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Issue #834 
October 29, 2023 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Indexes Broke Down and further downside expected. Nonetheless, November starts on Wednesday and it is a seasonal up month.
DOW Friday closing price - 32417
Across the board, new sell signals were given this past week as the indexes made new multi-month lows. In the case of the SPX and the NASDAQ, it was a new 5-month low. In the case of the DOW, it was a new 7-month low, and in the case of the RUT, it was a new 36-month low. All indexes closed on the lows of the week, suggesting further downside below last week's lows will be seen this week (DOW below 32327, SPX below 4103, NAZ below 14058 and RUT below 1633).
The RUT has led the way to the downside, having fallen 18.4% since July. The other indexes have all fallen about 10% in value during this period of time. Nonetheless, there is no reason to think that we are getting into a bear market again and that means that the RUT is likely to find a bottom this week as it has dropped 18.4% and a 20% drop means a bear market is in place. This index should begin to outperform the market from here on in.
Having said that, this break does leave open air below that is likely to be seen. In the DOW, the 200-week MA is currently at 31816 and that is a line that is highly unlikely to be broken at this time. That means that the index is likely to drop another 600 points this week but then find buying interest. It also needs to be mentioned that there is decent intraweek support at 31429 as that was the low seen in March and it is the 13-month low. It is doubtful it will drop down to that level but it does offer a second support area of consequence if the MA is pierced. The same MA line is seen in the SPX at 3940.
In the NASDAQ there is weekly close support at 13580 and at 13301. Nonetheless, there is also support at the 14000 demilitarized zone, from a clearly defined downtrend channel. It does need to be recognized that when the market gets into an up move, this index tends to outperform the rest. As such, if there is to be a seasonal up move in November (which starts on Wednesday), this index could start outperforming the rest and stop at the 14000 demilitarized zone.
The potential "fly in the ointment" is the RUT. The indexes broke a very important and well established support around the 1660 level and did make a new 3-year low, meaning that it has wiped out all the gains seen during this time (which is not something done by the other indexes). The index has "no support" below of any consequence until the 1266 level is reached (370 points lower). As such, this index will be dragging the other indexes down unless there is buying interest seen elsewhere.
The first 3 weeks of the earnings quarter are over and that means that earnings will not be a factor from here on in. AAPL still reports this week but it is not likely to be catalytic. The ISM Index report comes out on Wednesday and the Jobs report on Friday, but they also are not likely to be catalytic. The economy has been doing better than expected and it is unlikely these reports will change that. As such, this week is likely to be mostly about charts and the levels mentioned above. In addition, traders will be taking into consideration the seasonal tendency of the market, which starts on Wednesday.
Lots of uncertainty at this time and nothing that I can weigh into the chart analysis at this time. This week is all about watching what happens starting Wednesday.
Levels to watch to the upside on a daily closing basis are: DOW at 33141, SPX at 4247, NASDQ at 14604 and RUT at 1719. A close above those levels will mean the downtrend is over. Nonetheless and looking at a reachable level close by that could give a bit of a positive signal, if the RUT can generate a "confirmed" close above 1655 and give a failure signal against the bears, it could suggest that downtrend is over, at least for that index. The index closed at 1636 on Friday, meaning it is a doable scenario.
OIL generated a red week but it was uneventful given that it closed in the middle of the week's trading range and no support of resistance levels got broken. On a small positive note though, Oil closed at 85.19 and there is a weekly close support at 85.05 that held up. What this means is that the bulls remain with the edge and with short-term control. Having said that, the close in the middle of the range means that it could go above last week's high at 88.23 or below last week's low at 82.12 this week. A drop below 81.50 would be indicative for the bears and break above 91.88 would be indicative for the bulls. As stated last week, those two levels are the trading range Oil is presently in.
DOLLAR generated a positive reversal week, having gone below the recent low at 105.54 with a low at 105.36 and then going above the previous week's high and closing green and near the high of the week, suggesting further upside above last week's high at 106.89 will be seen this week. The positive reversal does suggest that the Dollar is ready to resume its recent uptrend, especially given that the weekly close resistance at 106.65 (just $.07 cents higher than the close on Friday) is a minor resistance at best. On a daily closing basis, resistance is found at 107.00. If that is broken, there is open air above to 107.99. Given the positive reversal, last week's low at 105.36 is now indicative and likely pivotal support.
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Stock Analysis/Evaluation
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CHART Outlooks
The indexes broke down this week and further downside is expected to be seen. Nonetheless, the seasonal tendency is for the market to go up in November and December and the month starts on Wednesday. It is expected that lower prices will be seen at the beginning of the week and indexes (as well as stocks) reach the next level of support that are there. This will mean that purchases can be considered this week if stocks get to desired entry points where risk can be clearly defined and rewards based on chart levels of resistance are at least 4-1. As such, mentions this week will all be purchases.
MRNA Friday Closing Price - 71.91
MRNA is a company that has dropped over 50% in price over the past 7 months and added another 10.4% this past week. I did purchase the stock this past week, at the first desired level of support but got stopped out. The stock is now likely to get close to the next (and stronger) level of support and should be purchased once again. The drop has been due to the declining interest in getting the Covid vaccine. Nonetheless, the company is more than just a vaccine producer and has begun to reach levels where it was trading (and in an uptrend) prior to having to do anything with vaccines (back in 2018/2019). As such, it is a stock that has a valid reason for being considered a purchase at these levels.
MRNA is now within $6.40 cents of the next and stronger support level at 65.49. That was the low seen on September 2020 and is the first established intraweek support level since 98.43 was broken. With the drop seen so far and November seasonal tendency possibly starting on Wednesday, it makes sense to purchase the stock as that level is neared. Using the daily closing chart, support starts to be found at 70.50, meaning that the desired entry point is found somewhere between that level and down to 65.74.
To the upside, the objective is a retest of the breakdown that occurred a few weeks ago from 98.61. This means that any purchase between 65.74 and 70.50 and using a stop loss at 65.29 will offer at least a 5-1 risk/reward ratio. These levels are all based on established low and high support and resistance levels, meaning much more dependable than the trade made this past week.
My rating on this trade is a 3.25 (on a scale of 1-5 with 5 being the highest).
NEM Friday Closing Price - 38.97
NEM is a Gold company that had been falling in price and was expected to fall a bit more this week. I gave a buy mention on the message board to purchase around the 36.35 level but it only got down to 36.70 and therefore I did not get filled. Gold is on a run to the upside and expected to go higher, meaning the stock needs to be chased. By the same token and due to the action seen this week, the stop loss can also be raised, meaning the risk/reward ratio remains the same. In addition and for the same reason, the probability rating has gone up.
NEM generated a positive reversal week, having made a new 3-week low and then closing green and on the high of the week, suggesting further upside above last week's high at 39.13 will be seen this week. Nonetheless, it is likely that at some point this week, a drop down to previously established intraweek support between 37.84 and 38.20 will be seen, as further building of a dependable support area occurs. Such a drop should be purchased.
To the upside and as a trade objective, the 200-day MA, currently at 43.90, is a very viable objective. Nonetheless, if Gold does make a new all-time high above $2085, it is likely the stock would break that line and move further up to the $50 level. Keep in mind that NEM traded as high as $60 just 9 months ago.
Last week's low should not be broken if the outlook for Gold occurs as expected. This means that a stop loss at 36.60 can now be used. As such, purchases below 38.20 and using a 36.60 stop loss and having a 43.90 objective, offers a 3.5-1 risk/reward ratio. My rating on the trade is 3.25 (on a scale of 1-5 with 5 being the highest.
Other Mentions
I did give a mention on AA last week with a desired entry point around the 21.00 level and using a stop loss at 19.65 and having a minimum objective of 26.20 will offer a risk/reward ratio of 3.8-1. My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
The mention remains the same but I have not updated this mention today, given that the probabilities of getting down to the desired entry point have diminished and I am not ready to chase it.
I also want to mention that in the Held Stocks area below, I do mention purchasing additional shares of OXY, which I did purchase this week. See the update for details.
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Updates
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Closed Trades, Open Positions and Stop Loss Changes |
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ENG broke down last week, having made a new all-time intraweek low at .25 and a new weekly closing low at .295, breaking the .30 level that had held up consistently over the past few months and breaking the previous all-time weekly closing low at .304 that was made in June 2013. Having said that, the stock did close in the upper half of the weeks' trading range, suggesting further upside above last week's high at .314 will be seen this week. It also needs to be mentioned that back in June 2013 when the previous all-time weekly closing low was made at .304, having broken the previous low at .38, the stock the following week negated the break and 10 weeks last was at 1.03 and 10 months later was at 3.93. Any daily close above .36 would generate new buy signal. The company reports earnings November 7th. One thing that does need to be mentioned is that due to the stock not rallying during the past 10 weeks and staying near the .30 cent, it created a magnet for the traders to break support and trigger all the stop loss orders below. Now that they accomplished that, there is no reason for the traders to push lower anymore, especially since there has been no negative fundamental news for months. LXRX did very little this week, having traded in a small $.13 trading range. The stock did go below the previous week's low at 1.10 with a low at 1.08 but did close near the low of the week, suggesting further downside below 1.08 will be seen this week. Nonetheless, the weekly close support at 1.09 held up, so it can be said the week was generally uneventful. The stock reports earnings on November 8th and that is likely to be catalytic. The company has received good fundamental news recently, suggesting the probabilities of the earnings report being better than expected are high. On an intraweek basis, support is at 1.04. On the other side of the coin, any intraweek rally above 1.26 would generate new buying interest. OXY generated a red week and closed on the low of the week, suggesting further downside below last week's low at 61.87 will be seen this week. Nonetheless and in spite of the red week, the stock continues to maintain itself above 2 weekly close support areas at 61.84 and at 61.40. On an intraweek basis, there is quite a bit of support between 59.70 and 60.84. The Oil chart continues to favor the bulls and the stock's chart has a sideways pennant formation that also favors the bulls, meaning the probabilities favors higher prices after this mini drop ends. The 200-day MA is currently at 61.81 and during the past 3 months, it has traded above the line 80% of the time (13 days below the line and 55 days above the line). The stock did have an open gap up at 61.94 and that gap; was closed this week, meaning there is no magnet for the downside anymore. My chart educated guess is that a drop down to 60.84 will be seen this week, followed by a positive reversal week and a close once again above the MA line next Friday. I may add positions this week if such a drop does occur. Stop loss remains at 59.00. PLNH has convincingly broken the midterm uptrend it has been on for the past 2 months, having traded all week below the 200-day MA, currently at .73. The stock did close on the low of the week and further downside below last week's low at .547 is expected to be seen this week. Nonetheless, the stock is reaching a level of decent to strong intraweek support between .52 and 55 that was in place for 2 ½ month (between May 22nd and August 15th) that is highly unlikely to be broken. This was the area that the stock traded within prior to the positive news of the company starting to trade Cannabis in Florida. The good news has not changed, meaning there is no reason for the stock to break below the .52 area at this time. Nonetheless, this also now makes the .60 level pivotal resistance. The company is likely to report earnings on November 9th. Probabilities favor the stock trading between .52 and .60 until that date. VWDRY generated a green week and a new 5-week 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 7.50 will be seen this week. Intraweek pivotal resistance is found at 7.60 and any daily close above 7.53 will generate another buy signal but will also generate a failure to follow through signal against the bears. To the downside, any daily close below 6.88 would negate the recent mini breakout. The company reports earnings on November 8th. ZLAB generated an outside week, having been above and below last week's trading range. On a couple of negative notes, the stock closed in the lower half of the week's trading range, suggesting further downside below last week's low at 22.54 will be seen this week, and additionally, the stock closed below a weekly close support at 23.75 (closed at 23.50). On the opposite side of the coin, the Chinese market generated a positive reversal week as well as generated a failure to follow through signal against the bears on the daily closing chart, opening the possibility that the downtrend has found a bottom. This was further strengthened with the index getting down close to a pivotal intraweek support at 16833 import with the index getting down to 16858 last week. The stock did gap down on Thursday and the gap was closed on Friday, meaning that it is possible the gap was a magnet on Friday and it being the reason why the stock closed in the lower half of the weeks' trading range. Anyhow, pivotal intraweek support is found at 22.35 and pivotal intraweek resistance is found at 25.83. It is likely one or the other will be broken this week and it will decide direction for the next few weeks.
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1) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 23.91. 2) ENG - Averaged long at 2.876 (6 mentions). No stop loss at present. Stock closed on Friday at .308. 3) VWDRY - Averaged long at 8.67 (23 mentions). Stop loss at 8.67. Stock closed on Friday at 6.71. 4) LXRX - Averaged long at 2.495 (2 mentions). No stop loss at present. Stock closed on Friday at 1.13. 5) OXY - Purchase at 61.96. Stop loss at 59.00. Stock closed on Friday at 62.23. 6) TNC - Covered shorts at 73.21. Averaged short at 80.485. Profit on the trade of $1415 per 100 shares (2 mentions). 7) PLNH - Averaged long at 1.526 (3 mentions). Stop loss at .66. Stock closed on Friday at .79. 8) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed at 1.45 on Friday. 9) MRNA - Purchased at 73.66. Liquidated at 71.91. Loss on the trade of $175 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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