February 1, 2024 - The RightLine Report
Notes From The Editor
In a previous RightLine Report, we delved into the insights of experienced trader Brett Steenbarger regarding the concept of "Perfectionism." Brett, a licensed psychologist with over two decades of active trading experience, frequently shares his expertise on the psychological aspects of navigating the financial markets.
According to Brett, one effective strategy for steering clear of detrimental trading habits involves adopting the role of an impartial observer of our own actions. Presented below are select passages from Brett's article, "The Three Vices of Trading." I found his commentary on "The Ego" particularly enlightening, and I trust you will as well.
Wishing you successful trading,
Thomas Sutton, Editor
Vice Two: The Ego
Everyone likes to win in the markets. It's only natural to feel good when you've done your homework and end the day with a profit to reward your efforts. Ego involvement in trading, however, goes further than this. When the ego is involved, we write the market a blank check for our self-esteem. If trading is green, we feel good about ourselves; if we go into the red, we feel diminished.
That places tremendous pressure on our trading over time. Not only do we have the burden and challenge of reading complex market patterns; now we also have a psychological gun pointed to our head ready to go off any time our pattern recognition fails us.
When traders invest their feelings about themselves in their trading, they are operating with maximum emotional leverage.
So much of their emotional account rides on each trade, that it inevitably affects decisions about cutting losses, letting profits run, and entering and exiting in a timely fashion. The successful trader wants their trades to work out; the ego-involved trader needs them to be profitable.
We know that ego threatens our trading when we find ourselves needing to trade just to win back some recently lost dollars; when we feel a desire to advertise our positions; and when we find ourselves riding an emotional roller coaster as profits wax and wane. Just as we can recognize traders' perfectionism from anger/frustration, we recognize ego-involved traders from euphoria/depression.
If trading has us truly depressed, we know that it's not just our trading account that's hurting. The antidote to ego-involved trading is to place our self-esteem eggs in many baskets: recreational interests; other work involvements; relationships; and our spiritual lives. Many times we pour our self-esteem into trading because those other facets of our lives are not properly developed. A balanced life makes for balanced trading.
If your good feelings in life come from good relationships and worthy achievements, you won't need the markets for your happiness. Market success can be the frosting on the cake of your successful life, rarely can it substitute to the cake itself.
~ Brett N. Steenbarger, Ph.D.
Note: Brett is a former Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY. He is also an active trader and the author of "The Psychology of Trading."
Stocks Covered Today Stock Splits
Quick List
Stock 02/01 02/01 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
STEP 33.70 0.25 34.46 2.47/1.24 1.72
NGNE 30.76 0.60 32.52 4.98/2.49 5.4
NAMS 20.80 0.32 21.17 19.45 1.72/0.86 3.08
GEN 23.92 0.44 / 0
AOSL 25.89 0.22 26.28 24.71 1.57/0.79 2.04
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
US equities made a recovery Thursday after Wednesday's pullback triggered by Fed Chairman Powell's announcement that that a rate cut in March was off the table. However, Thursday's productivity and labor cost data offered further evidence of easing inflationary pressures, leading both short- and long-term bonds to rally. The 10-year Treasury yields dropped to their lowest point in about a month, while short-term yields also declined, indicating that rate cuts may not be too far off.
Although the Nasdaq and growth-oriented investments lagged behind Wednesday, they led Thursday's gains. The upcoming earnings reports from Apple, Amazon, and Meta, all of which significantly contributed to last year's market gains, are highly anticipated by investors.
The Fed has removed its tightening bias but isn't rushing into rate cuts. The Fed announcement which prompted the equity pullback was quickly digested by the markets. The Fed, as expected, left rates unchanged and signaled that rates have likely peaked for this cycle, marking a crucial point after the most aggressive rate-hiking campaign in four decades.
Our perspective is that the market has been overly aggressive in pricing in six rate cuts for this year. The Fed can afford to be patient with easing as long as the economy remains robust. Nevertheless, we believe that continued progress in inflation and favorable data will enable policymakers to shift their stance, likely in May or June, towards rate cuts, which should provide support for both stocks and bonds.
Jan 31, 2024 Feb 1, 2024
-------------------- --------------------
Dow 38,150.30 -317.01 38,519.84 369.54
Nasdaq 15,164.01 -345.89 15,361.64 197.63
S&P 500 4,845.65 -79.32 4,906.19 60.54
NYSE Volume 4.71B 4.4B
NYSE Advancers 616 2,230
NYSE Decliners 2,227 637
Nasdaq Volume 5.88B 5.06B
Nasdaq Advancers 1,120 2,749
Nasdaq Decliners 3,178 1,512
New Highs/Lows
01/25 01/26 01/29 01/30 01/31 02/01
--------------------------------------------
NYSE New Highs 122 143 161 206 179 148
NYSE New Lows 21 12 22 17 28 31
Nasdaq New Highs 141 137 237 207 131 108
Nasdaq New Lows 132 75 98 94 126 128
Stocks Covered Today Stock Splits
TRADER'S TIP: "Free Advice From TV Talking Heads"
When it comes to financial advice, always remember that the brokerage firms who pay the advisors make most of their money from commissions on stock sales. It may only be a few bucks for each transaction, but it adds up to hundreds of billions of dollars. Though many analysts are well intended, a major purpose of their stock picks is to attract customers and generate order flow. Whether the recommendations are profitable or not really isn't that important - the companies make money whenever someone buys or sells shares.
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".
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, JAN. 29 None scheduled TUESDAY, JAN. 30 9:00 am S&P Case-Shiller home price index 10:00 am Job openings 10:00 am Consumer confidence WEDNESDAY, JAN. 31 8:15 am ADP employment 8:30 am Employment cost index 9:45 am Chicago Business Barometer (PMI) 2:00 pm Fed interest-rate decision THURSDAY, FEB. 1 8:30 am Initial jobless claims 8:30 am U.S. productivity Q4 9:45 am S&P U.S. manufacturing PMI (final) 10:00 am ISM manufacturing FRIDAY, FEB. 2 8:30 am U.S. nonfarm payrolls 8:30 am U.S. unemployment rate 8:30 am U.S. hourly wages 8:30 am Hourly wages year over year 10:00 am Factory orders 10:00 am Consumer sentiment (final) 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: "The Buy and Hold Myth"
Most long-term investors like to believe they are unaffected by short- term price fluctuations in the market. However, since most buy-and- hold advocates have no Exit Plan or Risk Control Strategy to protect capital and profits, the emotions of fear and pain eventually come to bear, often forcing unprepared investors to sell under the worst conditions.
Stocks Covered in This Issue
FINANCIAL SERVICES SECTOR
StepStone Group LP (STEP: Financial Services/Asset Management) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Thursday STEP seemed intent on initiating a rebound. With moving average support nearby, STEP is at a logical place for Bulls to regroup and extend the familiar uptrend that shareholders have become accustomed to. On continued buying, plan on taking long entries with a BUY at 34.46. Manage risk with a 2.47 stop. Tighten your stop to 1.24 when you have a 1.72 profit. STEP ended the day at 33.70. Earnings Report Date: Feb 08, 2024. Beta: 1.26. Market-Cap: 3.808B. Optionable.
HEALTHCARE SECTOR
Neurogene Inc. (NGNE: Healthcare/Biotechnology) - BULLISH BOUNCE. The charts for NGNE show that despite the downward pressure from sellers recently, the weekly uptrend is still going strong. Buyers showed up again on Thursday, resulting in the early stages of a rebound that started near moving average support. The resulting Bullish Bounce set-up offers a potential entry point for a long play. Set your trigger to BUY shares at 32.52, and follow your entry with a trailing stop of 4.98. Tighten it to 2.49 when a 5.4 profit is reached. NGNE ended the latest session at 30.76. Earnings Report Date: Mar 18, 2024. Beta: N/A. Market-Cap: 394.457M. Optionable.
NewAmsterdam Pharma Company N.V. (NAMS: Healthcare/Biotechnology) - 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. NAMS found itself in this condition on Thursday 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 21.17 and a SELL short trigger at 19.45. When NAMS moves outside of Thursday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.72 trailing stop. After you've got a 3.08 profit, tighten the stop to 0.86. NAMS closed at 20.80 on Thursday. Earnings Report Date: N/A. Beta: -0.09. Market-Cap: 1.712B. Not Optionable.
TECHNOLOGY SECTOR
Gen Digital Inc. (GEN: Technology/Software - Infrastructure) - BULLISH BOUNCE. GEN's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Thursday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move GEN back in step with the bullish weekly trend, so our BUY entry trigger is set at . Once you hold a position, trail a stop of . Tighten it to on a 0 gain. GEN closed at 23.92 on Thursday. Earnings Report Date: Feb 01, 2024. Beta: 1.14. Market-Cap: 15.326B. Optionable.
Alpha and Omega Semiconductor Limited (AOSL: Technology/Semiconductors) - SQUEEZE PLAY. AOSL shareholders know what it feels like to be squeezed. Thursday's slim price range reveals uncertainty on both sides of the table, a situation which often resolves itself by either Bears or Bulls quickly gaining a clear advantage. The question is "who will win?" Near-term market action tell us whether we should sell short or we should buy shares instead. AOSL closed Thursday at 25.89. The plan is to enter in the right direction by placing a BUY trigger at 26.28 and a SELL short trigger at 24.71. Once AOSL establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.57. After you've collected a 2.04 profit, tighten the stop to 0.79. Earnings Report Date: Feb 05, 2024. Beta: 2.44. Market-Cap: 719.341M. 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
---------------- ------- -------- ------- ------ -------
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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