December 14, 2021 - The RightLine Report
Notes From The Editor
Just like a snowflake, no two trading sessions are the same. Every day brings unique technical situations, news events, and other dynamics that shift the market. But along with these ever-changing factors are some common tendencies that savvy traders can profit from.
What I'm referring to here is the market's "rhythm" throughout the day.
Last week we talked about your personal morning habits, and how they can impact your trading account. Similarly, the market has its own daily habits. This shouldn't be a surprise, considering that when it's all boiled down, the market consists of thousands of humans making decisions.
When trading commences at the opening bell, the movement is fast and furious. Pre-market trading is suddenly reflected in gaps. Stocks not trading in pre-market react to overnight events.
I've often heard market veterans refer to the first hour of trading as "amateur hour" - a time when traders are lured in by quick prices changes, then whipsawed for a loss by the increased volatility.
In practice, I've found that this first hour can offer plenty of enticing entry points. Individual stocks often over-react when the broader market is making a decisive move. Imagine, for example, an equity called XYZ that falls sharply with the major indices at the beginning of trading.
While this sympathetic reaction is understandable, buyers suddenly begin to take notice as the stock approaches support at its 50 DMA. If that moving average is touched and successfully tested, XYZ could put in a decisive bottom and begin to retrace those early losses. The bounce can be particularly strong if the broader market also turns around.
I'm not necessarily endorsing jumping head-over-heels into a trade just five minutes after trading begins; with so little time, it's hard to get a feel for where the market and stock might be headed. However, once the initial dust settles during the first 15-30 minutes, windows of opportunity can suddenly open. The key is to have a reliable entry point, such as a bounce off a trendline or moving average, then place your stop relative to that level.
Early trading is also the time to employ our gap-open strategies for entering trade set-ups that have gapped beyond their entry points.
(Visit https://prorightline.com/gap-open-stock-trading-tactic/ for more information.)
Just as morning action has its own unique "vibe" and tendencies, so to does the afternoon half of the session. We'll touch on that next week and identify some specific tendencies that all traders should be aware of.
Here's to Profits,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 12/14 12/14 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
CCS 78.58 -1.58 81 5.59/2.8 4.3
RMBS 28.18 0.06 28.65 2.18/1.09 1.78
PSTG 31.64 -0.22 32.31 2.32/1.16 2.48
TER 155.94 0.58 158.36 10.95/5.48 8.86
HEAR 21.78 -0.24 22.23 20.75 1.48/0.74 2.3
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" and always use the RightLine Risk Control Calculator before entering any position.
For more on controlling risk go to the RightLine Risk Control System
For a glossary of terms unique to The RightLine Report go to: Glossary
Questions? Send us an email using our Contact Form.
Stocks Covered Today Stock Splits
Market Summary
US stocks were lower on Tuesday following inflation news that producer prices are up from last month and higher than expected. In other economic news, the US Federal Bank Open Market Committee started a two-day monetary policy meeting where investors expect Fed Governors to increase the pace of bond purchase tapering. Gold, oil prices and treasuries all finished the Tuesday session lower, while the USD/dollar moved higher.
Dec 13, 2021 Dec 14, 2021
-------------------- --------------------
Dow 35,650.95 -320.04 35,544.18 -106.77
Nasdaq 15,413.28 -217.32 15,237.64 -175.64
S&P 500 4,668.97 -43.05 4,634.09 -34.88
NYSE Volume 4.43B 4.46B
NYSE Advancers 1,024 1,013
NYSE Decliners 2,335 2,383
Nasdaq Volume 4.53B 4.79B
Nasdaq Advancers 1,310 1,315
Nasdaq Decliners 3,364 3,388
New Highs/Lows
12/07 12/08 12/09 12/10 12/13 12/14
--------------------------------------------
NYSE New Highs 90 82 49 56 89 36
NYSE New Lows 23 19 53 73 120 176
Nasdaq New Highs 72 50 59 50 65 34
Nasdaq New Lows 66 67 89 172 332 478
Stocks Covered Today Stock Splits
TRADER'S TIP: "Intuition"
Intuition - we've all learned to rely on it in different areas of our lives. When it comes to trading the markets, trusting our intuition exclusively is a process that often leads to financial harm. As a rule of thumb, it's best to use your intuition to develop your methodology - not to decide when to enter or exit a trade.
For example, you may find that you intuitively prefer to trade one type of trade instead of another. Following your intuition in this manner will often lead you to better setups, resulting in bigger profits. Intuition that causes you to fine tune and test your trading methods is much more effective than using it as an entry or exit strategy.
The Technical Analyst
For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Improve Your Trading With Moving Averages".
S&P 500 - 4634.09 December 14, 2021
52-Week High: 4743.83
52-Week Low: 3636.48
Daily Trend: DOWN
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
NASDAQ Composite - 15237.64 December 14, 2021
52-Week High: 16212.23
52-Week Low: 12397.05
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 17181.63
Resistance 2: 16317.19
Resistance 1: 15973.89
Pivot: 15452.75
Support 1: 15109.45
Support 2: 14588.31
Support 3: 13723.87
Dow Industrials - 35544.18 December 14, 2021
52-Week High: 36565.73
52-Week Low: 29755.53
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 38227.55
Resistance 2: 36878.29
Resistance 1: 36424.64
Pivot: 35529.03
Support 1: 35075.38
Support 2: 34179.77
Support 3: 32830.51
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): 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
Stocks Covered Today Stock Splits
TRADER'S TIP: "Victory!"
Regardless of what some "experts" have to say, trading isn't war. If you consider trading the same thing as combat, you may wind up being stressed, or even worse, hostile. Those who view trading as a matter of life and death usually take things very personally and tend to hold onto losses way too long. If you choose to use a military model for your trading approach, keep in mind that throughout history successful military leaders knew when to take a small loss on the battlefield. When outnumbered, they often retreated so they could return to fight another day.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Century Communities, Inc. (CCS: Consumer Cyclical/Residential Construction) - NEW HIGH DIP. Tuesday's price action is telling us that CCS is preparing to move back up to the 52-week high that was set just a few days ago. Our BUY trigger at 81 is ready to take advantage of a likely bounce from the current support level. Once your order is filled, enter a trailing stop of 5.59. Resize the stop to 2.8 after you reach a 4.3 profit. Earnings Report Date: Feb 02, 2022. Beta: 1.94. Market-Cap: 2.653B. Optionable.
TECHNOLOGY SECTOR
Rambus Inc. (RMBS: Technology/Semiconductors) - BULLISH BOUNCE. Positive price behavior near moving average support on Tuesday qualifies RMBS for a Bullish Bounce setup. After several sessions of declining prices, RMBS should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if RMBS moves up to our entry trigger set at 28.65. You can also enter a 2.18 trailing stop, to be replaced with a 1.09 trailing stop when you obtain a 1.78 profit. RMBS closed Tuesday at 28.18. Earnings Report Date: Jan 31, 2022. Beta: 0.99. Market-Cap: 3.082B. Optionable.
Pure Storage, Inc. (PSTG: Technology/Computer Hardware) - BULLISH BOUNCE. PSTG's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Tuesday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move PSTG back in step with the bullish weekly trend, so our BUY entry trigger is set at 32.31. Once you hold a position, trail a stop of 2.32. Tighten it to 1.16 on a 2.48 gain. PSTG closed at 31.64 on Tuesday. Earnings Report Date: Feb 22, 2022. Beta: 1.34. Market-Cap: 9.174B. Optionable.
Teradyne, Inc. (TER: Technology/Semiconductor Equipment & Materials) - BULLISH BOUNCE. The charts for TER show that despite the downward pressure from sellers recently, the weekly uptrend is still going strong. Buyers showed up again on Tuesday, resulting in the early stages of a rebound that started near moving average support. The resulting Bullish Bounce set-up offers a potential entry point for a long play. Set your trigger to BUY shares at 158.36, and follow your entry with a trailing stop of 10.95. Tighten it to 5.48 when a 8.86 profit is reached. TER ended the latest session at 155.94. Earnings Report Date: Jan 25, 2022. Beta: 1.39. Market-Cap: 25.419B. Optionable.
Turtle Beach Corporation (HEAR: Technology/Consumer Electronics) - SQUEEZE PLAY. The ticker for Tuesday's session shows HEAR is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 22.23 and a SELL short trigger at 20.75. When HEAR starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 1.48 trailing stop. Upon reaching a 2.3 profit, resize the stop to 0.74. Earnings Report Date: Mar 02, 2022. Beta: 1.50. Market-Cap: 349.482M. Optionable.
IMPORTANT: Before entering any positions, always use the Risk Control System to determine the level of acceptable risk and the maximum number of shares to buy. Use Gap Adjusted Entries to reset the Entry Price for stocks that gap beyond recommended entry levels.
Stocks Covered Today Stock Splits
Stock Splits
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 (Effective 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
---------------- ------- -------- ------- ------ -------
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
NAPCO Security NSSC 12/8/2021 1/5/2022 2-for-1 Yes
Merchants Bancorp MBIN 11/17/2021 1/18/2021 2-for-1 No
Split details are also available online at the RightLine Online Stock Split Calendar. For a detailed look at the different stages of a Stock Split, Click Here.
A simple yet powerful tool, the Risk Control Calculator helps you manage risk by recommending a maximum number of shares to purchase. Available in the RightLine Member's Area.
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