Issue #827
September 10 20, 2023 ,
The Oasis

Newsletter


The newsletter with chart analysis for stocks and stock indexes

Stock Indexes Analysis/Evaluation


Seasonal Downtrend Effect is being seen.

DOW Friday closing price - 34536
SPX Friday closing price - 4457
NASDAQ Friday closing price - 15280
RUT Friday closing price - 1851

The indexes all generated a red week. The September seasonal tendency to be the strongest down month of the year has begun to occur. Nonetheless, fundamentals are always what call-the-shots and the traders are waiting for the inflation report to come out this Wednesday, before they give in to the seasonal trend. Evidently, if the inflation number is lower than the anticipated 2% (core value), it will give the bulls some ammunition with which an attempt to prevent the negative seasonal trend from occurring. Any number higher than that would likely give ammunition to the bears. The overall number though, is expected to be higher than last month's 2%, given that the expectations are for a 6% rise. As such and after the numbers come out, we will see what the reaction is.

As far as the charts are concerned, the DOW has short-term pivotal support at 34029 and pivotal midterm support at 33610. A break of the former should take the index down to the 200-day MA, currently at 33789 and a break of the latter could generate enough selling interest to take the index all the way down to the 200-week MA, currently at 31629. In the SPX, the short-term and midterm pivotal point is 4335. A break of that level could take the index all the way down to the 200-week MA, currently at 4170. In the NASDAQ, the short-term and midterm pivotal support level is at 14739.

To the upside, here are the levels that if broken, would likely negate the expected September seasonal drop. In the DOW, the level is at 35070, in the SPX, the level is at 4541, and in the NASDAQ, the level is at 15618.

The probabilities do not favor the bulls. The inflation report is not likely to come in lower than expected but even if it does, it would need to be indicatively lower to prevent the seasonal tendency to be negated. The reality is that the indexes remain overbought and at such high levels (when compared to the all-time highs), that something fundamental and tangibly positive would need to happen for this correction and seasonal trend to be negated. Most of the analysts that I have been hearing on Bloomberg TV, continue to believe that some form of recession or further correction is to be seen this year.

As such, it is more likely that a drop down to the 200-week MA's (DOW at 31629, SPX at 3900, and NAZ at 12557) will be seen before the end of the year, than not. Then again, the amount of drop is not clear at this time and will depend a lot on the Fed Rate decision that is due out on Wednesday, September 20th. I do expect that a down week will be seen this week.


GOLD, as expected, generated a down week, having closed on Friday at $1942 after the previous week's bull failure to close above the $1966 level (closed at that level the previous week). Gold did close on the low of the week, suggesting further downside below last week's low at $1940 will be seen this week. Likely objective is $1929, to be seen before the inflation report comes out on Wednesday. The inflation report on Wednesday will likely be the fundamental catalyst for a short-term breakout (weekly close above $1966) or a short-term breakdown (a weekly close below $1929). The chart supports the latter but the decision is likely to be based on the fundamental outlook.

OIL generated a small trading range week but did close green and in the upper half of the week's trading range, suggesting further upside above last week' high at 88.08 will be seen this week. There is open air above to the 90.19/90.39 level. Decent and pivotal intraweek resistance is found at 93.74. To the downside and on a "daily closing basis", a confirmed close below 84.40, would negate this breakout. The inflation report on Wednesday could affect the price of Oil, but Oil has its own fundamental picture, which at this time strongly suggests further upside, irregardless to the inflation report. A trading range between $85 and $90 is expected to occur for the next 3-6 weeks. A weekly close above 92.61 or below 79.83 would change the chart picture.

DOLLAR generated a new 26-week intraweek and weekly closing high and did close on the high of the week, suggesting further upside above last week's high at 105.16 will be seen this week. The bulls were able to generate a new short-term buy signal, having broken the 13-week intraweek and weekly close resistance (104.70 and 104.21 respectively) convincingly. The bulls are now at a pivotal level of resistance (105.88 and 105.21 - intraweek and weekly close), which if broken, would officially end the downtrend and put the Dollar back into to midterm uptrend or recovery period, with a minimum objective of $108. Evidently the inflation report this week is important to what the traders are going to do, but more important will be the Fed rate decision on September 20th. Having said that, the probabilities do not favor this breakout occurring. A trading range between 102.31 and 105.21 (based on weekly closes) is the most probable.


Stock Analysis/Evaluation
CHART Outlooks

I have no new mentions this week given that the market is waiting for the inflation report on Wednesday before deciding what to do. Nonetheless, I will be adding positions in VWDRY this week (see the update below - under Held Stocks). In addition and after Wednesday morning's CPI report, I may put on addititional short positions. I will be announcing them on the message board.

By the same token, I will likely have new mentions in next week's newsletter.

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Updates
Closed Trades, Open Positions and Stop Loss Changes
CAT generated a negative reversal week, having made a new 5-week high but then reversing to close red. The stock closed in the lower half of the week's trading range, suggesting further downside below last week's low at 277.65 will be seen this week. If the occurs, the stock will show a needed/required retest of the all-time high made 6-weeks ago and that should bring in new selling interest. There is pivotal intraweek support at 268.80, which if broken, would offer a minimum downside target of 264.54. Using the daily closing chart, a confirmed daily close below 264.54 would open the door for a drop all the way down to the 200-day MA, currently at 241.66. Any intraweek rally above last week's high at 289.41, would give control back to the bulls, for an attempt to make new all-time highs.

DD bulls failed to follow through on the previous week's close on the high of the week and as such, a red week with a close on the low of the week occurred, suggesting further downside below last week's low at 74.88 will be seen this week. Pivotal support is found at 73.77, which if broken would open the door for a drop down to the 200-week MA, currently at 66.47. Nonetheless and in looking at the daily chart, there is support at the 200-day MA, currently at 71.50, meaning that this line would be the main target on a break of 73.77. To the upside, any break above 78.08, would give control back to the bulls and give an 81.54 objective.

ENG generated an inside week and traded within a $.04 cent trading range, meaning that there is no interest in trading the stock at this time, by either the bulls of the bears. Nonetheless, the stock has now generated 2 green weekly closes in a row and did close on Friday near the high of the week, suggesting further upside above last week's high at .346 will be seen this week. The stock remains at levels that are fully covered by the fundamentals, suggesting that if the stock does anything, it will be to the upside. The .30 and .40 levels are pivotal. A daily close above or below either one, will likely generate movement in that direction.

LXRX generated a new 16-month intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 1.57 will be seen this week. Nonetheless, the volume of trading is low and having made a new low, the volume should have picked up. The fact that it didn't, suggests that the continuing drop is more of no interest in trading the stock than in any negatives that are affecting the stock. On a negative note though, if the stock does go below last week's low and breaks below 1.56, there is open air down to the 1.31 level, meaning there is no established support below until that level is reached. Pivotal resistance is now found at 1.93.

PLNHF made a new 9-month intraweek high but when the bulls had to confirm the major breakout with a weekly close above 1.00, they were unable to do so, given that the stock closed at 1.00 on Friday. The stock closed exactly in the middle of the week's trading range, suggesting equal chances of going above last week's high at 1.20 as going below last week's low at .80. The rally came from tangible positive news, meaning that the bulls do have the edge right now. This is especially true when on the daily closing chart the stock did break on Thursday, the equally important resistance level at 1.00 (closed at 1.14) and the bears were unable to negate that breakout on Friday. Nonetheless, the 200-day MA is currently at .77, so it is possible that line will be a magnet. Either way, the fundamental news does now support higher prices. A daily close above 1.14 would likely thrust the stock up to the 1.40-1.50 level. A daily close below .75 would begin to negate the breakout.

TCEHY bulls failed to generate any follow through to the upside this past week, after having closed green and near the high of the week the previous week. The stock closed red and made a new 3-month intraweek and weekly closing low. The stock did close on the low of the week, suggesting further downside below last week's low at 40.00 will be seen this week. The bears are presently in control, which is also further supported by the Chinese index market that is also looking short-term weak. There is daily close support at 39.53 and at 37.32. It is highly likely that the former one will be seen this week. It is very difficult (at this time) to decipher what the midterm picture is for the stock. Nonetheless and in looking at all the charts (daily, weekly, and monthly), there is quite a bit of support between the 38.50 and 40.00 level, which suggests that the bears need negative fundamental news to break this area. Having said that, the bears are in control for now (next1-3 weeks).

TNC generated a sell signal on the daily and weekly closing chart this past week. The stock closed near the low of the week, suggesting further downside below last week's low at 77.29 will be seen this week. There is short-term pivotal intraweek support at 77.07, which if broken would leave open air below to 72.60. The 200-week MA is currently at 71.35, and that would certainly be a magnet if the 77.07 level is broken. Intraweek resistance is found at 80.53 and somewhat pivotal at 81.37. There is a open gap down on the daily chart at 74.25 that is likely to be reached this week or next, if there are no positive fundamental surprises.

TOL bulls failed to follow through on the previous week's new all-time high and close near the high of the week. The stock generated an inside week but did close below the previous all-time high at 83.52 (closed on Friday at 80.90), meaning that a failure signal against the bulls was given. The stock closed slightly in the lower half of the week's trading range, suggesting further downside below last week's low at 79.13 will be seen this week. If that does occur, there is open air down to 76.67. Intraweek resistance is now found at 82.54 and pivotal at 83.67. The failure signal given, as well as weak charts for the index market, suggests that the bears have the edge right now and that the bulls need new and positive news to take the stock higher.

VWDRY continued its free fall action, having dropped 26.5% in price over the past 7 weeks. During this fall, the stock has generated 6 red weeks and only 1 green week. Nonetheless, the stock has now reached the next level of established intraweek support between 6.55 and 6.89 (6.85 on a weekly closing basis), which should generate a bounce and some recovery. The stock closed on Friday at 6.94 and as such, it is expected that a positive reversal week is likely to occur this week. There is some daily close resistance at 7.50 and pivotal at 8.25. Getting back up to 7.50 has a high degree of probability. The low last week was 6.92 and as such, a drop down to at least 6.89, with a small possibility of it dropping down to as much as 6.55, is likely to be seen. Additional purchase of shares should be considered at these prices, given that the fundamental picture for the company over the next 12 months is highly positive. A drop below 6.55 would now be seen as a new negative.

ZLAB made a new 5-week high at 29.54 this past week, meaning that from the low seen the previous week at 22.43, the stock has rallied 24% over the past 2 weeks. Nonetheless and likely due to the weakness in the Chinese market, the bulls were unable to hold on to the gains and the stock fell back to close on the low of the week, suggesting further downside below last week's low at 25.91 will be seen this week. On a positive note, the bulls were able to confirm the failure signal against the bears that was given 2 weeks ago when the stock closed above 25.30, meaning that the stock is not likely to go down much further even if the Chinese index does. Important daily and weekly close support is now found at 25.30. As long as that support is not broken, the bulls will hold on to the edge they got when the positive fundamental news came out 2 weeks ago. Pivotal daily close resistance is now found at 28.64. The stock is likely to see 25.30 this week but the chances of a green weekly close next Friday are 50-50.


1) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 26.40.

2) ENG - Averaged long at 2.876 (6 mentions). No stop loss at present. Stock closed on Friday at .334.

3) VWDRY - Averaged long at 9.565 (2 mentions). Stop loss at 8.67. Stock closed on Friday at 6.94.

4) - Purchased at 1.61. Now averaged long at 2.495 (2 mentions. No stop loss at present. Stock closed on Friday at 1.59.

5) TCEHY - Purchased at 43.23. No stop loss at present. Stock closed on Friday at 40.29.

6) CAT - Shorted at 283.04. Stop loss now at 290.35. Stock closed on Friday at 282.28.

7) TNC - Shorted at 83.25. Stop loss now at 84.35. Stock closed on Friday at 78.26.

8) TOL - Shorted at 80.62. No stop loss at present. Stock closed on Friday at 80.92.

9) DD - Shorted at 77.65. Stop loss at 78.84. Stock closed on Friday at 75.41.


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Disclaimer

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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