December 20, 2022 - The RightLine Report
Notes From The Editor
Feeling, Thinking and Trading
American Psychologist magazine once featured a report by Robert Zajonc called "Feeling And Thinking." In the article he wrote, "We sometimes delude ourselves that we proceed in a rational manner and weigh all of the pros and cons of various alternatives. But this is seldom the case. Quite often "I decided in favor of X" is no more than "I liked X" ... We buy the cars we "like," choose the jobs and houses we find "attractive," and then justify these choices by various reasons."
Reading this reminds me that our emotional moods do influence our decisions - even when we're trading. In fact, studies show that the majority of us buy and sell stocks primarily on emotion instead of reasoning.
Most investors let negative feelings about their losing positions convince them to sell their winning positions in order to make up for the losers. Once the winners are sold, the average investor will hold onto losers way too long in hopes the stocks will recover.
This is the opposite of what should be done. In the real world, winners tend to keep on winning, while losers usually keep losing. The most successful position management strategy is pretty simple - sell losers and keep winners.
It's easy to understand how this approach pays off, but sticking with it can be a huge emotional challenge. The solution comes from gradually acquiring enough "discipline" to just do it.
Now for a brief psychological sidebar ... Acquiring the type of "discipline" we're referring to is in a real sense an informal, self-directed behavioral therapy. This process takes advantage of the fact that all behavior -- including trading stocks -- is based on collages of memories, or "programs" that our human behavior system assembles in response to our emotional environment at the time.
A "discipline program" of this sort is gained through conditioning. This approach is effective because our behavior "programs" are built recurrently, with the last response or behavior being the basis for the next behavior. Adding a "new" or improved behavior to the chain of recurrent memories alters the structure of the old program, in essence creating a new "program."
Positive changes in trading skills and behavior can occur quickly with this method. The new behavior modifies the program, causing the next behavior to be more like new behavior. Changing programs this way requires us to pay attention to our emotions and feeling. The emotional component is a major part of our programming. The key is to take any preferred "new" action with a calm and somewhat positive emotional tone.
Viewing this from a trading standpoint basically means selling any and all losing trades immediately upon their reaching a predetermined level, and holding any and all winners until they meet the specific sell criteria of your exit strategy. Do this calmly and with positive intent. Remember that the outcome for any individual short-term trade doesn't matter near as much as the long-term benefit you'll get from the improvement in your trading abilities.
Trade well!
~ Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 12/20 12/20 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
PINS 24.44 0.27 25.02 2.01/1.01 2.06
PERI 25.14 0.11 25.56 1.67/0.84 1.7
IGT 22.61 -0.06 23.12 21.69 1.43/0.72 1.38
ARRY 20.73 0.27 21.52 2.66/1.33 3.02
SHLS 25.20 0.48 26.22 2.92/1.46 4.3
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 major US stock market indices were higher on Tuesday as traders considered a round of monetary policy decisions from Asian central banks. The People's Bank of China and Bank of Japan left their benchmark interest rates unchanged, as the BOJ surprisingly tweaked its yield curve control policy by widening its cap on the 10-year Japanese Government Bond yields. In economic news, housing starts were down by less than predicted, and building permits dropped much more than analysts expected. Equity headlines featured General Mills (GIS $83) beating earnings estimates and raising its full-year guidance, while shares of Steel Dynamics (STLD $103) were higher after Standard & Poor announced that STLD will replace ABIOMED (ABMD $381) in the S&P 500. Gold prices, crude oil and treasury yields all rallied, the USD/dollar finished the session lower.
Dec 19, 2022 Dec 20, 2022
-------------------- --------------------
Dow 32,757.54 -162.92 32,849.74 92.20
Nasdaq 10,546.03 -159.38 10,547.11 1.08
S&P 500 3,817.66 -34.70 3,821.62 3.96
NYSE Volume 4.03B 4.01B
NYSE Advancers 932 1,650
NYSE Decliners 2,222 1,500
Nasdaq Volume 4.68B 4.74B
Nasdaq Advancers 1,269 2,359
Nasdaq Decliners 3,357 2,238
New Highs/Lows
12/13 12/14 12/15 12/16 12/19 12/20
--------------------------------------------
NYSE New Highs 91 46 38 31 41 48
NYSE New Lows 56 92 126 178 166 164
Nasdaq New Highs 123 100 84 67 79 86
Nasdaq New Lows 249 247 377 462 536 467
Stocks Covered Today Stock Splits
TRADER'S TIP: "More on Trading Frequency"
"If we flip a coin only ten times our odds of having 50% heads and 50% tails are not very good. However if we flip the coin one thousand times we are likely to come much closer to obtaining 50% heads and 50% tails. The same logic applies to our real-time trading. If we have a large sample of real trades then our results should come closer to our expectations than if we only have one or two trades. The active system will approach our expectations much quicker than the system that trades infrequently. If we have 50 or more trades per month with a good system we might reasonably expect to be profitable every month. However if we have a system that is only producing two or three trades per month then our monthly results will less predictable and inconsistent. The infrequent trading system might be expected to produce a profit every year but it would not be realistic to expect it to show a profit every month because the sample size in a month will be very small."
~Chuck LeBeau, Trader and author
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 - 3821.62 December 20, 2022
52-Week High: 4818.62
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4473.17
Resistance 2: 4200.12
Resistance 1: 4026.24
Pivot: 3927.07
Support 1: 3753.19
Support 2: 3654.02
Support 3: 3380.97
NASDAQ Composite - 10547.11 December 20, 2022
52-Week High: 15901.47
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 12832.12
Resistance 2: 11902.58
Resistance 1: 11303.99
Pivot: 10973.04
Support 1: 10374.45
Support 2: 10043.50
Support 3: 9113.96
Dow Industrials - 32849.74 December 20, 2022
52-Week High: 36952.65
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 37544.49
Resistance 2: 35486.79
Resistance 1: 34203.62
Pivot: 33429.10
Support 1: 32145.93
Support 2: 31371.41
Support 3: 29313.72
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, December 19, 2022: 19-Dec 10 am NAHB home builders' index Tuesday, December 20, 2022: 20-Dec 8:30 am Building permits (SAAR) 20-Dec 8:30 am Housing starts (SAAR) Wednesday, December 21, 2022: 21-Dec 8:30 am Current account deficit 21-Dec 10 am Consumer confidence index 21-Dec 10 am Existing home sales (SAAR) Thursday, December 22, 2022: 22-Dec 8:30 am Initial jobless claims 22-Dec 8:30 am Continuing jobless claims 22-Dec 8:30 am Real gross domestic product revision (SAAR) 22-Dec 8:30 am Real gross domestic income revision (SAAR) 22-Dec 8:30 am Real final sales to domestic purchasers (SAAR) 22-Dec 8:30 am Chicago Fed national activity index 22-Dec 10 am Index of leading economic indicators Friday, December 23, 2022: 23-Dec 8:30 am PCE price index 23-Dec 8:30 am Core PCE price index 23-Dec 8:30 am PCE price index (year-on-year) 23-Dec 8:30 am Core PCE price index (year-on-year) 23-Dec 8:30 am Real disposable income (SAAR) 23-Dec 8:30 am Real consumer spending (SAAR) 23-Dec 8:30 am Durable goods orders 23-Dec 8:30 am Core capital equipment orders 23-Dec 10 am UMich consumer sentiment index (late) 23-Dec 10 am UMich 5-year inflation expectations (late) 23-Dec 10 am New home sales (SAAR) 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: "Weekly Volume"
Trading volume either confirms price movement or brings it into question. It's considered very bullish when a stock rises on higher than average volume, while a similar move on lower than average volume is less bullish. It's always a good idea to look at a weekly chart to confirm rising volume. You can have five sessions of moderately higher volume on a daily chart without seeing anything significant. But put it on a weekly chart and suddenly it stands out in stark contrast. When all of those slightly higher volume days are added together, they show a real spike. Rising volume often means that institutions are buying, and that's the kind of buying that drives stocks skyward.
Stocks Covered in This Issue
COMMUNICATION SERVICES SECTOR
Pinterest, Inc. (PINS: Communication Services/Internet Content & Information) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, PINS fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 24.44, plan to buy shares at 25.02 and use a 2.01 trailing stop. Tighten the stop to 1.01 on a 2.06 gain. Earnings Report Date: Feb 01, 2023. Beta: 0.98. Market-Cap: 16.576B. Optionable.
Perion Network Ltd. (PERI: Communication Services/Internet Content & Information) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. PERI's current price action near moving average support signals a potential BUY entry at 25.56, followed by a 1.67 trailing stop which can be tightened to 0.84 upon earning 1.7. PERI closed Tuesday at 25.14. Earnings Report Date: Feb 07, 2023. Beta: 1.24. Market-Cap: 1.129B. Optionable.
CONSUMER CYCLICAL SECTOR
International Game Technology PLC (IGT: Consumer Cyclical/Gambling) - SQUEEZE PLAY. IGT 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 23.12 and a SELL short entry at 21.69. Once your trade is filled, enter a 1.43 trailing stop. Tighten it to 0.72 after a 1.38 gain. IGT closed on Tuesday at 22.61. Earnings Report Date: Mar 06, 2023. Beta: 1.88. Market-Cap: 4.529B. Optionable.
TECHNOLOGY SECTOR
Array Technologies, Inc. (ARRY: Technology/Solar) - BULLISH BOUNCE. Up-trending stocks like ARRY 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, ARRY is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 21.52 if positive price action occurs. As always, follow your entry with a trailing stop. A 2.66 trailer should work well with ARRY. Tighten it to 1.33 on a 3.02 gainer. Earnings Report Date: N/A. Beta: 1.98. Market-Cap: 3.12B. Optionable.
Shoals Technologies Group, Inc. (SHLS: Technology/Solar) - BULLISH BOUNCE. SHLS has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Tuesday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return SHLS to the previously established uptrend. The Bullish Bounce set-up is the basis for our BUY entry, so be ready to go long on a rise to our trigger at 26.22. Set a trailing stop of 2.92, tightening to 1.46 on a 4.3 profit. SHLS closed at 25.20 on Tuesday. Earnings Report Date: Mar 08, 2023. Beta: N/A. Market-Cap: 2.911B. 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
---------------- ------- -------- ------- ------ -------
Copart CPRT 11/4/2022 11/4/2022 2-for-1 Yes
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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