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Issue #188 
August 15, 2010 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Failure Signals Generated, Indexes Under Selling Pressure!
DOW Friday closing price - 10303
This past week was all about failure. The DOW ended up closing the previous week on a positive note, near the highs of the week and with a spike low. Follow through to the upside was expected to be seen and the resistance at 10730 was at risk of being taken out. Nonetheless, the best the index could do on Monday was move slightly above the previous week's high of 10703, with a rally up to 10720, and that is all she wrote. By the end of the week the index ended up having a key reversal to the downside, a close near the lows of the week, as well as successful retest of the resistance at 10730.
The DOW also ended up negating the break above the 100 and 200 day MA's and confirming the break with 3 days in a row below the line. From a technical chart perspective, it can be said the index had a very negative week canceling out all the positives the index had accomplished the week prior, and suggesting that no further upside will be seen.
On a weekly closing basis, resistance is decent at 10618 and decent to strong at 10654. On a daily closing basis, resistance is decent at 10451, minor to decent at 10538 and strong at 10699. On a weekly closing basis, support is very minor at 10098, decent between 10012 and 9932, and strong at 9688. On a daily closing basis, very minor support is found at 10266, minor to decent at 10098, and decent at 9974. Below that level there is minor to decent support 9816 and strong at 9686.
Two weeks ago the bulls were able to accomplish voiding 2 months of negativity seen between May and July, but the fall back below the 200-day MA, currently at 10440, must be seen as a strong blow to the hopes of the bulls as that line has/had to be considered a strong pivot point between a bullish or sideways scenario and a bear trend. The failure now opens up the probability of the recent lows at 9614 being tested and perhaps even broken.
The DOW is now highly likely to trade back down to the major psychological pivot point at 10,000 this coming week. If that happens, it is probable that the index will then get into a trading range for the next couple of weeks of 300 points above and below that level (9700 to 10300). This type of trading is generally seen at major psychological levels and especially when a lack of fundamental news is present.
The DOW was able to close above the top of the potential channel to be seen over the next few weeks when it closed at 10300 on Friday (closed at 10303), but any further daily closing weakness on Monday (likely) would likely cause the index to break into that channel and cause the top of the channel (10300) to become strong resistance thereafter. It is evident that this week's close at 10303 was the best the bulls could do on Friday, hoping that something positive would happen over the weekend. Nonetheless, the probabilities don't favor rallies on Monday and any close below 10300 would likely generate additional selling.
The inside trading day on Friday must also be considred bearish as inside days tend to get resolved by following the previous immediate trend, which is down. Though the chart does show decent support around the 10225/10235 level, that support is from December and it is not likely to hold up as there is no recent support at that price on the chart. In fact, the DOW shows no recent support whatsoever until 10008 is reached. Any break on Monday below Thursday's low at 10269 could open up the floodgates and cause a 300 point drop to occur on Monday. Thursday's high at 10362 held up strongly on Friday and has to be considered a resistance level for Monday's trading. Nonetheless, a rally back up to retest the break of the 200-day MA, currently at 10440, would not be a surprise.
Having seen a 451 point trading range this past week, including a negative reversal on the weekly chart, would suggest this coming week will be just as strong or stronger. Using 10362 as a possible high for the week would put the possible objective to the downside of at least 9911. Using 10440 as the possible high for the week would make the downside objective around 9970.
NASDAQ Friday closing price - 2173
The NASDAQ gave a bear-trend confirmation when it closed in the red this past week making the previous week's close at 2288 into the third successful retest of the high weekly close at 2530 (previous weekly closes at 2347 and 2310). In addition, the close below the 200-week MA at 2222 could be the "nail in the coffin" as it is also the third time the index has closed convincingly below the 200-week MA over the past 8 months. Generally speaking, three is the "charm".
It must be mentioned again that the NASDAQ led the rally to the upside last year and the fact the index has been the one giving all the strong sell signals this year suggests that it is truly a trend change that is being seen.
On a weekly closing basis, resistance is decent at 2288 and decent to strong between 2310 and 2317. On a daily closing basis, there is minor resistance at 2222, decent resistance between 2250 (previous daily closing high of some consequence) and 2265 (200-day MA), and strong resistance at 2306 (most recent high daily close as well as 100-day MA). On a weekly closing basis, support is decent at 2141 and strong at 2092. Below that, there is decent psychological support at 2200 and strong support at the 100-week MA, currently at 1965. On a daily closing basis, support is minor at 2156, decent at 2126 and strong at 20.92.
The NASDAQ is now showing a breakaway and runaway gap formation with the runaway gap being between 2198 and 2205. Such a formation, when added to all the other negatives mentioned above, is a powerful negative indicator that further downside will be seen immediately. The index does show some minor intra-week support at 2160 and then stronger at 2139/2141. Having closed at 2173 and having seen a low on Thursday at 2163, breaking below 2160 may not be difficult. Nonetheless, the 2139/2141 level is also a strong daily and weekly close support and may prove difficult to break. By the same token, if broken, there is absolutely no support until 2100 is reached.
To the upside, the gap area should prove to be strong resistance, but it is also strong because 2200 has proven to be in the past good support/resistance on the chart as well as psychologically. Evidently if the gap up at 2205 is closed, the breakaway gap at 2262/2237 will become a magnet.
Right now the probabilities strongly favor further downside and a drop down to at least the 2139/2141 level, perhaps Monday. Nonetheless, on an intra-week basis, the charts suggest that a drop down to 2100 will occur this coming week. By the same token, if that level is broken, the recent low at 2062 will be tested and likely broken as well, making the objective become the psychological support at 2000 and the chart support at 1965 (100-week MA).
Last week the NASDAQ saw a trading range of 146 points and considering that the runaway gap at 1198 will be strong resistance and not likely broken, the possible objective could be anywhere from 2000 to 2035 this coming week.
SPX Friday closing price - 1079
The SPX, much like the NASDAQ, was unable to get above its June 14th high at 1131, though it tried 2 weeks in a row with rallies up to 1129. The failure to generate those few extra points proved to be the crucial this past week as the index is generally considered to be a key factor in deciding where the market is heading.
Based on the weekly close, the SPX had given hope to the bulls that further upside could be forthcoming having closed above a previous close resistance of consequence at 1118 with a close the previous week at 1122. Nonetheless, that elation soon turned to despair as the index gave a failure-to-follow-through signal on Friday by closing substantially lower than the previous weekly close resistance at 1118.
On a weekly closing basis, resistance is now strong between 1118 and 1122. Above that level, resistance is also strong at 1145. On a daily closing basis, resistance is now decent to strong between 1096 and 1103, strong between 1115 and 1118, and strong to major at 1128. On a weekly closing basis, decent support is found at 1065/1066 and strong support at 1023. Below that level there is decent support at 1014 (100-week MA) and decent to strong at 1000 (psychological support). On a daily closing basis, support is decent at 1065/1066. Below that level, there is decent support at 1050 and strong at 1023.
The SPX gave all kinds of sell signals this past week starting with a failure to follow through signal on the previous week's break above 1118, continuing with the index breaking and closing below an important short-term daily close support at 1102/1103, and ending with the break below the 200-day MA once again. In general, there is not one positive thing that can be said about the index this past week.
The probabilities now favor a drop back down to at least the 1050 level where the bulls are likely to attempt to stem the negative feelings generated this past week. Support on the daily closing chart is decent at 1050. Nonetheless, on the weekly closing chart no such support exists at that level and if the index closes below 1065 the next support would be 1023.
It must be mentioned that the daily chart of the SPX shows a very rare occurrence inasmuch as the index is showing a breakaway gap between 1189 and 1187. This is not an index that often shows gaps so the fact there is one could be very indicative. The index generated the gap on Thursday and certainly attempted to close it on Friday, but was unable to do so as Friday's high was 1186. The index closed right on its lows on Friday and that certainly opens up the possibility of a runaway gap on Monday and a spike immediately down to 1150.
Since the SPX does not often leave gaps, much less leave them open, the possibilities are high the gap will be closed, but if it isn't, and a second gap occurs, that could also be the "nail in the coffin" suggesting the downtrend would accelerate and the 1000 level would then become the initial target. As far as the upside is concerned, should the gap be closed, rallies up to 1100 to 1102 would be highly likely. Nonetheless, the resistance there must now be considered decent and unlikely to get broken without fundamental help.
Having had a 52 point trading range this past week and closing on the lows of the week, suggests that if the gap at 1189 is not closed that a drop down to at least 1023 would likely occur. If the gap is closed and the index rallies up to 1102, the possible low for the week would be 1050.
The probability favors the first scenario, but then again it is important to note that this coming week is options expiration week and that could be a monkey wrench.
The economic calendar this week does not have any major reports, though a couple of reports such as Empire Manufacturing, Industrial Production, Capacity Utilization, Initial Claims, and Philadelphia Fed could have some short term effect. On the earnings front only 115 companies report and none can be considered major either, though some of the more important earnings reports may have some impact on the Retail Sales industry. The probabilities of the week being dominated with technical chart trading is high and if that is the case, more downside is likely. It will be very difficult for the bulls to make a case for their side based on the failure signals given this past week.
The biggest monkey wrench facing the market this coming week is options expiration, which often offers support even when the market is under selling pressure. Nonetheless, that buying is not usually seen until late in the week and if the indexes open substantially lower on Monday, as could easily happen due to the weak close and sell signals given on Friday, the panic selling could prevent the options expirations buying late in the week from occurring.
Either way, based on the action this past week, weakness is expected to be seen from here on in. Whether it be strong weakness or just minor weakness is yet to be determined, but it is now highly probable that at best a sideways market is in effect with the top of the channel having been seen this past week and the bottom of the channel still relatively far away, or that the downtrend has once again begun and that new 1-year lows will be made in the coming weeks.
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Stock Analysis/Evaluation
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CHART Outlooks
Based on the failure and sell signals given this past week, only short positions should be considered at this time. By the same token, in looking over the charts of many companies, it has been very difficult to find good risk/reward ratios anywhere. Most companies do show the probability of heading lower, but in most cases, the charts show some decent support levels not too far away and resistance levels where stops can be placed with confidence too far away to offer at least 4-1 risk/reward ratios.
The 2 stocks I do show as sell mentions are the exceptions among the stocks I researched this weekend.
This week I do show "one" stock as a purchase. The company is solid but at a severely depressed low price due to the competitive nature of the industry it is in. The stock shows a possible bottoming out chart scenario that offers a great risk/reward ratio as well as a decent probability rating.
SALES
LVS - Friday closing price - 28.39
LVS has been in an up-trend since March 2009 when the stock reached an all-time low of $1.38, after having seen an all-time high in October 2007 at 148.76. The rally has been impressive but this is a stock that can easily be affected by economic ills as the industry depends a lot on discretionary spending by consumers. With the recent slowdown in the economy and thoughts that things are not likely to get better soon, discretionary spending may take a dive.
LVS broke out of a 10-month bottoming-out trend in November of last year and has since been quite successful in holding itself above the 50-week and 100-day MA's, though the line has been touched and tested successfully on at least 2 previous occasions. At this time the stock is far above that line but is beginning to show signs that a temporary high has been found and that drops back to that line are probable.
On a weekly closing basis, resistance is minor at 28.81 and minor to decent at 34.00. On a daily closing basis, resistance is minor at 28.89 and decent to strong at 29.05. On a weekly closing basis, support is minor to decent between 24.86 and 25.12 from a couple of previous high daily closes as well as psychological. Support is strong between 21.00 and 21.59. On a daily closing basis, support is decent at 26.93 and then nothing until the 100-day MA is reached, currently at 24.30.
Though there is very little on the weekly chart to suggest the stock may be reaching a temporary top, it should be mentioned that the $30 has to be considered psychological resistance. In addition, the stock shows a previous low of some consequence at 30.54 as well as the most recent high seen a week ago at 29.56. It must be mentioned that upon reaching that 29.50 high 7 trading days ago, the stock gapped down 4 days after, suggesting that some strong selling was coming in. The stock has closed that gap as expected, but still finds itself trading below the recent high and giving notice, by the higher opening on Friday but close on the lows of the day, that selling is once again being seen.
One of the biggest reasons to consider shorting the stock at this time is that even if the up-trend is to continue, a drop back down to test once again the 50-week and 100-day MA's, both currently down in the low 24's is highly probable, especially if the indexes are heading lower.
In addition, if a double dip recession is coming, LVS could easily drop down to the 200-day MA, currently at 20.30, or even to the 200-week MA, currently at 14.10. Certainly after a 17-month up-trend, and a rally of over $28 (a 2300% rise in price), if a top has been found, a strong corrective phase could ensue.
Sales of LVS between 28.30 and 28.75 and using a stop loss at 29.60 and having an objective of 24.30 offers a 4-1 risk/reward ratio.
My rating on the trade is a 2.75 (on a scale of 1-5 with 5 being the strongest).
STX Friday closing price - 11.18
STX has been in a very strong downtrend that seems to be accelerating at this time, especially with this past week's break of the 100-week MA. It must be mentioned that in the past the stock has shown the ability to get into long and protracted trends that last for months and cover big price changes. In addition, the stock shows no recent support levels, other than the psychological one at $10, until last year's low at 3.04 is reached.
STX has already dropped more than 50% in value over the past 5 months and therefore that numerical area of support is now gone. The next numerical area of support is at 61.8% and that is still almost $3 lower in price from Friday's close.
On a weekly closing basis, resistance is decent at the 100-week MA, currently at 12.00. Above that level there is no resistance until decent resistance is found at 14.16. On a daily closing basis, very minor resistance is found at 11.28 and then nothing until minor resistance is again found at 12.00. On a weekly closing basis, there is decent support at 10.24 and then nothing until decent support is again found at 8.40. On a daily closing basis, there is very minor support at 10.99.
STX has proven to be a strong trending stock over the years and now finds itself in a downtrend that started in April from a high of 20.90. This past week the stock broke and closed below the 100-week MA, currently at 12.00, suggesting that further downside is likely to be seen, especially since the indexes are not likely to offer any support. The nearest support is down at 10.15 but it is old support from August 2004 and may not be respected by the traders. Below that level there is no support whatsoever until 7.78 is reached, but it too is old support from February 2003. The most recent support of any consequence is from March 09 and it is down at 3.04.
The recent downtrend in STX seems to be accelerating as the 100-week MA, currently at 12.00, was broken this week and a breakaway gap between 11.82 and 11.70 was generated. As such, the stock has a high probability of reaching the psychological support at $10 level this coming week. Nonetheless, if the indexes do generate a strong down move, the stock could break the $10 level easily because of the aggressive bear trend being seen.
In looking at a possible stop loss that makes sense in a runaway downtrend, it must be mentioned that not only is the 12.00 level where the 100-week MA is located an intelligent resistance, but it is also a previous intra-week low of some consequence. As such, it is unlikely the stock will be able to get above that level if there is no help from the indexes. In addition, the breakaway gap should also work as resistance, giving that whole area added resistance strength.
Sales of STX at Friday's closing price of 11.18 and using a sensitive stop loss at 11.81 or a stronger one at 12.10, and having an objective of 7.78 will offer a 6-1 risk/reward ratio.
My rating on the trade is a 3.25 (on a scale of 1-5 with 5 being the strongest).
PURCHASES
NOK Friday closing price - 8.86
NOK has been in a downtrend of consequence since Oct07 when the stock saw a 7-year high at 42.22. The downtrend was of such consequence that last year in March, the stock made a new 11 year low at 8.47. The stock did rally when the Indexes rallied between Mch09 to May10, from 8.47 to 16.58, but once again just 2 weeks ago, the stock broke the recent low and made a new 11-year low with a drop down to 8.02. It is evident that the competition with the new giants in the smart phone industry, such as GOOG, AAPL, and RIMM, has the company as "low man on the totem pole" and receiving the brunt of the selling.
Nonetheless, the company has no debt, is sitting on 40% cash reserves and has a strong and established status in emerging countries, making the present price attractive. In addition, from a chart perspective this most recent break of long term support at 8.47 did not show any follow through to the downside as the next support level from 1998 at 7.37 was not reached (got down only to 8.00) and the stock managed to rally and close back above the previous low at 8.47 just 2 weeks later, suggesting that perhaps the worst of the downside is over.
On a weekly closing basis, there is decent to strong resistance at 9.52. Above that, the $10 level should offer strong psychological resistance as well. On a daily closing basis, there is decent resistance at 9.43 and strong resistance at 9.68. On a weekly closing basis, support is decent at 8.25 and then nothing until 4.13. On a daily closing basis, support is minor at 8.41 and decent to strong at 8.02.
The trade in NOK is exclusively technical as I have little ability to evaluate the company fundamentally and cannot assess just how much the stock could appreciate in comparison with other companies in the industry. Nonetheless, I do believe there are enough fundamental and chart reasons to believe that the company may have found a bottom.
From a technical perspective, the recent 11-year low at 8.00 (8.02 on a daily closing basis) has to be considered important support right now. The stock does show an open gap between 8.62 and 8.71 that is likely to be closed as there was no fundamental news to generate a gap. In addition, the previous low at 8.47 needs to be tested as well. With the weakness in the indexes on Friday, the NOK chart shows a spike down on the weekly chart that should see follow through this coming week, thrusting the stock down to the support levels mentioned above.
To the upside, the recent high at 9.73, as well as the psychological resistance at $10 are likely to be difficult obstacles. Nonetheless, rallies up to at least the 10.03 level are likely to be seen if the stock does build a bottom. In addition, on the weekly chart there is no resistance at $10 other than psychologically, making a rally up to the 50-week MA, currently at 12.50, or even the 100-week MA, currently at 13.20 possible. Certainly those are highly probable rally points if a bottom is determined as the short-covering that would be seen on this strongly shorted stock would likely be strong.
Purchases of NOK between 8.47 and 8.63 and using a stop loss at 7.90 and having an objective of 12.50 will offer a risk/reward ratio of 6-1.
My rating on the trade is a 2.75 (on a scale of 1-5 with 5 being the highest).
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Updates
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| Updates on Held Stocks |
Closed Trades, Open Positions and Stop Loss Changes |
| NUAN received its earnings report this past week and it was considered to be negative as the stock dropped $2 on the news. The stock was able to hold itself above the 200-week MA at 14.90 though it did test it intra-week. In addition, the stock was also able to close above a strong weekly support level at $15. Nonetheless, the stock did close near the lows of the week and if the indexes head lower this coming week, it is likely the stock will break support and head down to the 100-week MA, currently at 13.45, with potential for an intra-week drop as low as 12.45. The stock generated a gap opening of consequence after the report and left itself in a position that if a second gap occurs this week, panic selling would likely occur. Friday's low was 15.00 so if the stock opens lower than that low on Monday, long positions should be liquidated immediately. Resistance will now be strong at the 200-day MA, currently at 16.00. Chart looks fragile and weak. DCTH had a classic reversal week this past week (higher highs, lower lows, and a close below last week's low) which suggests further downside will be seen this coming week. In addition, the stock broke and closed below the 7.50 support level that had been holding for the last 2 weeks. Drops down to the 6.84 level are now likely though there is a possibility that the minor support at 7.05 will hold. There is a "very slight" possibility that if the indexes show a lot of weakness and break important supports, such as 9700 in the DOW, that the stock could fall all the way back down to 5.85. Nonetheless, at this moment that seems to be a very low probability as a drop down to that level would negate all the recent strength and that just doesn't look like a good possibility of occurring. This correction back down to 6.84 is not a negative as the stock seems to be in the process of establishing that the low has been found and building a support base from which to generate a strong and lasting rally from. Nonetheless, the 7.50 level will now be a pivot point from this moment on and once the stock has dropped down to 6.84/7.05 will be used to determine the trend thereafter. Based on last week's trading range of 43 points, I would venture to say the trading range this coming week will be 7.05 to 7.50. IR had a spike type drop on the weekly chart and closed below the 200-day and 200-week MA's, currently at 35.85 and 36.00 respectively. The stock also now shows a breakaway and runaway gap formation on the daily chart with the runaway gap being 36.57 to 36.34. Rallies back up to the 200-day or 200-week MA's are now probable but further upside than that is now unlikely. On an intra-week basis, the stock does show some decent support at 33.96 and again at 34.36. Having seen a low this past week at 34.66, the probabilities are high that one of those two levels will be seen this coming week, especially since the stock did close in the lower half of the week's trading range. Nonetheless, the stock did show a $3.36 trading range this past week and considering that the possible high for this coming week will be 36.00 that could mean that a drop down to 32.64 might be seen. If that happens, the recent low at 33.11 would be broken, weakening the chart and bringing downside objectives of 31.24 or 30.12 into play. Additional shares can be sold between 35.80 and 36.00 using a stop loss at 36.56. In fact, the present stop loss should be lowered to that level now as well. ORCL broke down this past week after trying repeatedly to rally over the past few weeks, but failing to get above a minor daily close resistance at 24.60. The stock "gave up the ship" in an impressive way and dropped down to a decent support level at 22.50. Nonetheless, if the indexes see weakness on Monday as expected, the stock is likely to break below that intra-week support level and drop down to the next area of support at 21.55. Though the stock was able to erase over the past 3 weeks what looked like a strong inverted flag formation, it still shows up as a successful retest of the 26.63 high and the likely beginning of a downtrend which will likely take the stock below the recent lows at 21.24 and ultimately test the 200-week MA, currently at 20.50 as well as the psychological support at $20. Resistance should now be strong between 22.95 and 23.62. The 22.50 is likely to be an important pivot point from now on. The stock does show a gap from this past week between 23.56 and 23.39, if a second gap occurs on Monday (and the stock did close near the lows of the day/week on Friday), it would be considered a runaway gap and likely accelerate the stock downward. MMM had a classic reversal week going above last week's high and closing below last week's low. In the process, the red close on Friday made last week's close at 87.29 into a successful retest of the 22-month high weekly close at 88.67. The stock closed near the lows of the week suggesting strong follow through to the downside will be seen this coming week with $80 as the week's objective. On a weekly closing basis, there is no support of consequence until $80 is reached. On a daily closing basis, resistance will now be decent at 85.12. By the same token, the chart shows some minor to decent resistance at 84.57 and having seen a high on Thursday at 84.63 and on Friday at 84.47, it is possible that no further upside will be seen this coming week. The 100-day MA, currently at 82.90 and the 200-day MA, currently at 81.50 could slow down the bears, but the probabilities of the stock getting down to at least the 200-day MA are high. In looking at the daily chart, drops down to as low as 77.25 could be seen if the 200-day MA at 81.50 gets broken. Additional shorts can be put on between 83.74 and 84.47 using 85.35 as a stop loss point and 77.25 as the primary objective. RHT was unable to keep the breakout above $32 going, failing to go above the previous week's high at 33.99 and dropping all the way down to 30.62 and in the process giving a small failure-to-follow-though signal with Friday's close below 32.00. By the same token, the weekly uptrend is still intact and no sell signal was given, though on the daily chart the stock does show a breakaway and runaway gap formation that suggests that further upside at this time is unlikely to be seen. Support is decent to strong at 28.90 to 29.15 with the most recent weekly low close at the first price and the 50-week MA at the second price. By the same token, the stock was able to stay above the 20-week and 100-day MA, both currently at 30.60, in spite of the weakness seen in the indexes on Friday. In addition, the stock shows 3 gaps at this time and the third gap between 31.46 and 31.73 has a high probability of being closed, as well as a retest of the breakout point at 32.00 happening. The stock has the ability to go against the indexes, though not if the indexes are collapsing. In looking at the daily chart, a rally up to 32.52 could be seen. If that happens, I would suggest liquidating the long positions and waiting to see if the stock holds itself above the $29 level on the next dip down. AMZN not only had a reversal week generating higher highs than last week and closing in the red on Friday, but also gave a failure-to-follow-through signal having gotten above a previous high of some consequence at 129.15, as well as closing last week above the previous weekly close resistance at 125.83 and closing below both of those levels on Friday. On a weekly closing basis, the stock shows minor support at 122.77 and decent support at 117.52. On the daily closing chart, though, no support of consequence is found until the 120.00 level is reached. It must also be mentioned that the stock one week ago closed above the 200-day MA, currently at 127.50, and confirmed the breakout with 4 closes in a row above the line, only to negate all of that on Thursday as well as confirm the failure on Friday. The stock also tested intra-day the 200-day MA at 127.50 with a rally up to 127.45 on Friday, only to close on the lows of the day. Further downside is highly likely on Monday, with an immediate objective of $120. Nonetheless, having gotten a very negative earnings report a couple of weeks ago, it would not be surprising to see the stock get down to at least test the recent double bottom as 106.00 with a drop down to 109.00. MSFT has been in a sharp downtrend since the stock generated a double top at 31.00 back in April. The stock now also shows on the weekly closing chart 3 successful retests of the double top high with each retest being lower than the previous one (28.93, 26.44, and the most recent 2 weeks ago at 25.81. Is essence, the stock is in a strong downtrend. 7 weeks ago the stock broke below the 200-week MA, currently at 24.40, but was able to negate the break having closed above the line for the past 6 weeks. Nonetheless, the stock did close right on the line on Friday and if there is any follow through weakness this week in the indexes, it is highly likely the line will be broken, further pushing the stock down toward the next support level of consequence at $20. The most recent low at 22.77 is considered support but with the trend being sharply down, it is not likely to hold up if the indexes head lower. The stock shows an open gap between 23.48 and 23.58 that is now a magnet unless the indexes can rally on Monday. With no support here at 24.40 on the daily chart, drops down to that level this coming week are highly likely. The stock shows no close by resistance, but does show a strong previous low close at 24.79 which should act as resistance on a daily closing basis. NTES now shows, with a red weekly close on Friday, a second successful retest of the September high weekly close at 45.24 as well as a successful retest of the very strong weekly close resistance between 39.80 and 40.64. The stock had been on a 3 month rally from the recent low at $30 that had been generated due to recent popularity in some new Chinese online games. The red close on Friday, though, has now put that rally at risk of failing. The stock does show some decent support between 35.42 and 36.49 that if held, could generate a new attempt at the recent high at 40.13, but if broken would likely cause the stock to drop down to at least the 100-week MA, currently at 31.90, where some previous intra-week support also exists at 31.92. This is not a stock that will necessarily move with the indexes, so the stock needs to be watched based on its own chart. Its earnings report is due out on Wednesday evening and in this case, that is a cause for concern as earnings are expected to be very good. The 200-day MA is currently at 36.00 and if the stock drops down to that level before Wednesday, consideration should be given to liquidation. Nonetheless, if the stock breaks below 35.00 this coming week, and especially if it breaks below 34.00, it is likely the earnings report will not be as good as expected and consideration to keeping the short should be made. Resistance should now be decent at 37.90 but if broken, perhaps liquidation should be made as it is likely the report will be good.
SOHU had a key reversal week making a new 15-week high (got up to 51.88) and closing below last week's low at 49.02. In addition, the red weekly close made last week's close at 49.02 into a successful retest of the very important 200-week MA, causing the stock to give a failure signal in the process. With only minor support on the weekly closing chart at 43.20, the probabilities of the stock getting back down to the $40 level are now high once again. In addition, the stock also tested successfully on the daily closing chart, the 200-day MA, currently at 50.56 giving the stock the extra negative punch. The stock also left a gap open between 49.04 and 48.53 that will act as strong resistance as well. The stock does show decent intra-week support aroung the 46.60 level, from 2 previous important lows as well as two previous important highs, not to mention the 100-week MA, currently at that price. If the recent low at 46.26 gets broken, an open gap between 45.15 and 45.44 would become a magnet. In addition, no support is found until the 43.33 level is reached. The 46.60 level is likely to be an important pivot point on Monday, with 49.04 as a possible upside objective and 43.33 as the downside one, depending on which side the stock is trading on. Chart is now once again tilted strongly toward the downside.
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1) DCTH - Averaged long at 6.555 (2 mentions). No stop loss at present. Stock closed on Friday at 7.49.
2) AMZN - Shorted at 127.35 and again at 125.48. Averaged short at 126.565 (2 mentions). Stop loss is at 130.10. Stock closed on Friday at 124.69.
3) HPQ - Covered shorts at 42.80. Shorted at 45.30. Profit on the trade of $250 per 100 shares minus commissions.
4) ORCL - Averaged short at 23.79 (2 mentions). Stop lowered to 23.76. Stock closed on Friday at 22.66.
5) DD - Purchased at 41.21. Liquidated at 40.80. Loss on the trade of $41 per 100 shares plus commissions.
6) RHT - Averaged long at 33.00 (2 mentions). No stop loss at present. Stock closed on Friday at 30.93.
7) MMM - Shorted at 87.70. Stop loss lowered to 85.27. Stock closed on Friday at 84.01.
8) MSFT - shorted at 24.38. No stop loss at present. Stock closed on Friday at 24.40.
9) SOHU - Shorted at 47.90. No stop loss at present. Stock closed on Friday at 46.46.
10) NFLX - Shorted at 127.32 and again at 129.53. Covered shorts at 130.12. Loss on the trade of $339 per 100 shares (2 mentions) plus commissions.
11) VALE - Purchased at 28.49. Liquidated at 27.91. Loss on the trade of $58 per 100 shares plus commissions.
12) RIG - Purchased at 53.70. Averaged long at 54.675. Liquidated at 54.20. Loss on the trade of $95 per 100 shares (2 mentions) plus commissions.
13) IR - Shorted at 38.05. Stop loss lowered to 36.56. Stock closed on Friday at 35.29.
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