Notes From The Editor

So what's on your mind this holiday season? While most folks spend a lot of time thinking about money, you're much better off to forget about the cash ... at least when you're trading stocks. Instead of focusing on potential profits while you are in a trade, place your attention on making intelligent choices.

You make a decision each time you enter or exit a position. Every decision you make is an opportunity to grow - IF you give your experiences the value they deserve. On the other hand, if you view your experiences as "mistakes" and harshly judge yourself for not always making "perfect" choices, your confidence - and your trading account - will reflect that attitude.

Attitude is important because it affects everything. It flows from beliefs, which in turn regulate actions. Beliefs are like binoculars or blindfolds. They either help us to see opportunity, or keep us from seeing it at all.

Trading conditions are rarely optimum, so we usually make decisions under less than ideal circumstances. With this in mind, always steer clear of self-criticism, while taking full responsibility for your actions.

You are the only one who can set the value for each trading experience you have. How much are yours worth? Most people tend to underestimate the importance of personal experiences. Be sure to rate yours high enough.

Build your beliefs and improve your esteem by considering every trading experience valuable. Money is a byproduct of wise choices, so focus on trading intelligently and the money will come.

Trade well!

~Thomas Sutton, Editor<

Quick List

    
Stock     12/17     12/17      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

HOV      114.75     -0.12    117.72                 10.24/5.12      9.78
OCN       37.05      0.36     37.97                  3.08/1.54      2.78
LC        23.68     -0.19     24.47     22.26        2.21/1.11      5.58
RETA      29.41      0.57     30.37     27.09        3.28/1.64     12.52
FLR       24.33      0.51     24.75                   2.19/1.1      2.06

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.

Market Summary

Stocks were lower on Friday as the market continues the process of coming to terms with the US Federal Reserve Bank's decision to start tightening the easy monetary policies of the past two years. In equity news, FedEx (FDX $250) shares moved higher following the release of the company's earnings announcement, while General Motors (GM $55) and Darden Restaurants (DRI $140) slid lower despite beating profit expectations for the quarter. The USD/dollar finished the session higher, oil prices were lower, treasuries were mixed and gold remained near even.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 35,365.44  -532.20      -605.55    -1.68%
Nasdaq              15,169.68   -10.75      -460.92    -2.95%
S&P 500              4,620.64   -48.03       -91.38    -1.94%

NYSE Volume                      8.44B                       
NYSE Advancers                   1,388                       
NYSE Decliners                   1,953                       

Nasdaq Volume                    8.22B                       
Nasdaq Advancers                 2,514                       
Nasdaq Decliners                 2,160                       

                                 New Highs/Lows

                   12/10  12/13  12/14  12/15  12/16  12/17
                 --------------------------------------------
NYSE New Highs        56     89     36     69    110     41
NYSE New Lows         73    120    176    230     97    162
Nasdaq New Highs      50     65     34     56     83     49
Nasdaq New Lows      172    332    478    641    218    438
   

TRADER'S TIP: "Get A Groove Going"

Most companies will announce stock splits concurrent with a "major" event, such as an earnings release or during an annual shareholder's meeting. When a corporation breaks from this pattern and announces a split just before one of these events, it many times is a good "tip off" that further good news is just around the corner.

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 - 4620.64 December 17, 2021

52-Week High: 4743.83
52-Week Low: 3636.48
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4914.48
Resistance 2: 4782.71
Resistance 1: 4701.67
Pivot: 4650.95
Support 1: 4569.91
Support 2: 4519.18
Support 3: 4387.41

NASDAQ Composite - 15169.68 December 17, 2021

52-Week High: 16212.23
52-Week Low: 12397.05
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 16609.08
Resistance 2: 15932.39
Resistance 1: 15551.03
Pivot: 15255.70
Support 1: 14874.34
Support 2: 14579.01
Support 3: 13902.32
        
Dow Industrials - 35365.44 December 17, 2021

52-Week High: 36565.73
52-Week Low: 29755.53
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 37424.31
Resistance 2: 36518.74
Resistance 1: 35942.09
Pivot: 35613.17
Support 1: 35036.52
Support 2: 34707.60
Support 3: 33802.03
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, December 20, 2021:
20-Dec  10 am   Leading economic indicators

Tuesday, December 21, 2021:
21-Dec  8:30 am   Current account deficit

Wednesday, December 22, 2021:
22-Dec  8:30 am   GDP revision (SAAR)
22-Dec  10 am   Consumer confidence index
22-Dec  10 am   Existing home sales (SAAR)

Thursday, December 23, 2021:
23-Dec  8:30 am   Initial jobless claims (regular state program)
23-Dec  8:30 am   Continuing jobless claims (regular state program)
23-Dec  8:30 am   Nominal personal income
23-Dec  8:30 am   Nominal consumer spending
23-Dec  8:30 am   Core inflation (monthly)
23-Dec  8:30 am   Core inflation (year-over-year)
23-Dec  8:30 am   Real disposable income
23-Dec  8:30 am   Real consumer spending
23-Dec  8:30 am   Durable goods orders
23-Dec  8:30 am   Core capital goods orders
23-Dec  10 am   New home sales (SAAR)
23-Dec  10 am   UMich consumer sentiment index (final)
23-Dec  10 am   Five-year inflation expectations (final)

Friday, December 24, 2021:
24-Dec          Christmas holiday: None scheduled


For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "What's Important to Top Traders?"

When discussing the keys to success in the stock market, top traders generally don't talk much about what most folks might expect them to; namely, methods for locating high-probability trade setups. Instead, the conversation often centers around techniques for limiting drawdowns, deciding how many shares to include in a position and the importance of staying with their trading plan.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Hovnanian Enterprises, Inc. (HOV: Consumer Cyclical/Residential Construction) - BULLISH BOUNCE. Here is another example of a stock in an established uptrend that has recently experienced a counter-trend drop. The sliding price action has now found support near a moving average zone, bouncing upward during Friday's session to close at 114.75. Anticipate the rebound to continue, and be ready to buy HOV at 117.72. Follow your entry with a trailing stop of 10.24 which can be tightened to 5.12 on a 9.78 profit. Earnings Report Date: Feb 28, 2022. Beta: 2.47. Market-Cap: 717.754M. Not Optionable.

FINANCIAL SERVICES SECTOR

Ocwen Financial Corporation (OCN: Financial Services/Mortgage Finance) - NEW HIGH DIP. Stocks in the early stages of a bounce tend to move higher. This is especially true when a strong performer in an established uptrend dips to a well-known support level. OCN fits this model perfectly. After setting a new 52-week high a few days back, the stock dipped for several sessions due to profit taking. Now the price action is signaling there is a reversal underway. Plan to buy this dip if the bounce lifts OCN to our entry level BUY trigger at 37.97. Set a trailing stop of 3.08 and tighten to 1.54 on a 2.78 gain. OCN closed Friday at 37.05. Earnings Report Date: Feb 08, 2022. Beta: 1.89. Market-Cap: 340.888M. Optionable.

LendingClub Corporation (LC: Financial Services/Credit Services) - SQUEEZE PLAY. Friday's trading action forced LC's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction LC will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 24.47 if LC moves higher, and place your order to SELL short at 22.26 if price declines to that level. As usual follow your entry with a trailing stop, 2.21 should be sufficient. Reduce your stop to 1.11 on a 5.58 gain. LC closed Friday at 23.68. Earnings Report Date: Mar 08, 2022. Beta: 2.13. Market-Cap: 2.365B. Optionable.

HEALTHCARE SECTOR

Reata Pharmaceuticals, Inc. (RETA: Healthcare/Biotechnology) - SQUEEZE PLAY. A look at RETA'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 30.37 and a SELL short trigger at 27.09. Once RETA shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 3.28 and tighten to 1.64 on a 12.52 gain. RETA closed Friday at 29.41. Earnings Report Date: Feb 28, 2022. Beta: 1.48. Market-Cap: 1.07B. Optionable.

INDUSTRIALS SECTOR

Fluor Corporation (FLR: Industrials/Engineering & Construction) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday FLR seemed intent on initiating a rebound. With moving average support nearby, FLR is at a logical place for Bulls to regroup and extend the familiar uptrend that shareholders have become accustomed to. On continued buying, plan on taking long entries with a BUY at 24.75. Manage risk with a 2.19 stop. Tighten your stop to 1.1 when you have a 2.06 profit. FLR ended the day at 24.33. Earnings Report Date: Feb 24, 2022. Beta: 2.89. Market-Cap: 3.441B. 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.

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  1/18/2022   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.

Trader's Corner

"15 Ways To Trade Moving Averages"

Reading a chart without moving averages is like baking a cake without butter or eggs. Those simple lines above or below current price tell many tales, and their uses in market interpretation are unparalleled. Simply stated, they're the most valuable indicators in technical analysis.

You can trade without moving averages, but you do so at your own risk. After all, these lines represent median levels where your competition will make important buying or selling decisions. So it makes sense to predict what they're going to do before the fact, rather than afterward.

Here are 15 ways you can manage opportunity through moving averages:

1. The 20-day moving average commonly marks the short-term trend, the 50-day moving average the intermediate trend, and the 200-day moving average the long-term trend of the market.

2. These three settings represent natural boundaries for price pullbacks. Two forces empower those averages: First, they define levels where profit- and loss-taking should ebb following strong price movement. Second, their common recognition draws a crowd that perpetrates a self-fulfilling event whenever price approaches.

3. Moving averages generate false signals during range-bound markets because they're trend-following indicators that measure upward or downward momentum. They lose their power in any environment that shows a slow rate of price change.

4. The characteristic of moving averages changes as they flatten and roll over. The turn of an average toward horizontal signifies a loss of momentum for that time frame. This increases the odds that price will cross the average with relative ease. When a set of averages flatline and draw close to one another, price often swivels back and forth across the axis in a noisy pattern.

5. Moving averages emit continuous signals because they're plotted right on top of price. Their relative correlation with price development changes with each bar. They also exhibit active convergence-divergence relationships with all other forms of support and resistance.

6. Use exponential moving averages, or EMAs, for longer time frames but shift down to simple moving averages, or SMAs, for shorter ones. EMAs apply more weight to recent price change, while SMAs view each data point equally.

7. Short-term SMAs let traders spy on other market participants. The public uses simple moving average settings because they don't understand EMAs. Good intraday signals rely more on how the competition thinks than the technicals of the moment.

8. Place five-, eight- and 13-bar SMAs on intraday charts to measure short-term trend strength. In strong moves, the averages will line up and point in the same direction. But they flip over one at a time at highs and lows, until price finally surges through in the other direction.

9. Price location in relation to the 200-day moving average determines Long-term investor psychology. Bulls live above the 200-day moving average, while bears live below it. Sellers eat up rallies below this line in the sand, while buyers come to the rescue above it.

10. When the 50-day moving average pierces the 200-day moving average in either direction, it predicts a substantial shift in buying and selling behavior. The 50-day moving average rising above the 200-day moving average is called a Golden Cross, while the bearish piercing is called a Death Cross.

11. It's harder for price to break above a declining moving average than a rising moving average. Conversely, it's harder for price to drop through a rising moving average than a declining moving average.

12. Moving averages set to different time frames reveal trend velocity through their relationships with each other. Measure this with a classic Moving Average-Convergence-Divergence (MACD) indicator, or apply multiple averages to your charts and watch how they spread or contract over different time.

13. Place a 60-day volume moving average across green and red volume histograms in the lower chart pane to identify when specific sessions draw unexpected interest. The slope of the average also identifies hidden buying and selling pressure.

14. Don't use long-term moving averages to make short-term predictions because they force important data to lag current events. A trend may already be mature and nearing its end by the time a specific moving average issues a buy or sell signal.

15. Support and resistance mechanics develop between moving averages as they flip and roll. Look for one average to bounce on the other average, rather than break through it immediately. After a crossover finally takes place, that level becomes support or resistance for future price movement.

********************

This special guest article was written by Alan Farley, author of "The Master Swing Trader."

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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