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Issue #875 
August 25, 2024 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Market Y0-Yo's this week as Emotions run rampant....on both sides.
DOW Friday Closing Price - 41175 This past week was all emotional trading. The Bureau of Labor Statistics released the yearly numbers on Thursday and they were revised down by 818,000 jobs. This meant that the economy was in worse shape than was expected previously. The indexes made a new rally high on the news and then proceeded to reverse and make a new 3-day low. Fed Chief Powell talked on Friday and he clearly suggested that it was "time to" start cutting rates. The index market rallied strongly on that news and the DOW and the RUT made new rally highs and the SPX and NASDAQ recovered most of what was lost on Thursday. As such, the news was bad and then good and the traders reacted emotionally but now find themselves in a quandary as to what is going to happen from here on out. What do the chart say and how will the computers and algorithms look at this? Well to begin with, the all-time intraweek highs in all the 3 main indexes are still major barriers that should not get broken under any situation, unless the emotions run so strong that they get broken for a short period of time. In the DOW that level is at 41376 (200 points higher from Friday's close), in the SPX that level is at 5669 (35 points above), and in the NASADAQ, that level is at 20690 (970 points above). Evidently and based on the fact this rally is more emotional than anything and the DOW represents "safe" stocks, the traders will key on this index. Being only 200 points away from that high, it is evident that level can be in play this week. Having said that, what the traders will also key on this week, especially since the following week September begins (and that is a seasonal down month where it is difficult to see the indexes making new all-time highs) is whether they can make August a positive month or simply a so-so month as is usual seasonally. What I mean by this, is that the bears can ill afford to allow the indexes to close anywhere near the high of the month this Friday, or September will start on a positive note. This means that the traders will be looking at levels below that could be catalysts where if broken, they would automatically generate selling. In that respect, Thursday's intraweek lows will be the triggers. In the DOW, that level is at 40584, in the SPX that level is at 5560, and in the NASDAQ that level is at 19459. This is what this market is looking at this week, given the nature of the news and what happened last week chart-wise. This week is all about charts and nothing else. The fundamental news is out and none of it is clear (will inflation hold here or continue lower?, is the economy faltering more than anticipated or not?, will the Fed cut rates 25 points or 50 points? None of that will be answered this week and as such and at the levels that the indexes are at and with September around the corner, something is likely to break (to the upside or the downside). One thing that has to be tilting the minds of the traders to the downside is the NASDAQ, that has underperformed the market and in a bull situation, that is not likely to be the case. That is all I have for this week's indexes chart analysis. It really is all down to this simple scenario. HSI generated a new 5-week intraweek, daily, and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at 17641 will be seen this week. Having said that, the bulls cannot yet claim that the downtrend is over, given that the pivotal daily close resistance at 17635 was only broken by 6 points on Thursday but no confirmation occurred on Friday (closed at 17612). In addition and on the weekly closing chart, what is needed for a bottom to be confirmed is a weekly close above 17178 and that did not happen this week. The index is likely to go higher this week but the onus is still on the shoulders of the bulls. At this time, a daily close below 17391 would weaken the hand of the bulls and a daily close below 17344, would give the edge back to the bears.
GOLD(Dec 24 chart) made a new all-time intraweek and weekly closing high and closed in the upper half of the week's trading range, suggesting further upside above last week's high at $2570 will be seen this week. Nonetheless and like with the indexes, Gold did fall $64 from the high (most of that on Thursday) and recovered most of the drop on Friday, suggesting that Gold traders are also experiencing some emotional trading action. On the other side of the coin, Gold has certainly outperformed the index market, meaning that there is not as much uncertainty here as there. Having said that, Thursday's low at $2506 is a pivotal support level now. Probabilities do favor the bulls but this week could be indicative as to whether Gold will continue higher or have some form of correction. OIL generated a new 28-week intraweek low but then rallied enough to close in the upper half of the week's trading range, suggesting further upside above last week's high at 76.87 will be seen this week. On a potential negative note, the failure signal against the bears that occurred 3 weeks ago was negated this week, giving the bears the edge back. Then again and on the daily closing chart, a new sell signal was given on Thursday but then negated on Friday, meaning that much like with the index market, this coming week is likely to be indicative of what is to happen in the next 4 weeks after that. The chart is now set up so that any daily close below 71.93 would be a negative for the bulls and a daily close above 75.71 would be a positive for the bulls. Oil closed at 74.96 on Friday.
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Stock Analysis/Evaluation
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CHART Outlooks
I have no new mentions for this week, though one of the sell mentions from last week that was not filled, remains viable for this week. In addition, it is possible that I will add to my existing short positions this week, if things go as the charts/fundamentals suggest they will. If that does happen, I will mention them on the message board.
DD Friday Closing Price - 81.10
DD closed near the high of the week, suggesting further upside above last week's high at 81.46 will be seen this week. The stock is now highly likely to reach the intraweek resistance level between 82.30 and 82.63, which is the desired entry point area for the short position. 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 recovery rally that is now happening, 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.
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Updates
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Closed Trades, Open Positions and Stop Loss Changes |
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AAPL generated another green weekly close and kept the rally alive. Nonetheless, the green close was only by $.79 cents, meaning it was not a big statement. It bears mentioning that the stock closed at 226.84 on Friday and it "also" bears mentioning that the stock traded above that level on 5 of the past 6 days and yet it was unable to make any headway above that level. Having said that, the stock did close in the upper half of the week's trading range, suggesting further upside above last week's high at 228.34 will be seen this week. The potential upside objective remains 233.08, though that upside objective should have already been reached, meaning that the probabilities are now less as this week should end up being a down week in the index market. A drop below Thursday's low at 223.90, is likely to trigger increased selling interest. AXP generated a negative reversal week, having made a new 3-week high but then closing red. Nonetheless, the stock only closed red by $.40 cents and did close in the upper half of the week's trading range, suggesting further upside above last week's high at 254.62 will be seen this week. Having said that and on a negative note, the stock generated a new all-time daily closing high on Monday at 254.02 and above the previous one at 253.04) and then generated a failure signal against the bulls on Wednesday, which was confirmed on Thursday and Friday. With the market likely to start heading down this week, only a daily close above 254.05 will give the bulls the edge. Pivotal intraweek support is now found at 243.05. BABA generated a new 13-week intraweek and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at 85.79 will be seen this week. The stock got above one resistance level at 85.31 and the next is at 87.53. Pivotal intraweek resistance is found at 90.46. On the daily closing chart, there is no resistance above until 87.07 is reached. On that chart, the 88.54 level is also pivotal and short-term indicative. A daily close below 79.54 would take some of the momentum away from the bulls, and a daily close below 78.93 would negate this breakout. FSLR generated an inside week but did close green, extending the rally (on a weekly closing basis). The stock closed on the high of the week, suggesting further upside above last week's high at 231.98 will be seen this week. The 233.09 level is now pivotal resistance. Any drop below 217.19 would be a rally deflator. IBM made a new all-time weekly closing high, having closed on Friday at 196.10 and the previous one being at 195.95. The stock did close in the upper half of the week's trading range, suggesting further upside above last week's high at 197.92 will be seen this week. By the same token, a drop below last week's low at 193.72 would be a rally-buster. On the daily closing chart, the stock now shows a successful retest of the all-time daily closing high at 197.72, with a daily close at 197.21 on Wednesday, followed by two daily closes below that level on Thursday and Friday. A daily close above 197.72 would now be a win for the bulls. JD received bad news last week, in the form of Walmart selling its $3.6 billion stake in the company. The news came out on Wednesday and it caused the stock to immediately drop 8.4% in value. Having said that though, no levels of support were broken (in spite of the tangible bad news) and on Friday, the stock closed at 26.83 and the 200-day MA is at 26.92. With the negative news, it is evident that this week is extremely important to the stock. The stock did close near the low of the week, suggesting further downside below 25.85 will be seen this week. Support is short-term pivotal at last week's low and major pivotal at the recent 24.13 low. By the same token, if the stock is able to get and close above the MA line two days in a row this week, and especially if the gap up at 27.79 (gap created by the news) is closed, the bulls will get the edge back. It is evident this is a pivotal week for the stock and based on the news, the bears have the edge. LXRX generated a green weekly close and closed in the upper half of the week's trading range, suggesting further upside above last week's high at 1.99 will be seen. This could be a very pivotal week for the bulls to the upside, given that the 2.04 level is strongly short-term pivotal and indicative resistance. There are 4 previous intraweek week highs (over the past 17 weeks) between 2.01 and 2.04 and the last time that level was broken 5 weeks ago, and it caused a rally to 2.45 to happen (16.8% increase in price). As such, this level is important and likely to be seen this week. To the downside, there is no support until 1.69 and there is pivotal support at 1.51. On a positive note, the bears had been able to generate a breakaway/runaway gap to the downside but the breakaway gap was closed this past week, meaning that the bears lost their edge. SNDL has gone nowhere during the past 7 weeks and at this time, there is no reason to believe that anything will change this week. A break above 2.37 (in conjunction with a daily close above 2.29) would be a short-term breakout of note. A weekly close above 2.46 would be a midterm breakout of note. Any break below 1.84 would now be a strong short term negative. Stock closed on Friday at 2.11. VWDRY generated a red week but closed in the middle of the week's trading range, suggesting equal chances of going below last week's low at 1.53 or above last week's high at 1.95. During the last 8 weeks, the stock has gone nowhere but that is considered a small positive as the fundamental news that came out 9 weeks ago was negative. For the past 8 weeks, the stock has traded between 7.35 and 8.21 (based on a daily close). A break above or below either of those levels would be indicative (stock closed on Friday at 7.73. The bulls now have a double bottom on the intraweek chart at 7.34/7.35 that offers important support for the bulls, as well as gives them the edge at this time. A rally above last week's high at 7.95 would be a positive. ZLAB generated a new 12-day high and a green weekly close and did close on the high of the week, suggesting further upside above last week's high at 18.19 will be seen this week. the chart is now showing intraweek support at 17.47 and resistance at 18.91. Probabilities do favor the stock trading within that range this week but any break of either of those 2 levels will give a new edge to the bears or the bulls. Pivotal weekly close resistance is found at 20.08 and the opposite for the bears at 16.26.
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1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 18.02. 2) ENG - Averaged long at 18.30. No stop loss at present. Stock closed on Friday at 1.54. 3) VWDRY - Averaged long at 8.68 (4 mentions). No stop loss at present. Stock closed on Friday at 7.73. 4) LXRX - Averaged long at 1.5447 (4 mentions). No stop loss at present. Stock closed on Friday at 1.83. 5) BABA - Averaged long at 75.37 (2 mentions). Stop loss at 72.62. Stock closed on Friday at 85.41. 6) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed on Friday at 2.11. 7) JD - Averaged lonf at 22.74 (2 mentions). Stop loss is at 23.55. Stock closed on Friday at 26.83. 8) PYPL - Liquidated at 71.81. Averaged long at 59.316. Profit on the trade of $37.48 per 100 shares (3 mentions). 9) SNOW - Liquidated at 131.74. Averaged long at 137.343. Loss on the trade of $1641 per 100 shares (3 mentions). 10) IBM - Shorted at 194.72. Stop loss at 199.28. Stock closed on Friday at 196.10. 11) AXP - Shored at 248.42. Averaged short at 248.395 (2 mentions). No stop loss at present. Stock closed on Friday at 251.30. 12) FSLR - Shorted at 231.37. Stop loss at 233.35. Stock closed on Friday at 231.065. 13) AAPL - Shorted at 227.57. Stop los at 233.18. Stock closed on Friday at 226.l84.
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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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