December 22, 2022 - The RightLine Report
Notes From The Editor
It's that time of year again. You're sitting here reading the Report, which means you're not out enduring the long lines, packed parking lots, and generally festive craziness of that fine tradition known as last-minute-Christmas-shopping. Or, if you're like me, you did some late shopping online and are now crossing your fingers that the UPS guy shows up on time.
The Holiday season is a good time to sit back and reflect on what truly matters in our lives. Over time it becomes clear that there is far more to life than just material possessions. It takes faith, hope and love to live our dreams.
For traders, it can serve as a reminder of why we do this in the first place. Trading, after all, is just a means to an end. So what's your end?
Whether it's building a nest egg, saving for your kids' college or a down payment on a house, making some extra spending cash, or some other financial objective, these goals help to keep everything in perspective.
One of the reasons why traders sometimes forget to use risk management is the "monopoly money" effect. The funds in their brokerage accounts don't seem tangible, because they're only used for trading purposes. I suspect that this is one reason why traders let their risk management techniques slide; it's easy to get careless when your trading funds don't seem to be directly tied to any material benefit.
So whatever your "prize" is, keep an eye on it. Some traders even like to put a picture of said prize on their wall, as a constant reminder of why they're aiming for. To drive this point home, it's not a bad idea to occasionally pull some money out of your account following a profitable trade. In this day and age of cyber trading, cash is often just a click away. Some brokerages even have credit cards tied to trading accounts. Don't be afraid to reward yourself - say, with a night out on the town - after a successful trade or winning streak.
Sometimes the market can seem inhuman, impersonal, and almost machine-like. This is ironic, because when you boil it all down, the movement of every stock is actually the combined result of millions of individual trading decisions. As you make your own decisions, view the market as a personal tool for wealth accumulation and attaining your goals - whatever they may be.
Merry Christmas!
Note: The markets will be closed on Monday December 26th in honor of Christmas, which is on Sunday December 25th. RightLine will be closed on Friday the 23rd through Monday the 26th, so the next Report is shceduled to be published on Tuesday December 27th. From all of us at RightLine, we wish you a very Merry Christmas!
Stocks Covered Today Stock Splits
Quick List
Stock 12/22 12/22 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
LTHM 20.65 -0.25 20.97 19.64 1.33/0.67 2.76
EAT 33.08 0.28 33.53 2.7/1.35 2.7
WABC 58.00 -0.48 55.98 3.29/1.65 2.72
VCEL 24.42 -0.27 24.95 22.77 2.18/1.09 2.26
RMR 28.04 0.02 28.47 1.99/1 1.04
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.
Stocks Covered Today Stock Splits
Market Summary
US stocks were lower on Thursday, putting the brakes on a two day Santa Claus Rally as traders continued to contemplate the impact of aggressive global monetary policy tightening. In equities, CarMax (KMX $57) and Micron Technology (MU $49) both fell short of quarterly earnings estimates and lowered their outlooks. A deluge of economic reports hit the news, with unemployment claims coming in below estimates, manufacturing activity in the Kansas City region dipping further into contraction territory, while third quarter Gross Domestic Product - GDP - and Personal Consumption were revised upward and the Leading Economic Index fell more than analysts expected. Oil prices and gold declined, treasury yields were mixed and the USD/dollar stepped higher.
Dec 21, 2022 Dec 22, 2022
-------------------- --------------------
Dow 33,376.48 526.74 33,027.49 -348.99
Nasdaq 10,709.37 162.26 10,476.12 -233.25
S&P 500 3,878.44 56.82 3,822.39 -56.05
NYSE Volume 3.79B 3.96B
NYSE Advancers 2,409 698
NYSE Decliners 728 2,442
Nasdaq Volume 4.44B 5.14B
Nasdaq Advancers 3,112 1,513
Nasdaq Decliners 1,485 3,064
New Highs/Lows
12/15 12/16 12/19 12/20 12/21 12/22
--------------------------------------------
NYSE New Highs 38 31 41 48 52 47
NYSE New Lows 126 178 166 164 73 201
Nasdaq New Highs 84 67 79 86 83 96
Nasdaq New Lows 377 462 536 467 316 483
Stocks Covered Today Stock Splits
TRADER'S TIP: "What's It Worth?"
Garfield Drew, a prominent technician sixty years ago, said that "Stocks do not sell for what they are worth, but for what people THINK they are worth." It is generally recognized among technical analysts that prices in ALL markets at ALL times are based on trader psychology instead of company fundamentals.
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 - 3822.39 December 22, 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 - 10476.12 December 22, 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 - 33027.49 December 22, 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: "Entry Points"
Readers often ask, "How long is a Quick List stock entry point considered valid?" The short answer - it is valid for two weeks after we introduce it in the RightLine Report. Also, if the stock gaps through the entry level overnight, always use the Gap-Open tactic to set a new entry point. This new, gap-adjusted entry is valid for the same two-week period.
For more on Gap Adjusted Entries, click on the following link: http://www.rightline.net/education/gap-adjusted.html.
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
Livent Corporation (LTHM: Basic Materials/Specialty Chemicals) - SQUEEZE PLAY. Traders are feeling the pressure as LTHM's intra-day price range on Thursday 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 20.97 and a SELL short entry at 19.64. LTHM's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.33 trailing stop. Tighten it to 0.67 after you get a 2.76 gain. LTHM closed Thursday at 20.65. Earnings Report Date: Feb 15, 2023. Beta: 1.67. Market-Cap: 3.704B. Optionable.
CONSUMER CYCLICAL SECTOR
Brinker International, Inc. (EAT: Consumer Cyclical/Restaurants) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. EAT's behavior on Thursday could very well be a sign that a new bounce is underway. Place a BUY trigger at 33.53. In the event your trigger is met, also place a 2.7 trailing stop which can be trimmed down to 1.35 when you have a 2.7 profit. EAT closed Thursday at 33.08. Earnings Report Date: Jan 31, 2023. Beta: 2.30. Market-Cap: 1.457B. Optionable.
FINANCIAL SERVICES SECTOR
Westamerica Bancorporation (WABC: Financial Services/Banks-Regional) - BEARISH U-TURN. This short setup turns common stock behavior into profits. Grounded in the tendency for down-trending stocks to bounce briefly and then return to the familiar down-trend, the Bearish U-Turn points traders to weak stocks when conditions are calling for more downward price action. WABC's behavior on Thursday near moving average support signals a potential SELL short entry at 55.98, followed by a 3.29 trailing stop which can be tightened to 1.65 upon earning 2.72. WABC closed Thursday at 58.00. Earnings Report Date: Jan 18, 2023. Beta: 0.66. Market-Cap: 1.561B. Optionable.
HEALTHCARE SECTOR
Vericel Corporation (VCEL: Healthcare/Biotechnology) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in VCEL, 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 24.95 and a SELL short entry at 22.77. Let VCEL's price action determine your long or short entry. Once the order is filled, place a 2.18 trailing stop, and tighten it to 1.09 upon getting a 2.26 gain. VCEL closed Thursday at 24.42. Earnings Report Date: Feb 22, 2023. Beta: 1.93. Market-Cap: 1.153B. Optionable.
REAL ESTATE SECTOR
The RMR Group Inc. (RMR: Real Estate/Real Estate Services) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. RMR's reaction to support on Thursday created a Bullish Bounce setup with a BUY entry trigger at 28.47. Use a 1.99 trailing stop, which should work well with RMR's typical daily range. Tighten it to 1 on a 1.04 profit. RMR closed at 28.04 on Thursday. Earnings Report Date: Jan 25, 2023. Beta: 1.50. Market-Cap: 465.624M. Not 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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