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December 26, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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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.
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"QUICK LIST"
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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" 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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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
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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
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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
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TRADER'S TIP:
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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
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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 - 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 https://www.prorightline.com/rlch/122623SPX.jpg--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" 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: "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
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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 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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