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Issue #946 
Feb 1, 2026 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Correction is still likely to happen!
DOW Friday Closing Price - 48892 At the end of the week and after the volatility seen, the end-result was no indicative action expressed. With the exception of the RUT, the weekly closes in the index markets were all within a small percentage of where they closed the previous week. There were "some" potential for this week being indicative, given that the NASDAQ did not make a new all-time intraweek high (though it came within 17 points of doing so - 26167 versus 26182) but then closed near the low of the week and if it goes below this week's low at 25418, it will become a double top formation. It would be indicative because the main driver to the upside the past few weeks has been the Tech Industry with AI leading the way. If that gets turned around again, the sellers will step up. The other potential indicative action that could be seen this week is that the SPX did make a new all-time intraweek high at 7025 but then the bulls failed to confirm that on the weekly close, having closed on Friday below the all-time high weekly close at 6966. Last but not least, was the fact that the RUT underperformed the other indexes and up until the previous week, it had outperformed all indexes. Such a reversal could mean that the rally is over. This coming week though, we will be getting two of the most important economic reports of the month, with the ISM manufacturing index report and the Jobs report. Neither report is expected to show much change and if that happens, it will not affect anything. One thing that did happen this past week that did create a negative reaction was Trump's nomination of Kevin Warsh for Fed Chief. It was surprising, given that Trump wants lower interest rates and Warsh is known to be a hawk and pushes for higher interest rates. That nomination caused such an uproar, that Gold dropped $600 (11.5%) off of the nomination itself. Having said all of the above, there are still lots of questions and few answers, and at this time, nothing was resolved this past week. Here are the chart levels in play this week that would generate movement in one direction or the other. In the DOW and to the upside, a rally above 49621 would be a bull statement. To the downside, a drop below 47849 would do the opposite. In the SPX, the level to the upside is 7030 and to the downside it is at 6789. In the NASDAQ, to the upside is 26182 and to the downside, it is 24954. In the RUT, to the upside, it is 2735 and to the downside it is 2508. As you can see, the two important indexes with the closest levels of both support or resistance are the SPX and the NASDAQ. As far as earnings reports are concerned, AAPL and META reported better than expected earnings this past week, and NFLX worse than expected. With the exception of META, the other two had minimal changes in price after the reports. META rallied 1.5% in value. GOOG reports on Wednesday PM and AMZN on Thursday PM. Once again, the traders are uncertain and it does not look like any of that uncertainty will be going away this week. With very little in the way of scheduled economic reports that can be catalytic, it is probable that the traders will be watching Trump closely for clues as to what to do. With Trump not being predictable in any way, the prospects for clarity are slim. As such, the probabilities still favor the downside given the seasonal tendency for it to go down in February (2nd worst month of the year) and the fact that just like the economic data is not likely to hurt the bulls, it is not likely to help them either. HSI index, on an intraweek basis, generated a strong up week, having rallied 1426 points (5%) above the previous week's close. Nonetheless, it gave back 671 points to still close in the upper half of the week's trading range, suggesting further upside above last week's high at 28058, but leaving the door open for some downside early in the week. The index has decent weekly close resistance around the 28000 level (up to 28072), that at this time is not likely to get broken. By the same token and to the downside, the 26312 level offers the same strength of support.
Gold(Feb 2026 chart) generated the kind of trading action that strongly suggests that a top to this rally has been reached at $5625. Gold shows what is commonly called an "exhaustion high", given that Gold sold off $1023 dollars in the last 2 days of trading, to close at $4763. In addition, it was a negative reversal week, with an all-time intraweek high made and then closing below the previous all-time high weekly close at $4979. Such a huge drop strongly suggests that the bulls have taken profits to a large degree, and not likely to re-enter the market with the same kind of buying interest as was seen in the past year. Much of this reaction was the naming by Trump of his nominee for Fed Chief Kevin Warsh (a known hawk that is not likely to cut interest rates), which means that inflation will continue to be fought and not aided by lowering of interest rates. Gold closed near the low of the week, suggesting further downside below last week's low at $4702 will be seen this week. To the downside, there is no established intraweek support at $4279, and even then, it is considered a minor support. The $5000 demilitarized zone is now intraweek and weekly close resistance. OIL generated a new 5-month intraweek high and a new 7-month weekly closing high, and closed near the high of the week, suggesting further upside above last week's high at 66.48 will be seen this week. On an intraweek basis, there is resistance at 66.49 that given that Oil sold off $1.25 on Friday to close at 65.23, could be an obstacle this week. By the same token and using the weekly closing chart, there is no resistance above until 67.36 is reached. On a shorter-term basis and using the daily closing chart, there is resistance at 66.20 and then indicative and short-term pivotal at 67.36. To the downside and using the daily closing chart, there is support at 64.18, a bit stronger at 63.36 and decent as well as short-term pivotal at 62.52. On all charts but on an intraweek basis, there is important and longer term pivotal resistance at 69.80, which is not likely to get broken without a strong change in the fundamental picture. For now, it seems that Oil will be trading in the 62.50 to 67.35 level.
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Stock Analysis/Evaluation
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MENTIONS For this week
I do believe that putting on short positions is still the way to go. Nonetheless, finding stocks that offer good reward to risk ratios is not easy. I did find a couple that if the desired entry points are reached, are worth doing the trade.
Last week, only 2 of the 4 stocks mentioned as shorts, got to the desired entry point but one of them got immediately covered due to a positive fundamental news that came out. None of those other 2 are near any desired entry point, meaning the two offered this week are new mentions.
SALES
EDC Friday Closing Price - 67.66
EDC is the Direxion Daily MSCI Emerging Market Bull 3x shares and it is a, leveraged ETF designed to provide 300% of the daily performance of the MSCI Emerging Market Index. It is primarily for short-term trading, it offers amplified exposure to large-cap emerging market companies, particularly in financials and technology, with a 1.08% expense ratio. The stock made a new 4-year intraweek high but then reversed to close red and near the low of the week, suggesting further downside below last week's low at 66.62 will be seen this week.
EDC has appreciated from 48.77 to 74.25 over the past 7 weeks, which is a 65% appreciation in price, and did it with 6 straight up green weeks, until last week's reversal. There is some old intraweek support at 63.77 (not strong or decent) and then nothing below until 57.29, and even then that support is on a weekly closing basis and it is from a previous weekly closing high and not a low (therefore not all dependable). Decent intraweek support is not found until the 48.77 level from which the stock started the rally from.
To the upside and as far as a desired entry point, I had to look for the 200 10-minute MA, which is currently at 70.46, which is a line that had not been broken for the past 8 trading days and only broken that one time (for 1 day) for the past 85 trading days, suggesting the break is indicative. This break was stronger than the previous break and as such, much more indicative. Nonetheless and with the strength seen the past 7 weeks, testing of that line is likely to occur.
On that same chart, indicative resistance is at 72.46 or stronger at the high last week at 74.25. As such, a mental stop loss will be at 72.56 and a hard stop at 74.35. To the downside, a drop down to at least the 57.29 is expected to be seen, which will be the objective of the mention.
A sale of EDC above 70.20 and using a stop loss at 74.35 and having an objective of 57.29 will offer a 3-1 risk/reward ratio. Nonetheless, if the stock gets above 72.56, it most likely go higher so using the stop loss at 72.56 and having the same objective, will offer a 5-1 risk/reward ratio. My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).
RIO Friday Closing Price - 91.03
RIO is a major mining company of iron or, aluminum, and copper. Due to the recent run in that industry, the stock had moved up from a low of 51.67 to the all-time high last week at 97.11 (a 53% increase in price) over the past 10 months, with over 50% of that rise happening over the past 10 weeks.
RIO made a new all-time intraweek high last week but that did not get confirmed on all-time weekly closing chart, which is at 93.17. The stock closed green but near the low of the week, suggesting further downside below last week's low at 89.63 will be seen this week.
More importantly was the effect seen in other mineral industries with Gold, Silver and Copper dropping sharply from their all-time highs, mostly due to the idea with Trump's Fed Chief Nominee in Kevin Warsh that interest rates will not be lowered. This will in effect put a stop on the minerals market rally, if that turns out to be the case.
To the downside, RIO has "no" intraweek support until the 83.47 level is reached and that support is minor. The next support is 81.03 and that support is stronger as it also includes weekly close supports from 81.03 to 82.68, from a previous low to 3 previous high weekly closes. The 81.03 level will be the objective.
With RIO likely to experience a retest of the high but not likely to get above the weekly close resistance at 83.17, the resistances found above include the 200 10-minute MA, currently at 92.57, as well as a lot of intraday resistance between 93.13 and 93.45. With Friday's high being 93.34, the desired entry point will be above that level, which would mean that a retest of the high could be happening on the daily chart. The stop loss on this trade will be at 93.27.
A sale of RIO at 93.36 (or higher) and having a stop loss at 97.27 and an objective of 81.03 will offer a 3.2 to 1 reward to risk ratio. My rating on the trade is a 3.5 (on a scale of 1-5 with 5 being the highest). It does need to be noted that on the monthly chart, the downside objective is 73.61, and if that level is reached, the reward to risk ratio increases to 5-1.
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Updates
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| Monthly & Yearly Portfolio Results
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Closed Trades, Open Positions and Stop Loss Changes
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Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted. Status of account for 2026, as of 1/1 Profit of $0 using 100 shares per mention
Closed out profitable trades for January per 100 shares per mention
NONE
Closed positions with increase in equity above last months close. VWDRY $564 Total Profit for January, per 100 shares. $564 Closed out losing trades for January per 100 shares of each mention.
USAR (short) $38
CVX (short) $261 Closed positions with decrease in equity below last months close. NONE Total Loss for January, per 100 shares $299 Open positions in profit per 100 shares per mention as of 2/1
ORLY (short) $799
Open positions with increase in equity above last months close.
NB (long) $120 Total $919 Open positions in loss per 100 shares per mention as of 2/1
WVE (long)$562
Open positions with decrease in equity below last months close.
GSTRF (long) $18 Total $1,268 Status of trades for month of January per 100 shares on each mention after losses subtracted.
Loss of $84
Status of account/portfolio for 2026, as of 1/31Loss of $84 per 100 shares.
BCTX did get up as high as 5.16 but gave it all up and ended the week near the low of the week, suggesting further downside below last week's low at 4.22 will be seen this week It seems that the base-building scenario continues to occur, but this week the support at 4.00 is at risk of being broken. Short-term pivotal resistance is at 5.16
GSTRF generated a red week and closed on the low of the week, suggesting further downside below last week's low at .20 will be seen this week. Intraweek support is found at .18.3 but any close (daily or weekly) below .20, will be a clear sign of weakness. LXRX generated a new 19-week low after the company announced a new offering of 32 million shares at a price of $1.30. The offering is expected to be filled by Monday. This is a short-term fundamental negative given the additional shares dilutes the price of the stock. Short-term intraweek support is found at 1.00 and then at .92. On a weekly closing basis, the .99-1.01 level is pivotal support which if broken, would not allow for the stock to rally until some positive news comes out. A weekly close above 1.30 is now needed to negate this new negative. NB generated a negative reversal week, having made a new 14-week high and then closing red and below the previous week's low. The reason given for the reversal is that the energy department realigned the critical minerals program and evidently (not sure), this company was at the losing end of that scenario. The stock closed near the low of the week and further downside below last week's low at 5.70 is expected to be seen this week. The stock did generate a failure signal against the bulls (having closed below the previous weekly closing high at 6.51 ad below the previous daily closing high at 6.90 (closed at 6.14) but no other signal was given, meaning that there is still a chance that this drop could be reversed this week. Nonetheless, any daily close below 5.69 would open the door to liquidating the positions and taking the loss. Any daily close above 6.90, would negate the break. ORLY generated a negative reversal week, having made a new 8-week intraweek high and then closing red and near the low of the week, suggesting further downside below last week's low at 97.34 will be seen this week. The red weekly close made the previous week's close at 99.23 into the 3rd successful retest of the all-time high weekly close at 107.50. Any daily close below 96.13 would give the bears new ammunition, given that level was a previous all-time high daily close that lasted 3 months without being broken. In addition, the 200-day MA is currently at 96.39, meaning that such a close would be a clear signal of further downside to come. To the upside and on a daily closing basis, "any" close above 101.70 would be a signal to cover the shorts. WVE continue to show weakness and did close below an established weekly close support at 13.65 (closed at 12.94). Nonetheless, that same support is found on the daily chart at 12.85 and that was not broken. The stock did close near the low of the week, suggesting further downside below last week's low at 12.55 will be seen this week. Intraweek support was found at 12.66 that did get broken, meaning that the bears presently have the edge. As such, this week is very important because any further downside, especially on a daily closing basis, would be damaging to the chart and offer a drop down to the $10 level. The bulls have to show some strength starting Monday. Intraweek resistance is found at 14.55 that needs to be broken, for the bulls to get the edge back. ZLAB generated a new 17-month intraweek and weekly closing low and closed on the low of the week, suggesting further downside below last week's low at 16.50 will be seen this week. The bulls have been totally unable to generate any buying interest and if the intraweek low at 16.01 is broken, it would be a game changer. There has been no new negative news and with the Chinese Index moving higher, this weakness is very worrisome and could mean some "hidden" negative fundamental information is out there that has not yet been made public. This is a pivotal week for the stock, given that the bulls "need" to start generating some upside or the future will look bleak. There are 3 levels of daily close and intraweek resistance above that need to be addressed before short-covering begins to occur. The first is the 17.33 level, given that a close above that level would generate a minor failure signal against the bears. The second level is 19.03, where "some" (not pivotal but perhaps indicative) intraweek resistance is found. The last one is at 19.83 (on an intraweek basis), which if broken would suggest the downside is over unless new negative fundamental information comes out.
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1) ZLAB - Averaged long at 65.50 (7 mentions). No stop loss at present. Stock closed on Friday at 16.60. 2) LXRX - Averaged long at 1.513 (7 mentions). No stop loss at present. Stock closed on Friday at 1.11. 3) BCTX - Averaged long at 78.25 (2 mentions). Stock closed on Friday at 4.30. 4) GSTRF - Purchased at .42. No stop loss at present. Stock closed on Friday at .20. 5) NB - Purchased at 6.88. No stop loss at present. Stock closed on Friday at 6.14. 6) WVE - Averaged long at 15.75. No stop loos at present. Stock closed on Friday at 12.94. 7) ORLY - Shorted at 102.02 and at 101.83. Averaged short at 101.405 (2 mendtions) stop loss at 102.56. Closed on Friday at 98.41 8) CVX - Shorted at 170.02. Covered shorts at 172.64. Loss on the trade of $261 per 100 shares.
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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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