Week 37 - The Volatile Ride
Stock Investor US Podcast Week 37
The Volatile Ride
Hi, welcome to Stock Investor US Podcast for week 37. This is Jim. Today I got a bit of a sore throat, but we will manage. As usual, the podcast will last about 25-30 minutes. I will run through the major companies, how they look technically, and of course, speak a little bit about the market. Hopefully, I will manage to give you one or two good tips or tricks for your trading. We'll start by looking at the week that we just left. As I said in the last podcast, I expected some red days to start with for the major tech companies; maybe Tuesday, Wednesday. I believe it was Thursday which was very red. So, the major tech stocks had a huge fall last week. What didn't happen; I expected some of the money to flow from tech stocks and into biotech and healthcare stocks. Some biotech stocks did okay, but in general, it was more or less a market correction, which is kind of natural.
Looking at Dow Jones it started last week at 28,654 points and ended at 28,133, losing -1.8%. It was not much at all, but the week was a bit volatile. Nasdaq, which started the week at 11,695 points, ended at 11,313 points, losing 382 points. This equals around -3.3%. Again it's the major tech stocks pulling the index down, and one tech stock that really got beaten was Tesla [TSLA]. But if you look at the very big picture, Tesla [TSLA] has gained incredibly over the last few weeks, so it was a natural correction. As I mentioned in the last podcast when the split would take place it could peak all the way up to $500, which it really did, and then take a dive. Tesla [TSLA] was, I believe, on Friday at some point traded around $370 if I’m not mistaken, but ended just above $400.
Anyway, what we see, and as I said some times already; because the market's been going horizontal, some or actually many stocks have lost their momentum. The market's been driven by the major players ( like Apple [AAPL] and Tesla [TSLA] ) pushing the indexes upwards, while many stocks either been going sideways or have been falling for these last few weeks.
Last week the volatility started, and we had this one day which was extremely red. Friday, however, started green, but just after a few minutes of trading, it started falling. It was falling heavily before going up again. The day turned out not that bad.
This is also what I expect for the week ahead of us, that this volatility will continue. And, personally, I do believe that this phase which we're in, will end with larger falls, but not yet.
I don't think the week ahead of us will be the week where things really start falling. I think it will be a volatile week. Actually a good week if you are swing trading, because you will have these days where it is down a few percent and the next day it will go up a few percent. This creates a good trading environment.
For the rest of us, which doesn't do that much swing trading, the week will be a bit confusing. The stocks will go down one day, you will be scared, you want to sell and maybe you do sell, just to see that the second day everything goes up again. And I guess many people did that on Friday, they got so scared after a few hours of trading when the markets were down 3%, almost 4%. Dumping their shares, just to see that it ended quite well. This will be the very first trick that I will teach you. I’ve been speaking a bit about penny stocks. Many people love these stocks, Usually, we call them penny stocks because it's under one dollar, but also stocks traded at $1.10 - $1.30 can be considered penny stocks.
What's common for them; they have low liquidity. There is not that much trading, as like for instance in Tesla, these super big stocks, and this is the first trick. These small stocks, when there are super red days ( like we saw on Thursday and Friday ) these stocks tend to fall quite hard. That's the risk of low liquidity stocks or penny stocks. When they do good they do really well, but when air goes out they really go south. But like Friday, what you should watch for is the volume, because most of these penny stocks did not have that huge volume, they were falling much on low volume. This simply means, that if things turn a bit, you don't need that much volume to put them back to the same level.
We saw this in Diffusion Pharmaceutical [DFFN] which was traded 80 cents intraday and just got back to normal. I think it was down 10% but ended around 1% down or something. That's typical for penny stocks. For the bigger stocks it's a bit of a different game, but try to learn this thing about volume and liquidity, how things are connected together because that will help you time your trading much better.
APPLE INC [AAPL]
We'll start with some of the major tech stocks, and why not start with Apple [AAPL]. As I mentioned last week, so many of the tech stocks have been the upper part of the very nice rising trend, and that the reaction down was just very natural. Actually, it's supernatural, and there is nothing scary about it at all. The correction really happened for all of the tech stocks. Going to Apple [AAPL], for instance, it hit high early in the week at 134 dollars, then took a huge fall. I believe the stock started to fall slightly on Tuesday or Wednesday, and then that huge fall on Thursday ( where it was all the way down to just about $122 or some -10% ). On Friday it went slightly up, gaining 0.07%.
As I mentioned before, it's about support levels, etc. Apple [AAPL] broke all the major support. It had support at $128, $125, etc., but the fall on Thursday was so heavy that the stock broke through all these support levels. And the thing is, that now, as we had a slight reaction down and the stock is supposed to regain momentum, these support levels will become resistance levels.
Looking at the chart, Apple [AAPL] is now in the middle of a very nice rising trend, but it will be hard to go up to the previous level of $134, simply because, as I said, these previous support levels are now resistant levels. Looking at the chart I would expect that we will see Apple [AAPL] move somewhere between $115 and $125 during the week. It could, of course, if it's a good green day today, start to push upwards to $130, but technically, it looks like the stock would move towards the bottom of this rising trend which is somewhere around, $115 – $117. Then we'll see if it goes up. The volume indicates the same thing; that there is nothing major happening in Apple [AAPL] stock this week. It should be a slow week, moving up and down. As I said, between $115 - $125. These levels could be good trading opportunities for those doing swing trades.
We will see how things turn out in the end because by the end of next week Apple [AAPL] should start to test the support of the trend. That will tell something more about the medium to long term, but as is, Apple [AAPL] is still a buy candidate. Our algorithm scores it 1.96. It has a buy signal from the long term moving average, but not from the short term, which is a sell right now. I would not consider it the best buy right now, of course, you can gamble, depending on your horizon, but I would say, a better pick is around $115. Volatility is increasing a bit, this makes room for more trading.
Jumping to another stock. NIO [NIO] tested the roof of the trend like so many other stocks last week. The week before it was $20.44, but last week it did not manage to break up through this previous top and start falling along with the other stock. The thing about NIO [NIO] right now is that it's currently trading around $18. Between $15 and $18 there is very little support. Actually there is no previous accumulated volume, and if it falls below $18, it should fall quite rapidly down to the $15 level range ( which will be quite many percentages ).
We had this stock as a buy candidate all the way since the 26th of May and it's been gaining impressively 370% during this time. Currently, it is being ranked as a hold candidate. That just simply means that it's so hard to say whether it will continue to gain or if it will fall back. You will just have to wait and see. As I said, if it breaks support levels, if it falls further down, it should fall more rapidly, and it should probably then go all the way down to the $15 level range where it will find lots of support. But if this happens it will break that nice rising trend which it had for so long now. This will be the first sign that the stock will go more sideways in the medium and possibly also in the long term (remains to see).
Jumping to some pharmaceuticals, we have Innovo [INO]. This stock has been a sell candidate in our systems since back in August and has been falling 49%. The stock has a score of -5.66, but I’ve been mentioning this stock before. I believe it was the last podcast, where I mentioned, that if it managed to hold the $10 level range it could be the place where it will start to turn.
The volume is a little bit too low to give a real good technical analysis of the stock. The problem is, that it doesn't have much support under today's level, so it can just continue to fall. The stock is within a falling trend and has a sell signal from both the short term average and long term average. The last pivot was a pivot top etc. There are many negative signals, but as I said last week, and I will repeat it this week, personally I believe that it should turn now.
Last week it was traded around $12, so it's already lost -20% and is now being traded just under $10. However, this is the name of the game for these kinds of stocks. The high volatility stocks, they move fast up and down. I believe I mentioned last week the $12 to $20 as a trading range. It broke below $12 last week. The support didn't hold as the week was too negative.
Looking at the stock; I miss the high volume increase, which will define a real bottom. It's still not there, but the volume is showing small signs that the stock is about to turn. I still believe that there will be a trading range upwards to $20. You just have to pick it at the right time. And again, as I said so many times now, it all comes down to the volume. You have to look for volume because that will be the first sign that things are changing. Otherwise, it'll just continue to slide downwards. The risk-reward is not very good, so it's just speculative. But this a stock to keep on your watch list.
United States Oil Fund [USO]
Going further, a bit more random than I usually do. Let's look at the United States Oil Fund [USO]. This is another stock which I’ve been recommending all the way since it was at $17 and saying that it would just continue higher. It's been doing very well. It was traded as high as $30.93 two weeks ago, but since then it also took a huge fall. Last week oil prices plummeted from $43 to $38 for a short while, and the stock fell quite hard as well, ending at $28.50. And to be honest, I'm a bit surprised that it fell that much, I was expecting it to fall maybe to $29 – $30. As I said many times, I believe that oil prices will continue upwards, and these small corrections, these small scares, are quite natural. I still believe oil stocks to be a very good position to be in. As I mentioned in a few podcasts already; when we see oil prices above $43, these companies will start to earn good money, and then movements should be quite much faster. I don't manage to see the huge risk in the United States Oil Fund [USO] as is. I continue to be very positive towards this stock.
The stock broke many support levels, as so many stocks did last week. These levels will now turn into resistance levels, so it should go a bit slower upwards. Resistance at $29, $30, and some at $31. After $31 it should go quite much faster. All this remains to see. As I said, based on my beliefs of oil, and as I mentioned from the very first podcasts, somewhere ahead of us the demand and supply would crash a bit, pushing oil upwards.
I believe oil will get as high as $60 maybe more for the short term, and this should make oil stocks very attractive. I also mentioned many times that I expect the markets to fall and it's simply just natural correction. It's been a strong market, and knowing the situation where lots and lots of companies report negative quarter numbers, ( it is a bad situation for some stocks, of course, some stocks are perfect for the COVID markets, like some of the tech stocks and companies giving services which fits this situation very well are doing good ). But in general, the major stocks are delivering bad quarter results simply because it's a tough situation. Markets are very high, and at some point, it just has to have this correction down towards more natural levels. In this period, because I’m quite certain it will happen ( it's just trying to find exactly when it will happen ) we should see oil stocks doing better than the market as such. That's why I started personally to increase my portion of shares in oil-related stocks. My portfolio is slowly changing more into what I consider safe stocks. This is done so I’m prepared for when the market starts falling.
Royal Caribean Cruise Lines [RCL]
Moving to cruise lines. Very interesting. They've been moving so much faster than I thought. I expected it to be in October ( we are in September ), and looking at Royal Caribbean Cruise Line [RCL] it's just pushing upwards, and it's pushing very hard. Now it's traded at $71, almost $72.
Right now it's very overbought on the relative strength index, and we should see a natural correction. It has support at $70, later at $65. The stock has surely broken that horizontal trend which was moving within the last few weeks. It was moving within the $45 to a $55 range, but that is really broken now. Looking at the stock, technically, you can say that there is a rectangle formation that is broken, and based on this it should move all the way up to $65. But as I said, it's traded already at $72.
Since our system @ stockinvest.us started to recommend this stock it's been gaining 25%.
RCL is very overbought, volume does not manage to follow the stock. On Friday, the volume was very low. I expect the forthcoming week not to be as strong as last week. I would be surprised if we don't see a small correction downwards to $65. However, in general, these stocks are now looking very positive, and they still can double or so to get back to previous levels before covid situation. There are still lots of positive things that can happen with the cruise line stocks, but I would expect for the week ahead of us that we will see some sort of correction. Looking at the chart it will probably go up today (this Monday).
Norwegian Cruise Lines [ NCLH ]
Another cruise line stock is Norwegian Cruise Lines [NCLH}. Also, this stock is within a very nice short-term rising trend. It has buy signals from both the moving long and term moving average and from the pivot point. It simply is looking very good. But, also this stock had this divergence in volume. Volume did not follow the stock up on Friday. As I said, in general, that when the stock goes up, the volume should go up. That is technically a good sign which means that it's more predictable. Now we have this divergence, and I think that we'll see, as I believe in Royal Caribbean Cruise Lines [RCL], that the stock will have a minor correction. With lots of good support under today's level at $18, $17, $16, and $15, it shouldn't have any steep fall ( unless we get very bad days in the market). Any correction should be kind of slow; kind of natural, and looking at the shorter picture (more than one week, speaking one to three weeks ahead) it simply looks very good. I think that what we are seeing now is a trend shift for the medium and possibly the long term. It is still too early to tell about the long term, but with a positive medium-term the long term is looking quite much more positive right now.
Jumping a bit faster as we still got more stocks to go through.
Looking at Arbutus [ABUS] ( the reason I speak about Arbutus is that I’ve been personally invested in this stock ). I got in at $1.30 and I have had a nice ride. Currently, Arbutus [ABUS] is trading at $2.44, but the stock was as high as $9 intraday ( when it was in the discussion with Moderna about possible conflicts concerning the LNP licenses, etc). I believe it was back in late July) Since then it's been falling, falling, falling, falling, and currently looking at the chart there is a sell signal from the long-term moving average and a sell signal from the shorter moving average. There is very little support until it hits the $2 range, and it can simply continue to fall. It is at the bottom of a slight rising trend, but with this no support at current levels, it could still continue to slide downwards. What we really need to see is a change in volume that could change the game. If this happens it will meet resistance at $3, later $3.50 and $4.50. After $4.50 things will start to get interesting again, but currently, there are no technical indicators telling that this stock should do good in the week ahead of us. The technical picture is saying that there will be a slow, more likely to be red, than a green week for Arbutus [ABUS]. But this stock is very news-driven, and any news can change the game. The only thing I can think of, that possibly might happen, is that, as we are getting closer to the release of a vaccine there could be some news related to this and patents, pushing the stock. But this is just highly speculative. From a risk-reward point of view, it's not a good time to enter and if you have the stock you should not expect much from it for a week ahead of us.
Another biotech stock that I am personally invested in is Diffusion Pharmaceutical [DFFN]. I made good money on this stock. And, this stock looks a lot better than Arbutus [ABUS]. I am very positive this week, but again, as with the Arbutus; these are stocks which I personally trade (personally trading makes me very biased and you should remember this).
I have a position so I tend to be more positive than I should be, but I’ve been negative to Diffusion pharmaceuticals for some time now. I said it's more likely to go down than go up the last 4 weeks. But this week I’m very positive again, simply because it is at the bottom of the trend.
Diffusion Pharmaceutical [DFFN] is currently traded at $0.85, and with support from the previous bottom at $0.83. The volume is in the right divergence ( it's increasing while stock is falling and this is a slight indication that the bottom probably is close ). I actually expect that's what we will see this week, is that the stock should turn upwards. It will meet resistance at $0.90, $1.00, $1.10 and later $1.20. There will be no real fun until it breaks $1.20. Before that, it will just go slow and be a bit boring. But, personally I do believe there could be a high trading range this week. Maybe $1.10, possibly also $1.20.
There are expectations about news concerning the application to the food drug administration in the United States. ( They already started the trials in Romania etc. , and have pushed one good news about new board members last week, but nothing really happened. It was bad timing, the news should be out when there was momentum in the stock, not when it's been dead for very long). But, I believe that we're seeing the beginning of more volatility. And as I said, I’m positive for the stock this week. Our technical algorithms @ stockinvest.us have it as a sell candidate with a - 3.64 score and expect the stock to perform weekly over the next couple of days or weeks.
However, personally I believe that the week ahead of us could be very interesting. Again it's the same thing as in so many other stocks; Look at volume. An increase in volume will be the first signal that things really are about to kick off. Otherwise, it could just be slow and boring. I don't see the stock falling that much, simply because it has support at current levels. Upwards it will go a bit slow. I expect that at the end of the week, we will see Diffusion above $1 again.
If the right news hits it could go fast, but it will not go as fast as previously, when it was traded above $1.30. Any good news would not push it really high up now. It's too much resistance about current levels and people are waiting to get out of the stock. ( because they are sitting with losses and these will start selling as soon as the stock pushes upwards. That is the way that resistance works ) but any level above $1.20, and it will be real fun.
Advanced Micro Devices [AMD]
Jumping fast. Time is going too fast :) Also Advanced Micro Devices [AMD] took a natural correction down this week from the top of the rising trend. It's currently traded just around $82. It's close to the bottom of the trend and looking at it, I believe it should move a bit horizontal for the next few days, and then most likely start to pick up again.
I think the risk-reward for Advanced Micro Devices [AMD} is good. It's not perfect,but it's good. It could be a very good entrance point now. The stock has support at $80 and all the way down to $75. The next support will be at $ ’70s.
It has this divergence in the volume (stock was falling while volume was increasing), which is a good sign. It is indicating that a possible short-term bottom is close. You just have to try to time your buy. As I say, the risk-reward looks quite good to me, and I would be surprised if Advanced Micro Devices [AMD] don't end the week higher than it started. Personally I believe it will not set a new record this week, but it should be trading somewhere between $79 and $90 during the week. It should also end the week higher than $82. My very best guess is that it will end between $85 and $90 on Friday.
Sorrento Therapeutics [SRNE]
Jumping quickly to Sorrento Therapeutics [SRNE], this stock has more or less the same kind of pattern as Diffusion Pharmaceutical [DFFN]. It was having a high in early August at $18, almost $19, and has been falling ever since. Also, this stock is now oversold on the relative strength index and it has a slight divergence in volume. These things indicate that the stock should either fall at a slower pace, go horizontal, or possibly also even turn. The turn should be slow because it has resistance at $8, but when breaking $8 it should go very rapidly up to $12. That's super interesting because that equals almost 50% plus. Just keep it on your watchlist. Personally I am not into this stock right now, but it's on my watch list. Any levels around $8 on increasing volume, and I will be in to see how far it goes. At $12 to $14 it will meet so much resistance that I don't see it breaking it anytime soon.
As I said; reduce the risk a little bit. Don't go in too soon. Just wait for volume and the price to change. Price going up, volume going up and the fun will start.If it continues down, it has some support at today's level, later at $6,50. There is no real good support before $4, but slightly also the risk-reward for Sorrento Therapeutics [SRNE]is starting to look a bit better.
Microsoft Corporation [MSFT]
Microsoft Corporation took a huge fall last week. I mentioned this in last week's podcast. Microsoft Corporation [MSFT] was in the upper part of the trend. Now Microsoft Corporation [MSFT] is at the bottom of this rising and very solid trend. Volume is still a bit high; it worries me a bit, indicating that this stock could, for the week as such, continue a little bit more down, but not much and very slow. Probably it should be a good time to pick the stock.
Our system holds this stock as a hold candidate, and I totally agree with it. It has good support where it is and all the way down to $200. Nothing bad should happen really fast unless we have some sort of market crash. The exact timing, if you don't mind the dollar or two, just buy now. The stock is in a good and rising trend.
As I see it the risk-reward is very good. But, for a week as such, it should be volatile (meaning that it should move quite much up one day, just to go down the next day). For the end of the week, I expect the price to be more or less the same. It should be traded somewhere between $210 and $220, possibly around $218.
A few more stocks before ending this session and of course Tesla [TSLA] is one of them. Tesla [TSLA] was hit very hard last week.
I started the podcast talking a bit about tesla going up to $498 last week after a major rally from $300. It then took a huge fall (and there were all kinds of funny comments to read about Tesla; I’m screwed, Tesla screwed me, etc. but the fact is that it's just a natural correction). The stock is still looking good for the medium and long term.
Short term, I believe it should fall more towards the bottom. Right now it is traded in the middle of the trend. The bottom is at $350, and I believe we will see the stock fall downwards to this level, maybe as low as $330. At $330 it will find very good support all the way down to $270.
Our system holds this as a buy candidate with a score of 2.67. We have had Tesla [TSLA] as a buy candidate since August. The stock has been gaining and doing very well in this period, so we'll see. I believe it will go down to the bottom of the trend before continuing upwards. It could be that today, it will continue a bit up like it did Friday. TThe chart indicates it could move upwards to $430, maybe as high as $450, but then it should hit a new downturn again.
At the end of the week, I expect the price actually to be lower than today's price at $418, I believe it could be under $400 (somewhere between $350 and $400 on Friday). Given the markets, the end of the week should be a good place to get back into Tesla again.
I feel like I’m repeating myself, because the patterns for Amazon [AMZN] are the same as in Apple [AAPL], Microsoft [MSFT], etc. All of these stocks share similarities with Amazon [AMZN]. The stock hit the roof of the trend at $3,511 and then fell back. Now it is at the bottom of this very nice rising trend, but I believe it should continue slightly downwards to $3,200 (which will be a possible good pickup point for the shorter term - meaning more than the week ahead of us), because for the week ahead of us I don't expect very much from the stock. I expect it to go slightly downwards.
CABLE ONE INC [CABO] AND NVIDA [NVDA]
That was some of the stocks for this week. It became a long podcast, already; 37 minutes long. I would just like to mention two more stocks which you should keep on your watch list. One of them is Cable One Inc [CABO]. Something interesting is boiling there. I’m not sure exactly what and it is a high risk, but with high risk come possible high profit ( as well as possible high losses ). Keep it on the watch list,
Something might be boiling in Nvidia [NVDA] and it might just be one stock you should look into this week.
I’ll end this podcast now. I believe it's the longest podcast so far. I’ll end this podcast with the same thing I said as many times; use a stop-loss. Make stop loss your friend. You probably learned it the hard way on Thursday, seeing some heavy nice good profits going down the toilet. Use stop loss. Read a little bit about trailing stop loss (It's very good if your broker offers trailing stop loss). It simply means that the stop-loss will follow the stock upwards. You set stop-loss either by % or by amount. If the stock goes up the stop-loss automatically follows upwards. When you have these bad, bad days; like we had Thursday, when the market is almost crashing, the stop-loss will be triggered. It will make the decision for you ( because the hardest thing as investors, is always selling). As humans, we hope too much, but you have to be consequent and sell because it can always get far worse than you think.
I hope you all will have a perfect trading week. That you will do good, and that you will see some greens. We will speak next week. Bye.
Published: Sep 17, 2020 / Last updated: Sep 17, 2020Time For Change - Get started!
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