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Issue #872 
August 4, 2024 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| "Clear" fundamental and chart signs that the market is heading lower.
DOW Friday Closing Price - 39737 The economic reports this week (ISM index and JOBS) were disappointing and suggested that the economy is faltering. With the Fed announcing on Wednesday that there would be no rate cut in July, and then these reports coming out, it meant that nothing would be done to ease the slowdown, for at least another 6 weeks. The news triggered a selloff of consequence, with the 3 main indexes falling around 3% in value and the small cap index falling 6.7%. The DOW generated a failure signal against the bulls, having closed on Friday below the previous all-time weekly closing high at 40003. The SPX and the NASDAQ both generated another sell signal on the daily closing chart (3rd in a row), and the RUT generated a sell signal on the daily closing chart, as well as a failure signal on the weekly closing chart, having closed below the previous 30-month weekly closing high at 2124. All indexes closed near the low of the week and further downside below last week's lows (DOW at 39358, SPX at 5302, NAZ at 18263 and RUT at 2090). This was the first time this year that the news was clear and the action that followed left no doubt that the highs for the year in all indexes are now likely set. There are no possibly catalytic reports due out for the next 3 weeks and the only report that could cause some unexpected action is the Inflation report that is due out on Tuesday August 13th. At this time, inflation is no longer the key issue in the market. The economy is now the key issue and there are no scheduled reports with any possibly catalytic consequences that can derail what started this week. As such, the charts are likely to be very important for the next 3 weeks, and then only as far as indication of what the traders/computers/algorithms trading is concerned. Evidently and based on last week's action, there is more downside to be seen this week. The DOW shows no support below until 38908 is reached. Even then, that support is minor and not a support that can be depended on. With the index closing at 39753, it means an additional drop of about 850 could be seen. The SPX shows minor intraweek support at 5191 (about 155 points lowr) but on a daily closing basis, the support is found at 5254. The NASDAQ shows intraweek support at 18139 (about 300 points lower) and daily close support at 18339. The RUT has intraweek support of some consequence at 2009 (about 100 points lower) but does have some minor support at 2029. It is clearly evident that the NASDAQ is the index to watch, not only because its support is closer than the other indexes but also because this is the index that is likely to lead any kind of a recovery rally. Having said that, the 200-day MA is currently at 17643 (about 750 points lower) and that line is now a magnet that is likely to be reached at this time or sometime over the next 6 weeks. In looking at the monthly chart, the 16973 level (1467 points lower) is strongly pivotal to the mid-to-long term outlook. A break of that intramonth level will confirm that the 15-year uptrend has ended. One last thing that needs to be understood is that if the bulls want to prevent some additional drops (below what is mentioned above) from happening, they need to do so over the next 3 weeks. Seasonally speaking, August can go either way (up some or down some) but September is seasonally the worst month of the year. This means that the bulls need to do everything in their power (starting this week) to recover some of the losses seen this past week. Chart-wise and in order to do that, these are the now resistance levels above that need to be broken. In the DOW, intraweek resistance is found at 40077. In the SPX and on a daily closing basis, a close above 5399. In the NASDAQ, a daily close above 18796. If these things happen, it will take "some" ammunition away from the bears and make the downside in August not so indicative. A break of these levels will not turn things around, it will just ameliorate the downfall. As far as the RUT is concerned, the outperformance to the downside this past week (fell more than twice what the other indexes fell) was likely overdone. Those were the stocks that received the most buying interest the past 3 weeks and as such, were the first sold this past week. Nonetheless, those stocks were already at very depressed price levels and as such, should not have much more downside before support is found. The monthly chart does not suggest that this index will have much downside over the next two months (as the other indexes show). The index should stay above the 2028 level on a monthly closing basis, for the rest of the year, meaning that no more than another 4% drop should occur (over the next 2 months). Having said all of the above, this certainly was an indicative week and from the point of view of "trading the charts", this was a positive thing. The confusion shown most of the year will now be replaced with confidence that the charts will now (once again) have some meaning. The charts do suggest that this week will have both red and green seen. Further downside (below last week's lows) will be seen but rallies above Friday's closes will be seen as well (see the resistance levels mentioned above). HSI generated another red weekly close but this time, the loss was minimal (16945 vs 17021 = 76 points), meaning that there is buying interest here at the 17000 level. The index got down to the 17000 level on 6 out of the last 7 days and a bounce from there was seen every time except on Friday. There has been no new negative economic news of consequence released and as such, the bears do not have any new ammunition. The 17000 level is a support level of some consequence as it is the level from which (when broken to the upside) signaled that the 42-month downtrend was over. The 14687 downtrend bottom (on the monthly closing chart), was tested successfully once (15585 - 8 months ago) and this current drop is likely to become the 2nd successful retest. If the support here does not hold up (though it should), more support is found around the 16545 area, meaning that at most, only about 2.4% drop could be seen. Pivotal resistance is now found at 17408.
GOLD(Dec 24 chart) made a new all-time intraweek and weekly closing high, having gone up to $2522 and closing out the week at $2469 (above the previous high weekly close at $2428). Nonetheless, Gold generated a negative reversal day on Friday, having made the all-time high on that day (early in the morning) and then closing red and below Thursday's low. Gold closed in the middle of the week's trading range, suggesting equal chances of going above last week's high at $2522 or going below last week's low at $2414. With the first course of business on Monday likely being to the downside and selling being seen everywhere, probabilities "slightly" favor Gold having found a top to the rally. For that to happen, Gold will need to go below $2414 this week and close below $2428 on Friday. Otherwise, the bulls will still be in control. OIL generated a new sell signal on the weekly closing chart, having closed below the 6-month low weekly close support at 75.53 (closed at 74.15). Oil closed on the low of the week, suggesting further downside below last week's low at 72.97 will be seen this week. On a fundamental basis, there are a lot of problem occurring in the middle east that could disrupt Oil production, suggesting that the bears do not have a clear view to the downside. In addition, there is a lot of weekly close support between 71.23 and 75.16 that is likely to hold up for that reason alone. The chart does suggest that Oil is likely to see a weekly close at 71.50 before any recovery occurs. As such, that is the downside target for this week. A weekly close above 75.53 would take some of the sell pressure off.
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Stock Analysis/Evaluation
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CHART Outlooks
With the clear signals given this past week, the only thing that should be considered at this time are short positions. Nonetheless, with support levels not far below, chasing stocks is not a good idea. As such, shorting stocks when some bounce/recovery occurs is the way to go. The mentions given below all fit that scenario.
AAPL Friday Closing Price - 219.86
AAPL reported earnings this past week and they were slightly better than expected. In addition, the company is brining out a few new upgrades on existing products that seem to be positives and as such, the stock is not likely to head lower at this time, especially if the indexes reach support and bounce. On a big negative news, Warren Buffett (through Berkshire) sold 15% of its holdings on the company and it is expected they will sell more.
AAPL is therefore likely to generate a rally to test the all-time high at 237.23. The all-time high weekly close is at 230.54 and there is a decent possibility that the stock will rally to that level, making it the desired entry point. Downside target is the previous all-time high weekly close at 197.57 and the stop loss at 237.33. As such, the risk is $669, the profit potential is $3297 (per 100 shares), making the risk/reward ratio is 4.9-1. My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest.
This is not a trade that is likely to be filled this week. It is a trade though, that should be done whenever the desired entry point is reached. If I decide to change the desired entry point and stop loss, I will mention it on the message board.
AEP Friday Closing Price - 101.79
AEP is an electric power company and the stock has risen over the past 11 months from a low of 75.54 to this week's high at 104.35 (a 27% rise in value). Utility companies are not usually known for moving too much in value, but this company has been one of those exceptions given that for the past 5 years, the stock has averaged $28 moves per year, with the smallest year (2021) having a $20 trading range, and the biggest year (2020) having a $39 trading range. Having said that, the high for the past 5 years has been 105.60 (in 2022) and the low has been 65.14 (in 2020) and it is unlikely that a new all-time high will be made this year.
AEP rallied strongly this past week (from 96.45 to 104.35) because 6 different rating companies raised their upside objectives for the company. Here are the upside objectives given by the 6 different companies ($97, $98, $99, $100, $102, and $107). With the stock having gotten up to 104.35, all but 2 of the objectives have been reached. With the stock having closed in the upper half of the week's trading range, it does suggest that the stock could get up to the $105 level this week, meaning that 4 (of the 6) objectives will have been surpassed, 1 reached, and 1 not accomplished.
Going back the past 4 years there have been 5 times that the stock got higher than 104.35. Those 5 highs are at 104.81, at 105.48. and 105.00. 105.49 and at 105.60. This means that this area of resistance is major and the stock needs positive fundamental news to break above this level, and that is not likely to occur.
AEP closed on Friday at 101.72 and it closed slightly in the lower half of the day's trading range, meaning that if it goes on Monday below Friday's low at 99.72, the bulls will have trouble going above last week's high at 104.35.
To the downside, AEP shows intraweek support at 96.99, at 94.97 and again at 90.09. Nonetheless, all 3 of those supports are minor. The stronger and likely to hold up for the rest of the year, is the support at 87.63, and as such, that is the objective of this trade.
Sales of AEP between 103.63 and up to 105.00 and using a stop loss at 105.70 and having a downside objective of 87.63 will offer at least an 8-1 ris/reward ratio. My rating on the trade is a 4 (on a scale of 1-5 with 5 being the high). I do recommend though, that the stop loss be a mental stop loss as one rating company's objective is $107. A 107.35 stop loss would still offer at least a 4-1 risk/reward ratio.
DD Friday Closing Price - 79.12
DD has rallied from 61.14 to 85.12 over the past 28 weeks. In addition, the stock reported earnings on Wednesday morning and they were much better than expected, causing the stock to rally 5.6% overnight. The following day, about 5 rating companies raised their price targets with some giving a $105 price target. Nonetheless, the end result for the week is that the stock generated a negative key reversal week, having made a new 31-month intraweek high but then closing red, below the previous week's low and on the low of the week, suggesting further downside below last week's low at 78.43 will be seen this week.
Evidently and with the idea of "not chasing stocks", DD has to rally back up to a desired entry point before it can be considered for shorting. Even then, this is a "pure chart trade" as the fundamentals seem to favor further upside to higher prices. Having said that though, the chart picture is bearish, given that since 2019 (5+ years), the bulls have been unable to get above 87.27, though the stock has been above $84 on 9 different months. This makes this resistance area strong and difficult to break.
DD is presently showing recent intraweek resistance at 82.63 and 1-year old resistance at 81,57. As such and given the news and last week's high at 85.12, a rally back up to at least the 82.30 level is likely to be seen. That level (or higher) will be the desired entry point.
To the downside, DD has a clear objective of getting down to the 200-week MA, currently at 71.50. Such an objective only offers a 3.5-1 risk/reward ratio and given the fundamental picture, that trade is not all that attractive. Nonetheless and in looking at the monthly chart, that chart shows no support whatsoever until 66.37 and if the stock gets down to that price, the 200-month MA will beckon and that line is at 62.58. Much will depend on the economy (as far as reaching those downside potential objectives), but the reality is that the resistance presently in place, is strong enough that even a 3.5-1 risk/reward ratio looks attractive.
Shorting DD above 82,30 and using an 85.35 stop loss and having a 71.50 objective offers a 3.5-1 risk/reward ratio. My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest). The fundamental picture is what keeps the rating down.
FSLR Friday Closing Price - 213.04
FSLR is the #1 clean energy company in the U.S. but is a company that has shown a fair amount of volatility during its lifetime. In the last 16 years, the stock has been as high as 317.00, as low as 11.43 and most years it has traded in ranges of $50 or more dollars.
FSLR got back up to 306.77 just 3 months ago and it is now trading at 213.04. All the news that has come out of late (last 6 weeks) has been positive and yet the stock generated a failure signal on the weekly chart 5 weeks ago and the same thing happened on the monthly chart at the end of July. The failure signal has now been confirmed on 4 subsequent weeks in a row, and a new weekly low was made on Friday, in spite of the fact that the company reported better than expected earnings and Barclay's increased its upside objective from $280 to $290.
The chart action seen does suggest that a drop down to the $170-$180 level is on the immediate horizon. With the previous multi-year high weekly close being at 231.69 and that level now having a successful retest with the close 3 weeks ago at 226.74, followed by a new 10-week low weekly close, the risk/reward ratio is good and the trade does favor the bears.
Having said all of the above, the intraday charts are clearer (as far as the desired entry point is concerned), and I will be using them for this trade. On the 60-minute chart, FSLR has been below the 200 60-minute MA for the past 27 days. That line has had 4 successful retests over the past 7 days and therefore it is dependable. The more recent retest and intraday high was at 227.99, meaning that the stop loss will be at 228.35. The same chart, suggests that a rally back up to the $218-$220 level is likely to be seen, meaning that will be the desired entry point.
To the downside, the monthly chart has 172.28 as the objective. The intraweek chart, gives a 170.55 objective. The daily closing chart has the 200-day MA being currently at 181.99. This means that if the short is done at the desired entry point, the maximum risk is $1035 and the minimum profit potential is $3600, meaning a 3.5-1 risk/reward ratio. On the other side of the coin, if the higher desire entry point is reached and the lower objective is reached as well, the risk would be $835 points and the profit potential would be $4945 (per 100 shares), meaning a 6-1 risk/reward ratio. My rating on this trade is 3.25 (on a scale of 1-5 with 5 being the highest).
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Updates
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| Monthly & Yearly Portfolio Results
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Closed Trades, Open Positions and Stop Loss Changes
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Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted. Status of account for 2023, as of 7/1 Loss of Loss of $4,541 using 100 shares per mention Closed out profitable trades for July per 100 shares per mention
AAPL (short) $1506
Closed positions with increase in equity above last months close minus commissions. NONE Total Profit for July, per 100 shares and after commissions $1,506 Closed out losing trades for July per 100 shares of each mention (including commission)
NONE
Closed positions with decrease in equity below last months close plus commissions. INTC (long) $23 Total Loss for July, per 100 shares, including commissions $23 Open positions in profit per 100 shares per mention as of 8/1
DSGR (long) $492
Open positions with increase in equity above last months close.
BABA (long) $1370 Total $5,260 Open positions in loss per 100 shares per mention as of 8/1
AXP (long) $1229
Open positions with decrease in equity below last months close. SNOW (long) $1413 Total $2,642 Status of trades for month of July per 100 shares on each mention after losses subtracted.
Profit of $4,101
Status of account/portfolio for 2024, as of 7/31Loss of $440 per 100 shares.
AXP bulls were unable to generate any further upside after closing on new all-time highs and on the high of the week the previous week. Instead, the stock generated as much downside as seen the previous week to the upside, and generated a failure signal against the bears, having closed below the previous high weekly close at 240.00 (closed at 232.38). The stock closed near the low of the week and further downside below last week's low at 230.05 is expected to be seen. It can be said that this stock has been one of the leaders to the upside among all stocks as it had rallied 27% in price over the previous 8 weeks, meaning that this stock is going to be a good indicator this week as to what the DOW is likely to do. There is short-term pivotal intraweek support at 220.74, which if broken would mean that a top to the uptrend has been found at 256.26. A further break below 214.51 would confirm that signal. Intraweek resistance is now found at 243.54, which if broken (unlikely) would take away the severity of the move down seen this week. Like with the NASDAQ, the 200-day MA, currently at 207.77, is now a clear objective to be reached within the next 6 weeks. BABA generated a relatively uneventful week. It did close green and it did stay above the 200-day MA, currently at 76.09, all week and in spite of the weakness seen in the Chinese index. Nonetheless, it did close in the lower half of the week's trading range, suggesting a larger probability of going below last week's low at 75.77 than above last week's high at 80.02. The two "short term" pivotal intraweek levels to watch are 74.55 and 81.01. A break of either will bring additional buying or selling interest. DSGR generated a negative reversal week, having made a new 9-week high and then closing red and near the low of the week, suggesting further downside below last week's low at 32.00 will be seen this week. The stock did get up to established intraweek resistance between 35.61 and 36.61 with the week's high being 35.90. With the economy now beginning to regress, the probabilities of the stock having found a top to this rally are now high. This means that consideration to liquidating this stock on a recovery rally should now be given. The chart does suggest that at least a rally to 33.76 to perhaps as high as 34.68 is likely to be seen. Pivotal intraweek support is now found at 31.11, which if broken, would give the bears back control. JD made a new 16-week intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 24.77 will be seen this week. Nonetheless, the stock is showing decent intraweek support between 24.01 and 24.66 and decent to perhaps even strong weekly close support between 24.22 and 24.33. Indicative intraweek resistance is found at 27.39, which if broken would indicate the bears have lost their recent edge. The monthly chart does suggest that 24.01 will be seen in August but that the stock will close at 25.42 or higher at the end of the month. If that does happen, the target to be reached by the end of the year would be 32.86 (based on a monthly close). LXRX reported earnings on Thursday and they were worse than expected. The stock gapped down and closed below the 200-day MA, currently at 1.79 (closed at 1.70). Nonetheless, the fundamental outlook for the future remains very positive and the 9 rating companies that follow the stock, maintained their bullish outlook. The break of the MA was likely because the small cap index and all small cap stocks were weak this week. The stock closed red and on the low of the week, suggesting further downside below last week's low at 1.65 will be seen this week. There is a lot of intraweek support between 1.48 and 1.59, which is likely to hold up and if so, and the bulls can get the stock back up the MA line, this is a stock that is likely to outperform the market the rest of the year. Indicative intraweek resistance is now found at 2.04. Any weekly close below 1.46 would weaken the chart and a close below 1.30 would be destructive to the bulls. PYPL received upgrades from 2 rating companies (with upside objectives of $75 and $81) this past week and the stock rallied 13% off of the news. Nonetheless and due to the weakness seen in the overall market, the gain at the end of the week was only 6% and the stock closed in the lower half of the week's trading range, suggesting a slightly higher probability of going below last week's low at 58.07 than above last week's high at 67.03. The reality is that the news was good enough to prevent new lows from being made but on the other hand, the overall market is under sell pressure and as such, the probabilities are that the stock will do neither this week. Having said that, the gap that was created off of the news and down at 59.01 is likely to be closed as gaps normally are not supported by rating changes. The 200-day MA is currently at 60.87 and that line is expected to hold up. On the other hand, the stock did gap down on Friday (from 65.02) and that gap is also likely to be closed, meaning that a rally back up to that level is likely to be seen as well. The probabilities are that for the time being and likely for the rest of the month, the stock will trade between $59 and $65.50. SNDL made a new 17-day low and did close slightly in the lower half of the week's trading range, suggesting a slightly higher chance of going below last week's low at 1.99 than above last week's high at 2.34. Nonetheless and other than not confirming the previous break of weekly close resistance at 2.20, the action was not anywhere near as bearish as it was elsewhere. This suggests that the stock will continue to trade sideways, with a slightly higher chance of higher prices than of lower prices. Key levels to watch on the intraweek chart are 1.81 and 2.37. Whichever gets broken will generate some indicative follow through. Probabilities favor the stock trading between 1.95 and 2.25 for the next few weeks. SNOW made a new 24-month low and did close near the low of the week, suggesting further downside below last week's low at 116.89 will be seen this week. Nonetheless, the stock closed on Friday at 119.77 and the all-time low weekly close is 119.34, meaning that if a green close occurs on Friday, a double bottom will be built. The fundamentals and rating companies outlook do not suggest the stock will break down. As such and even if the stock goes below last week's low, the probabilities favor either a green close on Friday or at worst a small red close but still above the 119.34 level. The one level to watch this week is the 124.21 level, on a daily closing basis. That has been the low daily close for the past 24 months and a close above it will generate a failure signal against the bears. On the other side of the coin, a daily close below 113.30 would be strongly damaging to the stock. It is possible though, that the $113 level could be seen this week. VWDRY generated a new 5 week intraweek high and did close green, meaning that the stock outperformed the overall market this past week. Nonetheless, the stock did close slightly in the lower half of the week's trading range, suggesting a slightly higher chance of going below last week's low at 7.89 than above last week's high at 8.30. The stock did generate a gap up on the weekly chart between 7.84 and 7.89 and that gap is not supported with news, meaning that closure of the gap is the objective this week. The 8.30 level is now short-term pivotal resistance, which if broken would have open air to 8.76 and perhaps as high at 9.31. The 7.67 level is somewhat short-term pivotal for the stock. Probabilities do not favor either breaking this week. ZLAB generated a red week and did close in the lower half of the week's trading range, suggesting further downside below last week's low at 17.80 will be seen this week. Nonetheless, for the past 17 days, the stock has traded between 17.55 and 20.15, in spite of the weakness seen in the Chinese market and it is doubtful that this sideways trading range will be broken this week, and if it is, the chances would be more to the upside than the downside. The 2 levels to watch at this time are 17.41 and 20.61. They are both short-term indicative. They are not pivotal in any longer term way but they would determine what the stock is likely to do for the rest of the month.
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1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 18.21. 2) ENG - Averaged long at 18.30. No stop loss at present. Stock closed on Friday at 1.72. 3) VWDRY - Averaged long at 8.68 (4 mentions). No stop loss at present. Stock closed on Friday at 8.06. 4) LXRX - Averaged long at 1.553 (3 mentions). No stop loss at present. Stock closed on Friday at 1.695. 5) BABA - Averaged long at 75.37 (2 mentions). Stop loss at 72.62. Stock closed on Friday at 77.45. 6) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed on Friday at 2.24. 7) JD - Purchased at 21.33. Stop loss is at 23.55. Stock closed on Friday at 25.16. 8) PYPL - Averaged long at 49.465 (2 mentions). Stop loss is at 56.65. Stock closed on Friday at 61.98. 9) INTC - Liquidated at 30.74. Purchased at 30.34. Profit on the trade of $40 per 100 shares. 10) SNOW - Averaged long at 137.343 (3 mentions). No stop loss at present. Stock closed on Friday at 119.77. 11) DSGR - Purchased at 28.83. Stop loss is at 27.91. Stock closed on Friday at 32.87. 12) AAPL - Covered shorts at 217.29. Shorted at 232.35. Profit on the trade of $1506 (per 100 shares). 13) AXP - Averaged short at 246.895 (2 mentions). No stop loss at present. Stock closed on Friday at 232.28.
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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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