the bottom of the week's trading range, suggesting further downside below last week's low at 65.27 will be seen this week. This break is worrisome to the bulls as Oil had supposedly found a bottom at $70 and spent 16-weeks in building a base, only for it all to break down in one week and without any specific change in the fundamental picture. On a possible positive note, Oil closed at a level (around $66) that is of quite a bit of importance as it has been a pivotal level for the past 2 years and a pivotal area since 2018 (5 years). The $63-$66 area (on a weekly closing basis) has either been pivotal support or resistance on 9 different occasions during this period of time. As such, the chart strongly suggests that this area is "fundamentally ground zero" and that Oil either trades above or below this level based on mid-to-long-term outlooks. When Oil began the rally from $17 back in 2020, it stopped for 3 months at 66.09 (based on a weekly close) and then when Oil broke out and rallied to an established-for-6-year resistance level between 74.15 and 74.57, it dropped back down to 66.26, meaning that this area is strongly pivotal to computers, algorithms, and big chart traders. As such and without any catalytic news coming out this week, a green weekly close should be seen next Friday, given that Oil closed at 66.34 on Friday. On an intraweek basis, Oil could get all the way down to 62.43 or even to 61.74 but below the latter, it would open the door for further downside with $45 as the likely objective. To the upside, any bounce that occurs will now have the 74.57 level (on a weekly closing basis) as a resistance that will require a positive fundamental change to break. The daily closing chart does suggest that for the next few weeks, the 71.50 area will stop any rally. This area is clearly defined and dependable, as far as chart signals that are not-dependent-on-news are concerned.
DOLLAR bulls failed to generate follow through to the previous week's 14-week intraweek high at 106.10, having generated a lower low than the previous week and a red close. In addition, the weekly close resistance level at 105.86 has held up for 3 weeks and now this past week, a small failure signal occurred when the Dollar closed below a previous high weekly close of some importance at 104.54 (closed at 103.86 on Friday). This action suggests that the traders do not believe that interest rates are going to go much higher, if at all. Nonetheless and other than generating a small failure signal, the bears were not able to generate even a short-term sell signal, given that a close below 103.49 is required for that to occur. As such, it is evident that the traders are waiting for the Fed rate decision on Wednesday to make any decisions. A daily close below 103.49 will likely generate a move down to 102.28 and a close below 101.22 would generate a new downtrend. A daily close above 105.66 would likely generate a rally up to the $108-$109 level. It really all depends on what the Fed does on Wednesday but overall, probabilities favor the Dollar trading between $102 and $105 for the near future.
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Stock Analysis/Evaluation
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CHART Outlooks
As I stated on the message board on Friday, I do believe that purchases in the Chinese market stocks is the way to go, no matter what happens fundamentally to the U.S. markets this week. The HSI index generated a positive reversal week, gotten down to 19106 and then closing green and near the highs of the week, opening the door for a new run to the upside. Intraweek support was found at 19174 and at 18235 and it seems the first of the two has held, meaning a bit more strength found. As such, purchasing the Chinese stocks this week is the way to go.
The Chinese market is not likely to be affected with what the U.S. market is likely to go through, meaning that the charts say that purchases in Chinese stocks is the way to go at this time.
This is also a week that is likely to be indicative-of-trend for the next month or two and all will be based on the Fed rate decision on Wednesday. As such, I probably will have additional mentions after the report comes out and those will be given on the message board.
PURCHASES
BABA Friday Closing Price - 81.67
BABA (same industry as in Google) has proven to be a volatile stock. Over the past 19 weeks, the stock has moved up from a low of 58.01 to a high of 121.30 (more than doubled in price) and is now back down to 80.15 and into the desired entry point area. The stock did close slightly in the lower half of the week's trading range and further downside below 80.15 is expected to be seen this week but the probabilities are almost as high of the stock not breaking the low (but getting near that low) and turning around. Either way, the stock is a buy this week.
BABA has built a strong intraweek support base that spans the area between 73.29 and 81.07 but on a daily closing basis, the area of support is between 76.79 and 81.07 and on a weekly closing basis, it is between 85.65 and 76.71. Simply stated, the stock will likely re-enter an area this week where buying interest will be found. The chart suggests the stock will be in a trading range between $80 and $120 for the next 3 months but there are 4 analysts that are presently following the stock that state that the stock is in an uptrend and their stated upside objectives are between $130 and $160.
BABA does have quite a bit of established resistance between $122 and $125 but it can be said that there is a triple high in that area and that does suggest that at some point in the not too distant future, that area will be broken.
As far as support and given that the stock is volatile, the preferred entry point into the trade will be somewhere between $78 and $81, with the $78 level being the preferred entry point.
At this time, purchases of BABA around the 80.25 level and using a stop loss at 76.65 and having a $120 objective, offers a 9-1 risk/reward ratio. My rating on the trade is a 3.5-1 (on a scale of 1-5 with 5 being the highest.
TCEHY Friday Closing Price - 42.93
TCEHY is a Chinese multinational technology and entertainment conglomerate and holding company headquarters in Shenzhen. It is one of the highest grossing multi-media companies in the works, based on revenue. It is a stock that started trading back in 2008 at a price of $1.14 and moved up consistently to make an all-time high at 98.40 in February 2021, at which time is began a downtrend that seemingly ended in October of last year at 24.75.
TCEHY did generate a "straight-up" 3-month bounce (no corrections) back up to back up to 52.88 that ended in January of this year and has now given back 20.5% of that gain and though it closed green last week, it did close near the low of the week, suggesting further downside below last week's low at 42.32 will be seen this week. It is evident that this correction is likely to end up becoming the required/needed retest of the 24.75 low, which is a 6-year low that has not yet seen a retest of it. A successful retest of that low is required before any further upside can occur.
TCEHY has decent and "well-established support between 37.92 and 40.85. That support spans 4 years (going back to 2019) and has been proven to be support on 9 different occasions during that period of time. Given that the Chinese market index is likely to head lower this week but reach that same kind of support as is seen in the stock, the probabilities of a bounce occurring from there are high.
To the upside, TCEHY shows resistance at 51.55, at the recent high at 52.88 and at the 200-week MA, currently at 55.55. Nonetheless, if that MA is broken, there is open air up to the $65 level. Nonetheless, the 200-MA line is going to be the objective of this mention.
TCEHY is expected to get down to at least the 41.19 level (based on recent chart action) but if that level is broken, it could visit the 37.92 level. A break below 37.92 would weaken the chart but there is additional support at 36.57.
As such, purchases of TCEHY at 41.19 (or hopefully below) and using a mental stop at 37.65 and having a 55.55 objective will offer a 4-1 risk/reward ratio. Evidently, the ratio goes exponentially higher the lower the entry point is accomplished. My rating on the trade is 3.5 (on a scale of 1-5 with 5 being the highest).
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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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AMRX made yet another new all-time low at 1.31 but the bulls were able to manage a late-week rally and in the upper half of the week's trading range, suggesting further upside above last week's high at 1.55 will be seen this week. If that does occur, there is no resistance above until the 1.96 level is reached. Evidently, the liquidation selling has ended (after 3 weeks of red closes after the major support at 1.96 was broken) and given that the fundamentals do not support this low price, it is possible that the stock could see a recovery of that magnitude (35%) over the next week or two. Evidently a new low below 1.31 at this juncture, would generate new selling interest. ENG generated another new 3-year intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at .495 will be seen this week. The stock has now gotten down to the next and highly important weekly close support level at .49 (closed on Friday at .498). The all-time low is at .30, which would become the target if this level is broken. The book value for the company is .86, meaning that it is presently trading 40% below book value. What caused the stock to begin this recent fall (from .92 to .50) was an additional $3.4 million offering of stock to a private investor at .85 cents. The company remains viable, has signed contracts with the government for years to come, has little or no debt, and is in a growing industry (clean energy), as such, there is no reason to liquidate positions at this time. The stock has been in similar situations on 9 different times during the past 15 years that all ended up with spike up rallies of as little as double in price to as much as 9 times as much. The spike up tops have been usually seen within 6-12 months or having found a bottom to the downtrend. The stock is a hold here. PLNHF made a new 10-week intraweek and weekly closing low this week but closed in the upper half of the week's trading range, suggesting further upside above last week's high at .92 will be seen this week. The .70 level is the new intraweek support level that if broken would weaken the chart further and the .96 level is now pivotal intraweek resistance that if broken would generate new buying interest. VET generated a break of the 200-week MA, currently at 12.58, and closed on the low of the week, suggesting further downside below last week's low at 11.93 will be seen this week. There is "some" (but minor in nature) daily close support at 11.98. The only possible positive that could help the stock this week is that Natural Gas may be in the process of retesting its recent daily closing low at 2.17, having gone below the previous week's low and closing at 2.35. If Natural gas can generate a green close next Friday, or generate a daily closing low above 2.60 any day this week, the retest will be successful and new buying come in. That would do the same for the stock and generate a close next Friday above the MA line and negate the break. There is "no doubt" that this week, especially with the important Fed rate decision on Wednesday, that the action this week will be pivotal and decisive for the short-term. Any daily close above 13.32 would also be a signal that a low has been found. ZLAB generated a positive reversal week, having made a new 11-week intraweek low and then closing green and in the upper half of the week's trading range, suggesting further upside above last week's high at 35.39 will be seen this week. With the stock having gotten down to the important and pivotal intraweek support level at $30 and then bouncing from it with a positive reversal week, it does suggest that the worst of this recent downtrend has now been seen. If that gets confirmed this week with a close above the 200-day MA, currently at 36.99, and especially if a weekly close above 37.76 is seen next Friday, the objective for the next few weeks will be the $50 level. A new intraweek low below last week's low at 30.32 is seen, will further weaken the chart. Probabilities favor the bulls.
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1) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 33.85. 2) ENG - Averaged long at 3.378 (5 mentions). No stop loss at present. Stock closed on Friday at .50. 3) SHOP Covered shorts at 44.32. Shorted at 53.37. Profit on the trade of $905 per 100 shares. 4) CAT - Covered shorts at 216.38. Averaged short at 211.9675. Loss on the trade of $1765 per 100 shares (4 mentions). 5) AMRX - Averaged long at 2.01. No stop loss at present. Stock closed at 1.43 on Friday. 6) DOW - Covered shorts at 50.14. Profit on the trade of $244 per 100 shares (2 mentions). 7) VET - Averaged long at 16.73. No stop loss at present. Stock closed on Friday at 12.11. 8) TXT - Covered shorts at 66.53. Averaged short at 70.77. Profit on the trade of $848 per 100 shares (2 mentions).
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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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