Notes From The Editor

As active traders we interact with Wall Street on a regular basis, so we've become accustomed to the ever-changing personality of the stock market. As challenging as online stock trading may be sometimes, we're fortunate to experience the "real" Street - that gritty pavement zone where the rubber meets the road.

This view is in contrast to the average investor who usually has a rather naive impression of how things work. Investors typically only have contact with the stock market once or twice a year. Though they may not know it, relying on casual or occasional oversight of one's stock holdings is not the best route to take.

In fact, as a rule the only person who really cares about your finances is you. There may be some rare exceptions, but in the stock market it usually isn't a good idea for investors to delegate fiscal responsibility to someone else.

Proactive stock market trading causes a person to develop skills and learn quickly. Successful stock traders know that education is essential. Though many investors are in the dark about the consequences of their limited trading abilities, many others have developed skills to take advantage of an ever-changing stock market. This trend toward intelligent trading appeals to investors who want to be more capable and successful.

Though you never know for sure which aspects of the market's personality will show up at any given time, as long as prices move up and down you can make a profit.

Trade well!

~ Thomas

Quick List

    
Stock     12/26     12/26      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

DNLI      22.35      0.39     23.28     21.63        1.65/0.83      1.66
CCSI      25.72      0.10     26.48                  1.83/0.92      2.88
BASE      22.73     -0.27      23.6     22.03        1.57/0.79      1.78
CFLT      24.21     -0.06      24.7     23.18        1.52/0.76      2.04
SSTI      24.27     -0.01     25.12     23.19        1.93/0.97      2.36

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

US stocks extended their recent upward momentum as the final week of the year commenced after the Christmas holiday. Positive price trends and the anticipation of future rate cuts provide ongoing support for both stocks and bonds. The trading session for the day was subdued with low volumes, and several European markets were closed for the holidays. Notably, small-cap stocks outperformed, driven by a rally in the energy, real estate, and industrial sectors.

In corporate news, Bristol Myers Squibb agreed to acquire cancer drug developer RayzeBio for approximately $4.1 billion. Meanwhile, Treasury yields saw minimal changes, and WTI oil rose to around $75 amid continued concerns about shipping disruptions in the Red Sea.

Assessing the performance across various asset classes in 2023, with major economic releases and central bank policy announcements behind us, it's anticipated that the market narrative and performance will remain relatively stable in the remaining days of the year. Overall, 2023 has been a positive year for investors, marked by robust gains across sectors and market capitalizations. In contrast to the previous year, where cash was the sole positive asset class, all 11 asset classes in the framework ended the year positively, with only investment-grade bonds slightly trailing the performance of CDs and other cash investments.

As of Friday, large-cap stocks have registered a 26% gain, including dividends, followed by small-caps (+17%) and developed international large-caps (+17%). Emerging market stocks exhibited a comparatively modest performance (+7%) as China's growth fell short of expectations. US high-yield bonds recorded a 13% increase, surpassing cash (+5.1%) and US investment-grade bonds (+5%).

Closing the week on a positive note, the S&P 500 secured its eighth consecutive weekly gain, marking the longest winning streak since late 2017. The gains have been fueled by the easing of inflationary pressures, a resilient economy that has not only averted a recession but has also shown above-average growth, and the relaxation of financial conditions, driven by expectations of Fed rate cuts in 2024.

While market movements are rarely linear, and pauses are not uncommon, reasons for optimism as the new year approaches include the ongoing moderation of inflation, signals from the Fed indicating a shift to a more neutral stance, and attractive valuations, especially outside the high-performing assets year-to-date.

                        Dec 25, 2023           Dec 26, 2023   
                  --------------------   --------------------
Dow                 37,385.96   -18.36     37,545.33   159.36
Nasdaq              14,992.96    29.16     15,074.57    81.60
S&P 500              4,754.66     7.86      4,774.75    20.12

NYSE Volume                      3.11B                  2.53B
NYSE Advancers                   1,896                  2,086
NYSE Decliners                     936                    737

Nasdaq Volume                    4.94B                  6.17B
Nasdaq Advancers                 2,853                  3,028
Nasdaq Decliners                 1,479                  1,336

                                 New Highs/Lows

                   12/19  12/20  12/21  12/22  12/25  12/26
                 --------------------------------------------
NYSE New Highs       235    224     92    183    186    222
NYSE New Lows         14     21     20     10     11      3
Nasdaq New Highs     377    353    124    276    285    392
Nasdaq New Lows      105    114     87     83     81     65
   

TRADER'S TIP: "Consistent Profits Are No Accident"

Successful trading doesn't just happen by chance. It requires an open mind, willingness to learn, discipline, skillful execution, and the ability to forgive self inflicted damage. As with all things of quality, it is the "wise choice of many alternatives."

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 - 4774.75 December 26, 2023

52-Week High: 4784.72
52-Week Low: 3780.78
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3289.60
Resistance 2: 3225.01
Resistance 1: 1612.51
Pivot: 3160.43
Support 1: 1547.92
Support 2: 3095.84
Support 3: 3031.25

NASDAQ Composite - 15074.57 December 26, 2023

52-Week High: 15101.18
52-Week Low: 10207.47
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 10380.99
Resistance 2: 10171.27
Resistance 1: 5085.63
Pivot: 9961.55
Support 1: 4875.91
Support 2: 9751.83
Support 3: 9542.11
        
Dow Industrials - 37545.33 December 26, 2023

52-Week High: 37617.99
52-Week Low: 31429.82
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 25768.18
Resistance 2: 25332.40
Resistance 1: 12666.20
Pivot: 24896.62
Support 1: 12230.42
Support 2: 24460.84
Support 3: 24025.06
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

WEDNESDAY, DEC. 27					
None scheduled
				
THURSDAY, DEC. 28					
8:30 am	Initial jobless claims	
8:30 am	Advanced U.S. trade balance in goods	Nov.
8:30 am	Advanced retail inventories	Nov.			
8:30 am	Advanced wholesale inventories	Nov.			
10:00 am	Pending home sales	Nov.

FRIDAY, DEC. 29					
9:45 am	Chicago Business Barometer	Dec.		
Bond market closes early	

For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Over Extended"

Here is a quick and easy way to determine if a stock that is trending higher is "over extended." Compare the current distance between the price and the 22-DMA to previous weeks or months. If the current price is well beyond the average distance, the stock is probably overextended. This often occurs after a stock has risen sharply for several days in a row. The same comparison can be used on stocks that are trending lower and are about to reach the end of their recent drop.

Stocks Covered in This Issue

HEALTHCARE SECTOR

Denali Therapeutics Inc. (DNLI: Healthcare/Biotechnology) - SQUEEZE PLAY. Traders are feeling the pressure as DNLI's intra-day price range on Tuesday 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 23.28 and a SELL short entry at 21.63. DNLI's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.65 trailing stop. Tighten it to 0.83 after you get a 1.66 gain. DNLI closed Tuesday at 22.35. Earnings Report Date: Feb 26, 2024. Beta: 1.11. Market-Cap: 3.089B. Optionable.

TECHNOLOGY SECTOR

Consensus Cloud Solutions, Inc. (CCSI: Technology/Software - Infrastructure) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 25.72, CCSI is on our radar for a BUY entry at 26.48. If you purchase shares of CCSI, be sure to also place a trailing stop of 1.83. Snug it up to 0.92 on a 2.88 gain. Earnings Report Date: Feb 22, 2024. Beta: 1.56. Market-Cap: 492.631M. Optionable.

Couchbase, Inc. (BASE: Technology/Software - Infrastructure) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in BASE, 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 23.6 and a SELL short entry at 22.03. Let BASE's price action determine your long or short entry. Once the order is filled, place a 1.57 trailing stop, and tighten it to 0.79 upon getting a 1.78 gain. BASE closed Tuesday at 22.73. Earnings Report Date: Mar 05, 2024. Beta: 0.61. Market-Cap: 1.093B. Optionable.

Confluent, Inc. (CFLT: Technology/Software - Infrastructure) - SQUEEZE PLAY. A look at CFLT's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 24.7 and a SELL short trigger at 23.18. Once CFLT shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.52 and tighten to 0.76 on a 2.04 gain. CFLT closed Tuesday at 24.21. Earnings Report Date: Jan 29, 2024. Beta: 0.66. Market-Cap: 7.454B. Optionable.

SoundThinking, Inc. (SSTI: Technology/Software - Application) - SQUEEZE PLAY. Tuesday's trading action forced SSTI's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction SSTI will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 25.12 if SSTI moves higher, and place your order to SELL short at 23.19 if price declines to that level. As usual follow your entry with a trailing stop, 1.93 should be sufficient. Reduce your stop to 0.97 on a 2.36 gain. SSTI closed Tuesday at 24.27. Earnings Report Date: Feb 20, 2024. Beta: 1.46. Market-Cap: 308.729M. 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.

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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