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Issue #866 
June 16, 2024 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Positive News and Indexes generally moving higher!
DOW Friday Closing Price - 38589 Once again, the dichotomy in the index market continued. The SPX and NASDAQ made new all-time intraweek and weekly closing highs and the DOW and the RUT both closed red and in the case of the former, a weekly close support level was broken and in the case of the latter, a failure signal against the bulls was confirmed. The dichotomy continues to show that the new highs in the market are based only on the Tech and Financial markets and the rest of the stocks are seeing selling interest and of some consequence. This outlook is likely to continue this week as both the SPX and the NAZ closed on the highs of the week and further upside is expected to be seen this week and both the DOW and the RUT closed either in the lower half of the week (DOW) or the low of the week (RUT) and further downside below the lows of the week are expected to be seen this week. All the important economic reports are out and there is nothing of consequence scheduled to be reported this week, suggesting that this week will all be about charts and not the fundamental picture. The inflation report came in slightly better than expected but jobs increased at a surprising rate, meaning that the economy continues to look sturdy and as such, the Fed announcement suggested that only 1 Fed rate cut would happen this year and many analysts have opened the idea that there may not be "any" rate cuts this year as the numbers continue to suggest that because of he Tech Industry (over $2 billion was invested in Tech last week), the economy will continue to boom and as such, Fed rate cuts are not supported. Nonetheless, with the available investing funds going mainly into Tech, other industries and stocks are not seeing much buying and that too, is likely to continue. The DOW has a 38039 downside objective, which is 550 points lower than Friday's close. The RUT has a downside objective of 1935-1964 downside objective, given that the 200-day MA is at 1935 and the 200-week MA is currently at 1964. With no great intraweek support found until 1931, one of those two levels is likely to be seen this week. That means, another 56 to as much as 85 points lower than Friday's close. It is doubtful that further downside below these levels will be seen as the overall economy is growing. Nonetheless, with the money presently going elsewhere, getting down to these levels is a very viable chart objective. With both the SPX and the NASDAQ at all-time highs, there is no way to evaluate how much higher they can go. This means that what the traders will key on are the downside prices where failure signals will be given. In the SPX such a level is at 5327, which is 104 points below Friday's close. In the NASDAQ such a level is at 18940, which is 714 points below Friday's close. With both of those levels being so far away and no possibly catalytic reports are scheduled for the next 3 weeks, the probabilities do not favor the downside. By the same token and with those levels of support being so far away, the risk/reward ratios of purchasing here is very low, meaning that purchasing is likely to be seen but very limited in nature. What all of this means is that for this week more of the same dichotomy will be see but then after this week, the dichotomy is likely to change, with the DOW and the RUT doing some recovery rallies and the SPX and the NASDAQ doing some retracing and working to build new (but higher than the present ones) support levels. This means that the dichotomy (as has been seen the past two months) will continue this week, but then then the opposite will be seen. This could begin to happen this week, if and when the first two reach the downside levels early In the week. This "chart" picture is very viable and dependable, both from a fundamental and chart basis. When the next round of important reports begin in July (which includes earnings reports) this scenario could change. Nonetheless, with this being June 17th, the next 2 weeks are quite predictable. HSI got down to a short-term important weekly close at 17956, having closed on Friday at 17941. The index did close near the low of the week, suggesting further downside below last week's low at 17814 will be seen this week. Nonetheless, on an intraweek basis, the short-term important support is at 17573 and given that the index has averaged 500-point trading ranges the past 2 weeks, getting down to 17573 and then closing green above Friday's close, seems to be a good probability. One additional magnet in favor of the bulls is that the index now shows that last week the index gapped down between 18283 and 18269 and on the daily chart, there are 4 gaps down, which are not supported by news. The first two gaps on the daily chart could be considered breakaway/runaway gaps that could stand up given the present negativity of the Chinese index chart, but the last two gaps at 18302 and at 18776 should not stay unclosed. It is evident though, that the 17573 level is an important support level, especially given that the index did generate a breakout 7-weeks ago and the fundamental picture has not changed during this period of time. As such, that level of support should hold. If it doesn't, then a drop down to the 17000 level would likely occur, but that level is where the "original" break of the downtrend line occurred and that level should definitely not break without some clear negative fundamental news. The index has fallen 1900 points over the past 4 weeks and given that the index could drop an additional 400, to at most 900 points, it does mean that most of the downside is now over. On a fundamental basis, the outlook for the Chinese market/economy is positive. For the rest of 2024, the minimum upside objective given by the rating companies is for at least a 5% growth and some have it as high as 14%. This means that at least 18836 will be seen with a possibility of it going as high as 20452 by the end of the year. Overall, this means that Chinese stocks are likely a buy this week.
GOLD(Aug 24 chart) generated an uneventful inside week but did close green and near the high of the week, suggesting further upside above last week's high at $2358 will be seen this week. The green weekly close did make the previous week's close at $2305 into a successful retest of the pivotal low weekly close at $2299, suggesting that for at least this week, a break of the uptrend will not occur. Having said that, the fundamental picture of continuing high interest rates and no Fed rate cuts possible before July or September, or even the small possibility of no rate cuts this year, does give ammunition to the bears to break the uptrend and a decent correction occurring over the next couple of months. For this week, the charts are quite clear. The $2364 level is intraweek resistance, which if broken would suggest that $2385 would be seen. The key to that is the daily closing chart with some short-term pivotal daily close resistance at $2354. With Gold closing on Friday at $2348, the bulls only need an additional $6-plus dollars on Monday (on a daily closing basis) to generate a bit of additional buying. On the other side of the coin, if that fails to occur (most probable scenario), a drop down to $2311 would likely be seen, followed by a breakdown the following week. OIL generated follow through to the upside and a green weekly close and near the high of the week, suggesting further upside above last week's high at 79.32 will be seen this week. Oil has moved up 8.7% since last week and that does open the possibility that last week's low at 72.48 will be a spike low. Having said that, the key this week is the 80.62 level (80.06 on a daily closing basis). If that level gets broken, it will confirm the previous week's low as a spike bottom and bring in new buying interest, with 83.53 being the immediate objective. If not broken in the first 2 days of the week, a drop back down to 75.84 is likely to occur. Either way, Oil is not likely to be trending in either direction for any great amount of price change.
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Stock Analysis/Evaluation
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CHART Outlooks
I had not planned on having any new mentions this week as things have been quite skewed and difficult to trade. As such, I had not been looking at the charts of other stocks. Nonetheless, this week I was asked to do some chart evaluations on 3 stocks that I was not even aware of as I did not even have them in my own collection of over 500 stocks. In doing those chart evaluations, I did find every one of those stocks to be of buying interest. Those stocks are the ones mentioned here today. They are listed here with the one of highest interest being first.
DSGR Friday Closing Price - 30.65
DSGR is a distribution solutions company, meaning that it is always in demand no matter the outlook of the market. The stock has been on a constant but not steep uptrend since 2022 and the stock itself started trading in June 2022, meaning that it has shown to be a stock that is likely to continue higher. In addition, the type of uptrend seen means that purchasing the stock offers no great risk and it does offer a good probability rating for continuing the uptrend.
DSGR made a new all-time intraweek and weekly closing high 4 weeks ago and promptly generated a failure signal. On other stocks, this could be something to worry about, but in this stock and with the type of uptrend that stock has been in, this is a normal kind of action. On the previous 4 all-time highs made in the last 8 months, every single new high generated an immediate failure signal, only for the stock to then resume the uptrend a few weeks later. On this particular occasion, the stock did generate a sell signal on the weekly closing chart, which does suggest that "perhaps" a top to the uptrend has been found. Nonetheless, a retest of that top is likely to be seen, meaning that even if the uptrend is over, buying at the desired entry point, still offers a good risk/reward with a high probability rating.
DSGR generated a positive reversal week this past week, having made a new 14-week intraweek low and then closing green. The green weekly close means that the important and pivotal weekly close support area between 30.02 and 30.65 has held up. Nonetheless, the stock still closed in the lower half of the week's trading range, suggesting further downside below last week's low at 29.77 will be seen this week. Pivotal intraweek support is found at 28.01. There is established intraweek support at 29.61 that if the stock is to rally, should hold up. To the upside, the minimum rally should be up to at least 35.61.
As such, purchasing DSGR around the 29.70 level, using a stop loss at 27.91, and having an objective of 35.61 will offer a 3.3-1 risk/reward ratio. By the same token and based on its history, there is a good chance that the stock will continue the uptrend and if that happens, a rally above the recent all-time high at 37.31 will be seen. Such a rally would give the trade a better than 4.25-1 risk/reward ratio. My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest.
PYPL Friday Closing Price - 60.64
PYPL (PayPal) is a well-known company that has dropped 81% in value over the past 35 months. The stock is presently trading below the average of 17 times the earning value (trading at 16 times) and is down 16.5% from its 52-week high. The company has been working strongly on cutting down costs and putting in solutions that will cause it to start growing again. Those efforts should start showing results soon.
From a chart basis and for the past 13 months, PYPL has built a rounded bottom (strongest bottom in chart trading) but it is also showing an inverted Head & Shoulders formation with the left shoulder being at 60.95, the Head being at 50.25, and the right shoulder presently being built but with the stock getting down to 60.31 this past week, that shoulder is now likely to be found this week. The stock did close on the low of the week, suggesting further downside below that low will be seen this week. Nonetheless, the stock got down to the 200-day MA, currently at 60.88, this past week and the stock has been trading above that line for the past 3 months. Without any new negative news, this line should hold up, as the right shoulder is built around here. The neckline is presently at 68.30 and based on the H&S formation, a break above that level will offer an 86.35 objective to be reached 3-4 months after it is broken.
PYPL is showing well established intraweek support between 57.28 and 58.29 and then showing good but pivotal support at 55.77. It is unlikely the latter will be seen or reached but the former could be seen this week. By the same token, there is some minor intraweek support at 60.08 and the $60 demilitarized zone is also likely to offer some psychological support, especially since the MA is not likely to be broken by any large amount. In looking at established chart resistance levels, a break above 68.30 will offer little resistance until the 76.74 level is reached, meaning that level is a highly viable upside objective if the resistance level is broken.
Purchases of PYPL around the $60 demilitarized zone (between 59.70 and 60.30) and using a stop loss at 56.65 and having an upside objective of 88.35 will offer a 7.7-1 risk/reward ratio. If only the chart objective of 76.74 is reached, the risk/reward ratio is still 4.5-1. My rating on the trade is 3.75 (on a scale of 1-5 with 5 being the highest).
BEN Friday Closing Price - 20.61
BEN is an asset management company that invests in public equity, fixed income and alternative markets. It is a well-established company whose stock has been trading for 39 years. It saw its all-time high made in 2014 at 59.43 and thereafter, the stock got into a 6-year downtrend that ended in April 2020 at 14.91. From that low, the stock generated a recovery rally that ended with a high at 38.27, which was where the 200-month MA was at. From that high, the stock then went back down to retest the low and that was successful with a 20.24 low seen in October 2022. During the past 20 months, the stock has made 2 lower highs and two higher lows, suggesting that the action has been in building a major bottom support and from which another retest of the 200-month MA, currently at 35.32, to be seen sometime over the next 6-9 months.
One very important chart thing about BEN that makes this "slow moving" stock attractive this week is that the stock closed very close to a major short-term pivotal level, meaning that the risk factor in buying this stock and at this price and time, is very small and highly visible as well as dependable (in showing intent of the traders). The stock did close on the low of the week, suggesting further downside below last week's low at 21.57 will be seen this week. Pivotal daily close support is at 21.11 (20.24 on an intraweek basis), and if the bulls are to generate any buying interest, it will be from here. If not, the risk factor is very clear and limited.
To the upside and in looking at the daily chart, the 200-day MA, currently at 25.68, is definitely a viable and likely to be reached objective, if and when the support holds. Nonetheless and in looking at the weekly chart, the 200-week MA, currently at 27.28 will be a magnet if this area of support holds up.
As such, purchases of BEN between 21.46 and 20.24 and using a stop loss at 20.14 and having at 27.28 objective will offer a 4.4-1 risk/reward ratio. My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest). The negative to this trade is that it is a very slow-moving stock and as such, profits will not come in a fast way.
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Updates
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Closed Trades, Open Positions and Stop Loss Changes |
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BABA made a new 7-week low and did break an important but short-term support level at 77.17 (last week's low was 73.26). The stock closed on the low of the week and further downside is expected to be seen this week. There is still some important weekly close support down at 72.17 that should not be broken, at least not before a rally back up to retest the break of the 200-day MA, currently at 78.05, is seen. There is one piece of tangible and likely positive news that occurred on Friday. Benzinga (a company that follows option trading closely) noticed some out of the ordinary option trading of big money on Friday. There were 15 big option trades on Friday, with 3 of them being puts for a total amount of $472,000 and 12 being call options for a total of 581,000. Usually with this stock and with options, the bears represent 54% versus the bulls doing 45% of the trades. Here on Friday, the bulls represented 80% of the options purchased and 55% of the money traded. This suggests that some positive news, not yet released, is about to come up. Having said that, the break of support is meaningful and did cause the bulls to lose the edge they had gained over the previous 5 weeks (before the downslide began). That rally not only generated a 22.5% gain in price but a break of important daily close resistance at 78.23. There is quite a bit of decent daily close support between 71.50 and 72.30 that is likely to hold up, and a rally back up to 78.23 to be seen. Thereafter, it will depend on the Chinese index and news pertaining to the company itself, that will decide the future outlook for the rest of the year. For now, a $72-$78 trading range is the most probable. GCI made yet another new 25-month intraweek and weekly closing high and closed near the high of the week, suggesting further upside above last week's high at 4.50 will be seen this week. The stock has seen 7 weeks in a row of higher lows, meaning that some type of correction to build a new support level is likely to be seen soon. Nonetheless, there is open air above 4.87, where there is some "minor" intraweek resistance but if broken, a rally up to 5.66 would like occur. For now, the bulls are in control and if the small cap index reaches its downside objective this week and begins a recovery rally, the stock will likely continue higher with the 5.66 level as the upside objective. At this time though, any drop below a previous week's low (for this week, it is at 3.95), would mean the rally is temporarily over and new support building action is to happen. The intraday chart shows the 200 10-minute MA being at 4.32 and intraday support at 4.24. Those are the levels to keep a close eye on, this week. The 4.87 level is also a level to watch this week as it is short-term pivotal resistance. INTC continued to trade sideways in a trading range between 29.73 and 32.42, which has been in effect for the past 7 weeks. The stock did close near the low of the week, suggesting further downside below last week's low at 30.14 will be seen this week. The chart is leaning to the downside but the fundamentals of the Tech Industry lean to the upside, meaning that for now, nothing is clear (as far as the probability of a short-term breakout or breakdown). In looking at the daily chart, a break above 31.48 or a break below 29.87 would give the edge to one side or the other. The stock closed at 30.45 on Friday, meaning a slight advantage to the bears (break to the upside is $1.03 away and a break to the downside is $.58 cents away). It does need to be mentioned that Benzinga (the option following company) did uncover on Friday, 17 trades that were out of the ordinary with 5 of them being puts for a total of $291,000 and 12 being calls for a total of $773,000, suggesting that some positive news is likely on the immediate horizon. JD generated a new 7-week low and closed on the low of the week, suggesting further downside below last week's low at 28.64 will be seen this week. There is (or was) important daily and weekly close support at 28.89 that was broken (stock closed at 28.77) but the break has to be confirmed to be valid (the weekly close evidently being more important than the daily close), meaning that the bulls need to generate a green close on Friday. Hopefully they will do the same on Monday on the daily closing chart. There is minor intraweek support at 28.02, which is highly likely to be seen on Monday. The 200-day MA is currently at 27.21 and as long as that line is not broken and confirmed as broken, the midterm term remains to the upside. Though the previous daily closing high breakout occurred above 28.89, the short-term daily closing breakout occurred at 28.17. That was the most recent daily closing high broken and that was the high daily close from January 2nd through March 22nd and it also was where the 200-day MA was at when the breakout occurred, meaning that on a daily closing basis, that level is more important than the 28.89 is on the weekly closing chart. With the Chinese index likely to find support of consequence this week, and from that level a rally of some consequence is likely to occur, the same could happen to the stock. A confirmed daily close below the MA would be a tangible negative. A daily close above 29.56 would give a slight edge to the bulls, and a close above 30.92 would negate all the weakness seen. LXRX generated a buy signal on the weekly closing chart, having closed above the most recent high weekly close at 1.79 (closed at 1.82). Nonetheless, the buy signal was only by $.03 cents (not enough to be convincing) and in addition, the mini breakout was not confirmed on the daily closing chart as there the daily close resistance is found at 1.94 and the high daily close for the week was 1.93. Having said that, the stock is (at worst) in a sideways trading range between 1.60 and 1.93, with the advantage being on the side of the bulls as the stock has maintained itself above the 200-day MA, currently at 1.67, for 31 of the past 33 trading days. As long as that scenario remains in place, the bulls have the edge. With the small cap index likely to find a low to this move down this coming week, a bit of weakness could be seen in the stock for the next few days, but thereafter, a recovery rally is likely to occur. The chart parameters are set (1.60 and 1.93 - based on a daily close) and that is what needs to be watched. SNDL generated a new 6-week intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 1.93 will be seen this week. The stock now clearly shows that the uptrend that started the first week of March, has ended. Having said that, no support of pivotal consequence has been broken, suggesting the stock is trading sideways and likely will continue to do so until such a time that some positive (or negative) fundamental news comes out. The weekly closing levels that are in play in this sideways market are 1.87 and 2.46. With the stock closing at 1.95 on Friday, it does suggest that some recovery rally will start occurring this week. In looking at the daily closing chart, it suggests that a 1.90 to 2.50 trading range will be seen until news comes out. A daily close below 1.83 or above 2.65 will change that scenario. Beneficial fundamentals are leaning in favor of the Cannabis industry, meaning that the probabilities favor the upside and not the downside. Short-term (the next week) pivotal intraweek resistance is found at 2.08. If that level is broken, some short-covering action is likely to be seen. SNOW made yet another new 14-month intraweek and weekly closing low and closed in the lower half of the week's trading range, suggesting further downside below last week's low at 124.69 will be seen this week. Nonetheless, the stock is now close to very important and indicative support at 122.77 and 119.27 that is highly unlikely to be broken as AI continues to be a hot industry. The stock did generate a positive reversal day on Friday, having made the week's low on Friday but then closing green and in the upper half of the day's trading range, suggesting the first course of business for the week (on Monday) will be to the upside and above Friday's high at 128.89. If that generates some additional buying and going above last week's high at 133.38, then the downside is likely over. As I stated in the message board this week, the option trading by big pocketed investors seems to be leaning slightly in favor of the bulls and NVDA keeps on making new all-time highs. With the stock near important support levels and the upside wide open with the minimum upside being $160 and most rating companies having $210 (or even $250 as one rating company has stated this past week) being the upside objective, the risk/reward ratio greatly favors the bulls. It would not be surprising if the stock bucks the odds of it going below last week's low and begins a recovery rally this week. VWDRY generated follow through to the previous week's negative reversal and made a new 6-week low. The stock closed on the low of the week, suggesting further downside below last week's low at 8.65 will be seen this week. Having said that, the stock closed on Friday $.05 cents above the 200-day MA and $.01 cent above the 100-week MA and there is no fundamental reason at this time to believe either one of those lines will be broken on a closing basis. There is decent intraweek support at 8.50 and pivotal at 8.28 that if broken would change the outlook. Nonetheless, the fundamental picture for the stock remains in favor of the bulls and with the stock just 3 weeks ago breaking a pivotal resistance level and there being no fundamental negatives coming out since, the probabilities favor the bulls this week. Short-term pivotal daily close resistance is found at 8.89 ($.20 cents above Friday's close at 8.69) and if broken, open air is found to 9.16 (on a daily closing basis. ZLAB generated a negative reversal week, having made a new 3-week high and then closing red and on the low of the week, suggesting further downside below last week's low at 18.55 will be seen this week. The weakness seen probably had more to do with weakness in the Chinese index than any new weakness in the stock. In fact, on a daily or weekly closing basis, nothing was broken as 17.78 is the level of support on both those charts. For the past 6 weeks, the stock has traded between 17.78 and 20.08 and those are the parameters that need to be broken (on a weekly closing basis) for any new indication to be made. During the same 6 weeks, the Chinese index has dropped 9.7%, meaning that unlike the recent past 6 months, the stock has been outpacing the index and that is a decent positive. The parameters are clear and they do favor the bulls.
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1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 18.69. 2) ENG - Averaged long at 18.30. No stop loss at present. Stock closed on Friday at 1.41. 3) VWDRY - Averaged long at 8.68 (4 mentions). No stop loss at present. Stock closed on Friday at 8.69. 4) LXRX - Averaged long at 1.553 (3 mentions). No stop loss at present. Stock closed on Friday at 1.82. 5) GCI - Averaged long at 2.14 (2 mentions). Stop loss at 1.85. Stock closed on Friday at 4.40. 6) BABA - Averaged long at 75.37 (2 mentions). Stop loss at 77.62. Stock closed on Friday at 73.35. 8) SNDL - Averaged long at 9.05 (2 mentions). No stop loss at present. Stock closed on Friday at 1.95. 9) JD - Purchased at 21.33. Stop loss is at 23.55. Stock closed on Friday at 28.77. 10) PRAA - Liquidated at 19.65. Averaged long at 23.225. Loss on the trade of $715 per 100 shares (2 mentions). 11) INTC - Purchased at 30.34. Stock closed on Friday at 30.45. 12) SNOW - Averaged long at 137.343 (3 mentions). No stop loss at present. Stock closed on Friday at 127.17
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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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