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Issue #869 
July 14, 2024 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Signs given that the 7-month confusion experienced is starting to clear up. Small cap stocks the beneficiaries of that!
DOW Friday Closing Price - 40000 The DOW, SPX and NASDAQ all made new all-time intraweek highs, but the dichotomy seen most of the year changed as the DOW outperformed the other two, given that it rallied 1.6%, while the SPX rallied .9% and the NASDAQ dropped .003%. In addition, the RUT outperformed them all, having rallied 5.7%. This was an indicative week, given that the CPI inflation report came out and it showed a slight drop of .1%, meaning that inflation continues to move lower. This report solidified the idea that the Fed will start lowering interest rates in September. On the other side of the coin, the Consumer Confidence number dropped and the recent reports show that the economy is beginning to weaken, meaning that it is unlikely that the market will continue to move higher in a big way. The fact that the RUT small cap index outperformed all the other indexes, as well as the dichotomy between the DOW and the NASDAQ beginning to reverse does suggest that we are likely to be at the end of this 15-year bull market. This has been a market that has been led strongly by the Tech industry and all Tech stocks are now not only overbought but are at extremely high PE ratios. The normal PE ratio for Tech Stocks is 18 and to give you an example of how overdone things are, AAPL presently has a PE ratio of 36.11 (double what it should be). On the other side of the coin, some of the PE ratios on small cap stocks are as low as in the 8's and 9's and the small cap index has presently a PE ratio of 12.6 (normally it is at 15). This scenario now seems to be changing and given that the outlook for the economy, for the Fed rates likely to start dropping, and for the market now likely to go back to the established norms that has gone way out of whack this last year, it now seems that the traders can start to trade with more confidence that things will move according to the norm. Having said that, the traders are not likely to go full-mode into what is now likely to happen until things do start to happen, meaning that they are likely to be careful and cautious until September when the Fed is supposed to begin to cut rates. A few more economic and inflationary reports will come out before then and that will begin to "cement" what is now just a probability but not a certainty. What this likely means is that the reversal of the dichotomy and the small cap overperformance is likely to continue but in a cautious way (not aggressively so). As far as the charts are concerned, the NASDAQ generated a negative reversal week, having made a new all-time intraweek high but then closing red. The index closed in the lower half of the week's trading range, suggesting further downside below last week's low at 20165 will be seen. If that occurs, it will be a sign that perhaps (but more likely than not) a top to the uptrend has been found. Pivotal intraweek support, as well as confirmation of a top, is found at 19472. It is not likely that level will be broken at this time (and probably not for the next 3-6 weeks) but when it does happen, it will be indicative that the bull trend has found a top. The SPX did not generate a negative reversal and still closed slightly in the upper half of the week's trading range, suggesting a slightly higher chance of going above last week's high at 5655 than below last week's low at 5562. The seasonal outlook for the index is a 1.7% increase in price over the close in June and that means at 5666 objective. As such, this index could still go a bit higher, meaning that a top is not likely to have been found yet. Nonetheless, further upside is likely to be minimal and weakness likely to start being seen in the next week or two. The DOW did make a new all-time intraweek high but fell short by 3 points of making a new all-time weekly closing high (all-time weekly closing high is at 40003 and it closed on Friday at 40000). The index make a new all-time high weekly close in March at 39807 and then corrected. It broke that high in May with the close at 40003, meaning that it broke it by 196 points. Due to the dichotomy changing and the index closing near the high of the week, suggesting further upside above last week's high at 40257, the probabilities favor further upside and a close next Friday at 40199, followed the week after with the start of a correction. The RUT made a new 30-month intraweek and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at 2163 will be seen this week. The fundamental picture (small cap stocks likely to outperform) and the chart picture (with the breakout) suggests this index will continue to lead to the upside without any weakness being seen until the overall fundamental picture tangibly changes in September. The upside objective could be as high as 2352 (based on a weekly close) but resistance does start at 2159 (just 11 points above Friday's close). Evidently, where the index gets up to will depend on what the overall market does, but at this time and for the next couple of weeks, a viable intraweek upside objective is 2245 (another 4.4% rally). The one strong positive to all of this is that the traders now feel that the market is likely to start performing normally, meaning that chart support and resistance levels can be trusted a bit more than during the past 7 months. This will increase buying and selling across the board and that always makes trading the market more attractive. HSI generated Key positive reversal week, having made a new 11-week low and then closing green and above the highs seen the past 2 weeks. The index closed on the high of the week and further upside above last week's high at 18317 is expected to be seen this week. A buy signal was given on the daily closing chart, having closed above the two previous closing highs at 18028 and at 18089. This action does suggest that a bottom to the correction has been found. A daily close above 18430 will confirm that (index closed at 18293 on Friday). On the weekly chart, a close above 18382 would also confirm a bottom but also give decent new ammunition to the bulls for a rally up to at least 18746 (based on a weekly close). Using the daily closing chart, support is now found at 18079, which is a level that if broken, would take some of the strength of this rally away from the bulls. This move is definitely indicative and what happens from here on in will determine what the index does. A close at the end of the month above 18234 will also be indicative that the index is back to at least a sideways market (no longer in any kind of a downtrend) though it is not a pivotal area.
GOLD(Aug 24 chart) generated another green weekly close (3rd in a row) and came within $34 of the all-time intraweek high at $2464. Gold closed on Friday at $2414 and there is established weekly close resistance at $2413 and at $2424. Gold closed on the high of the week, suggesting further upside above the $2430 high seen last week will be seen this week. In looking at the weekly chart, it seems that Gold is in a slight upside channel with two previous weekly closing highs at $2413 and $2424 and two previous closing lows at $2308 and at $2313. If this channel continues viable, it would suggest that this coming week Gold will close around the $2437 level and then start a correction. In looking at the monthly chart, Gold is in the process of generating the 6th monthly green close and that has not occurred since 2008 and on that occasion, Gold then corrected 29% in value. For now though, it seems that based on the inflation number and the Fed interest rate scenario, Gold is likely to continue in that channel with a downside objective of $2321 to be seen within the next 6 weeks. Any break "and" close above the all-time intraweek high at $2464 would change the outlook. This does not seem possible. OIL generated a red weekly close and closed slightly in the lower half of the week's trading range, suggesting a very slightly higher chance of going below last week's low at 80.81 than above last week's high at 83.74. The red weekly close was disappointing to the bulls, given that the previous week's close at 83.16 was a successful retest of a previously established and indicative weekly close resistance at 83.19. This does suggest that for now, further upside is going to require positive fundamental news to occur. Based on this close, the probabilities are now high that a drop back down to the 79.83 level (based on a weekly close) is to be seen. For the time being and likely for the next 3-6 weeks, it is likely that on an intraweek basis, a sideways market is in place between 77.77 and 83.53.
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Stock Analysis/Evaluation
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CHART Outlooks
I have no mentions "at this time" but I do expect to have mentions on the next newsletter. On a positive note though, I do expect that the presently held stocks are going to be all profitable this week, meaning that everything presently owned seems to have positive outlook right now. In fact, one held stock (LXRX) should be strongly considered for adding positions to.
If anything does pop up during the week, a mention will be given on the message board. Nonetheless, I do not expect the traders to even start considering "new" positions on anything but small cap stock, at least until the end of the month nears.
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Updates
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Closed Trades, Open Positions and Stop Loss Changes |
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AAPL made another new all-time intraweek and weekly closing high (3rd out of the last 5 weeks) and closed near the high, suggesting further upside above last week's high at 233.08 will be seen this week. Nonetheless, that high was made on Wednesday and the stock did not follow through on Thursday and did see a drop of 3.2% on that day, and then on Friday it went above Thursday's high but then closed slightly in the lower half of the day's trading range, suggesting a slightly higher chance of on Monday going below Friday's low at 228.68 and if that happens, a successful retest of the high will have occurred (on the daily chart). If all of that occurs "and then" the bears are successful in breaking Thursday's low at 225.77, then the probabilities of a top to the rally having been found will increase and a correction to test the original all-time weekly closing high at 197.47 will increase as well. If the stock does follow through to the upside, it is just as unlikely to see any significant move to the upside (much like the index market), especially since the stock has already moved up 15.4% from the previous all-time high (15% is normally the high amount of rally seen when new all-time highs are made). As such, I have no stop loss to the short position at this time, though any rally of $3-$4 dollars above the 233.08 high will make me consider covering the short positions. BABA generated a new 6-week high and in the process, several resistance levels were broken as well as a new buy signal given on the daily closing chart. In addition, the stock closed above the 200-day MA on both Thursday and Friday, suggesting that the correction is now over. The stock closed near the high of the week, suggesting further upside above last week's high at 81.01 will be seen this week. One "potential" stumbling block is that the stock closed exactly at a previous weekly closing low at 79.64 (stock closed on Friday at 79.65), which is the weekly closing low support that when broken, brought about the drop all the way down to 71.80. The bulls need to close above that level this Friday, to generate a failure signal against the bears, which in turn would bring about a retest of the 8-month high at 90.46. Intraweek support is now found at 77.17, as well as at the 200-day MA, currently at 76.71. DSGR generated a new 4-week intraweek high and a new 5-week weekly closing high and closed near the high of the week, suggesting further upside above last week's high at 31.60 will be seen this week. The rally came immediately after the press announcement that the company had agreed to purchase Source Atlantic, which is an industry leading wholesale distributor of MRO products. A buy signal was given on Thursday and confirmed on Friday. One negative to all of this is that the bulls failed to close above the 200-day MA, currently at 31.00, meaning that though the fundamental news was good, it is not yet seen as a potential trend changing event. On a daily closing basis, short-term pivotal resistance is found at 31.28. A close above that level will open the door for a rally all the way up to the $34-$35 level. Daily close support is now found at the $30 demilitarized zone (29.70-30.30), which if broken, would suggest a drop down to 29.01 (based on a weekly close) would occur and erase the positives of the purchase. INTC generated a new 11-week 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 35.48 will be seen this week. The CTO of the company announced that they were targeting cumulative software revenue of $1 billion dollars. Nonetheless, the stock gapped up on Monday and that was due to increased demand for chipware, meaning that the two things put together has changed the short-term outlook for the stock from bearish to short-term bullish. There is no resistance above until 37.22 (minor to perhaps decent) and then at 40.07 (decent). If those levels are broken, the 200-week MA, currently at 42.54, would be the target. The 32.15 level is decent support now but that would mean the weekly gap at 32.34 would be closed. The bulls will try to prevent that from happening as the gap is good ammunition right now. As such, the 33.64 level of intraweek support is likely to hold up if any selling comes in (the stock closed on Friday at 34.49). The news and the chart favors the bulls at this time. JD made a new 3-week intraweek high and closed near the high of the week, suggesting further upside above last week's high at 29.07 will be seen. The stock appreciated in value 5% above the previous week's close and such action does suggest that the bottom of the correction has been made. The chart is showing minor to decent intraweek resistance at 29.39 but if broken, there is open air above to 30.92 (based on the daily chart) but up to 32.94 based on the weekly chart. On a decent positive note, the stock closed above the 200-day MA (currently at 27.03) on Thursday and confirmed the break of the line on Friday, meaning that the line is now support and also meaning that the probabilities of the correction being over are now high. On a daily closing basis, a daily close below 26.87 would now be a decent negative. Probabilities now seem to favor the stock moving up to the 32.94 level. LXRX generated a positive key reversal week, having made a new 6-week low and then closing green and above the previous week's high. The stock closed on the high of the week, suggesting further upside above last week's high at 2.04 will be seen. What made the rally this week impressive is that it rallied 15.7% above the previous week's close and did it without any new news to support the rally. The stock does show decent intraweek resistance at the 2.04 level but if it goes above last week's high "at 2.04", there is open air up to 2.46 level. I do want to mention that H.C. Wainright & Co. did reiterate on 6/24 their $10 price target (which is 500% above Friday's close). On the daily closing chart, the stock did generate a breakout signal, having closed above the decent 3-month established resistance level at 1.94. In addition, the stock closed at a previous low daily close at 1.98, which when broken caused the stock to drop all the way down to the 1.48 level. This means that the 1.94 level (on a daily closing basis) is now support and any green daily close on Monday would be a game changer, which would immediately open the door for a rally up to the 2.90 level. Chart and fundamentals favor the bulls. PYPL made a new 4-week intraweek and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at 60.93 will be seen this week. Having said that, the bulls still failed to make any kind of a statement as the stock is still trading below the 200-day MA, currently at 60.63 (stock closed at 60.27 on Friday). By the same token and on the daily chart, a bullish inverted Head & Shoulders formation has been built, with the left shoulder being at 58.79, the head at 57.03 and the right shoulder at 58.20. The neckline is at 60.76/60.93. If broken, it would offer a short-term target of 64.86. Intraweek support is now found at 58.20, which if broken would be a negative. The weekly chart does suggest that a rally to 68.21 is on the horizon, to be reached in the next 4-6 weeks. SNDL generated a new 5-week intraweek and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at 2.21 will be seen this week. The rally from the previous week's close to Friday's close was 9.8%, meaning it is indicative of the recent correction being over. Nonetheless, there is pivotal resistance on both the daily and weekly closing charts at 2.20, which needs to be broken this week in order to confirm that the recent correction is over. Indicative daily close support is now found at 1.97, which should no longer be broken if the bulls want to resume the uptrend. Any daily close above 2.20 would offer an immediate objective of 2.50. SNOW generated a 5% drop in price this week (based on the weekly closes) and closed in the lower half of the week's trading range, suggesting further downside below last week's low at 132.20 will be seen this week. The drop seen was further exacerbated by a downgrade that occurred on Friday when Piper Sandler downgraded the stock from an upside objective of $240 down to $165. Having said that, this move down is likely to become the needed/required retest of the 18-month low at 122.60, which was made a few weeks ago. Intraweek support is found at 128.76, which should hold up if seen. Nonetheless and in looking at the daily closing chart, the breakout of the downtrend occurred when the daily close resistance at 130.67 was broken and that level is now support that should hold up if seen. Overall, the outlook for the stock fundamentally and chart-wise remains bullish and that means that once this retest of the low is over, a short-to-midterm rally will likely start with a chart objective that could be as high as $200. Nonetheless, there is weekly close resistance at 161.86 and at 184.18 that will likely stop the rally temporarily or overall. In looking at the daily closing chart, any daily close above 143.02 would likely mean the $160 level will be seen. VWDRY followed through to the upside after the previous week's positive reversal week. The stock closed near the high of the week at and further upside above last week's high at 8.17 is expected to be seen this week. The stock did generate a minor buy signal on the daily closing chart, having closed above the previous high daily close at 7.87 (which is now support). Nonetheless, the buy signal was not convincing enough to say that no further downside can occur. In order for confirmation of a bottom to the downtrend to have occurred, the bulls need to generate a daily close above 8.69. A weekly close above 8.34 though, would increase the probabilities. Having said all of the above, it does need to be mentioned that the stock is presently trading above last month's close at 7.67 and if it closes on the 31st above that level, it will confirm that the bottom of a up-channel that started in September of last year is now a 3-point line (which makes it trustworthy). The top of the up-channel line is presently at 11.03 but it is rising and the stock is not likely to reach that line for another 3 months, meaning the line could then be around the $12 level. Based on the channel (which is now likely to be trustworthy), it is most likely that further upside is to come. ZLAB generated a key reversal week, having made a new 11-week low and then closing green and above last week's high. The stock closed in the upper half of the week's trading range, suggesting further upside above last week's high at 18.87 will be seen this week. The stock did generate a failure signal against the bears on the daily closing chart, having closed above a previous low daily close at 17.78, which when broken, caused the stock to fall to 16.20. Nonetheless and spite of those positives, the bulls have more to do to confirm that the bottom of this correction is over. A weekly close above 18.68 is needed for that to happen. A weekly close above 20.08 would be a strong short-term positive that would offer the 22.72 level as the next and immediate objective. As far as support is concerned, the 17.78 level (on a daily closing basis) is now the level the bulls want to hold. A daily close below 17.32 would give back control to the bears. Given the extreme lows the stock is presently at and the positive fundamental outlook for the stock, as well as the now seeming recovery of the Chinese index, it would not be surprising to see some big moves to the upside over the next 4-6 weeks with the $30 level as the viable objective.
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1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 18.04. 2) ENG - Averaged long at 18.30. No stop loss at present. Stock closed on Friday at 1.43. 3) VWDRY - Averaged long at 8.68 (4 mentions). No stop loss at present. Stock closed on Friday at 8.12. 4) LXRX - Averaged long at 1.553 (3 mentions). No stop loss at present. Stock closed on Friday at 1.85. 5) GCI - Liquidated at 4.72. Averaged long at 2.14. Profit on the trade of $516 per 100 shares (2 mentions). 6) BABA - Averaged long at 75.37 (2 mentions). Stop loss at 77.62. Stock closed on Friday at 79.65. 8) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed on Friday at 2.15. 9) JD - Purchased at 21.33. Stop loss is at 23.55. Stock closed on Friday at 28.15. 10) PYPL - Averaged long at 49.465 (2 mentions). Stop loss is at 56.65. Stock closed on Friday at 60.27. 11) INTC - Purchased at 30.34. Stock closed on Friday at 34.39. 12) SNOW - Averaged long at 137.343 (3 mentions). No stop loss at present. Stock closed on Friday at 135.75. 13) DSGR - Purchased at 28.83. Stop loss is at 27.91. Stock closed on Friday at 30.78. 14) AAPL - Shorted at 232.35. No stop loss at present. Stock closed on Friday at 230.54.
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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. |
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