February 11, 2020 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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Obviously the market goes up and the market goes down. One of the unique benefits of trading stocks is the opportunity to make money in any market. While traditional investors are limited to up- trends in bull markets, active traders with shorting skills can easily find opportunities in both bullish and bearish environments.

There are a number of reasons that investors normally don't short stocks. Most have never heard of shorting and have no idea what is involved. Those who are fortunate enough to hear about it are usually told that it's too hard or too risky.

In truth, shorting stocks is neither more difficult nor dangerous than buying stocks. Over the years two major fear tactics have been used to keep investors from learning how to short stocks:

1) "It's just too hard to short stocks because of the up-tick rule."

2) "It's too risky to short stocks because a loss can continue to grow indefinitely."

The first objection to shorting is outdated. The old rule that you could only go short on an up-tick was replaced years ago with a limited rule. It applies only to stocks which have fallen by 10% in price during a trading day, and applies only to the remainder of that trading day and the following trading day. During that period of time, a stock can only be sold short when the sale price is higher than the highest bid price maintained by any market maker in the stock. In other words, after a stock has fallen by 10% a short position has to be entered on an uptick. Before that, it can be entered at any time. In most cases you no longer have to wait for a stock's price to be moving up to get a short order filled. And due to improvements in online stock trading platforms, all you have to do is enter the info for the short trade and the broker will take care of the rest.

As for the second objection, anyone who would let a loss go on forever would have to be completely incompetent or in a coma. Theoretically a perpetual loss could happen, but it actually never does. Experienced traders use stop losses and other forms of risk control. In addition, brokerages monitor shorting activities very carefully and will pull the plug on a short sale before it gets completely out of hand.

Remember that things never stay the same. To be competitive we all have to embrace change and become more flexible. If you've been thinking about learning how to short, now is a good time to get started.

Trade well!

- Thomas Sutton, Editor 

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                           "QUICK LIST"
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Stock     02/11     02/11      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

DK        28.40     -0.35               27.34        2.32/1.16      1.78
CDNA      24.86      0.58     25.43                  2.64/1.32      2.22
BNTX      30.71     -1.41     31.89     28.90        2.99/1.50      7.04
SITM      31.37      0.59     32.28     29.72        2.56/1.28      4.00


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 www.rightline.net/education/using-quicklist.html. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to www.RightLine.net and login to the Member's area.

To learn more about controlling risk go to the RightLine Risk Control System at http://www.rightline.net/education/riskcontrol.html

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                           MARKET SUMMARY
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Stocks closed higher on Tuesday as traders focused on the first of Federal Reserve Chairman Jerome Powell's two-day monetary policy testimony on Capitol Hill, in which he repeated earlier comments that interest rates are unlikely to change in the near future. In equities news, Hasbro (HAS $101 announced strong earnings results, while Under Armour (UA $15) posted a disappointing loss. Shares of Sprint (S $8) surged upward after a District Judge ruled in favor of the company's merger with T-Mobile (TMUS $94). The USD/dollar, gold and treasury yields declined, oil prices advanced higher. 


                       Feb 10, 2020           Feb 11, 2020   
                  --------------------   --------------------
Dow                    29,277  +174.31        29,276    -0.48
Nasdaq               9,628.39  +107.88      9,638.94   +10.55
S&P 500                 3,352   +24.38         3,358    +5.66

NYSE Volume                      3.51B                  3.78B
NYSE Advancers                    1721                   2024
NYSE Decliners                    1211                    918

Nasdaq Volume                    2.23B                  2.44B
Nasdaq Advancers                  1905                   2037
Nasdaq Decliners                  1296                   1169

                                 New Highs/Lows

                   02/04  02/05  02/06  02/07  02/10  02/11
                 --------------------------------------------
NYSE New Highs       239    250    261    241    248    345
NYSE New Lows         46     16     32     64     86     45
Nasdaq New Highs     150    181    184    109    167    256
Nasdaq New Lows       53     34     47     80     92     57


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                              TRADER'S TIP:  
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TRADER'S TIP: "Efficient Execution"

How well do you execute your trading plan? You can judge your effectiveness by how skillfully you move in and out of the market each time you act on an entry or exit signal. Preparation and practice is necessary to avoid delays or mistakes at the point of action. It is helpful to write down the exact required steps in advance, so you will know exactly what to do before you need to do it.

When the time arrives, don't wait; always be decisive. Keep records of your results so you can correct any glitches that may arise. This disciplined approach keeps you focused on a repetitive process to prevent execution errors and produce favorable results over time. 
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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: www.rightline.net/education/how_to_use_rlr_technical_analyst.html. 
S&P 500 - 3357.75 February 11, 2020

52-Week High: 3375.63
52-Week Low: 2722.27
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3528.37
Resistance 2: 3416.07
Resistance 1: 3371.89
Pivot: 3303.77
Support 1: 3259.59
Support 2: 3191.47
Support 3: 3079.17

http://www.rightline.net/rlch/021120SPX.jpg

NASDAQ Composite - 9638.94 February 11, 2020

52-Week High: 9714.74
52-Week Low: 7292.22
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 10202.46
Resistance 2: 9815.35
Resistance 1: 9667.93
Pivot: 9428.24
Support 1: 9280.82
Support 2: 9041.12
Support 3: 8654.01

Dow Industrials - 29276.34 February 11, 2020

52-Week High: 29415.39
52-Week Low: 24680.57
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 31120.20
Resistance 2: 30031.80
Resistance 1: 29567.15
Pivot: 28943.40
Support 1: 28478.75
Support 2: 27855.00
Support 3: 26766.60

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                             MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern): 
Monday, February 10, 2020:
10-Feb          None scheduled

Tuesday, February 11, 2020:
11-Feb   6 am   NFIB small-business index
11-Feb  10 am   Job openings
11-Feb  11 am   Household debt

Wednesday, February 12, 2020:
12-Feb   2 pm   Federal budget

Thursday, February 13, 2020:
13-Feb  8:30 am   Weekly jobless claims
13-Feb  8:30 am   Consumer price index
13-Feb  8:30 am   Core CPI

Friday, February 14, 2020:
14-Feb  8:30 am   Retail sales
14-Feb  8:30 am   Retail sales ex-autos
14-Feb  8:30 am   Import price index
14-Feb  9:15 am   Industrial production
14-Feb  9:15 am   Capacity utilization
14-Feb  10 am   Consumer sentiment index
14-Feb  10 am   Business inventories

For a chart of typical Up or Down market reactions to specific major US economic reports, go to "Economic Indicator Effects" at this link: http://www.rightline.net/education/economic.html 
 
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                              TRADER'S TIP: 
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TRADER'S TIP: "Using The Gap Open Tactic When Selling Short"

The Gap Open Tactic works as well when we sell short as it does when we buy a stock. If the stock gaps down at the open, wait for it to take out its low of the first half-hour then enter 0.25 below that point. For more on the Gap Open Tactic go to:http://www.rightline.net/education/gapopen.html 

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                      STOCKS COVERED IN THIS ISSUE    
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ENERGY SECTOR

Delek US Holdings, Inc. (DK: Energy/Oil & Gas Refining & Marketing) - BEARISH U-TURN. Sometimes traders hear about a stock that's in trouble and then short it without any thought to timing the entry. This method often results in less profits even when the trade moves in the desired direction. The Bearish U-Turn setup provides a smoother entry than just jumping in. It also reduces risk by placing both the entry trigger and exit stop near the top of the reversal. We'll use this approach with DK which met our setup requirements on Tuesday. The SELL short trigger for this trade is set at 27.34, and the trailing stop is sized at 2.32. Reset the stop to 1.16 upon getting a 1.78 point gain. DK closed Tuesday at 28.40. Earnings Report Date: Feb 24, 2020. Beta: 1.65. Market-Cap: 2.108B. Optionable.

HEALTHCARE SECTOR

CareDx, Inc (CDNA: Healthcare/Diagnostics & Research) - BULLISH BOUNCE. Some people hear of a stock that's performing nicely and then buy it without any regard for timing the entry. This approach usually leaves money on the table, money that could just as well be added to profits. The Bullish Bounce setup provides a well timed entry and reduces exposure to risk by placing both the entry trigger and exit stop near the bottom of the bounce. We have an opportunity to use this approach with CDNA which met our setup criteria on Tuesday. The BUY trigger for this trade is at 25.43, and the trailing stop is sized at 2.64. Resize the stop to 1.32 upon collecting a 2.22 point gain. CDNA closed Tuesday at 24.86. Earnings Report Date: N/A. Beta: 0.93. Market-Cap: 1.055B. Optionable.

BioNTech SE (BNTX: Healthcare/Biotechnology) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into BNTX. A move to the upside will trigger our BUY entry at 31.89, while a drop to 28.90 will trigger our SELL short entry. Follow your position with a 2.99 trailing stop. Tighten the stop to 1.50 once you have a 7.04 gain. BNTX closed Tuesday at 30.71. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 6.964B. Not Optionable.

TECHNOLOGY SECTOR

SiTime Corporation (SITM: Technology/Semiconductors) - 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 SITM's case we will enter a BUY should it reach the 32.28 level, or a SELL short trade if it drops to 29.72. As usual a trailing stop is essential, 2.56 which should be tightened to 1.28 on a 4.00 gain. SITM closed Tuesday at 31.37. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 496.847M. 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: http://www.rightline.net/education/riskcontrol.html

Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels.
Link: http://www.rightline.net/education/gap-adjusted.html 

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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  
---------------- -------     --------    -------     ------  -------   

Currently there are no upcoming stock splits on the major US exchanges.

For a closer look at the different stages of a Stock Split go to: http://www.rightline.net/splits/index.html/#split-stages 
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Best of luck and have a Great Week!
 
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