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Issue #173 
May 02, 2010 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Indexes Give Strong Signs of a Top Having Been Made!
DOW Friday closing price - 11008
The DOW generated a red close this past week giving last week's close at 11204 the possible tag of "successful retest of the 200-week MA". Such a tag, if confirmed with another close below 11204 this coming Friday, would increase the probabilities that a mid to long term top to this 13-month rally has been found. The 200-week MA is an important indicator for long term trends as the MA has only been in play 3 times during the last 20 years (this is the fourth time). Each time the MA has been in play the trend has either changed or continued for at least the next 12 months (1 case). In the other 2 cases, it was for at least 4 years.
It must also be mentioned that a negative weekly reversal was seen this past week with a new 18-month high having been made, a drop below last week's low and a close in the red. Negative weekly reversals are a rare occurrence and especially after such a long-term rally (14 months). Such action suggests that some type of top has been found, if not long-term at least for the next 3-5 weeks.
On a weekly closing basis, last week's high at 11204 must be considered decent resistance. Above that level, there is minor resistance at 11422 and decent at 11734. On a daily closing basis, resistance is decent at 11167 and strong at 11205. On a weekly closing basis, support is minor to decent at 10325/10329 and strong at 10012. On a daily closing basis, support is decent at 10992, minor at 10898, and once more between 10836 and 10857. Below that level support is decent at 10725 (previous high daily close) and again at the 100-day MA, currently at 10590.
The DOW is also showing a small Head & Shoulders formation on the daily chart with the left shoulder at 11155, the head at 11257, and the right shoulder at Friday's high of 11197. The necklines are both down at 10974 and 10965. A break of the neckline gives an objective of 10691. This objective fits in well with what is normally established to be a "general trading range" at major even numbers which is 300 points above and below the even number, in this case 10700 to 11300. This objective also mirrors where the previous high is found at 10724. Previous highs are often tested before continuing on a trend, and therefore it can be said that a drop down to that level is a high probability even within the context of the bull market continuing.
It is still too soon to tell whether this "hiccup" in the DOW is a major top or simply a minor correction to the uptrend. Nonetheless, it is evident that the index is presently showing definite signs or exhaustion as the economic and earnings reports news seen this past week continued to be supportive to the market. It has been established that so far 79% of all earnings reports seen this quarter have beat expectations (some strongly so) and there has yet to be any one economic report that has shown weakness of consequence. As such, from a fundamental basis, the action seen this week should not have occurred.
It must be re-mentioned that the Elliott Wave Theory states that a major top was to be made before the first week of May and that also fits in with the action seen this past week which certainly has the "feel" of a major top. In addition, there is also an old adage that states "Sell in May and go away". This adage has never confirmed that the May through November period is a time to go short but it has confirmed that since 1950 the May through November period has generally underperformed the November to May period in a ratio of 2.5% to 7.9% (see the following chart - sell-in-may-and-go-away).
It is evident that for the reasons mentioned above as well as the highest overbought condition seen in the last 10 years, that any "hiccup" could turn into a major correction. Add to that the possibility that if the economy starts to sputter as well as the unemployment figures fail to go down significantly, the correction could actually turn into a downtrend, and you end up with an explosive situation where the "tip of the iceberg" could have been this past week's action.
It was stated on Bloomberg on Friday by one of the guest analysts that Unemployment is expected to stay high this year and probably next with the best expected being a drop down to 9.4%. Such a figure is not likely to be supportive of any new initiative for much higher prices.
On a chart basis and based on the possible/probable Head & Shoulders formation, Friday's high at 11197 should not be seen again. Support is evident at the "demilitarized zone" between 10970 and 11030 but if broken there is no evident support until some intra-day support on the 60-minute chart is found down at 10835. Nonetheless, the objective of the H&S formation is 10700 and a drop down to that level is now likely to be seen sometime over the next week or two.
On a daily closing basis, any close below 10992 will be seen as a break of support. On a weekly closing basis, the 10204 should now be considered major resistance and any weekly close above that level would likely erase all the negatives mentioned above.
It is possible that the 200-week MA, currently at 11110, will be tested one last time this week. As such, considering last week's trading range of 292 points, the possible trading range for this coming week could be 11110 to 10818.
NASDAQ Friday closing price - 2461
It can be said the NASDAQ generated the strongest negative signal this past week when the index closed in the red making last week's close at 2530 into a major double top when compared with the 2529 high weekly close seen in May 2008. That 2008 close has to be considered very important as it was the highest bounce seen after the recession started. A close above that level would have been a statement that all the negatives from the recession have been erased. Such a statement has to be considered fundamentally difficult to achieve.
The NASDAQ did not have a reversal week as did the DOW and the SPX and therefore it is still considered to be the strongest of the three. Nonetheless, it does have a close-by support of some consequence at 2445 that if broken would likely generate further downside of consequence. Based on the weekly closing chart, if the stock gets below 2445, it could easily drop all the way down to the 200-week MA at 2210 as the weekly support at 2396/2400 is considered to be minor to decent at best. As such, it is likely the NASDAQ will be the best indicator of direction this coming week.
On a weekly closing basis, strong resistance is found at 2529/2530. On a daily closing basis, decent resistance is found at 2512/2516 and strong at 2520. On a weekly closing basis, support is minor at 2445 and then again at 2336 and 2290. Below that levels there is strong support at 2239 and a bit stronger at 2210 (200-week MA). On a daily closing basis, support is very minor at 2431, decent at 2397/2398, and minor again at 2374 and at 2362. Below that there is no support until minor support is found between 2282 and 2288 and minor again at the 50-day MA, currently at 2270.
The NASDAQ did give a sell signal on the daily closing chart when it closed on Friday below the previous low daily close at 2472. If confirmed on Monday with another close below that level, there is only some minor to decent intra-week support at 2445/2452, but if broken there is nothing to stop the index from dropping down to the 2396/2400 level. Even then, the support there is considered minor.
The index has seen increased trading ranges over the past 2 weeks with 5 of the last 13 trading days seeing more than 50 points from high to low. The amount of days (5) with ranges of 50+ points over a period of 3 weeks has not been at any time during the last year. That type of action generally suggests that a trend change is about to occur.
It is evident that most recent daily high close at 2512 seen on Thursday is now considered important resistance, especially since a sell signal was given on Friday. As such, any daily close above 2512 from here on in, is likely a bullish sign.
Probable trading range for the week is 2480 to 2400.
SPX Friday closing price - 1186
The SPX generated a successful test of the 200-week MA (currently at 1223) with last week's close at 1217 and a red close this week. If confirmed next week with another close below 1217, the likelihood of the index heading down to the previous weekly high close at 1145 will increase. The SPX continues to be the "weak sister" of the indexes due to the problems associated with Goldman Sachs and the financial industry.
The SPX has now had reversal weeks two weeks in a row with the previous weeks close being a positive reversal and this past weeks close being a negative one. The previous week's positive reversal should have generated follow through to the upside of consequence this past week and yet not only was the follow through extremely minor but the index was unable to even "touch" the 200-week MA at 1223 (high this week was 1220). Such a failure as well as the volatile action seen suggests an exhaustion phase has started and that a major top is in place. This is not only true on the charts, but on a fundamental basis due to the continuing financial problems facing not only the largest financial institution around (GS) but also countries such as Greece and Portugal.
On a weekly closing basis, resistance is now decent to strong at 1217. On a daily closing basis, resistance is now decent to strong at 1207, again at 1212, and strong at 1217. On a weekly closing basis, support is minor at the previous high weekly close at 1145 and then nothing until strong support at the previous weekly low close at 1066. Below that level support is decent at the 100-week MA, currently at 1038. On a daily closing basis, decent support is found at 1184. Below that level, minor support is found at 1169, at 1166, and at 1160. Support is then non-existent until the 50 and 100-day MA are reached between 1125 and 1130.
The SPX chart is definitely the weakest of the three indexes as it failed to even get up to the previous high daily close, prior to 1217, at 1212 (closed at 1207), whereas the other indexes did get up to the left shoulder highs. The SPX is also showing a possible Head & Shoulders formation with the neckline being at 1182. A break of the neckline would project a drop down to 1144. That fits in well with the chart as the previous weekly high close prior to the recent rally was 1145. A retest of that breakout level seems highly probable.
The key to this coming week is 1184 as that has been the lowest daily close over the past 4 weeks. With the SPX closing on Friday at 1187, it likely means that if any follow through to Friday's weakness, of 4+ points on the close, is seen on Monday that the index would drop an additional 38 points thereafter. As such, Monday's action is likely to be indicative, at least as far as the "immediate" downside is concerned.
It is now evident that Thursday's close at 1207 is now a big key to the trend for the next few weeks and/or months. If the SPX is able to recover from all the signals that were generated this past week and close above that level, the bulls will recoup their confidence and likely generate a new 18-month high. Nonetheless, the probabilities are not in their favor, especially in this index where both charts and fundamentals seem to point to lower numbers.
Possible trading range for this coming week is 1200 to 1150.
More topping-out signs were given this week than at any time over the past few months. In addition, the signs were also given additional strength because of the chart levels that all three indexes reached, which were all major objectives as well as resistance level points of consequence. In addition, the recent financial problems in Greece and Portugal as well as the Goldman Sachs fiasco also support the possibility of a top having been formed not only chart-wise but fundamentally. In addition, these problems are not likely to be a short-term situation that will get fixed in a couple of weeks. As such, the probabilities have started to shift toward the bears, though only slightly.
Nonetheless, these signs of weakness have been seen several times over the past few months and "all" turned out to be false alarms. Each and every dip was met with strong buying and new mid-term highs made. As such, it is unlikely that the bulls will be "throwing in the towel" very fast. The fundamental picture has been "slightly" altered to the negative side because of the world's financial problems, but not sufficiently so yet, to generate strong profit taking or new short positions.
This still unclear situation leaves the market with long-term questions that are not likely to be resolved this coming week. Nonetheless, there were enough concrete signs during the past 3 weeks to suggest that at least a small short-term correction of 2-5 weeks will occur. In fact, it seems that at this time both the bulls and the bears are expecting one to happen, making it into a higher probability that it will. What happens thereafter is yet to be determined, but for the next week or two it is expected the indexes will be moving down to the closest levels of support available.
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Stock Analysis/Evaluation
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CHART Outlooks
All mentions this week will be sales as it is now likely that a top has been found to the indexes and that at least a correction if not a downtrend will begin.
Stocks chosen this week have good risk/reward ratios and high probability ratings.
SALES
MRK - Friday closing price 35.04
MRK has been in a short-term downtrend since January's high at 41.56 was made. The stock has tested the previous high successfully on 2 separate occasions and since the last retest that occurred in March with a rally up to 39.04, the stock has shown a great deal of weakness in spite of the strength seen in the indexes over the same period of time.
MRK has now reached the 200-day MA, currently at 34.75 and for the last 7 trading days has been pivoting around that line without breaking it convincingly but without generating a rally of consequence either. With the indexes likely heading lower, the probabilities have increased that the stock will break the 200-day MA and head down to the next support level of consequence between $30 and $31.
On a weekly closing basis, resistance is decent at 36.54, decent to strong at 38.06 and major at 39.47. On a daily closing basis, resistance is minor at 35.25, minor to decent at 35.46, and minor again at 36.06. Above that level, resistance is decent to strong between 37.49 and 37.71. On a weekly closing basis, support is minor between 35.00 and 35.04, minor to decent at 32.68 and decent at the 100-week MA, currently at 31.70. On a daily closing basis, support is minor to decent at 34.48, decent at 33.77 and then absolutely nothing until decent support is found at 31.01.
On the weekly chart, there is only very minor support at $35 and having closed at 35.04 this past Friday, if there is weakness in the indexes, it is highly likely that minor support will be broken. With no support whatsoever seen on the weekly chart below $35 until the 100-week MA is reached, down at 31.70, the probabilities favor the stock dropping down to that level.
MRK generated a bullish gap on Thursday morning between 34.80 and 34.98 breaking above the 200-day MA in the process. Such a break should have generated strong buying but the stock failed to get above the minor intra-week high resistance at 35.98, only reaching the 20-day MA at 35.80. That action was then followed with weakness on Friday and a close near the lows of the day and just slightly above the 200-day MA. Any follow through to the downside on Monday will not only confirm the rally up to 35.80 as a successful retest of that minor resistance at 35.98 but likely close the gap and trade below the 200-day MA as well. Such action would be disappointing to the bulls and likely generate a new round of selling.
Based on the chart action seen since January, as well as the probabilities of the indexes having topped out, MRK seems to be a high probability short trade.
Sales of MRK between Friday's close at 35.04 and up to 35.41 and using a stop loss at 36.06 and having an objective of 31.01, offers a risk/reward ratio of 4-1.
My rating on the trade is a 4 (on a scale of 1-5 with 5 being the highest).
AA - Friday closing price 13.43
AA has been in a downtrend since the January earnings report came out negative and the stock gapped down. The most recent earnings report was neutral but the stock has continued to fade lower. With the indexes seemingly finding a top the probabilities have increased the stock will be heading lower from these levels.
In addition, the stock is showing several bearish formations with a high probability that a Head & Shoulders formation has been built with the left shoulder at 15.11, the head at 17.66 and the right shoulder at 15.15. The neckline is prsently around 12.80 and it seems probable the stock is heading to that level this week. A break of the neckline would give a downside objective of 7.44.
On a weekly closing basis, resistance is decent at 14.11 and strong at 14.70. On a daily closing basis, resistance is decent to strong between 13.72 and 13.84 and a bit stronger at 14.11. Above that level, resistance is strong at 14.47 and major at 15.03. On a weekly closing basis, support is minor at 13.60, again at 13.30 and strong at 12.73. Below that level there is strong support again at 12.43 and then nothing until the psychological support at $10 is reached. On a daily closing basis, support is minor but important at 13.44 from the most recent daily low close as well as from the 200-day MA. Below that level there is an array of minor to decent supports starting at 13.06, 12.73, 11.83 and 11.55.
AA has been in a trading range between $12 and $15 for much of the last 8 months, with one exception of 4 weeks back in Dec/Jan where the stock rallied up to 17.60. The trading has generally been very calm and sideways during the period of time in which the indexes have continued their inexorable strong climb upward. Nonetheless, such action suggests that the bulls have had limited interest in buying the stock, especially when compared to other companies that have followed the indexes upward.
This past week the stock got down to the 200-day MA, currently at 13.60, and traded above and below the line on a couple of occasions. Nonetheless, the close on Friday was below the line and with further weakness expected to be seen in the indexes this coming week, the probability of that line being broken is high. A second close on Monday below 13.60 will confirm the break giving the bears added ammunition with which to push the stock lower.
The weekly chart of AA suggests that if the trading range low of $12 is broken that a drop down to the psychological support at $10 will be seen. Though there are tiers of support every 50 points down from this level, the break of the 200-day MA would likely increase the already bearish sentiment causing the stock to drop down at least to the neckline (currently at 12.80) of the Head & Shoulders formation. A break of that line would likely bring in heavy chart/technical selling taking the stock down to the psychological support at $10.
Sales of AA between Friday's closing price of 13.43 and up to 13.50 and using a stop loss at 14.16 and having an objective of 9.70, would offer a risk/reward ratio of 4-1.
My rating on the trade is 3.5 (on a scale of 1-5 with 5 being the highest).
LEN Friday Closing Price - 19.92
LEN has moved up in price over the past 5 months since the stock tested successfully a previous intra-week support level of consequence at 11.98, as well as the 100-week MA at the same price. Two weeks ago the stock accelerated the move up when reports stated that buying of new homes was on the rise. Based on those reports the stock spiked up into a long term resistance level from March 2008 between 21.64 and 22.70 with a rally up to 21.79. Nonetheless, the rally failed to follow through last week, generating an inside week as well as a close below the psychological resistance at $20. Such action suggests that further upside will be difficult to accomplish.
During the last few months, LEN and other home builders have been the recipients of the last vestiges of bargain hunting in the recent bull market. Nonetheless, having reached levels of resistance that were in existence prior to the brunt of the recession, and still having an industry that is awash with unsold homes, it seems difficult to believe that further upside will be forthcoming.
On a weekly closing basis, resistance is minor to decent at 20.53 and strong at 21.40 and again at 21.64. On a daily closing basis, resistance is strong between 20.28 and 20.53 and again very strong between 21.40 and 21.81. On a weekly closing basis, support is very minor at 18.41, at 17.15, at 16.11 and at 14.71. Below that level, support is strong at 12.89 and major at 11.85. On a daily closing basis, support decent at 18.94 and then nothing until strong support is found between 16.95 and 17.38. Below that level, support is minor until decent to strong support is again found between 14.65 and 15.00.
LEN has been on an uptrend since Nov08 when the stock reached a low of 3.42. Much like the indexes, the uptrend has been consistent and generally relentless. In Aug09, the stock got above the 100-week MA, currently down at 12.00, and after retesting that line repeatedly and successfully over a period of 12 weeks, the stock resumed the uptrend that may have culminated 2 weeks ago when the stock reached the resistance levels from the first quarter of 2008. Like the indexes, the stock seems to now be set at levels where strong chart and fundamental resistance is found. Its unlikely higher prices will be seen unless the indexes break out.
LEN rallied 2 weeks ago almost $5 from $17 up to close to $22 (got up to 21.76). The week it did that, the stock closed above $20 and near the highs of the week, making further follow through to the upside highly likely, based on momentum alone. Nonetheless, the follow through expected did not happen last week as the stock traded within the previous week's trading range and in the end closed in the red, below $20, and further sign that more upside is expected. The daily and weekly close resistance around the $20 level is copious and not only recent but dates all the way back to the Jan08-May08 period.
It must also be mentioned that the stock also shows a recent double top at 20.53, having closed on Apr23 at 20.53 and on Thursday Apr30 at 20.52. The double top is now established due to the red close on Friday. As such, it is highly likely that a clear signal of direction will be given this week.
The most recent low daily close at 18.94 (18.84 intra-day) must be considered an important pivot point as a break of that level leaves the stock without any support until the $17 level is reached. The stock did rally up to 21.17 on Friday but then sold off to close below $20 and on the lows of the day. Such a rally will be considered a successful retest of the recent 2-year high at 21.79 if the stock trades below Friday's low at 19.88 on Monday.
Though downside objectives are somewhat difficult to predict at this time (too many variables), a drop down to the 200-day MA, currently at 15.00, is a good possibility if the indexes get into a decent correction. Nonetheless, the weekly chart suggests that drops down to the $13 level could occur as well if a top has been found and the stock starts trading below $17.
Sales of LEN between Friday's closing price of 19.92 and all the way up to 20.70 and using a stop loss at 21.27 and having an objective of $15 will offer a 4-1 risk/reward ratio.
My rating on trade is a 3.25 (on a scale of 1-5 with 5 being the highest).
UTX Friday Closing Price - 74.95
UTX, being a DOW stock, has mimicked the index rally over the past year. Nonetheless, just like the index, the stock has been showing increased volatility and trading ranges over the past week, suggesting that a top has been found. In addition, the resistance levels the stock is facing are much stronger than the DOW as the stock has gotten within 6% of its all time high, unlike the index which is still 15% away from its all-time high and failing only because of the 200-week MA has been reached.
UTX made a new 28-month weekly closing high the previous week when it closed above the 75.15 weekly high close seen the week of April 28th 2008. Nonetheless, this past week the stock closed below that high suggesting that a failure to follow through signal is being generated. Another close below 75.15 next week would confirm the failure and likely generate strong selling.
On a weekly closing basis, resistance is now decent at the previous week's close at 76.47. Above that level, there is strong resistance at 78.07 and major at 80.84. On a daily closing basis, decent resistance is found at 76.02 and strong at 76.93. On a weekly closing basis, support is minor at 73.69 and then nothing until minor support is again found between 67.49 and 68.01. Below that level, strong support is found at 65.69. On a daily closing basis, support is minor at 74.85/75.00 and decent at 74.32. Minor support is again found between 73.46 and 73.69 and then nothing until minor support from a previous high is found at 72.81. Below that level there is absolutely no support until the 200-day MA, currently at 64.15 is reached.
UTX is showing definite signs of exhaustion up at these lofty levels. Having gotten within 6% of its all time high, the stock has begun to encounter strong selling, especially since the indexes seem to have found a top as well. The stock shows a small double top on the intra-day chart at 77.08.77.09 as well as a successful retest of that high with a rally on Friday to 76.49 and a reversal type day having gone above the previous day's high and closing below the previous day's low. It can also be said that on the daily closing chart, the high daily close at 76.93 has been successful tested with Thursday's close at 76.02 and Friday's close in the red.
UTX has been on a rampage to the upside since February 8th when the stock was trading down at 65.31. Nonetheless, due to the steep climb with no pauses of consequence, the stock has been unable to build any important support and if it starts breaking, the fall could be notable. Over the past 4 weeks, the stock has been able to generate a bit of support between 73.61 and 75.00 but the support is considered minor and if broken, it could cause the stock to fall all the way down to the support of consequence at $65.
The high daily close for the last 28 months was at 76.93 and the most recent high daily close (a retest of the highs) was at 76.02. if the stock is heading lower, neither of these two resistance levels should be broken. As such, a short trade in UTX offers a clearly defined small risk and high profit potential.
Sales of UTX between Friday's closing price of 74.95 and up to 75.75 and using a stop loss at 76.59 and an objective of $65 will offer a risk/reward ratio of 6-1.
My rating on the trade is a 3.75 (on a scale of 1-5 with 5 being the highest).
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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 2010, as of 3/31 Profit of $2229 using 100 shares per mention (after commissions & losses) Closed out profitable trades for April per 100 shares per mention (after commission)
RIMM (short) $277 QCOM (short) $1082 VALE (short) $107 RIMM (short) $303 AMZN (short) $965 RIMM (long) $521 AMZN (short) $588 Closed positions with increase in equity above last months close. KO (short) $108 Total Profit for April, per 100 shares and after commissions $3951 Closed out losing trades for April per 100 shares of each mention (including commission)
CAL (short) $57
MS (short) $109 TRLG (short) $156 AIPC (short) $149 AMZN (short) $4 RIMM (short) $39 GPS (short) $285 BA (long) $3 SKX (short) $379 NUAN (short) $54 AMZN (long) $47 RIMM (short) $38 Closed positions with decrease in equity below last months close.
OSK (short) $265 Total Loss for April, per 100 shares, including commissions $2499 Open positions in profit per 100 shares per mention as of 4/30
GPS (short) $91 SKX (short) $289 MS (short) $118 CAL (short) $104 RIMM (short $302 Open positions with increase in equity above last months close. None $0 Total $918 Open positions in loss per 100 shares per mention as of 4/30
COO (short) $48
Open positions with decrease in equity below last months close.
WMT (long) $784 Total $845 Status of trades for month of April per 100 shares on each mention after losses and commission subtractions.
Profit of $1525
Status of account/portfolio for 2010, as of 4/30Profit of $3754 using 100 shares traded per mention.
NUAN attempted to follow through on the previous week's breakout above 17.70 but ended up having an inside week (lower highs and higher lows) than last week and a close below last week's close (18.26 vs. 18.32). The stock did test intra-week support as well as the previous week's low at 17.10 and after accomplishing that successfully attempted to rally to follow through on the breakout. Nonetheless, the late week sell off in the indexes acted as a brake and left the stock without any clear confirmation as to where the next $2 will come from. The stock does show a potential double top on the intra-week chart at 18.50/18.47 that will likely be resolved on Monday. A drop below Friday's low at 18.16 will set Friday's high as a double top. Such action will likely be a negative that would cause the stock to generate a failure-to-follow-through signal and a drop below last week's low of 17.20. Any red close on Monday, especially below 18.00 would be a negative signal as it would make Friday's close at 18.26 into a successful retest of the recent high daily close at 18.41. It is likely the stock will react to whatever the indexes do this week.
GIGM had another uneventful week (2 weeks in a row) and failed to give any indication of direction. The daily chart seems to be building a coil formation that if broken on either side (a daily close above 3.08 or below 2.98) would likely generate further movement in that direction. Nonetheless, possible upside and downside objectives are very limited with 3.38 on the upside and 2.64 on the downside. The formation slightly favors the bears, but it is only by about a 55-45 ratio. WMT has totally erased the bullish formation that was built a few weeks ago when the stock broke and closed above $55. Nonetheless, there are no signs that the stock has changed directions, other than to get back into a sideways trading range. Support will again be strong at the 200-week MA, currently at 53.00 and resistance again strong at 55.00. In looking at the chart, the probabilities favor both of those levels being seen over the next couple of weeks, perhaps repeatedly. The short-term trend is presently down and using the daily chart, there is a slight possibility the stock will drop down to the 200-day MA, currently at 52.60. The 54.24 to 54.50 level seems to be the pivot point at this time. RIMM generated a spike type rally this past week and approached the intra-week high seen the week of April 21st at 73.41 with a rally up to 73.37. Nonetheless, the stock failed to generate any new buying and closed out the week near the lows of the week and showing a spike high. Based on the close, follow through to the downside will likely be seen this coming week with 2 possible objectives being the 200-week MA at 69.50 or the 100-week MA at 69.00. Should the stock break below the most recent low of consequence at 68.46, it would be a strong bear signal that would likely give a possible objective of 62.50. By the same token, any rally above this past week's high at 73.37 would be a bullish sign. Probabilities lean heavily toward the downside. COO has been trading with no direction for the last 2 weeks, in spite of quite a lot of volatility and change of directions in the indexes. Nonetheless, the stock got up to the most recent intra-day high at 39.57 with a rally on Friday to 39.56. The stock then proceeded to drop and close on the lows of the day suggesting the stock will go back down to test the bottom of this recent trading range with a drop down to the 100-day MA, currently at 38.25. A break below 38.00 would be quite bearish while a rally above 39.57 would take some of the recent bearishness out of the chart. In addition, if the stock gets below Friday's low at 38.86 (likely), Friday's high would generate a small double top that could pressure the stock down. Probabilities favor the downside by a slight margin (60-40). MS had an uneventful inside week this past week, but on a weekly closing basis the stock failed to follow through on the previous week's break above a minor weekly close resistance at 30.98. In addition, the stock failed to close above a decent weekly close resistance at 32.25 and with the failure to follow through seen has put itself back into a slightly bearish light. The $30 level, on a daily closing basis, continues to be an important pivot point. Any close below 30.00 (more specifically 29.93) would likely generate a move down to the 100-week MA, currently at 27.70. Nonetheless, the stock does have an array of minor support levels on both the daily and weekly closing charts that suggest that drops down to that level will not be easy. The stock did generate a successful retest of the recent daily high close at 31.94 with the red close on Friday after a close on Thursday at 31.31. As such, any daily close above 31.31 would now be considered a positive. The 100-day MA is currently at 29.50 and based on Friday's weak close, a drop to that level now seems highly probable. SKX had a very negative week closing below the psychological support at $40, as well as the previous all-time weekly high close, seen back in 2001, at 38.80. Another close below 38.80 next Friday would give a strong failure-to-follow-through signal that would likely thrust the stock down to the nearest support which is not found until the $30 level is reached. On the daily chart the stock shows some minor to decent daily close support at 37.76 but if broken, there is nothing but vacuum until the $30 level is reached. The probabilities favor a drop down to 37.76 (37.29 intra-day) and a bounce back up to retest the $40 level one more time. Overall, though, the chart is beginning to look strongly tilted toward the downside. CAL has been holding up well recently due to the probability of a positive merger with United Airlines. Nonetheless, in looking at the chart, the stock seems to be building a strong top formation that if confirmed would likely thrust the stock toward lower prices. On Friday, the stock spiked up to 23.47 and in the process tested the previous high at 24.29 as well as a left shoulder high at 23.64. The stock then turned around and sold off to close near the lows of the day and giving the resistance level at 22.570/22.99 added strength. It is likely the stock will have some follow through to the downside on Monday, based on the late sell off on Friday. Support is decent and somewhat important between 21.43 and 21.47, both on an intra-day and daily closing basis. A break below that level would likely thrust the stock down to the next support, as well as 100-day MA, both currently at 20.30. As of right now, a break above this past week's high at 23.47 or below 20.30, would suggest a follow through move of probably $2-$2.50. Chart is tilted toward the downside by about 60-40. GPS gave a possible failure to follow through signal this past week when the stock closed below the previous 9-year weekly closing high at 25.13. Another close below 25.13 next Friday would confirm the failure and likely generate a move down to the $20 level. The stock is starting to show volatility and big trading ranges and that is a sign of a top being formed. On the daily chart, the stock tested successfully the previous 9-year daily high close at 26.21 with a close on Thursday at 25.63 and a red close on Friday. In addition, a sell signal was given on Friday when the stock closed below the 2 most recent low closes at 25.14 and 25.02. Any close below 25.00 by at least 10 points on Monday, would confirm the sell signal and likely thrust the stock down to the previous daily closing high at 23.21. The action on Friday was bearish and the probabilities favor further downside by about a 75-25 ratio. Any daily close above 25.63 would now be a strong positive.
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1) GPS - Shorted at 25.64. Stop loss now at 25.93. Stock closed on Friday at 24.73.
2) GIGM - Purchased at 2.87. Stop loss now raised to 2.93. Stock closed on Friday at 3.01.
3) WMT - Averaged long at 53.80 (4 mentions). No stop loss at present. Stock closed on Friday at 53.64.
4) SKX - Shorted at 41.25. Stop loss at 42.50. Stock closed on Friday at 38.35.
5) CAL - Shorted at 23.39. Stop loss at 24.39. Stock closed on Friday at 22.35.
6) AMZN - Shorted at 149.82. Covered shorts at 140.03. Profit on the trade of $979 per 100 shares minus commissions.
7) MS - Shorted at 31.54. Stop loss now at 31.86. Stock closed on Friday at 30.22.
8) RIMM - Purchased at 68.64. Liquidated at 73.97. Profit on the trade of $533 per 100 shares minus commissions.
9) RIMM - Shorted at 72.06 and at 73.35. Averaged short at 72.705 (2 mentions) Stop loss at 74.33. Stock closed on Friday at 71.19.
10) RIMM - Shorted at 71.59. Covered shorts at 71.91. Loss on the trade of $32 per 100 shares plus commissions.
11) COO - Shorted at 38.41. Stop loss at 40.19. Stock closed on Friday at 38.89.
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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.
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information enclosed above, regarding his background, length of trading, and experience, is correct
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