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December 11, 2021 - The RightLine Report
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NOTES FROM THE EDITOR
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"You can't beat the market" is a common stock trading myth. Most people are convinced it is practically impossible for individual traders to earn more than the stock market in general. Financial advisors and index fund salesmen will even tell you that you can't trust anyone who claims otherwise.
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"QUICK LIST"
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Stock 12/10 12/10 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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FWONK 60.52 0.52 61.87 4.52/2.26 2.4
SKY 82.30 0.81 83.55 5.42/2.71 4.66
VERA 24.36 -0.14 25.55 22.93 2.62/1.31 9.02
NPO 107.22 0.45 109.26 6.03/3.02 6.22
SWIM 25.20 0.54 25.58 23.8 1.78/0.89 3.54
The "Quick List" provides a brief summary of each stock write-up and should be taken in the context of the related write-up presented in the "Stocks Covered in This Issue" section of this Report. Be sure to read "How To Use The RightLine Quick List" at https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/
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MARKET SUMMARY
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The US major indices were higher on Friday as the S&P 500 set a new record closing high. Traders got a first look at the November inflation picture which showed prices remain elevated with the basic rate hitting the highest level since 1982. In other economic headlines, the University of Michigan reported that preliminary December consumer sentiment rose upwards from a 10-year low. On the equities front, shares of Costco (COST $559), Oracle (ORCL $103) and Broadcom (AVGO $632) all moved higher following the release of their earnings reports, while Lululemon Athletica (LULU $410) declined after issuing mixed guidance. Gold and oil prices were higher, the USD/dollar finished lower, treasuries were mixed.
Friday On The Week
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Dow 35,970.99 216.30 +1390.91 4.02%
Nasdaq 15,630.60 113.23 +545.13 3.61%
S&P 500 4,712.02 44.57 +173.59 3.82%
NYSE Volume 3.91B
NYSE Advancers 1,582
NYSE Decliners 1,764
Nasdaq Volume 4.43B
Nasdaq Advancers 1,900
Nasdaq Decliners 2,786
New Highs/Lows
12/03 12/06 12/07 12/08 12/09 12/10
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NYSE New Highs 28 53 90 82 49 56
NYSE New Lows 208 137 23 19 53 73
Nasdaq New Highs 27 42 72 50 59 50
Nasdaq New Lows 732 657 66 67 89 172
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TRADER'S TIP:
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TRADER'S TIP: "Moving Average Rainbows" Place a variety of moving averages on your chart, then watch how they crossover each other and fan out into a "rainbow." The patterns that are drawn as the trend unfolds will indicate the strength of a reversal. Try 13, 22, and 50 period Exponential Moving Averages to see how it works. This combination has shown to be effective under a wide range of conditions. Take notice of any similarities in the rainbows that have occurred historically, with particular attention to the way the rainbow takes shape after bouncing from support or resistance. This is a helpful tool to avoid head fakes, and determine true trend reversals in almost any time frame.
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THE TECHNICAL ANALYST
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This section contains important technical data for the three major market averages -- the S&P 500, the Nasdaq Comp Index, and the Dow Industrial Average. For guidance on how to use this information, go to: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ S&P 500 - 4712.02 December 10, 2021 52-Week High: 4743.83 52-Week Low: 3633.40 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 5001.48 Resistance 2: 4828.42 Resistance 1: 4770.22 Pivot: 4655.36 Support 1: 4597.16 Support 2: 4482.30 Support 3: 4309.24 https://www.prorightline.com/rlch/121021SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, December 13, 2021: 13-Dec None scheduled Tuesday, December 14, 2021: 14-Dec 6 am NFIB small-business index 14-Dec 8:30 am Producer price index Wednesday, December 15, 2021: 15-Dec 8:30 am Retail sales 15-Dec 8:30 am Retail sales excluding autos 15-Dec 8:30 am Import price index 15-Dec 8:30 am Import price index excluding fuels 15-Dec 8:30 am Empire State manufacturing index 15-Dec 10 am NAHB home builders' index 15-Dec 10 am Business inventories 15-Dec 2 pm Federal Reserve FOMC announcement 15-Dec 2:30 pm Jerome Powell press conference Thursday, December 16, 2021: 16-Dec 8:30 am Initial jobless claims (regular state program) 16-Dec 8:30 am Continuing jobless claims (regular state program) 16-Dec 8:30 am Building permits (SAAR) 16-Dec 8:30 am Housing starts (SAAR) 16-Dec 8:30 am Philadelphia Fed manufacturing index 16-Dec 9:15 am Industrial production index 16-Dec 9:15 am Capacity utilization Friday, December 17, 2021: 17-Dec None scheduled For a chart of typical Up or Down market reactions to specific major US economic reports, go to "Economic Indicator Effects" at this link: https://prorightline.com/index.php/economic-indicator-effects/
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TRADER'S TIP:
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TRADER'S TIP: "Keep It Simple" When it comes to trading, bigger and more complex methods aren't usually better. However, over-simplification can have the same negative effects as over-complication. When trimming back unnecessary components from your trading approach, be sure to avoid increasing risk. All successful traders maintain a balance, with most leaning toward the KISS side of the equation.
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STOCKS COVERED IN THIS ISSUE
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COMMUNICATION SERVICES SECTOR Formula One Group (FWONK: Communication Services/Broadcasting) - NEW HIGH DIP. "Buy the dip" is usually good advice when applied to an up-trending stock. This is expecially true when a new 52-week high has recently made its mark on the charts. FWONK meets the setup requirements, so get ready to BUY if shares reach our trigger price of 61.87. Once you've confirmed that your order is filled, follow it with a 4.52 trailing stop which can be changed to 2.26 when you have a 2.4-point gain. FWONK closed Friday at 60.52. Earnings Report Date: N/A. Beta: 1.23. Market-Cap: 13.853B. Optionable. CONSUMER CYCLICAL SECTOR Skyline Champion Corporation (SKY: Consumer Cyclical/Residential Construction) - NEW HIGH DIP. SKY is still showing the bullish strength that gave this stock a new 12-month high just a few days ago. Friday's intra-day price action near moving average support tells us that another run to the high-mark may be in the works. Get ready to BUY shares if SKY reaches our trigger price of 83.55, and enter a 5.42 trailing stop. The stop can be resized to 2.71 once you have a 4.66 profit. SKY closed Friday at 82.30. Earnings Report Date: Jan 31, 2022. Beta: 1.92. Market-Cap: 4.813B. Optionable. HEALTHCARE SECTOR Vera Therapeutics, Inc. (VERA: Healthcare/Biotechnology) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. VERA traders reached this state of stand-off on Friday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 25.55 and a SELL short trigger at 22.93. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 2.62 which can be tightened to 1.31 on a 9.02 gain. VERA closed Friday at 24.36. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 518.322M. Not Optionable. INDUSTRIALS SECTOR EnPro Industries, Inc. (NPO: Industrials/Specialty Industrial Machinery) - NEW HIGH DIP. As a rule of thumb, outstanding stocks like NPO continue to perform well for extended periods of time. The recent pullback from a new 52-week high gives us a chance to enter a position without taking much risk. NPO's price behavior on Friday points to another move higher, so prepare to BUY shares at the trigger price of 109.26. Once in, follow the purchase with a 6.03 trailing stop. Change the stop to 3.02 upon gaining 6.22 points. NPO closed Friday at 107.22. Earnings Report Date: Feb 22, 2022. Beta: 1.50. Market-Cap: 2.209B. Optionable. Latham Group, Inc. (SWIM: Industrials/Building Products & Equipment) - SQUEEZE PLAY. SWIM traders on both sides of the fence are now locked in a head-to-head shootout. Friday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 25.58 and a SELL short trigger at 23.8. When one of the orders is filled, cancel the remaining order and enter a 1.78 trailing stop. When you've reached a 3.54 paper profit, tighten the stop to 0.89. SWIM closed at 25.20 on Friday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 3.02B. Optionable. IMPORTANT: Before entering any recommended positions, always use the RightLine "Risk Control System" to determine the level of acceptable risk and the maximum number of shares to buy. Link: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/
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STOCK SPLIT SUMMARY
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Below are the stocks that have announced splits and have recently executed or will execute soon. There is generally a return to normal price behavior in the weeks following a split announcement in what we call a "Dormancy Phase." As the stock nears its split execution date it often moves into the "Pre-Split Run" stage where quick and sometimes dramatic gains can occur.
Announce Eff. Split
Company Name (Symbol) Date Date Ratio Options
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Arista Networks ANET 11/1/2021 11/18/2021 4-for-1 Yes
ePlus PLUS 11/9/2021 12/14/2021 2-for-1 Yes
For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/
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TRADER'S CORNER
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Intra-day Traders: "Unlock The Secrets Of The Ticker Tape" Many good traders lose money because of tape-reading incompetence. After all, the markets are little more than a set of numbers and their rate of change over time. Watching how these numbers interact offers traders a precise method for short-term prediction. It works because the flow of the tape reveals the crowd's intentions. Technical analysis alone won't make you a profitable trader. You still need to learn the fine art of reading the tape. That could be a shock after all of the time you've spent studying the charts and probing the indicators. Of course you can continue to trade without the tape, but you do so at your own risk. Charts often paint pretty pictures that trigger perfectly wrong signals, but the tape never lies. This goes back to the old admonition to trade what you see, not what you believe. Once you learn how to read the tape, it becomes much harder to get fooled by the whipsaws that are tossing other traders around. The bottom line is that price and volume provide most of the information needed to play the markets successfully. The flow of buying and selling pressure reveals forces that remain hidden on the charts and in the news flow. It reflects the real activities of market players, as opposed to the smoke and mirrors being offered to the public. Mastering the ticker tape is tough, because there's no definitive book or formula on the subject. It can only be learned through long periods of personal observation. But once you develop your tape-reading skills, you'll have a lifetime advantage over other traders, because you're accessing the hidden pulse of the markets. Here are 15 tricks to learning the secrets of the ticker tape. 1. Start your education by memorizing key levels on your favorite charts. Then watch the tape closely when price approaches these pivot points. Record your observations and see if you can predict reversals before the crowd does. 2. Most tape signals help you anticipate the unexpected. For example, a bull trap is set when volume dries up for no reason after a breakout. The tape reader has the advantage, because this occurs long before a reversal shows up on the chart. 3. Study the tape with one eye on the clock, because swings tend to occur in predictable cycles. For example, watch for the "third bar reversal" about 11 minutes into the new day. Follow the tape in whatever direction price moves at the open, then see if momentum fades at the critical time. 4. Interpret the crowd's excitement level with an average volume reading next to the real-time volume on your watch list. Look for stocks that trade well above their average volume, because this is where the real action will be for the day. 5. Look for divergences between market sentiment and the tape flow. Are interested buyers holding up prices in the middle of a broad selloff? Or do the rally fires fizzle when everything else is moving higher? 6. Ask if price action matches your expectations. Look for buyers at breakout levels and sellers at breakdown levels. When they don't show up, stand aside or fade the move. Don't be patient. Contrarians step in immediately when the crowd doesn't appear at price pivots. 7. Market makers and specialists use knowledge of the order book to move markets in whatever direction yields the greatest volume. They routinely manipulate crowd emotions against order flow to shake weak hands out of positions. 8. Use Nasdaq Level II as a contrary indicator. Its purpose is to fool the public into making bad decisions. The best feedback from this tool comes when you see a few shares hold a market up or down for extended periods. It means someone important is hiding a large order. 9. Ignore the players who are lined up on either side of the spread, and track only the depth of their interest through many tiers. Pay attention to whoever steps in to fill the gap when the spread opens more than a few cents. That's the highly motivated player who will most likely move the market. 10. Get out of the way when NYSE specialists show big size on one side of the market. They intend to push price through many tiers until their orders gets filled. Alternatively, scalpers can trade with size until it works out of the system. 11. Use the opening price principle. The opening tick on the SP 500 futures remains a pivot number through the entire session. Draw a line across it to remind yourself where it is. Then use opening price breakouts, breakdowns and reversals as trading signals. 12. Closely watch the relationship between current price and the daily range. A stock that holds high within its range has hidden strength, while a stock that holds low has hidden weakness. 13. Interpreting the bid/ask spread requires a different skill-set than reading price. Keep in mind that most spread movement is pure noise. Watch for those few times when the spread widens and price surges farther on fewer shares. That's where directional signals will appear. 14. Follow the professionals in quiet times and the public in wild times. Insiders push price in the direction that sets up their accounts for the most gain, but they lose control of the tape when the public enters the market in force. 15. Keep one eye on market breadth and exchange tick, and the other on the ticker tape. Interrelationships between these forces generate convergence and divergence that predict market direction. *************** This special guest article was written by Alan Farley, author of "The Master Swing Trader."
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Best of luck and have a Great Week!
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The RightLine Report is an information service for investors and traders. It is not a solicitation nor a recommendation or offer to buy or sell securities. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. The publishers of The RightLine Report are not brokers or financial advisors, and are not acting in any way to influence the purchase or sale of any security. Stock picks, entry points and exit points should be considered an information resource to assist the trader in developing a trading plan and it is the sole responsibility of the reader to conduct his or her own due diligence before executing a trade. Trading securities should be considered speculative with a high degree of volatility and risk. The publishers of The RightLine Report recommend that anyone trading securities should do so with caution, exercise prudent trading discipline and have a personal risk management strategy in place before doing so. It is possible at this or some subsequent date, the publishers and staff of The Pro Right Line Corp. may own, buy or sell securities presented. The Pro Right Line Corp. is not a financial advisory service. Its publishers, owners or investors, are not liable for any losses or damages, monetary or otherwise, that result from the content of The RightLine Report. Past RightLine Report performance may not be indicative of future performance. All subscriptions and/or use of the RightLine.net website are subject to RightLine's "Terms of Use" and "Subscriber Terms & Conditions" which are posted at www.rightline.net. Any REDISTRIBUTION of the above information, without The RightLine's written consent, is STRICTLY PROHIBITED. Copyright / The Pro Right Line Corporation - All Rights Reserved To Unsubscribe, send an email to cs@prorightline.com or call 800-737-4518. |