February 1, 2022 - The RightLine Report
Notes From The Editor
Many traders consider stock picking the most important aspect of trading, and will devote the majority of their trading time to selecting stocks to buy or short. Just cruise around the Internet or listen to small talk around the water cooler - everyone's looking for the next hot stock!
While choosing entries in good stock candidates is certainly a big part of any successful trading system, selecting stocks and determining entries aren't necessarily the most important components.
In reality, properly sizing your position prior to entering a trade and then managing the trade after the entry have a much greater impact on overall profitability than stock and entry point selection.
Trading veteran John Hayden says, "Although it sounds impossible, always remember this simple truth: Proper risk management techniques will dramatically increase profits of a marginally good trading methodology; Alternatively, an outstanding methodology will lose money if no risk management is practiced."
A well rounded approach to your trading education should include a wide variety of topics. Just remember that none of them are more important than Risk Management - food for thought the next time someone mentions a new hot stock.
Trade well,
~ Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 02/01 02/01 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
BOMN 26.29 -0.10 27.15 25.22 1.93/0.97 2.28
BWMX 22.48 0.02 23.16 21.19 1.97/0.99 2.16
ARCE 21.24 0.09 21.79 20.27 1.52/0.76 2.66
CALT 21.15 -0.06 21.56 20.21 1.35/0.68 1.72
ZIP 21.84 0.15 22.67 21.12 1.55/0.78 2.52
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
Stocks were higher on Tuesday despite rising concerns that global central banks may begin or continue to tighten their monetary policies following the US Fed Bank's indication last week that the first rate hike since 2018 could arrive in March. In equities news, UPS (UPS $231) and Exxon Mobil (XOM $81) both released solid earnings results, while shares of AT&T (T $24) were under selling pressure after the company announced it will merge its WarnerMedia division with Discover (DISCA $27). A robust economic calendar showed that job openings surprisingly increased, manufacturing activity was somewhat muted, and construction spending rose but at a slower rate than predicted. Treasuries and the USD/dollar were lower, gold was higher, oil prices were stable.
Jan 31, 2022 Feb 1, 2022
-------------------- --------------------
Dow 35,131.86 406.39 35,405.24 273.38
Nasdaq 14,239.88 469.31 14,346.00 106.12
S&P 500 4,515.55 83.70 4,546.54 30.99
NYSE Volume 5.22B 4.82B
NYSE Advancers 2,744 2,513
NYSE Decliners 633 931
Nasdaq Volume 5.2B 4.63B
Nasdaq Advancers 3,962 3,583
Nasdaq Decliners 859 1,279
New Highs/Lows
01/25 01/26 01/27 01/28 01/31 02/01
--------------------------------------------
NYSE New Highs 18 44 36 10 26 63
NYSE New Lows 159 193 429 542 118 48
Nasdaq New Highs 25 34 22 20 34 57
Nasdaq New Lows 280 376 846 1,152 212 123
Stocks Covered Today Stock Splits
TRADER'S TIP: "Turning Hunter-Gatherers Into Investors"
Studies show that when it comes to intelligent investing, human beings just aren't wired very well. Investors are emotionally driven, and are usually unaware of their own self-destructive behavior. The instinctive "fight or flight" response in each of us serves an important purpose, but it doesn't lend itself to the capital markets. For example, in one study the majority of investors sold their winning positions to make up for losers, then held the losers way too long in hopes they would recover. This is the opposite of what should be done. Winning stocks tend to keep on winning, while losers usually keep losing. The most common management strategy used by successful traders is pretty simple. Get rid of losers quickly, and keep winners profitable with a stop order based exit strategy.
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 - 4546.54 February 1, 2022
52-Week High: 4818.62
52-Week Low: 3723.34
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4830.45
Resistance 2: 4599.84
Resistance 1: 4515.84
Pivot: 4369.23
Support 1: 4285.23
Support 2: 4138.62
Support 3: 3908.01
NASDAQ Composite - 14346.00 February 1, 2022
52-Week High: 16212.23
52-Week Low: 12397.05
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 15438.62
Resistance 2: 14530.62
Resistance 1: 14150.59
Pivot: 13622.62
Support 1: 13242.59
Support 2: 12714.62
Support 3: 11806.62
Dow Industrials - 35405.24 February 1, 2022
52-Week High: 36952.65
52-Week Low: 30014.97
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 37561.16
Resistance 2: 35895.82
Resistance 1: 35310.64
Pivot: 34230.49
Support 1: 33645.31
Support 2: 32565.15
Support 3: 30899.81
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, January 31, 2022: 31-Jan 9:45 am Chicago PMI Tuesday, February 01, 2022: 01-Feb 9:45 am Markit manufacturing PMI (final) 01-Feb 10 am ISM manufacturing index 01-Feb 10 am Job openings 01-Feb 10 am Job quits 01-Feb 10 am Construction spending Wednesday, February 02, 2022: 02-Feb 8:15 am ADP employment report 02-Feb 10 am Home ownership rate Thursday, February 03, 2022: 03-Feb 8:30 am Initial jobless claims 03-Feb 8:30 am Continuing jobless claims 03-Feb 9:45 am Markit services PMI (final) 03-Feb 10 am ISM services index 03-Feb 10 am Factory orders 03-Feb 10 am Core capital equipment orders (revision) Friday, February 04, 2022: 04-Feb 8:30 am Nonfarm payrolls (month to month) 04-Feb 8:30 am Unemployment rate 04-Feb 8:30 am Average hourly earnings (month-to-month) 04-Feb 8:30 am Labor-force participation rate 25-54 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: "Profits"
Most profits usually come from a relatively few big winning trades, while the remaining positions are made up of numerous small gainers and losers. This comes as a surprise to many traders, for most assume that a very high win-to-loss ratio is necessary to succeed in the markets. In fact, trying to maintain a high win-to-loss ratio usually results in traders taking small gainers too early, before the position can develop into it's full potential.
At the same time there is a tendency to ignore losers, to hope that they will reverse and turn into winners. While this is a common strategy for beginners, professionals know that it just doesn't work. All it takes is one big loser to undo several positive trades, so concentrate first on minimizing losses, then look to maximize gains by locking in profits as they accumulate.
Stocks Covered in This Issue
COMMUNICATION SERVICES SECTOR
Boston Omaha Corporation (BOMN: Communication Services/Advertising Agencies) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in BOMN, 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 27.15 and a SELL short entry at 25.22. Let BOMN's price action determine your long or short entry. Once the order is filled, place a 1.93 trailing stop, and tighten it to 0.97 upon getting a 2.28 gain. BOMN closed Tuesday at 26.29. Earnings Report Date: Mar 28, 2022. Beta: 0.36. Market-Cap: 779.485M. Not Optionable.
CONSUMER CYCLICAL SECTOR
Betterware de Mexico, S.A.B. de C.V. (BWMX: Consumer Cyclical/Specialty Retail) - SQUEEZE PLAY. Traders are feeling the pressure as BWMX'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 23.16 and a SELL short entry at 21.19. BWMX's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.97 trailing stop. Tighten it to 0.99 after you get a 2.16 gain. BWMX closed Tuesday at 22.48. Earnings Report Date: Feb 10, 2022. Beta: 0.32. Market-Cap: 822.431M. Not Optionable.
CONSUMER DEFENSIVE SECTOR
Arco Platform Limited (ARCE: Consumer Defensive/Education & Training Services) - SQUEEZE PLAY. Tuesday's trading session left ARCE in a very narrow price range after buyers and sellers fought to a near stalemate. Both sides are looking for some traction, and a breakout either way could provide a nice gain in the short term. To get aboard, set your BUY trigger at 21.79 and your SELL short trigger at 20.27. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.52 trailing stop. Once you have a 2.66 profit, reduce the stop to 0.76. Earnings Report Date: Mar 14, 2022. Beta: 0.74. Market-Cap: 1.223B. Optionable.
HEALTHCARE SECTOR
Calliditas Therapeutics AB (CALT: Healthcare/Biotechnology) - SQUEEZE PLAY. The ticker for Tuesday's session shows CALT is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 21.56 and a SELL short trigger at 20.21. When CALT starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 1.35 trailing stop. Upon reaching a 1.72 profit, resize the stop to 0.68. Earnings Report Date: N/A. Beta: 1.45. Market-Cap: 553.512M. Optionable.
INDUSTRIALS SECTOR
ZipRecruiter, Inc. (ZIP: Industrials/Staffing & Employment Services) - SQUEEZE PLAY. ZIP is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 22.67 and a SELL short entry at 21.12. Once your trade is filled, enter a 1.55 trailing stop. Tighten it to 0.78 after a 2.52 gain. ZIP closed on Tuesday at 21.84. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 2.55B. 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
---------------- ------- -------- ------- ------ -------
ePlus PLUS 11/9/2021 12/14/2021 2-for-1 Yes
NAPCO Security NSSC 12/8/2021 1/5/2022 2-for-1 Yes
AeroCentury Corp ACY 12/17/2021 1/10/2022 5-for-1 No
Merchants Bancorp MBIN 11/17/2021 1/18/2022 2-for-1 No
SMART Global Hold SGH 1/4/2022 2/2/2022 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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