December 19, 2023 - The RightLine Report
Notes From The Editor
The constant pressures at work between bulls and bears in the market are similar to the earth's tectonic plates. They shift along a geologic fault line and the pressure continues to build. Sooner or later something is bound to give way.
So who will be victorious in these battles? Actually you can take your pick. Since the fight for dominance goes on indefinitely, the "winner" is determined by whatever time frame you choose to apply. In this game the selected time horizon makes all the difference in the outcome.
It's important for traders and investors to understand the power of time frames. In fact, the skill of "time-framing" is one of the most valuable abilities we can attain. It is certainly a required subject if we want to take full advantage of trends, for a trend can't be correctly defined without an associated time frame.
Time-framing uses a clock that measures "normal" time, and also takes price movement into account. It always assumes that we have an expectation for profits, and that expectation is based on historical price movement.
For example, if we expect a trade to take two or three days to develop, but two weeks later the price is still hovering at the same level we entered, the market clock has already told us that time is up.
On the other hand, if we enter a trade expecting a reasonable profit in two or three days, and within two hours the stock shoots up ten times the expected profit amount, then there probably is little reason to hold it for the entire expected period. Of course some of you will remind me that by using trailing stops you can lock in the windfall gains AND still stay in the trade - just in case it keeps going higher! You are absolutely right - and I'm sure you see my point about the market clock.
Regardless of the "time" aspect, most profits usually come from a relatively few big winners, while the remaining positions are made up of numerous small gainers and losers. This concept comes as a surprise to many traders, for most assume that a very high win-to-loss ratio is necessary to succeed in the markets - in fact this isn't the case.
Trying to maintain a high win-to-loss ratio usually results in taking small gainers too early, before they can develop into their full potential. At the same time there is a tendency to ignore losers, to hope that they will reverse.
While holding on to losers is a common strategy for beginners, it just doesn't work. All it takes is one big loss to undo several positive trades. First concentrate on minimizing losses, then look to maximize gains by locking in profits as they accumulate.
Trade well!
~Thomas Sutton
Stocks Covered Today Stock Splits
Quick List
Stock 12/19 12/19 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
LKNCY 28.22 -0.28 27.34 2.17/1.09 2.32
LOVE 27.00 0.52 27.78 25.95 1.83/0.92 1.82
GH 27.90 0.68 28.59 2.23/1.12 2.62
HCP 22.80 0.67 23.16 21.61 1.55/0.78 1.72
S 27.48 0.75 28.01 25.94 2.07/1.04 1.38
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
The Dow Jones Industrial Average (DJI) secured its fifth consecutive record-high close on Tuesday, and the S&P 500 index (SPX) inched closer to an all-time high, propelled by the ongoing holiday rally in the market. This surge is fueled by the perceived policy "pivot" of the Federal Reserve and optimistic sentiments regarding the economy achieving a "soft landing."
The Nasdaq marked its ninth consecutive day of advancement, reaching a new all-time high for the third day in a row. Small-cap stocks continued narrowing the gap with their larger counterparts, with the Russell 2000 Index (RUT) surging nearly 2% to a 16-month high.
The S&P 500 concluded the day within 28.19 points, or 0.6%, of its record-closing high of 4,796.56, set on January 3, 2022, the first trading day of that year. Market leadership was well-distributed, with growth sectors like communication services performing admirably alongside cyclical sectors such as energy and materials.
US housing starts exhibited a remarkable increase of over 14% month-over-month, surpassing consensus expectations, while Canadian CPI data slightly exceeded forecasts. Treasury yields saw a decline, with the 10-year yield hovering around 3.93% and the 2-year yield dropping to approximately 4.43%. Oil prices built on Monday's gains, reaching over $74 per barrel.
Dec 18, 2023 Dec 19, 2023
-------------------- --------------------
Dow 37,306.02 0.86 37,557.92 251.90
Nasdaq 14,904.81 90.89 15,003.22 98.03
S&P 500 4,740.56 21.37 4,768.37 27.81
NYSE Volume 4.06B 4.04B
NYSE Advancers 1,385 2,316
NYSE Decliners 1,430 556
Nasdaq Volume 5.9B 5.77B
Nasdaq Advancers 1,942 3,232
Nasdaq Decliners 2,259 1,134
New Highs/Lows
12/12 12/13 12/14 12/15 12/18 12/19
--------------------------------------------
NYSE New Highs 144 261 379 196 134 235
NYSE New Lows 45 26 10 13 13 14
Nasdaq New Highs 218 353 465 251 119 377
Nasdaq New Lows 188 171 83 108 62 105
Stocks Covered Today Stock Splits
TRADER'S TIP: "Raindrops Keep Fallin' On My Head"
According to the Hulbert Digest, professors from Ohio State and the University of Michigan found that weather had a strong impact on the stock markets of 26 countries around the globe between 1982 and 1997. Specifically, those stock markets went up more than average when it was sunny in the cities where the markets were located, and declined more than average when it was cloudy.
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 - 4768.37 December 19, 2023
52-Week High: 4768.69
52-Week Low: 3764.49
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4974.07
Resistance 2: 4828.89
Resistance 1: 4774.04
Pivot: 4683.71
Support 1: 4628.86
Support 2: 4538.53
Support 3: 4393.35
NASDAQ Composite - 15003.22 December 19, 2023
52-Week High: 15003.81
52-Week Low: 10207.47
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 15726.80
Resistance 2: 15195.75
Resistance 1: 15004.83
Pivot: 14664.70
Support 1: 14473.78
Support 2: 14133.65
Support 3: 13602.60
Dow Industrials - 37557.92 December 19, 2023
52-Week High: 37562.83
52-Week Low: 31429.82
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 39194.13
Resistance 2: 38077.72
Resistance 1: 37691.44
Pivot: 36961.31
Support 1: 36575.03
Support 2: 35844.90
Support 3: 34728.49
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, DEC. 18 10:00 am Home builder confidence index Dec. TUESDAY, DEC. 19 8:30 am Housing starts Nov. 8:30 am Building permits Nov. WEDNESDAY, DEC. 20 8:30 am U.S. current account Q3 10:00 am Existing home sales Nov. THURSDAY, DEC. 21 8:30 am Initial jobless claims Dec. 8:30 am GDP (revision) Q3 8:30 am Philadelphia Fed manufacturing survey Dec. 10:00 am U.S. leading economic indicators Nov. FRIDAY, DEC. 22 8:30 am Durable-goods orders Nov. 8:30 am Durable-goods minus transportation Nov. 8:30 am Personal income Nov. 8:30 am Personal spending Nov. 8:30 am PCE index] Nov. 8:30 am Core PCE index Nov. 8:30 am PCE (year-over-year) 8:30 am Core PCE (year-over-year) 10:00 am New home sales Nov. 10:00 am Consumer sentiment (final) Dec. 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: "Trading Ranges"
When a stock is in a "trading range" you can draw relatively horizontal parallel lines that enclose most of the highs and lows. As time passes, these lines can provide potential resistance - on top - and support - on bottom - for the stock. When it breaks through these lines and disrupts the trading range, a new pattern can begin as long as the stock does not quickly return to its previous range. When the stock breaks out, the previous top - resistance - can become the bottom - support - of a new trading range.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Luckin Coffee Inc. (LKNCY: Consumer Cyclical/Restaurants) - BEARISH U-TURN. LKNCY's chronic decline over the past weeks was relieved by a recent upward bounce that has boosted hope for weary shareholders. Unfortunately for them, Tuesday's price action near moving average support indicates the bullish rebound may be over. If this turns out to be the case, short-sellers can enter a SELL position at 27.34. Control risk with a 2.17 stop that can be resized to 1.09 on a gain of 2.32. LKNCY closed at 28.22 on Tuesday. Earnings Report Date: Feb 29, 2024. Beta: -0.54. Market-Cap: 7.786B. Not Optionable.
The Lovesac Company (LOVE: Consumer Cyclical/Furnishings, Fixtures & Appliances) - SQUEEZE PLAY. LOVE traders on both sides of the fence are now locked in a head-to-head shootout. Tuesday'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 27.78 and a SELL short trigger at 25.95. When one of the orders is filled, cancel the remaining order and enter a 1.83 trailing stop. When you've reached a 1.82 paper profit, tighten the stop to 0.92. LOVE closed at 27.00 on Tuesday. Earnings Report Date: N/A. Beta: 2.52. Market-Cap: 418.203M. Optionable.
HEALTHCARE SECTOR
Guardant Health, Inc. (GH: Healthcare/Diagnostics & Research) - BULLISH BOUNCE. Up-trending stocks like GH have a tendency to bounce their way skyward rather than travel higher in a straight line. After touching down to a moving average support level on Tuesday, GH is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 28.59 if positive price action occurs. As always, follow your entry with a trailing stop. A 2.23 trailer should work well with GH. Tighten it to 1.12 on a 2.62 gainer. Earnings Report Date: Feb 21, 2024. Beta: 0.90. Market-Cap: 3.292B. Optionable.
TECHNOLOGY SECTOR
HashiCorp, Inc. (HCP: Technology/Software - Infrastructure) - 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. HCP traders reached this state of stand-off on Tuesday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 23.16 and a SELL short trigger at 21.61. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.55 which can be tightened to 0.78 on a 1.72 gain. HCP closed Tuesday at 22.80. Earnings Report Date: Mar 09, 2024. Beta: 1.26. Market-Cap: 4.465B. Optionable.
SentinelOne, Inc. (S: Technology/Software - Infrastructure) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. S found itself in this condition on Tuesday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 28.01 and a SELL short trigger at 25.94. When S moves outside of Tuesday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 2.07 trailing stop. After you've got a 1.38 profit, tighten the stop to 1.04. S closed at 27.48 on Tuesday. Earnings Report Date: Mar 14, 2024. Beta: 0.51. Market-Cap: 8.208B. 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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