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Issue #913 
May 25, 2025 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Indexes drop, suggesting that a correction has begun.
DOW Friday Closing Price - 41603 The 3 main indexes generated a negative reversal week, having gone above the previous week's high and then closing red and near the low of the week, suggesting further downside below last week's low will be seen this week. In the DOW, that is below 41354, in the SPX, that is below 5767, and in the NASDAQ, that is below 20777. All 3 of the indexes dropped around 2.6% in value, meaning that there was no dichotomy seen this week. The lack of dichotomy suggests that confusion as to what is to come was the prevalent scenario, coming from the fact that the fall began on Wednesday when the "beautiful" tax bill was passed by the House (meaning higher debt) and that was followed on Friday when 50% tariffs on EU were announced, as well tariffs on AAPL products not made in the USA. These 3 items caused the selloff but none of the items is yet a "done" thing, meaning uncertainty was prevalent. Having said all of the above, and in looking at the weekly closing charts, Friday's closes were mixed (as far as negative signs), with the DOW closing below an important short-term weekly close support at 41938 and the SPX doing the same with the close below 5827. Nonetheless, in the NASDAQ the bulls closed above the same kind of weekly support as in the other two indexes, with the support being at 20847. This all means that the bears won the week but not in a way that makes a clear statement. There is a big magnet this week in the SPX and in the NASDAQ, which is closure of the weekly gaps that occurred 3 weeks ago, with the SPX gap being at 5720 (47 points lower than last week's low) and in the NASDAQ at 21443, and RUT at 2114). 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 gap being at 20249 (521 points below last week's close. Those gaps have no reason to stay unclosed, especially with the news that came out. In looking at the charts, the likely objective of this correction (if confirmed this week with closure of the gaps and another red weekly close) is 40,000 in the DOW, is 5500 in the SPX and it is 19152 in the NASDAQ. There are no important reports scheduled for this week, and nothing of last week's negative news is likely to be resolved or confirmed this week, meaning the charts are likely to be used by the traders to accomplish objectives. As such, it is certainly possible (not certain though) that those downside objectives could be seen this week. As far as potential negation of all of the above, a rally above last week's highs would be needed to change the chart picture. In the DOW, last week's high was 42842, in the SPX it was 5968, and in the NASDAQ it was at 21482. The overall picture right now is that a correction is occurring to the 7-week rally that occurred after Trump brought the tariffs back down on China. It should also be mentioned that May ends on Friday and it is likely to end up being an up month (rather than the norm of it being a "sell in May and go away" month). It should also be noted that on the monthly chart, the low seen in April has not yet been tested. Given that it was a 13-month low, it does require a successful retest of it, if the bulls want to attempt to resume the previous 28-month uptrend. This month's lows are 40703 in the DOW, 5578 in the SPX, and 19605 in the NASDAQ. As such, it is highly likely that the indexes will go below these lows in June, or below whatever lows are made this week. As far as the RUT is concerned, the index dropped more than the other 3 indexes this past week (it fell 3.6%). It is the index that has the most pivotal supports close-by, which makes it an index to watch closely this week. On a weekly closing basis, the 200-week MA is at 2001 and pivotal support is found at 1950. In addition, and on the monthly closing chart (Friday), pivotal support is at 1962. A close below all 3 next Friday would be a strong negative sign for the market. HSI has outperformed the U.S. index market, having closed green over the past 7 weeks and on Friday, closing above a minor but likely indicative weekly close resistance at 23477 (closed at 23601). The index closed near the high of the week, suggesting further upside above last week's high at 23935 will be seen this week. There decent pivotal weekly close resistance at 24231, which if broken, offers open mostly open air up to 25727. On the monthly closing chart, the monthly close resistance is at 23801, which if broken does offer open air to the 23510 level. Any daily or weekly close below 22736 would negate this bullish scenario.
GOLD(Jun 2025 chart) generated a new all-time weekly closing high (at $3357 and above the previous one at $3444) and closed on the high of the week, suggesting further upside above last week's high at $3366 will be seen. This was a winning week for the bulls but not yet a victory as on the daily closing chart, the double top at $3425/$3422 remains unbroken and a strong obstacle that requires further positive news to break. In looking at the monthly chart, Gold is having an uneventful inside month with the previous month's close being $3332. A close below that level on Friday would generate a red monthly close. By the same token, Gold would need to close out the month below $3236, for it to be in the lower half of the month's trading range and suggest further downside in June. Having said all of that, the bulls did regain the edge that only a daily close below $3295 would negate. OIL generated a negative reversal week, having gone above last week's high and below last week's low and then closing in the lower half of the week's trading range, suggesting further downside below last week's low at 60.05 (than above last week's high at 64.13) is the higher probability. The bears do remain with the edge but the action last week does not suggest that anything of consequence is likely to occur this week. Short-term pivotal resistance is at 64.43, which if broken would give the short-term edge to the bulls. On the monthly closing chart, the 63.91 level has some meaning. A close above it would suggest some further upside will be seen in June. To the downside, there is no level close by on any of the charts that is likely to be seen (much less broken) that is of consequence.
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Stock Analysis/Evaluation
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CHART Outlooks
At this time and at these prices, trading this market on either side remains more of a gamble than a likely dependable trade, given that the risk/reward ratios for this week are not good for a sell position and are not probable for a buy position.
Nonetheless and in reading about the fundamental picture of some industries, which are high probabilities and not necessarily affected by any of Trump's actions, there is one "purchase" trade that if the desired entry point is reached, does offer a good risk/reward ratio, as well as a high probability trade. It is the only trade I am offering this week but it is somewhat unlikely that the stock will get down to the desired entry point now. It does remain a desired trade at any time the desired entry point is reached.
PURCHASES
CRDO Friday Closing Price - 61.78
CRDO engages in the development of connectivity solutions and products for the data infrastructure market.
Desired entry point = at 55.60 or lower
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Updates
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Closed Trades, Open Positions and Stop Loss Changes |
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AAPL generated a sell signal as well as a failure signal against the bulls when Trump announced a 25% tariff against the company on any IPhone not built in the U.S. The stock closed near the low of the week, suggesting further downside below last week's low at 193.46 will be seen this week. With the news and the chart pattern, the 200-week MA, currently at 179.86 is now a magnet likely to be reached. The stock did gap down on Friday from 199.70, and that could be a magnet to the upside. Intraweek resistance is found at 200.61. BCTX commented on their cancer drug positive results and rallied 21% but then by the end of the week, it gave back most of the profits, to close 3% higher. It did close green but near the low of the week, suggesting further downside below last week's low at 2.91 will be seen this week. The stock did make a new all-time low at 2.81 the week before and as such, that low needs/rquires a successful retest of it, before the bulls climb aboard. It is likely that is the goal of the bulls this week, meaning going below 2.91 but not below 2.81 and then closing green and on or near the high of the week (on Friday). Pivotal intraweek resistance is found at 3.72 but in looking at the intraday chart, a rally above 3.34 would give the bulls a slight edge. Evidently, a drop below 2.81 would be a negative. LXRX generated an uneventful inside week but did close green and on the high of the week, suggesting further upside above last week's high at .66 will be seen this week. On the other side of the coin, the fact that the stock reported lower-than expected earnings the previous week "and" closed on the low of the week, and then the fact that the bears were unable to take the stock below the previous week's low is not uneventful. It does suggest that the .51/.52 level is reliable support. The stock did close above a previous low daily close support at .65 and that could be indicative. Daily close resistance is found at .73, which if broken would offer a rally up to the 200-day MA, currently at 1.00. Any daily close below .51 would now be a negative. MMM generated a negative reversal week, having made a new 8-week intraweek high and then closing red and on the low of the week, suggesting further downside below last week's low at 147.01 will be seen this week. The red week does establish previous week's intraweek high at 154.73 into a new and successful retest of the very well-established previous 9-week period of time when the stock generated intraweek highs at 155.00, at 155.50, at 156.35, at 153.98 and at 155.00 again. It also means that the all-time weekly closing high at 155.13 now shows a successful retest of it with the previous week's close at 153.11. Pivotal weekly close support is found at 144.98 (144.84 on a daily closing basis), which if broken would offer a 137.30 objective. Daily close resistance is found at 150.74. RBLX continues to outperform the market, having generated yet another all-time high weekly close. The stock closed near the high of the week, suggesting further upside above last week's high at 83.04 will be seen this week. Having said that, the stock did trade within a $3 trading range from Tuesday to Friday, with the high of the week being made on Wednesday, suggesting that the momentum is ebbing. Short-term pivotal support is found at 78.66, which if broken, would suggest the previous all-time daily closing high at 75.47 will be tested. If that happens, consideration can be given to covering the short positions at a loss. TXN generated a key negative reversal week, having made a new 11-week intraweek high and the closing below the previous week's low. In addition, the stock dropped in value 8.6% and closed below the 200-week MA, currently at 177.62. The stock closed near the low of the week, suggesting further downside below last week's low at 173.75 will be seen this week. The stock has an open gap on the weekly chart down at 172.60, which is a definite target for this week. Nonetheless and on the daily chart, there is a 2nd gap down at 168.43 that should be closed if the gap at 172.60 is closed. The downside target of this correction is 164.51, which was the daily close resistance level that when broken caused the rally. It is also interesting and "indicative" that the stock got up to the 200-day MA, currently at 190.08 and the bulls were unable to break above after trying to do so on 6-different occasions where the stock got up as high as 189.00. This means that overall, the bears maintain the overall control in the mid-to-longterm trend. Any close above 185.91 would weaken this chart scenario. VWDRY generated a negative reversal week, having made a new 9-week intraweek high and then going below last week's low and closing red and near the low of the week, suggesting further downside below last week's low at 5.00 will be seen this week. The stock did generate a failure signal against the bulls, having closed below the weekly close breakout level at 5.23 (closed at 5.11). The stock shows an open gap on the weekly chart at 4.93 that is a target for closure, even though the gap does have a valid reason for it, given that it was generated by a better-than-expected earnings report. Indicative daily close support is found at 5.00, which should hold up due to the fundamental picture, as well as the chart picture. It should also be mentioned that the selling seen was because the stock got up to the 200-day MA, currently at 5.49, and the bulls failed to close above it. This was the first test of the 11-month line, and as such, it was expected to fail, given that such a resistance usually takes 3 attempts before breakage occurs. ZLAB had a relatively uneventful week based on the daily and weekly closing charts, as no resistance or support level were tested or broken. On a potential short-term negative note, the stock was showing a breakaway/runaway gap formation on the daily chart and the runaway gap was closed on Friday, making the breakaway gap at 28.82 into a potential target. On an intraweek basis, there is support at 29.85 that would be the deciding factor as to the closure of the breakaway gap, depending on what happens if/when that level is reached. On the other side of the coin, a rally above 33.22 would give new ammunition to the bulls. Either way, the bulls need a weekly close above 32.37 and the bears a weekly close below 28.84, for anything of consequence to occur.
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1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 31.32. 2) VWDRY - Averaged long at 8.68 (4 mentions). No stop loss at present. Stock closed on Friday at 5.11. 3) LXRX - Averaged long at 1.513 (6 mentions). No stop loss at present. Stock closed on Friday at .66. 4) BCTX - Averaged long at 7.825 (2 mentions). Stock closed on Friday at 3.07. 5) TXN - Shorted at 189.62. Stop loss now at 190.35. Stock closed on Friday at 176.30. 6) AAPL - Averaged short at 205.62 (2 mentions) Stop loss is at 214.66. Stock closed on Friday at 195.27. 7) MMM - Shorted at 151.23. Stop loss at 156.35. Stock closed on Friday at 147.62. 8) RBLX - Shorted at 74.11. No stop loss at present. Stock closed on Friday at 82.26.
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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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