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December 18, 2021 - The RightLine Report
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NOTES FROM THE EDITOR
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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.
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"QUICK LIST"
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Stock 12/17 12/17 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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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" 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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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
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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
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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
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TRADER'S TIP:
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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
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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 - 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 https://www.prorightline.com/rlch/121721SPX.jpg--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" 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: "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
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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 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/ ***********************************
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 ---------------- ------- -------- ------- ------ ------- 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 For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
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"Time" by Alan Farley Sophisticated technical indicators evolve from simple data inputs of price and time. While most traders understand how price patterns reveal hidden opportunity, many fail to comprehend how time impacts both tactics and results. Lacking a skilled understanding of opportunity cost, they misinterpret signals and waste valuable resources. Or, trapped in common trend relativity errors, they prepare trades in one time frame but execute them in another. Opportunity cost defines how the trader manipulates working capital. For example, this important concept reveals why cutting losses efficiently is so important for long term survival. By its nature, taking any stock position dictates that those funds will not be available for another trade. This becomes a critical issue on account draw downs when individual trades can dictate success or failure for the aspirant. All trends in the markets are time frame specific. For example, the existence of an uptrend in a daily chart says nothing about the trend in the monthly or intra-day chart. This highlights the importance of correct time input in preparing technical indicators or reading chart patterns. When improperly time-tuned, technical analysis loses its effectiveness. Alternatively, resonant time readings will evoke startling accuracy with otherwise mediocre data input. Time Summation of indicators falls into three general categories: - Moving averages of elements such as price or volume - Relationships between the open, close, high and/or low of individual bars - Repeating cycles of price or volume behavior Time Period of indicators falls into three general categories: - Short Term - Intermediate Term - Long Term Individual units of time are best viewed as relative periods, as opposed to daily, weekly or monthly lengths. Since no two technicians trade in exactly the same time frame, patterns and indicators must serve a broad range of uses. Fortunately, technical analysis studies a fractal market. Valid predictions may be made with indicators developed from 5-minute bars or monthly ones in exactly the same manner. But don't be fooled: prediction can only be made in the same time frame as the tools being used to study it. See Chart - https://prorightline.com/rlr/TCibm100403.gif Trends are dependent on the time frame in which you are viewing them. While IBM shows a promising reversal taking place on the intra-day, the daily and weekly show a major correction in progress. Notice how the weekly reveals an excellent buy point at the top of the multi-year price channel, a support level completely missed on the daily chart. ---- This guest article was written by Alan Farley, trader and author of "The Master Swing Trader." ======================================================================
Best of luck and have a Great Week!
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