Notes From The Editor

Getting Started: Applying Trade Filters

Watching a stock ticker scroll across the TV screen for a few minutes can impart a good sense of just how many equities are out there. On the NYSE alone, there are more than 3000 issues. Add the 4000+ stocks traded on the Nasdaq, and you've got a huge assortment of listed companies representing every imaginable business and sector. This can be daunting without a filtering process that narrows down the field.

Fortunately, there are a few key factors that can be used to quickly separate the wheat from the chaff.

For traders, who need the ability to buy or sell a stock in a moment's notice, liquidity is one of the most important elements. Without enough interested buyers or sellers, having an order filled promptly can take hours. Even worse, without reasonable liquidity you'll be looking at huge spreads between the bid and ask, resulting in having orders filled at unfavorable prices.

You won't find liquidity listed among any stock's key statistics, but you will find its average daily volume (ADV). The filter to apply here is simple: simply avoid stocks with low ADV. As for what constitutes "low," consider weeding out anything that trades on less than 30,000 shares/day. This will all but ensure that orders are promptly filled with reasonable bid/ask spreads.

Volatility is another important filter. Too much increases the amount of potential risk, while too little means that it may take longer for a trade set-up to come to fruition. Remember that there's an opportunity cost to having your money in an equity that's directionless; those funds could be yielding profits in a stock that's actually moving.

The "Beta" listed among a stock's key statistics - and in every RightLine set-up - is a measure of volatility versus the S&P 500, with 1. 00 being the baseline. For example, a stock with a Beta of 0.50 tends to be only half as volatile as the S&P 500. These may not move fast enough for many traders. Similarly, Betas above 2.00 might be too choppy for all but the most aggressive strategies.

However, volatility is a bit more subjective than volume. The Beta doesn't tell the whole story. "Eyeballing" a chart can also reveal details about volatility. Stocks with low Betas can enter periods of higher choppiness, while even the most volatile stocks can become downright boring for weeks at a time. Take note of recent price action. If it doesn't suit your trading style, cast the stock aside.

As a general rule, certain sectors tend to be much more volatile than others. Utilities, for instance, tend to be slower movers, while tech stocks typically have much higher volatility. Certain areas of the market may also see a change in volatility as money rotates in and out of sectors. In the ever-changing stock world, what is ignored by investors one month may suddenly become a group that yields dozen of appealing trade candidates.

Have a great weekend!

Kent Barton
Senior Analyst

Quick List

    
Stock     12/01     12/01      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

METC      17.49      0.78     18.34                  2.17/1.09       2.9
RCKY      28.88      0.00     29.54     27.56        1.98/0.99      3.16
ZJYL      24.90      0.84     25.25                  2.09/1.05      1.82
SAVA      20.80     -0.03     21.58     20.04        1.54/0.77      4.06
VERX      27.82     -0.24     28.44      26.7        1.74/0.87      2.84

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

Following an exceptionally robust November that propelled the Dow to a yearly peak, major equity indices extended their ascent Friday on the first day of December. Small-cap stocks displayed notable strength, and significant European indexes also made gains following an unexpected expansion in China's manufacturing sector. Long-term Treasury yields experienced a decline, reaching their lowest point since September in response to Fed Chairman Powell's comments. On another front, oil prices sustained pressure, with WTI dipping below $75. OPEC+'s decision to implement additional voluntary production cuts, without an official quota reduction, contributed to a 5% decline in prices over the past two days.

Friday's focus revolves around manufacturing data and Powell's comments. The ISM PMI remained unchanged in November, indicating ongoing challenges in manufacturing activity. Despite 13 consecutive months of contraction, optimism persists for a potential rebound in the coming year. The November market rally hinged on expectations of the Fed concluding its tightening efforts. However, questions arise about whether the market anticipates rate cuts in the coming year.

Powell, in his morning commentary, struck a balanced tone, expressing the central bank's readiness to tighten further if necessary while acknowledging that policy is currently in "restrictive territory." The prevailing belief is that the Fed will likely adopt a cautious approach, signaling an extended pause and maintaining the fed funds rate at 5.25% to 5.5% in the first half of the year. Nevertheless, easing inflation, a cooling labor market, and a growth slowdown may pave the way for interest-rate cuts in the latter part of 2024.

Reflecting on a historically robust November, which stood out as the strongest month for global equities in the current year, both stocks and bonds experienced a broad rally. US markets, leading the resurgence, witnessed the S&P 500 gaining 9%, marking its second-best November since 1980, surpassed only by the pandemic-induced rebound in 2020. Government bonds achieved one of the most impressive monthly performances on record, with the U.S. aggregate bond index rising by 5%, the most substantial monthly gain since 1985. Contributing to this surge was the significant drop in yields, fueled by growing confidence in the Fed's conclusion of rate hikes. Better-than-expected corporate earnings and resilient economic data also played a role, maintaining the trend of disinflation.

While markets might momentarily pause to assimilate the upward movement post-November gains, seasonal trends could act as a supportive force, given that December historically proves to be a robust month for stocks. Key to future outlooks will be the trajectory of Fed policy, set to undergo a notable shift.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 36,245.50   294.61      +855.35     2.42%
Nasdaq              14,305.03    78.81       +54.18     0.38%
S&P 500              4,594.63    26.83       +35.29     0.77%

NYSE Volume                       4.4B                       
NYSE Advancers                   2,469                       
NYSE Decliners                     421                       

Nasdaq Volume                    5.62B                       
Nasdaq Advancers                 3,349                       
Nasdaq Decliners                   999                       

                                 New Highs/Lows

                   11/24  11/27  11/28  11/29  11/30  12/01
                 --------------------------------------------
NYSE New Highs        89    103     68     97    118    179
NYSE New Lows          6     23     27     25     24     16
Nasdaq New Highs      86     93     91    149     96    168
Nasdaq New Lows       62    131    131    110    127     99
   

TRADER'S TIP: "At Home on The Range"

The price "range" tells us how eager buyers are to own a stock. This eagerness is demonstrated when the daily range expands beyond the normal trading range due to buyers' willingness to purchase a stock at higher and higher prices during the day. Looking at range from a bullish perspective, it's always good to see range expansion as a stock sets new highs, and range contraction during the expected pullbacks. The opposite is true if you are a bear . . .

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 - 4594.63 December 1, 2023

52-Week High: 4607.07
52-Week Low: 3764.49
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4701.38
Resistance 2: 4639.23
Resistance 1: 4616.93
Pivot: 4577.08
Support 1: 4554.78
Support 2: 4514.93
Support 3: 4452.78

NASDAQ Composite - 14305.03 December 1, 2023

52-Week High: 14446.55
52-Week Low: 10207.47
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 14877.43
Resistance 2: 14581.26
Resistance 1: 14443.14
Pivot: 14285.09
Support 1: 14146.97
Support 2: 13988.92
Support 3: 13692.75
        
Dow Industrials - 36245.50 December 1, 2023

52-Week High: 36264.85
52-Week Low: 31429.82
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 37898.86
Resistance 2: 36914.58
Resistance 1: 36580.04
Pivot: 35930.30
Support 1: 35595.76
Support 2: 34946.02
Support 3: 33961.74
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

MONDAY, DEC. 4					
10:00 am	Factory orders			


TUESDAY, Dec. 5					
9:45 am	S&P U.S. services PMI	
10:00 am	ISM services	Nov.		
10:00 am	Job openings	Oct.
		
WEDNESDAY, Dec. 6					
8:15 am	ADP employment	
8:30 am	U.S. productivity (revision)	Q3		
8:30 am	U.S. trade deficit	Oct.		

THURSDAY, Dec. 7					
8:30 am	Initial jobless claims	12/2		
10:00 am	Wholesale inventories	Oct.		
3:00 pm	Consumer credit	Oct.		

FRIDAY, Dec. 8					
10:00 am	Consumer sentiment (prelim)	Dec.		
8:30 am	U.S. employment report	Nov..		
8:30 am	U.S. unemployment rate	Nov.		
8:30 am	U.S. hourly wages	Nov.		
8:30 am	Hourly wages year over year			
For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Just When We Think It's Safe . . ."

Remember that just when we start getting "too comfortable" with a stock's trend - be it up or down - it might be a good time to review the "other" side of the trade. For example, once we've identified a clear up trending pattern, and played it for a bounce a few times, that's precisely when we ought to start looking for a failure of support and an opportunity to short. Trends don't last forever, and we don't want to get lulled into a single-sided trading mentality.

Stocks Covered in This Issue

BASIC MATERIALS SECTOR

Ramaco Resources, Inc. (METC: Basic Materials/Coking Coal) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday METC seemed intent on initiating a rebound. With moving average support nearby, METC 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 18.34. Manage risk with a 2.17 stop. Tighten your stop to 1.09 when you have a 2.9 profit. METC ended the day at 17.49. Earnings Report Date: N/A. Beta: 1.00. Market-Cap: 905.931M. Optionable.

CONSUMER CYCLICAL SECTOR

Rocky Brands, Inc. (RCKY: Consumer Cyclical/Footwear & Accessories) - SQUEEZE PLAY. Friday's narrow price range has created a potentially profitable setup in RCKY, 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 29.54 and a SELL short entry at 27.56. Let RCKY's price action determine your long or short entry. Once the order is filled, place a 1.98 trailing stop, and tighten it to 0.99 upon getting a 3.16 gain. RCKY closed Friday at 28.88. Earnings Report Date: Feb 21, 2024. Beta: 1.31. Market-Cap: 213.072M. Not Optionable.

HEALTHCARE SECTOR

Jin Medical International Ltd. (ZJYL: Healthcare/Medical Instruments & Supplies) - BULLISH BOUNCE. The charts for ZJYL show that despite the downward pressure from sellers recently, the weekly uptrend is still going strong. Buyers showed up again on Friday, 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 25.25, and follow your entry with a trailing stop of 2.09. Tighten it to 1.05 when a 1.82 profit is reached. ZJYL ended the latest session at 24.90. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 192.975M. Not Optionable.

Cassava Sciences, Inc. (SAVA: Healthcare/Biotechnology) - SQUEEZE PLAY. SAVA is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 21.58 and a SELL short entry at 20.04. Once your trade is filled, enter a 1.54 trailing stop. Tighten it to 0.77 after a 4.06 gain. SAVA closed on Friday at 20.80. Earnings Report Date: Feb 26, 2024. Beta: 0.03. Market-Cap: 877.221M. Optionable.

TECHNOLOGY SECTOR

Vertex, Inc. (VERX: Technology/Software - Application) - SQUEEZE PLAY. Traders are feeling the pressure as VERX's intra-day price range on Friday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 28.44 and a SELL short entry at 26.7. VERX's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.74 trailing stop. Tighten it to 0.87 after you get a 2.84 gain. VERX closed Friday at 27.82. Earnings Report Date: N/A. Beta: 0.44. Market-Cap: 4.256B. 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  
---------------- -------     --------    -------     ------  -------   

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.

Trader's Corner

Trading Tactic: The New High Dip

The New High Dip tactic takes advantage of reoccurring market behavior that often takes place after a stock has just set a new 52-week high. It consists of buying the first pullback or "dip" after a stock moves above previous resistance and sets a new high. What makes this tactic so effective is the consistency of human nature - the driving force behind all price movement. Here's how it works:

After the initial flurry of buying that occurs when a stock breaks out to a new high, prices will usually pull back for a breather. This retreat is often a good place to buy, and usually provides a safe entry on a stock that has obviously shown strength already.

Several emotional dynamics are behind this tactic. One group of traders missed the first breakout move, and is hoping for another chance to get in before prices race off to even more new highs. They buy into the pullback and in doing so contribute their part to slowing the decline with their cash investment. They feel that they've made a wise choice and patiently wait for the shares to bounce.

Another group is already in the stock with profits, having bought into the stock before the breakout. This group is looking for a chance to add to their positions and will take advantage of the retreat to get in at a good price.

The last group of traders - just like the second group - bought into the stock before the breakout. But instead of holding on as prices began to retreat, they sold near the high and pocketed some profits for their efforts. Now they are waiting for a rebound to give them a chance to get back in and ride the "profit highway" once again.

The best place to enter a buy order is usually near the original breakout level. Sometimes a significant moving average will also line up to strengthen the support at the breakout level. The dip back to the support in that zone will usually result in a short-term bounce.


>

Each of the previously mentioned groups of buyers will help the stock rebound from the support level and often resume the advance to new highs.

While the market dynamics at work increase the odds that the upward trend will continue, there are a few things that can interrupt the stock's upward progress.

If the broader market falls hard enough and long enough, trader's moods can change and more selling will occur, stopping the stock from rebounding. Negative news about the company or industry can also have an impact and keep the stock from heading higher.

To protect your trading account, always use protective stops to prevent unplanned losses. Remember that no tactic will work 100-percent of the time, but sound risk management will ensure that any losses are minimal.

Just make sure that the reason for the stock's decline after reaching a new 52-week high appears to be the result of normal profit taking and not some significant negative event.

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.

Disclaimer

The RightLine Report is an information service for investors and traders. It is not a solicitation nor a recommendation or offer to buy or sell securities. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. The publishers of The RightLine Report are not brokers or financial advisors, and are not acting in any way to influence the purchase or sale of any security. Stock picks, entry points and exit points should be considered an information resource to assist the trader in developing a trading plan and it is the sole responsibility of the reader to conduct his or her own due diligence before executing a trade. Trading securities should be considered speculative with a high degree of volatility and risk.

The publishers of The RightLine Report recommend that anyone trading securities should do so with caution, exercise prudent trading discipline and have a personal risk management strategy in place before doing so. It is possible at this or some subsequent date, the publishers and staff of The Pro Right Line Corp. may own, buy or sell securities presented. The Pro Right Line Corp. is not a financial advisory service. Its publishers, owners or investors, are not liable for any losses or damages, monetary or otherwise, that result from the content of The RightLine Report. Past RightLine Report performance may not be indicative of future performance.

All subscriptions and/or use of the RightLine.net website are subject to RightLine's "Terms of Use" and "Subscriber Terms & Conditions" which are posted at www.rightline.net.

Any REDISTRIBUTION of the above information, without The RightLine's written consent, is STRICTLY PROHIBITED.

Copyright / The Pro Right Line Corporation - All Rights Reserved

Click Here To Unsubscribe