|
|
|
|
|
|
Issue #30 
July 29, 2007 | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
|
Updates |
Stock Indexes Update |
Stock Picks for Next Week | |
| Updates on held stocks
COGT was liquidated at 14.12 and purchased back at 12.99. Major support around the 12.70-13.00 level. If this level holds a rally up to 14.00 and maybe up to 15.00 will likely ensue. See mention in newsletter.
SONS broke aggressively due to a slightly negative earnings report. Nonetheless it shows a spike low and a close on Friday at a very important level where the previous high weekly close prior to the breakout is found as well as at the 50-week MA. Due to the spike low and somewhat positive close at this time SONS looks like the worst is over and the stock will trend higher from here.
ANGO broke strongly due to the breaking indexes as well as fear of the earnings report. The earnings report was positive and ANGO rallied strongly and erased all the negativity of the early week break. ANGO maintained its breakout above the 20-week MA with a close above 17.66. In addition and due to the spike up it shows a flag formation that gives an objective of 19.30. Support should now be strong at 17.46-17.66. Resistance will now be found at 18.30-18.67.
NUAN has strong previous support at 16.45 and the 20-week MA is at 16.33. The weekly up-trend in NUAN continues to look impressive but if the 20-week MA is broken, on a closing basis, the probabilities will swing toward a weekly correction phase that could take the stock all the way down to the breakout level at 13.46. This coming week will likely determine the short-term direction of the stock. The 17.00-17.27 level will now act as strong resistance.
PMCS has given up its recent gains and now finds itself in a sideways phase with positive connotations. The 7.50 level will continue to act as major support and it seems highly unlikely to be broken. The low on Friday at 7.80 was within a couple of ticks of the 50-day MA and the 20-week MA is currently at 7.47. Resistance will now be decent at 8-20-8.25 but there is a gap between 8.53 and 8.50 that should draw some attention as this stock has received positive fundamental news and gaps on the upside should not be left unclosed. PMCS should not see the south side of 7.50 and if the stock is as strong as it has shown itself to be recently, the 7.75-7.80 level should act as a base from which to launch a rally.
WOLF suffered what appears to be a crushing blow to the daily charts as it dropped over 16% in value over the past 3 weeks and 14% in just the last 3 days. Such a drop far exceeds what the indexes may have caused. Nonetheless in using the weekly charts WOLF was able to close on Friday above the 50-week MA at 13.47 thus giving hope that the weekly up-trend is still in effect. The 14.01 level will now show some resistance and the 14.50 resistance level will be strong. A rally up to 14.00 is likely to be seen in the early part of the week. The daily and weekly charts look totally different so until some more chart information is available it is tough to give you a good chart analysis of where the stock will go from here. Certainly any further weakness will be a cause to "jump ship". Rallies above 14.50 will be cause for joy.
SWKS was looking so strong and in one fell swoop erased much of what it had built over the last couple of weeks. The weekly breakout above 8.38 was not confirmed. In addition the stock now finds itself below a strong support at 8.00 and if the stock is not able to reverse that in the first few days of the week it may be in trouble. In using the daily charts SWKS was able to close within 5 ticks of what was previously a breakout level at 7.86 and therefore Friday's close is not necessarily bearish yet. It is evident that SWKS needs to show some immediate pop to the upside or the recent move up and breakout will be totally erased. There is some minor resistance at 8.07-8.11 but after that there is nothing until 8.50. This stock should tell its story in the first couple of days of the week.
JSDA is at a very important support level (see mention in newsletter) and should rally from here. A break below 14.40 will look negative and a break below 13.65 disastrous.
COMS is down at major support (see mention).
Updates on last week's mentions and stock positions
1) PMCS - Averaged long at 7.90. Stop loss order lowered to 7.41. Stock closed Friday at 7.89.
2) ANGO - Liquidated longs purchased at 16.72 at 17.12. Profit on the trade of $200 per 100 shares (5 mentions) minus commission.
3) ANGO - Re-purchased stock at 17.43. Stop loss at 17.38. Stock Closed Friday at 17.76.
4) COGT - Liquidated longs averaged at 14.38 at 14.12 for a loss of $78 per 100 shares (3 mentions) plus commissions.
5) COGT - Purchased at 12.99. Stop loss at 12.61. Stock closed Friday at 12.86.
6) SONS - Purchased additional shares at 6.14 and now averaged long at 7.51. No stop loss at this time. Stock closed Friday at 6.86.
7) SWKS - Purchased at 8.35. Mental Stop loss now at 7.70. Stock closed Friday at 7.81
8) JSDA - Purchased at 16.08. Stop loss now at 14.42. Stock closed Friday at 14.66.
9) CRYP - Covered short at 21.57. Profit on the trade of $330 per 100 shares minus commission.
10) COMS - Purchased at 4.43. Stop loss order presently at 3.66. Stock closed Friday at 4.02.
11) GIGM - Covered short at 11.21. Profit of $250 per 100 shares minus commission.
12) FCEL - Purchased at 8.14. Stop loss order at 6.92. Stock closed Friday at 7.19.
13) WOLF - Long at 14.38. No stop loss at present time. Stock closed Friday at 13.69.
14) VPHM - Purchased at 14.01 and liquidated at 13.51. Loss on the trade of $50 per 100 shares plus commission.
15) NUAN - Purchased at 17.20. Stop loss presently at 16.23. Stock closed Friday at 16.56.
|
Chart Analysis DOW corrects strongly
DOW Friday close at 13265
The DOW suffered a 750 point drop this past week that was triggered by earnings reports that did not live up to expectations as well as renewed concerns about the sub-prime mortgage industry.
From a chart perspective the DOW has not yet produced a sell signal but the close on Friday is within 15 points of generating a definitive confirmation that a mid-term top (3-6 months) is now in effect. Major support, in the form of a double bottom, is currently at 13250. That double bottom launched the recent rally up to the 14000 level and a break of that support will totally negate the recent up move and thrust the market into a sideways to downtrend.
With the close on Friday being on the low of the day and within 15 points of the major support the probabilities of the support level getting broken are high. If the break happens one must look at the 20-week MA (currently at 13173) as being the only nearby support of consequence left. If the 13250 level breaks (probable) and the 20-week MA at 13173 does not hold, at least on a closing basis, it would likely signal a correction of at least 10% from the recent highs and a probable drop down to the 12600-12800 area over the next few weeks.
Any way you look at this it seems improbable that the 14000 level will be seen again any time soon. With this recent drop the 13691 will now become major resistance and if the support at 13250 is broken the buyers will not have a level of support they can feel comfortable with in buying against. Under such a scenario the bear traders will gain major strength and the buyers will be on the defensive. Intra-day resistances will now be found at 13300, 13439, and 13520.
In looking at the chart my personal opinion is that the support at 13250 will be broken but the 20-week MA at 13173 will hold, at least on a closing basis. I believe the DOW will get into a sideways trend between 13173 and 13691 for the next few weeks and after all the earnings reports are out the index will correct further and down to the previous breakout high at 12795.
NASDAQ Friday Close at 2562
The NASDAQ low on Friday reached the 20-week MA and since it closed on its low it is likely the 20-week MA will be pierced this coming week. The NASDAQ does have a plethora of support levels nearby and therefore it is likely that any further drops from here will be limited. Unlike the DOW a break of the 20-week MA will not generate substantial selling pressure and therefore it is likely that if the indexes continue to break from these levels that the NASDAQ will be the least affected.
Over the past few months there has been a lot of talk about a long-term "cup-and-handle" formation on the weekly charts with an objective of 2940. With the move down this past week a second smaller and more recent "cup-and-handle" formation seems to be formed as well. The drop this past week could be looked upon as the handle being formed. If that is the case then the 2515-2531 level will act as rock bottom to any further drops.
Because of the clarity of the formations in the NASDAQ as well as the myriad of support levels the index is now getting close to, I would think that this is the index that needs to be watched closely. There is support at 2560 but between 2515 and 2530 the support is major and looks difficult to break.
The NASDAQ will now find resistance at 2625-2635 and then again at 2673. A gap was left at 2682-2688 and that will now become a "key" to any recovery which may be seen in the future.
The NASDAQ needs to be closely monitored as a break below 2500 will likely be longer term disastrous. In simple words, a break below 2500 may give a signal to "jump ship".
S&Poors 500 Friday close at 1458
The SPX was certainly the index that lead the upward movement chart-wise and now that the indexes are going down the SPX also seems to be the leader on the way down. With Friday's drop the SPX closed substantially below the 20-week MA and unlike the other indexes is only a few points away from its previous breakout high point at 1451.
In addition the SPX now also shows a major double top, using intra-day numbers, with the high seen in the year 2000 and the high seen this past week. Such a top could signal the beginning of a downtrend and not simply a corrective phase in the indexes.
One particular area of concern is that moves below 1450 will change the longer-term aspect of the chart and likely destroy this last up-trend entirely. Below the 1451 level there is only the 50-week MA at 1426 but other than that there is no support of consequence until the 1365 level is seen. A drop down to the 1365 would be close to a 10% drop in price. A 10% correction is what a lot of analysts have been predicting over the past few months but if such a break occurs that would likely mean that a new high would not have a chance to be made for at least 1 year.
Resistance in the SPX will now be strong at 1493-1500 and major at 1541. Using the intra-day chart the 1480 will also act as strong resistance. The only support seen is 1451 and some at 1426.
Monday should be a "key" to how to play the market the rest of the week. With the indexes all closing right on the lows of the day it is likely that they will open lower or go lower sometime during the day. Depending on how low the indexes go on Monday and where support is found the traders will likely take cue from that and decide how to play the market the rest of the week.
|
Stocks CHART Outlooks
This past week's drop has created many opportunities for a fast profit if the indexes are able to hold their important support levels. Since the market, in general, has been in a major up-trend and trends usually do not change at the "drop of a pin", purchasing stocks that have held their support levels but were affected negatively with the drop in the indexes should be the way to go.
Buying of these stocks should not be done on the opening bell but done after the indexes or the stocks themselves have had a chance to trade for a few minutes. Certainly watching whether the indexes are holding or breaking their supports will give a good cluse whether to jump in to purchase or not.
COGT (Friday Close at 12.89)
COGT is a stock that broke out of a major resistance level a few months ago due to strong fundamentals as well as an attractive chart formation. The breakout was confirmed but follow-through was not seen and investors decided to bail out and the stock has dropped back down to the previous breakout level at 12.70. In addition, Friday's low took the stock down to the 50-week MA and since there has been no negative fundamental news released it is probable that this level of support will hold.
Resistance will now be strong at 14.00 and at 15.00 and support should continue to be found at 12.70.
Purchases of COGT between 12.70 and 13.00 using a stop-close-only order at 12.60 and an objective of 15.00 will offer a risk/reward ratio of at least 5-1. Should the previous up-trend resume and the stock able to get above the recent high at 15.61 this stock has the potential of reaching $20 before the end of the year.
My rating on the trade is a 6 (on a scale of 1-10 with the strongest probability rating being 10).
FCEL (Friday close at 7.19)
For the last 8 weeks FCEL has been in a strong weekly up-trend and two weeks ago was able to make a 10-month weekly closing high above the previous high of 7.86. FCEL confirmed that breakout with a second close two weeks ago. Last week, mirroring the drop in the indexes, FCEL dropped back down to major support.
In looking at the weekly charts there is a previous low on Aug 9th 2004 at 7.16 and one on May 16th 2005 at 7.19. In addition, both the 20 and 50 week MA currently between 7.20 and 7.25 gives strength to the belief that this area needs to be considered major support.
Using the daily chart FCEL has been in a major up-trend that started on 5/18 at 6.32 and has yet to falter. For the last 14 trading days FCEL has been trading in a sideways fashion getting rid of its overbought condition and now looks ready to re-start its up-trend after having established itself above the 7.86 breakout level.
There are 5 tops at 8.40 as well as a gap between 8.10 and 7.99 that should act as a magnet for traders. A high with so many tops as well as a gap left without a fundamental piece of news being the cause usually get filled and taken out.
Purchases as Friday's close of 7.19 and using a stop loss order at 6.92 and a short-term objective of 8.40 will offer a risk/reward ratio of 4-1. Nonetheless if the 8.40 level is seen again FCEL will probably break it and has an opportunity of rallying up to and above $10 thus offering a much more attractive risk/reward ratio.
My rating on the trade is an 8 (on a scale of 1-10 with the strongest probability rating being 10).
COMS (Friday closing price 4.02)
COMS dropped down to the 4.00 level due to weakness in the indexes. In the past the 4.00 level has proven to be a major support/resistance level for COMS as there have been over 18 occasions over the past 2 years where 4.00 proved to be either a major support or major resistance.
With the high in COMS over the past 15 months being 5.70 and the low during the same period of time being 3.61 it is evident that purchasing COMS, at this level (at 4.00), is likely to lead to a profit. In addition, over the past 4 months the weekly chart trading range has been shrinking and it appears that a breakout or a breakdown will occur soon. The look of the chart seems to point to a breakout and if and when that happens the objective would be the $8 area.
Recently there have been rumors of a possible buy-out of COMS in the near future so that does add interest to the purchase side. Over the past 2 years COMS has been a stock with very high open interest and volume but conservative in nature. COMS is not likely to be affected much more by the indexes even if they continue to drop.
A purchase of COMS at Friday's closing price of 4.02 and using a stop loss at 3.66 and an objective of 7.80 will give a risk/reward ratio of 10-1. Even if COMS continues to trade within the recent established trading range the risk/reward ratio on a purchased at 4.02 is 2-1.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
JSDA (Friday closing price 14.66)
JSDA is a wide trading range stock with quite a bit of natural volatility which offers potential for strong profits in a short period of time if traded correctly. Having had a high of 32.60 on April 16th of this year and a recent low of 13.65 the stock is now trading near levels that offer very strong risk/rewards on the purchase side.
In addition, Friday's low of 14.46 was exactly down to the 50-week MA.
There was a gap left on the daily chart on the previous rally between 14.68 and 14.75 and that gap has now been closed therefore removing that "magnet" from the sellers. With the 50-week MA now being tested as well as the indexes likely to have seen their worst JSDA is seen like an attractive buying opportunity.
There is very decent resistance at 16.79 from a previous weekly high prior to the rally up 18.55 as well as the 50-week MA. If the stock holds Friday's low of 14.46 a rally up to that price would be expected.
Purchases of JSDA between 14.46 and Friday's closing price of 14.66 and using a stop loss order at 14.36 and an objective of 16.79 offers a risk/reward ratio of 7-1. If purchasing JSDA for the longer-term objective of $20 a stop loss below the 13.65 low at 13.50 should be used.
My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).
View May 27, 2007 Newsletter View Jun 03, 2007 Newsletter View Jun 10, 2007 Newsletter View Jun 17, 2007 Newsletter View Jul 01, 2007 Newsletter View Jul 08, 2007 Newsletter View Jul 15, 2007 Newsletter View Jul 22, 2007 Newsletter |
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. |
|
|
|