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December 21, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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Writer Sydney Harris says, "An idealist believes the short run doesn't count. A cynic believes the long run doesn't matter. A realist believes that what is done or left undone in the short run determines the long run."
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"QUICK LIST"
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Stock 12/21 12/21 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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AMX 18.70 0.32 19.04 1.16/0.58 0.7
SRDX 36.32 0.72 37.41 2.73/1.37 2.26
VRDN 21.37 0.94 21.76 20.33 1.43/0.72 1.9
DNLI 21.56 0.38 22.1 20.37 1.73/0.87 1.72
SMTC 22.25 1.25 22.55 20.91 1.64/0.82 1.64
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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Following a significant decline on Wednesday, stocks resumed their upward trajectory on Thursday, with the S&P 500 concluding the day with a gain of over 0.9%. Since its recent lows on October 27, the S&P 500 is on track for a 15% increase. A noteworthy contributor to the recent surge in both stocks and bonds has been the substantial decrease in Treasury yields. The 10-year Treasury yield, which reached its peak in mid-October at around 5%, has since dropped by over 1% to approximately 3.89%. This decline in yields mirrors the more favorable inflation trends observed in recent months, coupled with the Federal Reserve's indications of a potential shift towards rate cuts in 2024. The decline in bond yields has bolstered a comprehensive stock rally, encompassing both growth and value sectors, along with an uptick in investment-grade bonds, which have seen a nearly 10% increase since mid-October. Inflation metrics persist in indicating a downward trend. Investors absorbed updated third-quarter GDP data on Thursday, encompassing revisions to growth, consumption, and inflation metrics. The GDP growth for the third quarter was revised lower to an annualized rate of 4.9%, down from the prior reading of 5.2%, and consumption also experienced a decrease from 3.6% to 3.1%. Notably, the GDP price index was revised from 3.6% to 3.3%, and the core index shifted from 2.3% to 2.0%. These figures align with other inflation data, including CPI and PPI inflation, indicating an ongoing moderation in inflation across both goods and services. In the view of many analysts, inflation is likely to continue moderating, driven in part by an ongoing relaxation in shelter and rent inflation, as well as a slowdown in wage gains, supporting lower services inflation. Looking ahead to 2024, investors, already enjoying substantial market gains, are likely contemplating portfolio positioning for the upcoming year. Two noteworthy themes for 2024 emerge. First, the potential diminishing status of cash as king, with a pause in the unprecedented flows into CDs and money market funds seen in 2023, providing opportunities for core asset classes. Second, the possibility that lagging asset classes of 2023, such as cyclical and value sectors, as well as mid-cap and small-cap stocks, may experience a resurgence in leadership in 2024. Given the trends of improved inflation, a potential Federal Reserve pivot to rate cuts, and lower bond yields, opportunities appear to be emerging in both stocks and bonds in 2024. Dec 20, 2023 Dec 21, 2023
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Dow 37,082.00 -475.92 37,404.35 322.35
Nasdaq 14,777.94 -225.28 14,963.87 185.92
S&P 500 4,698.35 -70.02 4,746.75 48.40
NYSE Volume 4.21B 3.45B
NYSE Advancers 658 2,295
NYSE Decliners 2,198 550
Nasdaq Volume 6.32B 5.49B
Nasdaq Advancers 1,302 3,167
Nasdaq Decliners 3,015 1,125
New Highs/Lows
12/14 12/15 12/18 12/19 12/20 12/21
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NYSE New Highs 379 196 134 235 224 92
NYSE New Lows 10 13 13 14 21 20
Nasdaq New Highs 465 251 119 377 353 124
Nasdaq New Lows 83 108 62 105 114 87
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TRADER'S TIP:
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TRADER'S TIP: "Selling & Shorting" "It is one thing to take profits on a long position but quite another to go short. Shorting requires a much higher level of proof that the trend has turned. When your indicators tell you that a stock is too high, there is nothing wrong with taking profits. You need to set much more exacting parameters for shorting, making sure that a stock has in fact turned down, permitting you to short. Use the same approach at the bottoms - decide in advance what price action will confirm an upside trend reversal, permitting you to buy." ~ Alex Elder, Trader and Author **************************
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 - 4746.75 December 21, 2023 52-Week High: 4768.69 52-Week Low: 3764.49 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 3279.69 Resistance 2: 3219.35 Resistance 1: 1609.67 Pivot: 3159.01 Support 1: 1549.33 Support 2: 3098.67 Support 3: 3038.33 https://www.prorightline.com/rlch/122123SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): 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" 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: "Drawing Trend Lines - The Basics" Every trader and investor should learn to recognize and identify price trends within their chosen time frame. This is a relatively simple - yet very valuable - skill used to confirm the direction that an individual stock or market is moving. While overall price movement on a chart may seem obvious to some, even market strategists at major brokerages and trading institutions use trend lines to help determine exactly when a current trend is in play. In a nutshell, a trend line is simply a straight line that connects a series of highs or lows on a price chart. Learning to draw trend lines isn't complicated at all, and most charting software includes a trend line tool that makes learning this skill even easier. Look at a price chart in any time frame and notice the high points across the top. Then imagine that the highs are peaks of a mountain range that you are viewing from a distance. Starting on the left side, draw a straight line across the top of the peaks so that only the two highest peaks are connected. Is the line moving up? Or is it moving down? If the line is up, then the mountain peaks are in an up-trend from left to right. If the line is headed down, then the trend is down. As with most skills, drawing a trend line isn't always so simple. Some traders prefer to use opening or closing prices instead of highs, while others will use any of these to find the best "fit." Regardless of your preferred method, taking the first steps towards learning to recognize a trend isn't difficult at all. ***********************************
STOCKS COVERED IN THIS ISSUE
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COMMUNICATION SERVICES SECTOR América Móvil, S.A.B. de C.V. (AMX: Communication Services/Telecom Services) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, AMX 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 18.70, plan to buy shares at 19.04 and use a 1.16 trailing stop. Tighten the stop to 0.58 on a 0.7 gain. Earnings Report Date: N/A. Beta: 0.32. Market-Cap: 58.47B. Optionable. HEALTHCARE SECTOR Surmodics, Inc. (SRDX: Healthcare/Medical Devices) - BULLISH BOUNCE. SRDX has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Thursday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return SRDX 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 37.41. Set a trailing stop of 2.73, tightening to 1.37 on a 2.26 profit. SRDX closed at 36.32 on Thursday. Earnings Report Date: Feb 05, 2024. Beta: 1.15. Market-Cap: 516.972M. Optionable. Viridian Therapeutics, Inc. (VRDN: Healthcare/Biotechnology) - SQUEEZE PLAY. The ticker for Thursday's session shows VRDN is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 21.76 and a SELL short trigger at 20.33. When VRDN starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 1.43 trailing stop. Upon reaching a 1.9 profit, resize the stop to 0.72. Earnings Report Date: Mar 06, 2024. Beta: 1.05. Market-Cap: 1.124B. Optionable. Denali Therapeutics Inc. (DNLI: Healthcare/Biotechnology) - SQUEEZE PLAY. Thursday's trading session left DNLI in a very narrow price range after buyers and sellers fought to a near stalemate. Both sides are looking for some traction, and a breakout either way could provide a nice gain in the short term. To get aboard, set your BUY trigger at 22.1 and your SELL short trigger at 20.37. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.73 trailing stop. Once you have a 1.72 profit, reduce the stop to 0.87. Earnings Report Date: Feb 26, 2024. Beta: 1.11. Market-Cap: 2.98B. Optionable. TECHNOLOGY SECTOR Semtech Corporation (SMTC: Technology/Semiconductors) - SQUEEZE PLAY. SMTC 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 22.55 and a SELL short entry at 20.91. Once your trade is filled, enter a 1.64 trailing stop. Tighten it to 0.82 after a 1.64 gain. SMTC closed on Thursday at 22.25. Earnings Report Date: N/A. Beta: 1.72. Market-Cap: 1.43B. 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 ---------------- ------- -------- ------- ------ ------- 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. For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ ======================================================================
Best of luck and have a Great Week!
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