December 9, 2021 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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When you send your gift requests to Santa, be sure that Dr. Alex Elder's book "Sell & Sell Short" is on the list. Alex is the same author that wrote the "official" trader's manual many years ago ... "Trading For A Living." Below are a few brief excerpts from chapters three and seven. When you read them you'll get a taste of the book's value, plus a valuable glimpse into a veteran trader's mind.

Enjoy!

- Thomas Sutton, Editor


"On Keeping Records" - from Chapter Three

Whenever you put on a trade, you must have two goals. The first, of course, is to make money. The second is to become a better trader.

You can reach the first goal in some trades, but not in every trade. There is a fair bit of randomness in the markets, and even the best planned trades can go awry. Even a top trader cannot win in every trade -- this is a fact of life.

On the other hand, becoming a better trader is an essential and very reachable goal for every trade. Whether you win or lose, you must become a better trader at the conclusion of each trade. If you haven't, the trade has been wasted. All the energy and time you put into analysis, all the risks you took with your money -- wasted. You must keep learning from your experience, otherwise you are just playing at being a trader and not being serious. The absence of records exposes a wannabe trader as a dreamer and an imposter.

The best way to learn from your experience is to keep good records. Keeping good records allow you to transform fleeting experiences into solid memories. Your market analysis and your decisions to buy or sell become deposits in your data bank. You can draw on those memories, re- examine them, and use them to grow into a better trader. Writing your notes makes you focus and use your "extracranial memory." A human mind has a limited amount of memory that is instantly available (what the computer people call RAM).

The rules of money management we have just discussed will help you survive the inevitable rocky times. The record-keeping methods I am about to share with you will put your learning into a solid uptrend, and your performance will follow. Money management and record-keeping, taken together, create a rock-solid foundation for your survival and success.

"Shorting Stocks" - from Chapter Seven

Stocks do not move in straight lines. They rise and fall as naturally as humans inhale and exhale. Some of their rises and declines are minuscule, but others are quite large, presenting attractive trading opportunities.

There is one common prejudice from which you must free yourself order to sell short. Most people feel comfortable buying but feel uneasy profiting from declines. I think they acquire this prejudice as young adults. When I taught a class on trading at a local high school, the kids took to shorting like fish to water. They were responsible for bringing in trading ideas, and we would discuss them in class and trade them in the account I had opened for that class. On any given day the kids would make as many suggestions to sell short as to buy. Often the same kid would bring up both a long and a short.

The kids got it. They understood that trading means betting on moving objects. It matters little whether you bet on a rise or a decline. You only need to get the direction right and determine the most promising entry point, profit target, and where to place a protective stop. The kids came to the market without prejudices and had no inhibitions against shorting. The class bagged some profits on the way up and on the way down. It also took some losses in both directions, but we made sure they were smaller than our wins. We played the game in both directions. 

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                           "QUICK LIST"
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Stock     12/09     12/09      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

GPI      201.97     -0.11    206.52                   12.6/6.3     13.88
NOG       20.42     -0.32     20.93     19.41        1.52/0.76       2.6
FLNG      21.36     -0.13     21.96     20.36          1.6/0.8      1.68
AUPH      20.97      0.13     22.44     20.21        2.23/1.12      4.58
EDRY      21.02     -0.78               20.22        1.74/0.87      5.06


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 stock averages were mixed on Thursday, with the Dow Jones Industrial Average nearly unchanged, while the S&P 500 Index and the Nasdaq Composite were both modestly lower. Economic headlines featured unemployment claims hitting a 50-year low, while wholesale inventories were revised higher. In equities, GameStop (GME $156) announced mixed results, coming in below earnings expectations and reporting a bigger loss than expected. Hormel Foods (HRL $45) beat earnings and revenue expectations with record sales and profits for the quarter. Oil prices and gold were lower, the USD/dollar was higher, treasuries were mixed.


                       Dec 8, 2021            Dec 9, 2021    
                  --------------------   --------------------
Dow                 35,754.75    35.32     35,754.69    -0.06
Nasdaq              15,786.99   100.07     15,517.37  -269.62
S&P 500              4,701.21    14.46      4,667.45   -33.76

NYSE Volume                      4.37B                  3.85B
NYSE Advancers                   2,069                    848
NYSE Decliners                   1,290                  2,485

Nasdaq Volume                    4.64B                  4.48B
Nasdaq Advancers                 3,074                  1,148
Nasdaq Decliners                 1,592                  3,547

                                 New Highs/Lows

                   12/02  12/03  12/06  12/07  12/08  12/09
                 --------------------------------------------
NYSE New Highs        17     28     53     90     82     49
NYSE New Lows        188    208    137     23     19     53
Nasdaq New Highs      31     27     42     72     50     59
Nasdaq New Lows      619    732    657     66     67     89

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                              TRADER'S TIP:  
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TRADER'S TIP: "Paper Trading"

"The purpose of rehearsal is to create the habit of the objective."

~ William H. Macy, actor

Paper trading is helpful because it allows newcomers to learn and develop a certain degree of skill without putting real money into the market. However, this type of "virtual" experience is limited because it doesn't produce genuine emotional involvement.

In fact there is a huge difference between the safety of imagined risk and the raw challenge of having to put cash - your cash - at risk. In the real world, emotional challenges due to routine losses usually influence a trader's attitude and decision-making process to a larger degree than ever expected. 
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                         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 - 4667.45 December 9, 2021

52-Week High: 4743.83
52-Week Low: 3633.40
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4924.49
Resistance 2: 4746.66
Resistance 1: 4642.54
Pivot: 4568.83
Support 1: 4464.71
Support 2: 4391.00
Support 3: 4213.17
https://www.prorightline.com/rlch/120921SPX.jpg

NASDAQ Composite - 15517.37 December 9, 2021

52-Week High: 16212.23
52-Week Low: 12214.74
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 17087.31
Resistance 2: 16185.26
Resistance 1: 15635.36
Pivot: 15283.21
Support 1: 14733.31
Support 2: 14381.16
Support 3: 13479.11


Dow Industrials - 35754.69 December 9, 2021

52-Week High: 36565.73
52-Week Low: 29755.53
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 37186.85
Resistance 2: 35905.92
Resistance 1: 35243.00
Pivot: 34624.99
Support 1: 33962.07
Support 2: 33344.06
Support 3: 32063.13


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                             MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern): 
Friday, December 10, 2021:
10-Dec  8:30 am   Consumer price index
10-Dec  8:30 am   Core inflation
10-Dec  8:30 am   CPI (year-over-year change)
10-Dec  10 am   UMich consumer sentiment index (preliminary)
10-Dec  10 am   Expected inflation, five-years (preliminary)
10-Dec   2 pm   Federal budget

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: "How Do You Get To Carnegie Hall?"

We've all heard the answer to this old joke . . . "practice, practice, practice!" While it is certainly obvious that trading successfully requires plenty of it, many investors have yet to apply this ancient bit of oriental wisdom: "Practice is the best of all instructors." 

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                      STOCKS COVERED IN THIS ISSUE    
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CONSUMER CYCLICAL SECTOR

Group 1 Automotive, Inc. (GPI: Consumer Cyclical/Auto & Truck Dealerships) - NEW HIGH DIP. Confident in its ability to continue trending skyward, GPI's pullback from a new 52-week high sets the stage for a return to that peak. Price activity on Thursday provided a setup, with the BUY trigger ready at 206.52 should GPI reach that level. Follow up your entry with a 12.6 trailing stop. Tighten it to 6.3 when you have a 13.88-point gain. GPI closed Thursday at 201.97. Earnings Report Date: Feb 02, 2022. Beta: 1.72. Market-Cap: 3.656B. Optionable.

ENERGY SECTOR

Northern Oil and Gas, Inc. (NOG: Energy/Oil & Gas E&P) - SQUEEZE PLAY. One interesting trait of price volatility is that it cycles back and forth through periods of expansion and contraction. Stocks that have recently seen their daily price range shift from an average or wide range to an extremely contracted state are ideal candidates for expansive price moves. In many cases the next move is relatively fast and covers a sizable amount of territory. To take advantage of these trades we use both a BUY and a SELL entry. This allows us to enter in whichever direction the breakout takes. In NOG's case we will enter a BUY should it reach the 20.93 level, or a SELL short trade if it drops to 19.41. As usual a trailing stop is essential, 1.52 which should be tightened to 0.76 on a 2.6 gain. NOG closed Thursday at 20.42. Earnings Report Date: N/A. Beta: 2.43. Market-Cap: 1.576B. Optionable.

FLEX LNG Ltd. (FLNG: Energy/Oil & Gas Midstream) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in FLNG's narrowest trading range of the past seven sessions. With neither group able to take complete control on Thursday, the stock's short term destiny is up for grabs. You can capitalize on this unusually tight condition by placing both a BUY order at 21.96 and a SELL order at 20.36. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.6 trailing stop. Tighten the stop to 0.8 once you have a 1.68 gain. FLNG closed Thursday at 21.36. Earnings Report Date: N/A. Beta: 0.42. Market-Cap: 1.135B. Not Optionable.

HEALTHCARE SECTOR

Aurinia Pharmaceuticals Inc. (AUPH: Healthcare/Biotechnology) - SQUEEZE PLAY. Trader indecision has put AUPH squarely in the center of a Bull versus Bear standoff. This tight spot should soon give way to a clear winner in the short-term, and we want to be in position for the move. To do that we've set a BUY entry at 22.44 and a SELL short entry at 20.21. Now it's up to AUPH to show us which entry will be filled. Once the trade is underway place a 2.23 trailing stop, which can be tightened to 1.12 after you achieve a 4.58 profit. AUPH closed on Thursday at 20.97. Earnings Report Date: Feb 22, 2022. Beta: 0.66. Market-Cap: 2.719B. Optionable.

INDUSTRIALS SECTOR

EuroDry Ltd. (EDRY: Industrials/Marine Shipping) - BEARISH U-TURN. The weekly trend for EDRY is down, but recent daily price activity has lifted shares upward in what's known as a "counter-trend" bounce. As the name implies, this type of rebound is against the main trend. These bounces tend to revert back to the direction of the main trend - in this case downward - once the bounce reaches significant resistance. This is exactly the situation EDRY finds itself in, as Thursday's recoil from moving average resistance presents the beginnings of a possible return to the weekly downtrend. EDRY now sits at 21.02 after reaching an intra-day high of 21.68 during the latest session. Place a short-SELL order with your broker if price drops to the 20.22 level. Follow your entry with a trailing stop of 1.74 and tighten to 0.87 on a 5.06 profit. Earnings Report Date: Feb 16, 2022. Beta: 0.30. Market-Cap: 59.787M. Not 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/ 

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                           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  
---------------- -------     --------    -------     ------  -------   
Arista Networks   ANET      11/1/2021   11/18/2021  4-for-1   Yes
ePlus             PLUS      11/9/2021   12/14/2021  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/ 
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Best of luck and have a Great Week!
 
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