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December 3, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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The Anticipation Approach to Trading
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"QUICK LIST"
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Stock 12/03 12/03 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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CAL 22.31 0.10 22.84 21.23 1.61/0.81 2.08
IFS 24.54 0.22 25.02 1.72/0.86 2.78
STEL 33.56 -0.06 34.06 1.96/0.98 2.44
SI 26.49 1.27 26.86 24.11 2.75/1.38 11.26
TCX 31.33 0.29 32.07 29.47 2.6/1.3 5.08
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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The major US stock averages were mixed and near even on Friday as traders took in the latest labor report showing stronger job growth than expected. The news appears to have lowered the odds of a less aggressive Fed in the short-term, as hopes increased earlier this week after Chairmsn Powell suggested that they might slow the pace of its rate tightening campaign. In equities, quarterly earnings reports were in focus with Marvell Technology (MRVL $45) disappointing investors and cutting its outlook, while Ulta Beauty (ULTA $471) handily beat profit forecasts and announced impressive sales growth. Oil prices, gold and the USD/Dollar declined, treasury yields were mixed. Friday On The Week
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Dow 34,429.88 34.87 +82.85 0.24%
Nasdaq 11,461.50 -20.95 +235.14 2.09%
S&P 500 4,071.70 -4.87 +45.58 1.13%
NYSE Volume 4.04B
NYSE Advancers 1,712
NYSE Decliners 1,426
Nasdaq Volume 4.57B
Nasdaq Advancers 2,634
Nasdaq Decliners 1,954
New Highs/Lows
11/25 11/28 11/29 11/30 12/01 12/02
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NYSE New Highs 63 47 46 82 104 89
NYSE New Lows 30 59 68 66 25 44
Nasdaq New Highs 92 118 85 134 126 98
Nasdaq New Lows 96 189 189 218 107 128
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TRADER'S TIP:
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TRADER'S TIP: "Positive Returns" In one sense risk can be defined as the events or conditions that discourage traders - so much that they sometimes abandon strategies that have the potential to produce high returns. This is the main reason to use Risk Control. With a planned risk management strategy, situations and events that discourage others have little or no negative effect on you. This means while others are giving up, you remain focused on learning and earning, while protecting your capital. Over time, you become skillful at trading the markets and enjoy the positive returns others have abandoned. **************************
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 - 4071.70 December 2, 2022 52-Week High: 4818.62 52-Week Low: 3491.58 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 4362.33 Resistance 2: 4199.47 Resistance 1: 4135.59 Pivot: 4036.62 Support 1: 3972.73 Support 2: 3873.76 Support 3: 3710.90 https://www.prorightline.com/rlch/120222SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, December 05, 2022: 05-Dec 9:45 am 05-Dec 10 am ISM services index 05-Dec 10 am Factory orders Tuesday, December 06, 2022: 06-Dec 8:30 am Trade deficit Wednesday, December 07, 2022: 07-Dec 8:30 am Productivity (SAAR) revision 07-Dec 8:30 am Unit labor costs (SAAR) revision 07-Dec 3 pm Consumer credit (level change) Thursday, December 08, 2022: 08-Dec 8:30 am Initial jobless claims 08-Dec 8:30 am Continuing jobless claims Friday, December 09, 2022: 09-Dec 8:30 am Producer price index final demand 09-Dec 10 am UMich consumer sentiment index (early) 09-Dec 10 am UMich 5-year inflation expectations (early) 09-Dec 10 am Wholesale inventories revision 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: "Make Strength Your Ally" Only a few traders have the financial strength to move individual low- volume stock prices in the direction they prefer, and no one is capable of consistently moving the entire market. Since this is the case, the best thing we can do is learn to identify and align our positions with the dominant side. Regardless of whether we trade 5-minute bars or weekly charts, whenever the balance shifts within our chosen time frame, we should always realign with the side of strength. ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR Caleres, Inc. (CAL: Consumer Cyclical/Footwear & Accessories) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. CAL traders reached this state of stand-off on Saturday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 22.84 and a SELL short trigger at 21.23. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.61 which can be tightened to 0.81 on a 2.08 gain. CAL closed Saturday at 22.31. Earnings Report Date: N/A. Beta: 1.77. Market-Cap: 813.516M. Optionable. FINANCIAL SERVICES SECTOR Intercorp Financial Services Inc. (IFS: Financial Services/Banks-Regional) - 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 24.54, IFS is on our radar for a BUY entry at 25.02. If you purchase shares of IFS, be sure to also place a trailing stop of 1.72. Snug it up to 0.86 on a 2.78 gain. Earnings Report Date: Feb 08, 2023. Beta: 0.92. Market-Cap: 2.832B. Not Optionable. Stellar Bancorp, Inc. (STEL: Financial Services/Banks-Regional) - 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. STEL's reaction to support on Saturday created a Bullish Bounce setup with a BUY entry trigger at 34.06. Use a 1.96 trailing stop, which should work well with STEL's typical daily range. Tighten it to 0.98 on a 2.44 profit. STEL closed at 33.56 on Saturday. Earnings Report Date: Jan 25, 2023. Beta: N/A. Market-Cap: 1.755B. Optionable. Silvergate Capital Corporation (SI: Financial Services/Banks-Regional) - SQUEEZE PLAY. SI traders on both sides of the fence are now locked in a head-to-head shootout. Saturday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 26.86 and a SELL short trigger at 24.11. When one of the orders is filled, cancel the remaining order and enter a 2.75 trailing stop. When you've reached a 11.26 paper profit, tighten the stop to 1.38. SI closed at 26.49 on Saturday. Earnings Report Date: Jan 16, 2023. Beta: 2.71. Market-Cap: 838.636M. Optionable. TECHNOLOGY SECTOR Tucows Inc. (TCX: Technology/Software-Infrastructure) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. TCX found itself in this condition on Saturday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 32.07 and a SELL short trigger at 29.47. When TCX moves outside of Saturday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 2.6 trailing stop. After you've got a 5.08 profit, tighten the stop to 1.3. TCX closed at 31.33 on Saturday. Earnings Report Date: Feb 08, 2023. Beta: 0.88. Market-Cap: 338.157M. 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 ---------------- ------- -------- ------- ------ ------- Copart CPRT 11/4/2022 11/4/2022 2-for-1 Yes For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
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"The History, Science & Art of Technical Analysis" The very first chartists in the United States appeared at the turn of the century. They included Charles Dow, the author of the famous stock market theory, and William Hamilton who succeeded Dow as the editor of the Wall Street Journal. After the famous stock market "crash" of 1929, Hamilton advocated the use of charting in an editorial entitled "The Turn of The Tide" and then proceeded to lay out the principles of Dow's stock market theory in a book titled The Stock Market Barometer. The decade of the 1930's was the Golden Age of charting. Many innovative researchers published their work during that period including Richard D. Wyckoff, a trader who started in 1888 as a 15- year-old stock runner, W.D. Gann who began his career as a stockbroker in 1906, and R.N.Elliott, widely known for the "Elliott Wave Theory." Their work went into two distinct directions. Researchers such as Wyckoff saw charts as a graphic record of market supply and demand, while others including Gann and Elliott searched for a perfect order in the markets. In 1948, Edwards and McGee published a book called Technical Analysis of Stock Trends. They popularized the use of chart formations such as triangles, rectangles, head and shoulders, as well as support, resistance and trend lines. Things have changed a great deal since then. In the 40s, daily volume of an active stock on the NYSE was only several hundred shares. Today it's not uncommon to see an active stock trade tens of millions of shares each day. Bears were firmly in control of the stock market in the "good old days", but as years passed, the balance of power shifted to favor bulls. However, with bears back in the cockpit the past couple of years, some of the market tendencies that were evident back then are reappearing on the charts. Early technical analysts noted that stock market tops were sharp and fast, while bottoms took a long time to develop. That was true in the de-flationary era of the 30s and 40s, but from the 50s until mid 2000 bottoms tended to form quickly while tops took longer. The beginnings of technical analysis go back much further than the early nineteen hundreds. Japanese rice traders began using candlestick charts some two centuries before the first chartists appeared in America. Before you envision lots of dripping wax and flaming wicks, the term candlestick was adopted because of the similar appearance between candles and the symbols used to represent price that were drawn on each chart. The Japanese focus is on the relationship between opening and closing prices and on patterns that include several candles. They consider highs and lows relatively unimportant. Unfortunately, most candlestick chartist's fail to use many tools of Western analysts. They ignore volume and have no trend lines. This now appears to be changing as modern analysts combine Western technical indictors with classical candlestick patterns. A classic case of east meets west. OK, that's enough history for now. Let's take a quick look at two subjects, which help determine the success or failure of technical analysis in action. Is it Science or Art? "It would be possible to describe everything scientifically, but it would make no sense; it would be without meaning, as if you described a Beethoven symphony as a variation of wave pressure." ~Albert Einstein It may come as a surprise to find that technical analysis combines the dual categories of science and art. Although the subjects appear to be at opposite ends of the spectrum, joining them together creates a dual perspective that provides remarkable market insight. The resulting combination can be compared to night-vision goggles that let you see what others can't - like trend lines. This advantage gives you an edge and helps shift the odds into your favor. Science 101 The scientific aspect of technical analysis presents itself in many forms. There are literally dozens of separate indicators and unlimited ways of applying them. A lot of research went into developing these components, and even more to determine effectiveness and reliability. Studies have shown that the wide array of technical indicators and methods exhibit different degrees of success depending on how, when and under what condition they are applied. Art - So what is it, a Picasso or Rembrandt? The artistic qualities of technical analysis become obvious the instant you look at a visual display on a computer screen. Colorful charts graphically reveal elements of technical analysis as different indicators are painted in patterns and lines. Talk about abstract art! One look and you feel like it should be hanging in a metropolitan art museum. Less obvious than the graphic display but just as important is the impact of artistic interpretation. OK, so how should we interpret this painting? Although the price bars are determined by actual stock prices, the placement of each line, the number of bars included in each moving average and whether any technical indicators are used depends on the preference of the individual. It may look good, but no matter how pretty the picture, it is far more important that the final choice of technical tools and patterns can be used by the trader to produce profits. - Summary It turns out that technical analysis is a hybrid of art and science that has evolved over the centuries. Due to the complex choices that have to be made, many newcomers will never recognize the tremendous value of TA, and will remain unaware of the powerful forces at work behind the scenes. For those who desire a long-term relationship with the markets, the time and energy spent to learn how to use this powerful technology will be well rewarded! ======================================================================
Best of luck and have a Great Week!
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