 |
 |
 |
 |
 |
 |
Issue #856 
April 7, 2024 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
|
| Strong indications were given this past week that suggest the end of the rally might be over.
DOW Friday Closing Price - 38904 The indexes generated a red week and all closed in the lower half of the week's trading range, suggesting further downside below last week's lows (DOW below 38559. SPX below 5146, NASDAQ below 18785 and RUT below 2048) will be seen this week. Nonetheless, the SPX and the NAZ closed just very slightly below the midpoint of the week's trading range, meaning that it is possible that they could go above last week's highs at 5263 and 18391, respectively. Nonetheless, the red weekly closes are a negative. In the case of the DOW and the RUT, the red weekly close did generate failure signals against the bulls. In the case of the NASDAQ and on the weekly closing chart, a double top at 18303/18339 has now been formed. In the case of the SPX, there are now 3 intraweek highs at 5261, 5264, and 5263, suggesting that there is now decent intraweek resistance that will not be broken without some positive fundamental news. The ISM report and the JOBS came out this past week and they were both better than expected but they failed to generate new all-time intraweek highs. This means that on a economic report basis, positive reports are not likely to generate new highs. The inflation report (CPI) is due out on Wednesday and if that report is anywhere close to the expected number at 3.5% it is not likely to help the bulls. In fact, the report would need to be quite negative (under 3%) for it to have any "potentially" positive effect, given that the market is presently reacting to whether the Fed will lower interest rates or not, and only lower inflation would give the Fed any reason to lower rates. Even then, a lower inflation report would not necessarily be a positive for the market given that the market is already in overbought condition that is screaming out loud for some corrective phase to occur. Having said that, the levels of support and resistance are now clearly defined and the probabilities of one or the other being broken this week are high. In the DOW, those levels are at 38457 and at 39890. With the index closing on Friday at 38904, the bulls would need a rally of 986 points for it to be positive, while the bears only need 437 points for it to be a negative. In the SPX, those levels are 5264 and 5123, meaning a rally of 60 points or a drop of 81 points. In the NASDAQ, those levels are at 17764 and at 18464, meaning that a rally of 356 points or a drop of 344 points. In the RUT, those levels are at 2135 and at 2009, meaning a rally of 72 points or a drop of 57 points. As you can see and with the exception of the DOW, the indexes are mostly in the middle of those trading ranges. This means that this week is likely to be a big up or down week, given that those levels are pretty far away from Friday's closing prices. The earnings quarter does begin on Friday with JPM and WFC reporting. Normally, the first 3 weeks of the earnings quarter would be a big deal, given that the traders would be keying on how the big stock/companies are doing, in order to make decisions on what the market is to do for the next 3 months. Nonetheless, the big key to the market right now is the Fed and earnings on these companies are not going to affect the decisions made by the Fed. This does suggest (once again) that the inflation report this week could be pivotal and that the earnings reports are not likely to be playing a big part this quarter. Keep in mind that this is simply "my opinion" and I could easily be wrong. Anyhow, the inflation report on Wednesday is only 3 days away and after that report comes out, we will know if this evaluation is correct or not. By Friday, either the support or resistance levels should be broken. As such, we wait until then to make decisions. By the same token, what happened this past week does mean that the probabilities do favor the bears.
OIL generated a new 23-week intraweek and weekly closing high and closed near the high of the week, suggesting further upside above last week's high at 87.63 will be seen this week. Oil broke all the intraweek resistance levels (6 of them) that have been set over the past 18 months except the two remaining ones at 89.85 and at 95.03. On a weekly closing basis, the two remaining resistance levels are at 87.79 and at 90.69 (on a daily closing basis, they are at 89.37 and at 93.36). There is open air up to the 89.85 level, meaning that Oil should easily get up at least another $2 above Friday's close. Having said that, Oil seems to be in the same situation as Gold, with more upside to be seen this week but with an upside objective that is not likely to generate any further upside above that level of resistance. I do want to add that other commodity products, such as Silver and Copper, are also facing the same chart scenario as Gold and Oil, meaning that this is about the commodity market in general and not about any one commodity on its own. It is of some (minor) note that Oil sold off late Friday to close in the middle of the day's trading range, suggesting that some selling interest is starting to be seen. Friday's low at 84.64 has now become short-term pivotal support, which if broken, would suggest the rally may have found a top. Nonetheless and at this time, the probabilities favor Oil getting up to the $89 level before seeing any selling of consequence step up. As such, the 84.64 level of support is not likely to be in play this week.
|
Stock Analysis/Evaluation
|
CHART Outlooks
With the action seen last week and the overbought condition that presently exists, the trades that should be considered this week are sells. Nonetheless, even if the sales mentions reach their desired entry points before Wednesday, the probability ratings on those trades will be relatively low. After Wednesday though, they will either be canceled (if the desire entry points have not been reached) or lower entry points (chasing the stock) will need to be found.
I do want to let you know that due to the recent results of my short mentions this year (which have not been good), I did give extra thought and did extra searches for good stocks to short. I looked at over 80 stocks and I also looked at what industries they were in (based on the fact that some industries, such as AI are going up no matter what) so that fundamentally and chart-wise, had a fair chance of going down. I did find 3 stocks that have chart patterns, are overbought, and have clear risk/reward ratios that are excellent. These are the mentions for this week.
SALES
AMZN Friday Closing Price - 185.07
AMZN got to within $2.38 cents of its all-time intraweek high and within $.90 cents of it all-time weekly closing high. The stock did close near the high of the week and further upside above 186.27 is expected to be seen. Nonetheless, the company is facing legal issues with the FTC, which if they lose the lawsuit (due to be heard in 2026), it would affect the company negatively and in a big way. As such, buying interest in Amazon at all-time highs is likely to be limited, even if it occurs. This scenario, in conjunction to what is happening to the market overall, makes the stock a very appetizing sale for the big companies.
With AMZN being in a very close area to its all-time highs and the chart showing very little established support until the $160 level is reached, sales of the stock at these levels offers a very good risk/reward ratio (perhaps even as high as 11-1) and a decent probability rating (over 3.5 - On a scale of 1-5). These numbers (of course) are seen now but could change after the inflation report on Wednesday. Either way though, the problems the company is facing on its own, do make this short almost a "must-do" trade.
As stated above, there is very little established support until the $160 level is reached. In looking at the monthly chart, there is zero support until 158.81 is reached. In looking at the intraweek support, there is minor support at 171.47 and again at 165.75 and then clear air until 158.18 is reached. On a weekly closing basis, the support is at 174.42 (which if broken would generate a sell signal) and at 169.41, which if broken would confirm that a top has been found. Below that, there is open air to 160.00. On a daily closing basis, a sell signal would be given if the 180.00 level is broken and a failure signal given if 178.75 is broken. To the upside, intraweek resistance is found at 188.85. On a weekly closing basis, resistance is at 185.97. On a daily closing basis, resistance is found at 186.57.
It is likely that AMZN will get up this week to the 186.67 level, meaning that will be the desired entry point. Stop loss point will be that 188.95 but it will be a mental stop as a new high by less than 30 points would still offer a possible double top scenario. Even then, if the stock makes a new all-time high before Wednesday's inflation report, waiting for the report should be done, before considering any liquidation. With $160 being the minimum downside objective (using the above numbers), the trade offers an 11-1 risk/reward ratio.
CPRT Friday Closing Price - 57.92
CPRT is a stock that has been on a tear since September 2022, having increased over 200% in value from 26.60 to 57.92 (based on monthly closes) over the past 19 months. During this period of time, the stock has made 3 new all-time high monthly closes and based on last month's close, the stock rallied 14.9% above the previous high monthly close. This month, the stock is having a negative reversal month, having gone above the previous month's high at 58.15 (this months high so far has been 58.58) and now trading red.
More importantly, CPRT generated a key reversal week this past week, having made the new all-time high on Monday and then closing out the week below the previous week's low. It also needs to be mentioned that the stock did generate a rally on Wednesday, above Tuesday's high and then made the new lows for the week, meaning that on the daily chart, the all-time high now show a successful retest of it. Adding to all of this, there are 4 rating companies that have followed this stock for the past few years and the company that had the highest rating, had an upside objective of $58, that objective has now been reached with the stock closing on Friday at 57.92. Simply stated, everything about this stock now suggests that at least a correction to this rally is to occur.
If a correction is occurring with CPRT, the potential downside objective is likely to be the original all-time high made in November 2021 at 38.91. Nonetheless, reaching that objective would probably take a year or more to achieve. On a shorter term basis, a drop down to the 47.50 level could be seen over the next 8-14 weeks.
CPRT closed near the high of the day on Friday and the first course of action for the week is likely to be above Friday's high at 56.95. There is no resistance found until 57.58 is reached, suggesting that could be the objective for Monday or Tuesday. As such, that will be the desired entry point.
Sales of CPRT around the 57.58 level and using a stop loss at 58.73 and having a downside objective of 47.50, will offer a 6-1 risk/reward ratio. My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest).
DD Friday Closing Price - 75.53
DD is a stock that for the past 18 months has traded consistently in a trading range between 78.75 and 61.14. It has been up to the highs on 4 occasions and to the lows on 2 occasions. This past week, the stock made a new 30-week high at 77.94 but then generated a negative reversal week, having closed red, having gone below the previous week's low, and closing near the low of the week, suggesting further downside below last week's low at 74.92, will be seen this week.
With the index market likely to head lower and DD having reached a strong and established resistance level and turning down, it does strongly suggest that the established lows are likely to be tested again.
For the previous 9 weeks, DD had moved up over 30% in a straight up manner, with no support levels built, meaning that the bulls do not have any close by levels of established support from which to purchase the stock with a clear limitation of risk. There is some very minor (but relatively old) intraweek support at 73.14. The next support (but also relatively old) is at 72.36. It is a bit stronger, meaning that a bounce could occur from that level in order to retest this recent high. Nonetheless, below that level there is open air down to the 66.66 level, which does include (on a weekly closing basis) the 200-week MA, which is currently at 69.63. For this mention, that level will be the objective. By the same token, if this move down in the index market is not just a correction but the beginning of a downtrend, a drop down to the $61 level could easily occur.
To the upside, DD did close in the upper half of the day's trading range on Friday, suggesting that Friday's high at 75.91 will be broken on Monday If that happens, there is open air up to the 76.82 level, which will be the desired entry point into the short position.
Sales of DD around the 76.80 level and using a stop loss at 78.35 and having a 66.60 downside objective, offers a 6-1 risk/reward ratio. My rating on the trade is a 3.75 (on a scale of 1-5 with 5 being the highest).
|
Updates
|
Closed Trades, Open Positions and Stop Loss Changes |
|
|
BABA generated a negative reversal week, having gone above the previous week's high and then closing red and on the low of the week, suggesting further downside below last week's low at 71.41 will be seen this week. The stock did make a new 11-week weekly closing low but during these past 11 weeks, the stock has generated 8 weekly closes between 71.85 and 73.96, meaning that the close on Friday at 71.66 is not all that indicative of new weakness. The stock does remain above the 12-week weekly closing low at 69.42. On the daily chart and since December 11th (4 months), the stock shows 8 previous intraweek lows between 70.00 and 72.23, meaning that the stock remains in a trading zone that is not indicative of any special or indicative weakness. Short-term pivotal resistance is now found at 72.56 and equally indicative-to-the-downside support is at 70.00. The Chinese index market is showing a higher possibility of going up rather than down and that should help the stock. ENG remained "dead in the water", having generated another uneventful week. Nonetheless, the stock did generate the lowest weekly close (by $.02 cents) seen in the past 4 weeks, suggesting the traders might be testing the most recent intraweek support at 1.60 this week. Having said that, the stock has had a low of 1.55 and a high of 1.92 during the past 3 weeks (15 trading days) and until one of the other get broken, the stock will be going nowhere. GCI generated a negative reversal week, having made a new 9-week intraweek high and then closing red and slightly in the lower half of the week's trading range, suggesting a slightly higher probability of going below last week's low at 2.24 than going above last week's high at 2.49. Having said that, there is a small mountain of intraweek support between 2.14 and 2.26 and on Friday it got down to 2.24 and then closed on the high of the day at 2.34, suggesting further upside above that high will be seen on Monday. The 200-day MA is currently at 2.40 and if the bulls can close above that line, it will give the edge back to bulls. Otherwise, it is evident that the stock is trading sideways for now and until either 2.14 or 2.49 get broken, the sideways movement will continue. JD generated a negative reversal week, having made a new 3-week high and then closing red and on the low of the week, suggesting further downside below last week's low at 25.96 will be seen. There is a small mountain of intraweek, daily close and weekly close support between 24.01 and 24.66, which should be seen this week. Nonetheless, such a move down (if the supports are not broken) would be more bullish than bearish, given that a flag formation seems to be being built. A move down to 24.66 (for example), would make that level not only a test of support but the building of the bottom of the bullish flag. If that formation is built with these parameters and then broken to the upside, it would give a 32.03 objective. That objective also fits in with the overall chart support and resistance levels, given that at 32.10 there is a pivotal daily close that when broken, generated the move down to the $21 level. A retest of that level is always a high chart probability when a stock has found a bottom to the downtrend (which the stock has done). Having said that, a break below 24.01 or above 28.55 would now be indicative. LXRX generated another sell signal on the weekly chart, having closed below the most recent weekly close support at 2.17 (closed at 2.06). This weekly close keeps the bears with the short-term control, with the target being the 1.91 level of weekly close support, which is considered decent support. This move down does mean that more base building and retest of the lows action is needed. It does put the stock in a situation where an intraweek trading range between 1.70 and 2.70 (on a weekly closing basis, between 1.90 and 2.50) will be seen for the next 2-4 months. SIMO generated a new 9-month intraweek high and a new 18-month weekly closing high. The stock closed near the high of the week, suggesting further upside above last week's high at 81.84 is expected to be seen this week. Nonetheless, the stock has reached a level of decent and indicative weekly close resistance between 80.00 and 81.74 that seems likely to stop the rally and generate a correction. The stock closed on Friday at 80.40 and that is above a previous high weekly close resistance of importance at 80.00. Nonetheless, the resistance was only broken by $.40 cents and the weekly close resistance at 81.74 remained unbroken. The stock does have bullish fundamentals and the rating companies do project the $90 as the objective. Having said that, the stock has moved almost straight up for the past 12 weeks without building any support and the probabilities do favor a correction occurring with a downside target of $66. This does strongly suggest that taking profits this week and rebuying the stock after a correction has occurred is likely the most sensible approach. If the stock fails to get above last week's high and goes below the intraday support at 79.80, which does include the 200 10-minute MA, currently at 80.05, the stock should be liquidated. The stock has been above the 200 10-minute MA for the past 5 days and a break of that line would be indicative. SNDL made a new 17-month intraweek high but then sold off to still close green but in the lower half of the week's trading range, suggesting that at some point this week, the stock will go below last week's low at 1.91. Having said that, the stock has now generated 2 weekly closes above the important and pivotal weekly close resistance at 2.15, suggesting that this breakout is "for real". As such and on a weekly closing basis, the 2.15 level should not get broken to the downside any more. Some support building action is likely to be seen for the next few weeks, before the bulls attempt to renew the uptrend and go above last week's high at 2.67 and target the next area of resistance at 4.50. Any drop now below 1.91 would be a negative. VWDRY generated a short-term sell signal this past week, having closed below the most recent low weekly close at 9.09. The stock closed near the low of the week and further downside below last week's low at 8.61 is expected to be seen. There is pivotal intraweek support at 8.50, which if broken and then confirmed with a daily close below 8.53 would be a "game changer". This means that this week is strongly pivotal for the stock, with the bulls in a must-generate a green weekly close next Friday or lose control of the rally. The stock did generate a close on the high of the day on Friday, suggesting the first course of action for the week will be to the upside and above Friday's high at 8.71. There is no resistance above until 9.33 is reached (very minor) and then pivotal resistance between 9.65 and 9.71. ZLAB made a new all-time low weekly close on Friday, having closed at 15.52 and the previous one being at 15.70. The break of support was not by enough of a margin as to be convincing but it does force that bulls to generate a green weekly close next Friday or face a major game changer. It is evident that the traders are aware of the importance of this level, given that on Friday, the stock traded 95% of the day between 15.52 and 15.87. The stock did close near the low of the week and further downside below last week's low at 15.24 is expected to be seen this week. The all-time intraweek low is at 14.29, meaning that on an intraweek basis, there is room for further downside without it being a game changer. Nonetheless, the week that low was made (October 2018), the stock closed in the lower half of the week's trading range but no further downside was seen the following week. As such, it is possible that no further downside is seen. Last week's high at 16.43 is now short-term pivotal resistance.
|
1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 15.52. 2) ENG - Averaged long at 18.30. No stop loss at present. Stock closed on Friday at 1.69. 3) VWDRY - Purchased at 8.74. Averaged long at 8.68 (4 mentions). No stop loss at present. Stock closed on Friday at 8.70. 4) LXRX - Averaged long at 1.495 (2 mentions). No stop loss at present. Stock closed on Friday at 2.06. 5) GCI - Purchased at 2.35. Averaged long at 2.14 (2 mentions). Stop loss at 1.85. Stock closed on Friday at 2.34. 6) BABA - Purchased at 72.54. Stop loss at 69.65. Stock closed on Friday at 71.66. 8) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed on Friday at 2.20. 9) JD - Purchased at 21.33. Stop loss is at 23.55. Stock closed on Friday at 26.02. 10) GILD - Liquidated at 71.17. Averaged long at 72.35. Loss on the trade of $236 per 100 shares (2 mentions). 11) SIMO - Averaged long at 63.45 (2 mentions). Stop loss now at at 79.65. Stock closed on Friday at 80.40. 12) TOL - Covered shorts at 121.92. Shorted at 121.49. Loss on the trade of $43 per 100 shares.
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. |
|
|
|