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Issue #873 
August 11, 2024 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Wild week with downside objectives reached and a recovery rally now likely started!
DOW Friday Closing Price - 39497 The indexes all made multi-week intraweek lows (SPX and NASDAQ new 17-week lows) but then reversed to close on or near the highs of the week, suggesting that not only follow through to the upside (above last week's highs) will be seen this week but that a low for this correction has been found for now. The NASDAQ did generate a positive reversal week given that it closed green on Friday. This was the leader of the recovery rally and that makes the rally more reliable as this index has been the leader to the upside during the last 15 years. All of the important and possibly catalytical reports for the month are out and that means that the bears will get no new ammunition for now, with which to make new lows below the ones made this past week. In addition, the index got down to (or close to) established support levels where computer and algorithm buying was expected to be seen. Such support levels always require tangibly negative news to break. This means that a recovery rally is likely to continue for the next 3 weeks (until the end of the month), before new and possibly catalytical reports come out. By nature, August has been a (so-so) month seasonally, meaning that a "big" drop in value in this month is not the seasonal norm. Here then are the specifics of what is likely to be seen (based on the charts) for the rest of the month. The DOW has 2 levels of established intraweek resistance at 39889 and at 40077. The first one is highly likely to be reached and the second one is likely to be reached. If the second one is broken, there is open air up to 40589. The 39797 is the midpoint of the month's trading range and given that September is seasonally the worst month of the year, meaning that the recent lows are likely to be broken in September, it is likely that the index will close "below" that midpoint (at the end of the month). Nonetheless, reaching that level during the month is a high probability. That is 300 points higher than Friday's close. I do expect the index to get up as high as the 40,000 level, suggesting that the index will see at least a 500 point rally from Friday's close. The SPX index does not have as clear a chart as the DOW does and as such, its outlook is a bit clouded. The index did end up closing an open gap down at 5139 this past week (low was 5119) and it closed above an important weekly close support at 5254 (closed at 5244), meaning that the bulls actually still have the edge (contrary to the DOW). On the weekly closing chart, there is open air above until the all-time high weekly close is reached at 5615. On the daily chart there is minor intraweek resistance at 5375 and then nothing until 5505. One important item is the fact that there is presently a breakaway/runaway gap formation to the downside and if the runaway gap at 5410 is closed, the breakaway gap at 5639 would become a target for closure. Given that September is the worst month of the year, and the fundamental news is showing a slowdown in the economy, it is highly unlikely that the index will get anywhere near the all-time high. In addition, the midpoint of the month's trading range is at 5343 and given the index closed on Friday at 5344, it does suggest that the index will underperform the DOW. As such, this index is showing a truly clouded chart picture. I do see the index getting up to 5375 and if the runaway gap at 5410 is closed, I would expect 5505 will be reached. Nonetheless, I do not see anything more (to the upside) occurring and even that picture is at best a 50-50 proposition. I do see the index closing below 5343 at the end of the month. The NASDAQ is likely to be the key for the market this month. It is likely to outperform the other indexes and unlike the SPX it does have a clearer chart picture, but not as clear as the DOW. The index will find some minor resistance 18907 (396 point higher than Friday's close) and then open air above to 20017 (a level that should not be broken). Nonetheless, I do see the index going above this month's high at 19538 in September, and as such, likely to see the 20017 level in September, before turning back down for the month. For this week, I do see the index getting up to at least 18907 but even probably to 19224 but after that, it is not clear. On the daily chart, there is decent resistance between 19474 and 19538 (both on an intraweek and daily closing basis) that is not likely to be broken this month. It must be kept in mind that this index is both a leader to the upside when things are good and a leader to the downside when things are bad, and as such, where the index closes in 3 weeks (end of the month), will give a good picture of what will happen in September. The mid-point of the months trading range is at 18489 and with the index closing at 18513 on Friday, it may continue higher for a week or two but then reverse. The RUT is going to be a bit of a key index during the next few weeks, because it has a clear chart picture. The index got down to the 200-week MA, currently at 1987, this past week (got down to 1993) and bounced off of it. That is a level that should hold up for the rest of the month. By the same token, there is decent intraweek resistance at 2138 that is not going to be easy to break. With the index closing at 2080 on Friday, another 58 points higher are expected to be seen at least. If 2138 does break, there is mostly open air above to 2260. The index has a gap at 2171 that is a magnet for closure, so if 2138 breaks, 2171 is a gimme. Nonetheless and in looking at the monthly chart, the index is likely to close below 2128 at the end of the month, meaning that the probabilities do favor more upside but it is not clear how much. For the next few weeks the bulls will have the edge but then again, this market is working off of speculation of what the economic scenario truly is right now and what the Fed is going to do about it (and how much). The charts are not all that clear as to how much upside is coming, but at least for this week, that should not be much of a question (bulls should have the decided edge this week). Hopefully at the end of the week, the chart picture in all the indexes will be cleared up a bit more. HSI generated positive reversal week, having made a new 17-weeek low but then closing green and near the high of the week, suggesting further upside above last week's high at 17252 will be seen this week. On a cautionary note, the stock closed at the weekly close resistance level at 17087 (closed at 17090), which was the recent weekly close breakdown point, meaning that no signal has yet been given to confirm that a bottom to the correct has been set. Having said that, the 16441 intraweek low seen this past week does fulfill a downside objective on the monthly closing chart, meaning there is some decent potential for a bottom to have been found to this downtrend. For this week, intraweek support is found at 16924 and short-term pivotal resistance is found at 17408. If that resistance is broken, it will strongly suggest that the bottom to the downtrend has indeed been found.
GOLD(Dec 24 chart) generated a relatively uneventful inside week but did close in the upper half of the week's trading range, suggesting further upside above last week's high at $2500 will be seen this week. In addition, Gold did technically make a new all-time high weekly close on Friday, having closed above the previous week's all time high at $2469.80 by $1 (closed at 2470.80). This does keep the bulls in full control. The all-time intraweek high is at $2622 and breaking that level needs to be the objective for the bulls this week. On a daily closing basis though, the short-term outlook is not clear. The bulls need to generate a daily close above $2480, in order to keep the bulls in control, and on the opposite side of the coin, a daily close below $2431, would weaken their hand. As such, $2481 and $2431 are key short-term indicative levels this week. OIL generated an indicative positive reversal week, having made a new 26-week intraweek low and then closing green and on the high of the week, suggesting further upside above last week's high at 77.09 will be seen this week. This recovery rally is supported by the news of falling global inventories (which are expected to keep falling) and the threat of the Iran/Israel war continuing. Oil should continue higher and will not find any resistance of consequence until 80.06. Nonetheless and in order to reach that level, the bulls need to stay above 76.87 (on a daily closing basis) this week. In looking at the weekly and monthly closing charts, there is no resistance of consequence until 83.16 is reached. Nonetheless, that resistance will need further positive fundamental news to have any chance of breaking. To the downside, the 75.53 level (on a weekly closing basis) is now support that should not be broken. This all means that at least for the next 3 weeks, the $76-$83 area should be the trading area seen.
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Stock Analysis/Evaluation
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CHART Outlooks
It was a wild week in which many short-term downside objectives were reached and a bounce back up (recovery) started. Though it is likely that this rally will continue this week and perhaps for the next 3 weeks, the seasonal outlook for September being the worst month of the year and the top of this uptrend (for at least this year) having been found, continues to suggest that shorting stocks is "the way to go".
None of the short positions mentioned last week got up to the desired entry points and as such, no new shorts were instituted. The same stocks remain of interest to be shorted. Two of the 4 mentions, I have come up with a new (and lower) desired entry point and on the other two, the same desired entry points remain. It is unlikely that any of them will reach the desired entry points this week but if they do, they should be shorted. The mentions will remain viable for the next 3 weeks (if not filled this week).
AAPL Friday Closing Price - 216.24
AAPL generated a drop down to $196 (which was the original mention's objective) and then turned around to close on the high of the week, suggesting further upside above last week's high at 216.78 will be seen this week. With the chart having fulfilled its downside objective and not having a high likelihood of heading below $196 this month (and perhaps not next month either), the stock is now only tradeable for shorter-term moves. Nonetheless, it does remain a preferable short trade than a long trade. For this week, the stock is likely to get up to at least 220.20 and could get up to 222.08. Short-term pivotal intraweek resistance is found at 225.60, which should not get broken. Downside objective for "this" trade is 206.59.
In order to get a tradeable risk/reward ratio, using a stop loss at 225.70 and having a 206.59 objective, no short should be instituted below 221.90. As such, a sale of the stock at 221.90 and having a stop loss at 225.70 and an objective of 206.59, the risk/reward ratio is 4-1. My rating on the trade is a 3.5 (on a scale of 1-5 with 5 being the highest).
AEP Friday Closing Price - 97.53
AEP is an electric power company and the stock has risen over the past 11 months from a low of 75.54 to the previous 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 got up to 104.41 last week but did it on the opening bell on Monday and within 1 minute it was down to 100.00, meaning the short position was not able to be instituted. Having fulfilled its upside objective and having generated a negative reversal week with a close near the low of the week, means that the upside is done and that the downside objective (reaching the 200-week MA, currently at 87.81), now has an increased probability of being reached.
Nonetheless, a new desired entry point needs to be used to short the stock. The 100.32 level is now decent intraweek resistance and that is supported by the 2-year daily closing high at 101.24.
Sales of AEP above 100.00 and using a stop loss at 101.34 (on a daily closing basis) and having an 87.81 objective, will offer a 9-1 risk/reward ratio. My rating on the trade is 3.5 (on a scale of 1-5 with 5 being the highest).
DD Friday Closing Price - 78.53
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 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 the previous week's high at 85.12, a rally back up to at least the 82.00 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 82.00 and using an 85.35 stop loss and having a 71.50 objective offers a 3.4-1 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 - 211.80
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 211.80. All the news that has come out of late (last 7 weeks) has been positive and yet the stock generated a failure signal on the weekly chart 6 weeks ago and the same thing happened on the monthly chart at the end of July. The failure signal has now been confirmed on 5 subsequent weeks in a row, and a new weekly low was made this week at 195.27, 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 previous week.
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 4 weeks ago at 226.74, followed by a new 11-week low weekly close, the risk/reward ratio is good and the trade does favor the bears.
FSLR did close in the upper half of the week's trading range, suggesting further upside above last week's high at 219.67 will be seen this week. With the rest of the market likely to see some recovery as well, and the positive fundamental outlook for the future being positive, it is likely that the stock will get up to established intraweek resistance levels and temporarily (for the next 3 weeks) stop the downfall. In July of last year, the stock got to 224.50 and then traded below that level for the next 10 months. As such, that level is clearly a target for a recovery rally. The previous multi-year high (seen in May of last year) is at 232.87, meaning that if that is broken, the stock will get back into an uptrend. As such, that will be the stop loss 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 (above $124.00), the maximum risk is $897 and the minimum profit potential is $4201, meaning a 4.5-1 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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Closed Trades, Open Positions and Stop Loss Changes |
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AXP generated a positive reversal week, having made a new 8-week intraweek low and the closing green and on the high of the week, suggesting further upside, above last week's high at 238.34 will be seen this week. There is intraweek resistance at 240.55 and stronger at 244.10. There is an open gap at 246.41 and further but somewhat minor intraweek resistance at 248.99. Given the outlook for the next 7 weeks, it is highly doubtful that the latter resistance will be broken. The big question mark is whether the gap between 244.65-246.41 will be closed or not. It is likely that the 244.10 level will be seen. Intraweek support for the next 3 weeks will be at 229.10. BABA generated a positive reversal week, having made a new 4-week low and then closing green and on the high of the week, suggesting further upside above last week's high at 80.31 will be seen this week. The stock technically generated a new buy signal, having closed on Friday above the 12-week high weekly close at 79.65 (closed at 79.99). If the 10-week intraweek high at 81.01 gets broken (likely), there is open air to 87.83 and if the 11-month intraweek high at 90.46 gets broken, it will be a breakout of note. For now though (the next 3 weeks), probabilities do favor a rally up to the 87.83 level occurring. Any daily close below 77.90 would weaken the outlook and any daily close below the 200-day MA, currently at 76.01, would negate this outlook. DSGR generated another red weekly close and closed in the lower half of the week's trading range, suggesting further downside below last week's low at 31.10 will be seen this week. The stock did generate a break of weekly close support, having closed below weekly close support at 32.90 (closed at 32.39), but did not break the previous intraweek support at 31.10, having gotten down to 31.10 this past week. The overall market is likely to go up this week and as such, it is possible that the stock will not follow through to the downside. The 200-day MA is currently at 31.40 and that line has a good chance to hold up this week, and if it does and the bulls can generate a daily close above 33.44, the chances of not following through to the downside will be strongly diminished. A daily close above 34.01 will negate this week's downside outlook. Overall, the chart still looks tilted toward the bulls on the monthly chart. I continue to look to take profits around the 34.50 level. JD generated a positive reversal week, having made a new 22-week intraweek low and then turning around to close green and on the high of the week, suggesting further upside above last week's high at 26.08 will be seen this week. What was even more important is that last week's low at 24.13 was into a very pivotal and longer term important intraweek and weekly closing support between 24.01 and 24.22. Having bounced from that area suggests that the support remains strong there and that the probabilities strongly favor no further downside will be seen. The first order of business for this week will be to get up to the 200-day MA, currently at 26.85. If the bulls can close above that line and also get above the 27.39 level (on an intraweek basis), it will be confirmation that the downtrend is over. On an intraweek basis, the 25.57 level is now support (stock closed at 25.88 on Friday. Probabilities favor a rally to 26.85, a drop back down to 25.57 (to test the recent low) and then a recovery rally of some consequence to begin. All of this to happen over the next 1-3 weeks. The 29.07 level is strong pivotal resistance that when broken, would offer a $34 objective within a week or two thereafter. LXRX generated a new sell signal, having closed below the 2 previous low weekly closes at 1.67 and at 1.62 (closed at 1.60). Nonetheless, the pivotal weekly close support at 1.58 and the breakout weekly close support at 1.53 held up, meaning that the sell signal given is not yet indicative of an important change in the chart, other than to extend the time frame for a recovery rally to take effect. This week is all about the 1.53 and 1.68 levels (on a daily closing basis) being indicative. A close below 1.53 or above 1.68 will be short-term indicative, with the former being a bit more important than the latter. For the bulls to gain a true edge, they need to get established above the 200-day MA, currently at 1.78, and for them to gain a measure of control, they require a daily close above 1.99. Any weekly close below 1.46 would be reason enough to consider liquidating the positions and looking elsewhere. PYPL generated and inside week but several positive things were accomplished, with 1) being that the open gap down at 59.10 was closed with the 58.65 low, 2) the double intraweek low at 57.03/56.97 received the needed/required successful retest, 3) that the 200-day MA, currently at 61.07 was tested successfully with the low daily close for the week at 60.46, followed/confirmed with 4 daily closes above it, and 4) a new 2-month high weekly close that confirmed the previous week's failure signal against the bears. All of this chart action, in addition to the recent positive fundamental news, support the stock breaking out shortly and getting on a midterm uptrend. To do that, a weekly close above 67.30 is needed but given that the stock rallied 10.7% from the low to the high last week and with it closing at 64.73 on Friday, meaning only another 3.9% rally is needed this week, it is possible that a major breakout is on the immediate horizon. The recent rating upgrades gave $75 and $81 as upside objectives and the chart does suggest $75 is a very viable objective. Daily close support is now at 60.42 and with the stock closing at 64.73, consideration can be given to buying additional shares if the stock gets down around the 63.50 level (would offer a 4-1 risk/reward ratio using a 60.32 stop close only stop loss and a $75 objective. Stock looking highly positive. SNDL generated more of the same (as evaluated on weekly closes) and as seen during the past 12 weeks. It did make a new 5-week intraweek low but then closed only $.05 cents below the previous week's close and within $.01 of the low week's close for the past 5 weeks at 2.07. The stock did close near the high of the week, suggesting further upside above last week's high at 2.16 will be seen this week. The stock is now showing 2 successful retests of the intraweek low at 1.75, made on April 17th. Intraweek support should now be found at 1.94 and resistance at 2.26. A break above 2.37 or below 1.75 will change the present sideways performance. SNOW generated what could be a pivotal week, having made a new all-time intraweek low but then closing green (in a spike up fashion) and generating what is now likely to be a double bottom (or at least a successful retest of the bottom) with the previous week's close at 119.77 and the all-time low weekly close at 119.13. The stock closed at 124.41 (13.3% above the low for the week) and the previous low daily close is at 124.21, meaning that if it closes green on Monday, a failure signal against the bears will be confirmed. Additional confirmation is required by a close above 127.17 on Friday. If all of that occurs, it will be confirmed that the correction/recent downtrend is over and that the next and short-term target will be a rally back up to the 140.84 level. A red daily close on Monday would keep the bears with the short-term edge. VWDRY generated an uneventful week but with the indexes being down so strong early in the week, uneventful is a positive. Having said that, one positive that did occur is that the stock closed near the high of the week, suggesting further upside above last week's high at 8.21 will be seen this week. If that occurs, a required/needed retest of the recent 10-month low at 7.34 will be confirmed and if the stock goes above the 6-week high at 8.30, the correction will be officially over. Any weekly close above 8.34 will also generate a failure signal against the bears and open the door for a rally up to 9.71. A daily close below 7.62 would now be considered a negative. ZLAB reported earnings this week and though they were lower-than-expected, sales were higher. The stock opened higher after the report but then Canton Fitzgerald reiterated its overweight rating and the stock plunged 22% from its high. The stock ended having a negative reversal week of consequence, having made a new 11-week high but then making a new 15-week low. The stock closed on the low of the week and further downside below last week's low at 16.01 is expected to be seen. The stock did generate a new sell signal on the weekly closing chart, having closed below the previous low weekly close at 17.32 (closed at 16.26). This chart action has negated the seemingly positive action seen the past 5 weeks and suggests that the all-time low at 13.48 (14.07 on a weekly closing basis) will now be tested. Having said all of the above, the company did report positive sales and what caused the down move was not a fundamental negative but a lowering of a rating, suggesting that this move down is not the downtrend being renewed but further building of a support base for future upside to come. As it is, the all-time low has "not" received a true retest of it. Now, that is what is likely to happen. In order for this scenario to turn around, the first thing that needs to happen is a daily close above 16.62 (generate a failure signal against the bears) and a close above 17.25 (a new buy signal on the daily closing chart). With the Chinese index likely to go higher, the bears will not have an easy time taking the stock lower. Nonetheless, they do have control right now.
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1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 16.26. 2) ENG - Averaged long at 18.30. No stop loss at present. Stock closed on Friday at 1.45. 3) VWDRY - Averaged long at 8.68 (4 mentions). No stop loss at present. Stock closed on Friday at 8.10. 4) LXRX - Purchased at 1.53. Averaged long at 1.5447 (4 mentions). No stop loss at present. Stock closed on Friday at 1.60. 5) BABA - Averaged long at 75.37 (2 mentions). Stop loss at 72.62. Stock closed on Friday at 79.99. 6) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed on Friday at 2.06. 7) JD - Purchased at 24.15. Average lonf at 22.74 (2 mentions). Stop loss is at 23.55. Stock closed on Friday at 25.88. 8) PYPL - Purchased at 59.02. Averaged long at 59.316 (3 mentions). Stop loss is at 56.65. Stock closed on Friday at 64.72. 9) SNOW - Averaged long at 137.343 (3 mentions). No stop loss at present. Stock closed on Friday at 124.41. 10) DSGR - Purchased at 28.83. Stop loss is at 27.91. Stock closed on Friday at 32.39. 11) AXP - Shoreted at 245.42. Covered shorts at 222.81. Profit on the trade of $2361. 13) AXP - Shored at 248.37. No stop loss at present. Stock closed on Friday at 237.85.
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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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