December 14, 2023 - The RightLine Report
Notes From The Editor
Financial media gurus are always willing to give their opinions as to which direction stocks are certain to go. Trouble is, no one knows for sure. Even if they did, there's no way to know which of the hundreds of future-tellers are to be believed.
Actually, anyone's opinion about whether the markets are going up or down should have no impact on how you trade. Market predictions are just noise. Sometimes the noise inspires the crowd to buy, and in some cases it scares them into selling.
It really doesn't matter whether predictions are Bullish or Bearish; they tend to make the listener feel either better or worse - depending on the listener's bias. That's why most forecasters are usually bullish. They know that most investors and traders are hoping the market will go up, so they give them what they want to hear.
This type of catering to expectations is a common trait found wherever money is involved. For example, I occasionally visit a local Chinese restaurant for a run at the buffet. At the end of each meal the waitress faithfully delivers fortune cookies for everyone at the table. Here are a few words of wisdom that have turned up in the past:
1) "You will step on the soil of many countries."
2) "Sing and rejoice, fortune is smiling."
3) "People find it difficult to resist your persuasive manner."
4) "Practice is the best of all instructors."
Okay, you can choose any one you want. I happen to prefer number four, though number three got the biggest laugh at our table. Oh, and I almost forget to tell you that the lucky numbers are 5, 42, 31, 46, 8, and 2.
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 12/14 12/14 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
CARS 19.03 0.05 19.59 1.38/0.69 1.02
MORF 29.55 0.19 30.66 28.3 2.36/1.18 2.52
SNCY 16.28 0.18 16.53 1.12/0.56 1.12
IBM 162.91 -0.71 165.65 10.36/5.18 3.18
MPTI 27.72 0.35 28.76 26.19 2.57/1.29 6.26
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
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Stocks Covered Today Stock Splits
Market Summary
After a Dow Jones rally of more than 500 points on Wednesday spurred by a dovish Federal Reserve meeting and outlook, markets sustained their upward momentum on Thursday. Stocks displayed gains across the board, with the Russell 2000 small-cap index once again outperforming the S&P 500. Additionally, the 10-year Treasury yield continued its descent, with markets pricing in nearly six rate cuts by the Federal Reserve in 2024. The current 10-year yield is approximately 3.92%, a notable decrease from the 5% it reached in mid-October.
The combination of improved inflation trends, the Fed signaling rate cuts for the next year, and declining rates has fueled robust performance in both stocks and bonds over the past month. While some of this momentum is expected to persist until year-end, intermittent bouts of volatility are likely as we transition into the new year and potential economic growth softening.
In the realm of central banks, the US Federal Reserve, Bank of England, and European Central Bank (ECB) all maintained their existing stances. The Federal Reserve, on Wednesday, kept its benchmark fed funds rate steady at 5.25% to 5.5%, with Chair Jerome Powell acknowledging moderated inflation despite a resilient labor market.
The Fed's latest economic projections hinted at slightly lower economic growth and inflation in 2024 compared to September forecasts. Crucially, the Fed's projections now entertain the possibility of three rate cuts next year, up from two in the September outlook. Nonetheless, the market has surpassed these expectations, anticipating up to six cuts in 2024. The prevailing viewpoint is that the Fed is likely to cut three to four times, potentially commencing in mid-2024.
Concurrently, the Bank of England and the ECB opted to maintain their benchmark interest rates on Thursday. Although both central banks signaled that it's premature to contemplate rate cuts, the economies of the UK and Eurozone have been weakening, prompting expectations of over 1.0% in rate cuts in 2024 to support decelerating economic growth.
As bond yields underwent substantial declines in recent weeks, sectors sensitive to interest rates demonstrated outperformance. Notably, in the S&P 500, sectors like utilities and real estate emerged as top performers over the past month, benefiting from a lower-rate environment. Small-cap stocks outshone mid and large cap stocks, given their higher proportion of floating-rate debt, which tends to benefit as interest rates decrease. Furthermore, high-quality dividend stocks outpaced the broader S&P 500 over the same period. This trend aligns with a broader theme of market leadership diversifying beyond large-cap technology, a pattern anticipated to extend through 2024.
Dec 13, 2023 Dec 14, 2023
-------------------- --------------------
Dow 37,090.24 512.30 37,248.35 158.11
Nasdaq 14,733.96 200.57 14,761.56 27.59
S&P 500 4,707.09 63.39 4,719.55 12.46
NYSE Volume 5.08B 6.33B
NYSE Advancers 2,580 2,315
NYSE Decliners 319 586
Nasdaq Volume 6.77B 8.05B
Nasdaq Advancers 3,333 3,100
Nasdaq Decliners 1,053 1,261
New Highs/Lows
12/07 12/08 12/11 12/12 12/13 12/14
--------------------------------------------
NYSE New Highs 62 101 44 144 261 379
NYSE New Lows 35 19 10 45 26 10
Nasdaq New Highs 101 145 0 218 353 465
Nasdaq New Lows 122 108 1 188 171 83
Stocks Covered Today Stock Splits
TRADER'S TIP: "Breakouts . . . Too Late?"
Most traders believe they're too late when they find a breakout that has already taken off and left them at the station. In reality, they usually have plenty of time to get in. Instead of chasing after the crowd, it's often best for traders to wait until the stock reverses and returns back to near the initial breakout level. Pullback entries are much safer than chasing. They eliminate the pain of head fakes and normally provide just as much of a profit ride if the breakout turns out to be genuine.
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 - 4719.55 December 14, 2023
52-Week High: 4738.57
52-Week Low: 3764.49
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4712.15
Resistance 2: 4649.42
Resistance 1: 4626.89
Pivot: 4586.70
Support 1: 4564.17
Support 2: 4523.97
Support 3: 4461.24
NASDAQ Composite - 14761.56 December 14, 2023
52-Week High: 14855.62
52-Week Low: 10207.47
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 15009.93
Resistance 2: 14651.53
Resistance 1: 14527.75
Pivot: 14293.13
Support 1: 14169.35
Support 2: 13934.73
Support 3: 13576.33
Dow Industrials - 37248.35 December 14, 2023
52-Week High: 37287.50
52-Week Low: 31429.82
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 36755.67
Resistance 2: 36470.32
Resistance 1: 36359.09
Pivot: 36184.97
Support 1: 36073.74
Support 2: 35899.62
Support 3: 35614.27
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, DEC. 11 None scheduled TUESDAY, DEC. 12 8:30 am Consumer price index Nov. 8:30 am Core CPI Nov. 8:30 am CPI year over year 8:30 am Core CPI year over year 2:00 pm Monthly U.S. federal budget Nov. WEDNESDAY, DEC. 13 8:30 am Producer price index Nov. 8"30 am Core PPI Nov. 8:30 am PPI year over year 8:30 am Core PPI year over year 2:00 pm FOMC interest-rate decision 2:30 pm Fed Chairman Jerome Powell press conference THURSDAY, DEC. 14 8:30 am Initial jobless claims Dec. 8:30 am Import price index Nov. 8:30 am Import price index minus fuel Nov. 8:30 am U.S. retail sales Nov. 8:30 am Retail sales minus autos Nov. 10:00 am Business inventories Nov. FRIDAY, DEC. 15 8:30 am Empire State manufacturing survey Dec. 9:15 am Industrial production Nov. 9:15 am Capacity utilization Nov. 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: "Strong as Steel, Slow as Molasses"
Two of the strongest forms of trending price action are up trends and down trends that slowly inch along without any counter-trend reactions of any magnitude. This is easy to see on charts in any time frame - minutes, hours, days, weeks, or months.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Cars.com Inc. (CARS: Consumer Cyclical/Auto & Truck Dealerships) - BULLISH BOUNCE. CARS's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Thursday 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 CARS back in step with the bullish weekly trend, so our BUY entry trigger is set at 19.59. Once you hold a position, trail a stop of 1.38. Tighten it to 0.69 on a 1.02 gain. CARS closed at 19.03 on Thursday. Earnings Report Date: Feb 21, 2024. Beta: 2.09. Market-Cap: 1.26B. Optionable.
HEALTHCARE SECTOR
Morphic Holding, Inc. (MORF: Healthcare/Biotechnology) - SQUEEZE PLAY. A look at MORF's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 30.66 and a SELL short trigger at 28.3. Once MORF shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 2.36 and tighten to 1.18 on a 2.52 gain. MORF closed Thursday at 29.55. Earnings Report Date: Feb 21, 2024. Beta: 1.38. Market-Cap: 1.47B. Optionable.
INDUSTRIALS SECTOR
Sun Country Airlines Holdings, Inc. (SNCY: Industrials/Airlines) - BULLISH BOUNCE. The charts for SNCY show that despite the downward pressure from sellers recently, the weekly uptrend is still going strong. Buyers showed up again on Thursday, 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 16.53, and follow your entry with a trailing stop of 1.12. Tighten it to 0.56 when a 1.12 profit is reached. SNCY ended the latest session at 16.28. Earnings Report Date: Jan 31, 2024. Beta: 1.62. Market-Cap: 881.3M. Optionable.
TECHNOLOGY SECTOR
International Business Machines Corporation (IBM: Technology/Information Technology Services) - BULLISH BOUNCE. Positive price behavior near moving average support on Thursday qualifies IBM for a Bullish Bounce setup. After several sessions of declining prices, IBM should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if IBM moves up to our entry trigger set at 165.65. You can also enter a 10.36 trailing stop, to be replaced with a 5.18 trailing stop when you obtain a 3.18 profit. IBM closed Thursday at 162.91. Earnings Report Date: Jan 23, 2024. Beta: 0.77. Market-Cap: 148.756B. Optionable.
M-tron Industries, Inc. (MPTI: Technology/Electronic Components) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in MPTI, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 28.76 and a SELL short entry at 26.19. Let MPTI's price action determine your long or short entry. Once the order is filled, place a 2.57 trailing stop, and tighten it to 1.29 upon getting a 6.26 gain. MPTI closed Thursday at 27.72. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 77.279M. Not 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
---------------- ------- -------- ------- ------ -------
NOTE: The number of stock split announcments goes up during Bull markets,
and goes down during Bear market cycles. There are currently no upcoming
stock splits that meet RightLine's proprietary criteria for split ratio,
trading volume and price action.
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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