Issue #912
May 18, 2025 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Tariffs on China reduced, bulls generate rally based on the information.
DOW Friday Closing Price - 42654 The index market had another strong week with the indexes all gapping up and closing on the high of the week, suggesting further upside above last week's highs (DOW at 42663, SPX at 5958, NASDAQ at 21443, and RUT at 2114) will be seen this week. The reason for the rally was the agreement between the U.S. and China to scale back the tariffs from 145% to 35% and from 125% to 10%, basically eliminating the negatives that those tariffs generated. The indexes appreciated from a low of 3.6% with the DOW to 6.3% with the NASDAQ. The benefit of this action is short-term relief but the lowering of the tariffs on China has a 90-day time-frame in which the two nations have to both agree to a longer-term deal, meaning this rally does not yet have the assurance of a trade deal that would give the bulls enough confidence with which to resume the uptrend. In addition, the present tariff war with the other 176 countries is a tangible negative that also requires deals be made, in order to give the bulls enough confidence to continue buying here. Keeping in mind that the NASDAQ has recovered 91% of the 24.3% drop seen from the high of 22222 to 16542 (from February 17th to March 7th), it does suggest that the bulls will start running into increased selling interest this week. Making new all-time highs is a low probability scenario under the present fundamental conditions. Having said all of the above, here is the picture on a chart basis. The DOW has continued to underperform the NASDAQ and that is a bullish sign. If the indexes are to start seeing selling, that should turn around. Chart-wise, the index has some minor intraweek resistance at 42821 and then stronger at 43325. On a daily and weekly closing basis, there is decent resistance at 43275. The index closed above the 200-day MA, currently at 42286 and there is daily close support at 42140, which if the index closes below, would suggest more downside is to come. The SPX has intraweek resistance at 6017 and at 6001 on a daily closing basis (5975 on a weekly closing basis). A daily close below 5759 would give a failure signal against the bulls and would also break the 200-day MA, currently at the same price. The NASDAQ has intraweek resistance at 21703, at 21837 and at 21945, any of which could stop the rally. A break of all three would be indicative. To the downside, the 20538 level is intraweek support, which if broken would likely be indicative. A daily close below 20238 would mean that the rally is over. This index is the indicative one, starting with whether it under or over performs the DOW. The RUT has resistance at 2135 that is indicative because if it is broken there is open air to 2237 (on the intraweek chart). Nonetheless, there is daily close resistance at the 200-day MA, currently at 2176, which should not be broken unless the overall market is heading higher. To the downside, closure of the gap at 2037 would suggest that the rally is over. All indexes have one negative that affects the bulls and that is the open gaps on the weekly chart. In the DOW, that level is at 41773, in the SPX that level is at 5720, in the NASDAQ that level is at 20249 and in the RUT it is at 2040. Those gaps are not supported (at this time) by dependable fundamentals, and given that the fundamental picture will not likely be confirmed for months, those gaps are magnets to be closed. The only thing that is a question mark right now is "when" the gaps will be closed. Nonetheless, given that decent resistance levels are likely to be reached this week or next, it would be safe to assume that those gaps will be closed sometime over the next 2-5 weeks. HSI has outperformed the U.S. index market, having also rallied green over the past 6 weeks and now finds itself within 3% of the multiple-year high made in February. Having said that, the same reasons for the rally occurring have supported the Chinese index as the support seen in the U.S. indexes, making it unlikely that the multiple-year high at 24874 (on a weekly closing basis at 24237) will be broken. Unlike the U.S. index market, the HSI closed in the middle of the week's trading range, giving it equal chances of going above last week's high at 23715 or below last week's low at 22975). Having said that, the index did break a decent intraweek and weekly closing high at 23241 (22729 on a weekly closing basis), meaning that the bulls presently have control. There is daily close resistance at 23787, that has a decent chance of being seen this week. To the downside, a daily close below 23238 would begin to weaken the chart and a daily close below 22941 would suggest the rally is over.
GOLD(Jun 2025 chart) made a new 5-week low and closed in the lower half of the week's trading range, suggesting further downside below last week's low at $3123 will be seen this week. A sell signal was given on both the daily and weekly closing chart, when $3243 and $3222 were broken (Gold closed on Friday at $3187). Nonetheless, no failure signals were given as Gold had to close below $3166 on the daily closing chart, for that to occur. This does suggest that for now, this is a correction and not necessarily a major top having been found. A confirmed daily close below $3166 would be a negative. A weekly close below $3114 would confirm such a scenario. To the upside, a confirmed daily close above $3222 would suggest the recent high might be tested again. OIL generated a small failure signal on the weekly closing chart, having closed above the most recent low weekly close at 61.50 (closed at 62.49). Nonetheless, this failure signal is not significant as a weekly close above 66.76 is needed for the bears to get an edge. Oil did close in the upper half of the week's trading range, suggesting further upside above last week's high at 63.90 will be seen this week. Short-term pivotal resistance is found at 65.09, which if broken would give the bulls a short-term edge for a rally up to at least the $67 level. To the downside, a daily close below 59.24 would give control back to the bears.
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Stock Analysis/Evaluation
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CHART Outlooks
I have no new mentions for this week, given that short positions at these levels have the better probability but the picture for this week is not clear as to whether this is the week that a high to this recovery rally is seen or not. In addition, there are no possibly catalytic events or reports scheduled for this week, meaning that it is not expected that either the bulls or the bears will get help in making their case. By the same token and for now, I am holding on to the short positions put on last week.
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Updates
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Closed Trades, Open Positions and Stop Loss Changes |
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AAPL gapped up and had a green week but unlike the indexes and other stocks, it did not break the most recent intraweek high (in spite of the Chinese tariffs coming down). This is a negative sign for the stock as the tariffs were specifically negative to AAPL and them coming down should have given the bulls more ammunition than shown. In addition, the stock did not close on the high of the week (closed slightly above the middle of the week's trading range), meaning that even though going above last week's high at 213.94 is the most likely scenario, the intraweek resistance at 214.56 could still hold up, which in turn would give the bears new ammunition with which to close the gap down at 204.10. There is certainly a viable possibility that the stock will not go above last week's high, but go below last week's low at 206.75, which in turn would give valuable chart ammunition to the bears to even take the stock much lower than just closing the gap. Evidently, a break above 214.56 would do the opposite and open the door for a rally up to the $225 level. On the intraday chart, the 200 10-minute MA is currently at 210.85 and if that gets broken and then confirmed with a drop below 209.94, the bears are likely to get enough of an edge to take the stock down. BCTX generated a new all-time low intraweek low at 2.81 and closed in the lower half of the week's trading range, suggesting further downside will be seen this week. The break of all supports (intraweek, daily and weekly close) is an unexplainable event given that there has been no negative news having come out recently. Having said that, the bears are in full control as the bulls have no support levels below. The 200 10-minute MA, currently at 3.05, is somewhat catalytic at this time, as the stock has been below the line for the past 16 trading days and has tested the line successfully on 4 different occasions (making it a valid resistance line). A break of the line and confirmation of the break (going above 3.22) would shift the edge back to the bulls. LXRX reported earnings and they were worse than expected, and the stock broke the intraweek support at .62 and also gave a failure signal against the bulls, having closed below the previous daily and weekly close resistance breakout level at .57 (closed at .53). The stock closed on the low of the week, suggesting further downside below last week's low at .513 will be seen this week. On a very slight positive note, the stock made the low of the week on Thursday and did generate a green daily close on Friday, suggesting that further downside of consequence is not likely to occur. There is pivotal intraweek support at .36 and the same to the upside at .80. Probabilities favor the stock trading between those 2 levels for the next few weeks. MMM made a new 7-week intraweek high and a new 10-week weekly closing high, and closed on the high of the week, suggesting further upside above last week's high at 153.28 will be seen this week. Having said that, the stock finds itself at a resistance area of note, which spans 9-weeks with intraweek highs at 155.00, at 155.50, at 156.35, at 153.98 and at 155.00 again. To break such an established and strong resistance area does require help from news or from the index market, none of which is expected to happen. The two reasons that the stock rallied this week was that the company settled a lawsuit for $300 million, but that settlement was expected to be higher, and JP Morgan raised their price target to $167. Nonetheless, Mizubo also raised its price target but only to $155, meaning that area is likely to be seen this week but not necessarily broken unless the indexes manage to go higher than expected. Pivotal intraweek support is at 145.37. which if broken would suggest $137 would be seen. RBLX made a new all-time intraweek and weekly closing high and closed on the high of the week, suggesting further upside above last week's high at 82.02 will be seen this week. There was one announcement this week about the gaming genre that the company represents being in a strong growth industry, which in turn created the break of intraweek resistance. That break, in conjunction with the strength in the index market, generated liquidation of short positions. Goldman Sachs also announced that they maintained a target of $80 but did retain their "neutral" rating, suggesting that at $82, the stock is likely overdone to the upside. The stock is likely to begin the week higher but then see some selling interest come in if the index market begins to weaken. A retest of the previous all-time closing high at 75.47 is expected to be seen at some point over the next few week and consideration to covering the shorts there can be given. At the very least, a drop back down to the 200 10-minute MA, currently at 77.89. is expected to be seen this week. VWDRY generated a new 8-week intraweek and a new 28-week weekly closing high and closed near the high of the week, suggesting further upside above last week's high at 5.62 will be seen. The 27-week intraweek high is at 5.64 and if that gets broken this week (likely), there is open air above to the 6.40 level. The 200-day MA is currently at 5.56, and that is what generated the resistance seen when reached. A confirmed daily close above 5.62 will generate new buying interest as it will mean that a bottom to this downtrend has been found and that the stock is now in at least a sideways trading range with recovery likely to "ultimately" take the stock to the 200-week MA, currently at 8.42. On a daily closing basis, short-term pivotal support is at 4.99. ZLAB generated an inside week but did close green and on the high of the week, suggesting further upside above last week's high at 30.98 will be seen this week. The green weekly close did make the previous week's close at 29.24 into a successful retest of the 28.84 weekly close, which does represent pivotal support. There is daily close resistance at 33.91, which is a target for this week. On a daily closing basis, there is important and indicative support between 28.31 and 28.82.
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1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 30.93. 2) VWDRY - Averaged long at 8.68 (4 mentions). No stop loss at present. Stock closed on Friday at 5.51. 3) LXRX - Averaged long at 1.513 (6 mentions). No stop loss at present. Stock closed on Friday at .535. 4) BCTX - Averaged long at 7.825 (2 mentions). Stock closed on Friday at 2.94. 5) FSLR - Liquidated at 189.15. Averaged long at 155.50 (3 mentions). Profit on the trade of $10.095 per 100 shares (3 mentions). 6) AAPL - Shorted at 211.42. Averaged short at 205.62 (2 mentions) Stop loss is at 214.66. Stock closed on Friday at 211.26. 7) MMM - Shorted at 151.23. Stop loss at 156.35. Stock closed on Friday at 153.11. 8) RBLX - Shorted at 74.11. No stop loss at present. Stock closed on Friday at 81.27.
9) IMB - Shorted at 255.13. Covered shorts at 259.24. Loss on the trade of $413 per 100 shares.
Previous Newsletters
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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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