Below is a Glossary of terms used in the The RightLine Report.
ADD SHARES A phrase often found in the RightLine Report meaning to add shares to an existing position.
ALPHA Alpha measures a stock’s move during the month when the S&P 500 index is unchanged. For example, a stock with an alpha of 6 would be expected to rise 6% in a month when the price of the S&P 500 index doesn’t change.
BETA A measure of the magnitude of a portfolio’s past share-price fluctuations in relation to the fluctuations in the overall market (or appropriate market index). The market, or index, has a beta of 1.0, so the price of a portfolio with a beta of 1.50 would be expected to rise or fall by 15% when the overall market rose or fell by 10%.
BLUE SKY BREAKOUT A term often used to highlight where a significant move is likely after a stock has set a record high, or has pushed up through a resistance level or previous high in price.
BOUNCE A point where a stock price has fallen to support, or risen to resistance, and then reverses the up or down trend convincingly.
BREAKOUT Point when a stock price moves above some resistance level.
BREAKOUT OVER A phrase found in RightLine stock writeups, used in this context it means to buy the stock long once it rises above the indicated price.
CONGESTION AREA Series of trading days in which there is no visible progress in price.
CONSOLIDATION A pause that allows market participants to reevaluate the market and sets the stage for the next price move.
DAILY MOVING AVERAGE (DMA) Moving averages take into account a number of price periods to show average price over time. A “Daily” moving average uses “daily price periods.” For more information see Moving Average.
DARN STOCK A fictitious stock name often used by RightLine to explain a scenario where a “Darn Stock” is bought and the trade immediately goes sour.
DIP See PULLBACK
DOUBLE BOTTOM (TOP) Price action of a security or market average where it has declined (advanced) two times to the same approximate level, indicating the existence of a support (resistance) level and a possibility that the downward (upward) trend has ended.
DOWN-TICK A stock is said to be on a down-tick if the last trade price was lower than its preceding trade. See Ticks.
EARNINGS PER SHARE Calculation derived when a company’s earnings are divided by the number of common shares outstanding.
FADE Selling a rising price or buying a falling price. For example, a trader fading an up opening would be short.
FILL Used when an order to buy or sell is executed.
FLOAT The number of shares outstanding minus what is owned by insiders and what the company is holding back (treasury stock).
FLIPPING A STOCK To buy a stock at the close with the intent of selling at the open to capture a gap open.
FOMC Federal Open Market Committee.
GAP OPEN The difference between the price of a stock at the open compared to the previous day’s close (up or down.)
INDEX Indexes are numerical calculations, based on groups of similar investments, meant to convey the overall price level of a given market.
IPO (INITIAL PUBLIC OFFERING) A corporation’s first offering of stock to the public.
LIMIT ORDER Order to buy or sell a security at a specific price or better. A limit order is considered a day order unless otherwise specified. See Open Order.
LIQUIDITY How quickly an investment can be turned into cash. Stock ownership, for example, is usually a very liquid investment, because you can redeem your shares at any time. On the other hand, a house is a very illiquid investment.
LONG See LONG POSITION.
LONG ON A BOUNCE A phrase found in RightLine stock writeups, used in this context it means to buy the stock long once it has fallen to support at the indicated price and then risen above that price convincingly.
LONG OVER A phrase found in RightLine stock writeups, used in this context it means to buy the stock long once it rises above the indicated price.
LONG POSITION To buy or hold a long position is the state of actually owning a stock, security, contract, or commodity. It is the opposite of a short position.
MARKET LIQUIDITY Used to track money flow into and out of the markets. Positive cash flow can serve as an indicator that fund managers have cash to put into the markets at the next buying opportunity. Conversely, negative cash flow may indicate that fund managers may need to liquidate some holdings to meet redemption requirements. Additionally, IPO’s reduce market liquidity, however, mergers increase market liquidity.
MARKET SENTIMENT A measurement of the bullish or bearish attitude of the crowd.
MARKET VOLATILITY INDEX (VIX) A market consensus forecast of future stock market volatility over the next month.
MOVING AVERAGE Moving averages are one way to view historical price levels. Moving average take into account some number of price periods (a new period is added and the oldest is dropped from the calculation) to show average price over time. It is possible to weight more recent prices and by linearly or exponentially smoothing the average lines. The longer the averaging period, the more lag you will see between the average and the most recent prices.
NOT OPTIONABLE A term used by RightLine to indicate that the stock does not have options available.
OPTIONABLE A term used by RightLine to indicate that the stock has options available.
PEG RATIO See Price/Earnings Growth (PEG) Ratio.
POSITION TRADING Also referred to as Swing Trading, Position Trading refers to taking positions in stocks that are moving and getting out when they stop moving. A position trader buys and holds until a trend peaks, while a buy-and-hold investor buys for the long term.
PRICE/EARNINGS GROWTH (PEG) RATIO Commonly used for growth stocks, the PEG ratio takes into consideration growth by dividing the P/E ratio by current annual growth or forward annual growth estimates.
PRICE/EARNINGS (P/E) RATIO The ratio of a stock’s current price to its per-share earnings (P/E) over the past year. For a portfolio, the ratio is the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth in earnings.
PULLBACK A temporary drop in price. When stocks are trending higher, they will usually pullback for a short rest before resuming the up-trend. This is also called a “dip.” When prices set new highs in a strong uptrend, always buy the first pullback, or dip. Once you are in the trade, look for the previous trend to continue. The same is true of stocks that are trending lower. They will usually pullback (rise higher) for a short rest before resuming the downtrend. When prices set new lows in a strong downtrend, always sell-short the first pullback, or rise.
RESISTANCE Historical price level at which rising prices have stopped rising and either moved sideways or reversed direction; usually seen as a price chart pattern.
RISK The potential to lose money (principal and any earnings) or not to make money on an investment.
RISK TOLERANCE An investor’s personal ability or willingness to endure declines in the prices of investments.
ROLLOVER A point where a stock price has fallen to support, or risen to resistance, and then reverses the up or down trend convincingly.
SCALING INTO A term used by RightLine to recommend entering a small position in a stock and possibly increasing the position if the stock begins to move up.
SECTOR Sector is another word for industry. Sector funds groupings usually focus on a single industry, such as health care, technology, or utilities.
SHORT See SHORT SALE.
SHORT BELOW A phrase found in RightLine stock writeups, used in this context it means to sell the stock short once it has fallen below the indicated price.
SHORT ON A BOUNCE DOWN A phrase found in RightLine stock writeups, used in this context it means to sell the stock short once it has risen to support at the indicated price and then fallen below that price convincingly.
SHORT SALE To sell a stock you do not currently own. To go short you “borrow” stock from the Broker/Dealer, then sell the stock, with the intent to buy the stock back at a lower price than you had initially had sold it for. A short sale can only take place on an ‘up tick’ or ‘zero-plus tick’ (See Ticks).
SHORT SQUEEZE A price point where short sales are stopped out (usually 1-2 points above a resistance level or previous high) setting in motion a series of automatic buys and potentially a strong price move upward.
SPLIT An increase in the total number of shares outstanding. This increase in the number of shares results in the proportionate decrease of share price. For example, a company declares a “3 for 1” stock split, the price of the stock is currently $60 a share, a shareholder with 100 shares before the split would have 300 shares after the split with a value of $20 a share. The shareholders’ equity does not change. A ‘reverse split’ is where the total number of shares is decreased and the stock price increases proportionally. As in a split the total stock holders equity remains the same.
SPREAD The spread is the difference between the bid price and the
STOP LIMIT ORDER A stop order that becomes a limit order after the specified price has been reached.
STOP ORDER An order to buy at a price above or sell at a price below the current market price. A Stop Order becomes a market order when the stop price is triggered.
STOPS Can be either a buy or a sell stop. A buy is placed above current prices and a sell is placed below current prices. These order types instruct the broker to execute at market once a specific price objective is reached and traded at.
SUPPORT Historical price level at which falling prices have stopped falling and either moved sideways or reversed direction; usually seen as a price chart pattern.
SWING TRADING See Position Trading.
TICK The number of stocks whose last trade was an up-tick or a down-tick.
TICKS The minimum upward or downward movement in the price of a security. Down Ticks, Up Ticks and Zero Plus Ticks, these are all-important types of ticks. An “Up Tick” occurs when a stock trades higher than the previous trade on the bid or offer. “Down Ticks” occur when a stock’s execution price is lower that the previous execution price trades at a price lower than the current bid or offer, remember the stock has to trade. A Zero Plus Tick happens when a stock Up Ticks on a trade and the following trade is executed at the same price level. One thing to note, NASD rules states; you may only short stock on an Up Tick or a Zero Plus Tick.
TOP TICKED A term used by RightLine to indicate buying a stock at the high of the day.
TRAILING STOP Also know as a progressive stop, a technique that trails the price of a stock up with a stop right behind it. In most cases this is a manual process by the trader though a few brokerages are now beginning to offer this form of stop.
TRIPLE WITCHING HOUR The last trading hour on the third Friday of the quarters (Mar/Jun/Sep/Dec) when options and futures on stock indexes expire concurrently.
TRO See Turnover Rate.
TURNOVER RATE (TRO) TuRnOver is the relationship between the float and the average monthly volume of a stock. The higher the turnover rate, the more volatile the stock and the greater potential for wider swings in price (both ways).
UP-TICK A stock is said to be on an up-tick if the last trade price was higher than its preceding trade. See Ticks.
VIX See Market Volatility Index (VIX).
VOLATILITY A measure of the fluctuation in the market price of the underlying security. Mathematically, volatility is the annualized standard deviation of returns.