February 10, 2022 - The RightLine Report
Notes From The Editor
While as traders we prefer to be prepared for a market move in either direction, it's always good for morale to see all the major averages moving higher. However, since market leadership rotates between the different indices, it's sometimes difficult to know which index to track.
Although the Dow has traditionally been given the primary spotlight due to its status as the "oldest" index, it is only made up of 30 stocks. On the other hand, the Nasdaq Composite includes over 4,000 companies - essentially all common stocks listed on the Nasdaq Stock Market.
However, sheer size doesn't mean that it represents the market as a whole. The extremely high percentage of technology companies traded on the Nasdaq cause it to act much like a huge tech sector, while the broader market contains a much wider variety of industries.
The S&P 500 is clearly more balanced. With five hundred of the world's largest companies making up the diverse component list, it carries a lot of weight. Though it may not have gotten as much attention as the Dow and Nasdaq over the past years, it is certainly worth considering when making decisions about "what" the market is doing - especially when it comes to confirming market bottoms and tops.
The Wilshire Total Market Index is the largest and most inclusive index of all. It is made up of virtually every stock traded in the U.S. markets, and is used by many economists to measure broad market health.
Regardless of which index you use, it pays to be aware that there is more than one way to measure "the market." The larger group directly influences most stocks. It's certainly helpful for traders to be aware of which indices have the most affect on their positions. The indices give us clues to help pinpoint the areas where the trend should continue, or a rebound will likely occur.
Trade well,
~ Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 02/10 02/10 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
PCB 24.26 -0.11 24.93 1.89/0.95 2.08
TCBK 43.90 -0.14 44.98 42.33 2.65/1.33 2.56
PLMR 54.15 -0.60 55.47 51.45 4.02/2.01 5.84
UMBF 102.80 -0.43 105.55 99.18 6.37/3.19 7
RDVT 26.38 0.13 26.84 25.13 1.71/0.86 4.2
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
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Stocks Covered Today Stock Splits
Market Summary
The major stock indices were lower on Thursday following the news of an unexpected acceleration in January consumer price inflation and hawkish comments from St. Louis Federal Reserve Bank President James Bullard. Earnings season continued to roll out, with shares of Walt Disney (DIS $152) surging higher after the firm topped expectations on strong Disney+ subscriber growth and a post-pandemic return to profitability for its theme park unit. In other earnings highlights, Mattel (MAT $24) and Coca-Cola (KO $61) rallied following the release of their results, while PepsiCo (PEP $168) was lower despite beating profit forecasts. The USD/dollar and oil prices were higher, gold finished the session lower. Treasuries were also lower, lifting the yield on a 10-year treasury note above the 2% mark for the first time since 2019.
Feb 9, 2022 Feb 10, 2022
-------------------- --------------------
Dow 35,768.06 305.28 35,241.59 -526.47
Nasdaq 14,490.37 295.92 14,185.64 -304.73
S&P 500 4,587.18 65.64 4,504.08 -83.10
NYSE Volume 4.52B 5.32B
NYSE Advancers 2,394 856
NYSE Decliners 916 2,527
Nasdaq Volume 4.72B 5.22B
Nasdaq Advancers 3,295 1,460
Nasdaq Decliners 1,379 3,260
New Highs/Lows
02/03 02/04 02/07 02/08 02/09 02/10
--------------------------------------------
NYSE New Highs 56 67 53 58 91 86
NYSE New Lows 150 265 199 242 148 349
Nasdaq New Highs 38 45 50 71 64 61
Nasdaq New Lows 237 347 237 249 148 268
Stocks Covered Today Stock Splits
TRADER'S TIP: "Is Shorting Risky?"
Though some folks believe that shorting is riskier than going long, it is far more dangerous to be on the wrong side of an established downtrend. And of course you always have the option to stand aside. If you aren't comfortable trading in a declining trend, then by all means head for the sidelines - there will be plenty of buy-side opportunities once the trend reverses.
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 - 4504.08 February 10, 2022
52-Week High: 4818.62
52-Week Low: 3723.34
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4865.86
Resistance 2: 4684.57
Resistance 1: 4592.55
Pivot: 4503.28
Support 1: 4411.26
Support 2: 4321.99
Support 3: 4140.70
NASDAQ Composite - 14185.64 February 10, 2022
52-Week High: 16212.23
52-Week Low: 12397.05
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 15597.73
Resistance 2: 14860.62
Resistance 1: 14479.31
Pivot: 14123.51
Support 1: 13742.20
Support 2: 13386.40
Support 3: 12649.29
Dow Industrials - 35241.59 February 10, 2022
52-Week High: 36952.65
52-Week Low: 30547.53
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 37454.54
Resistance 2: 36271.44
Resistance 1: 35680.59
Pivot: 35088.34
Support 1: 34497.49
Support 2: 33905.24
Support 3: 32722.14
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Thursday, February 10, 2022: 10-Feb 8:30 am Initial jobless claims 10-Feb 8:30 am Continuing jobless claims 10-Feb 8:30 am Consumer price index (month-to-month) 10-Feb 8:30 am Core CPI (month-to-month) 10-Feb 8:30 am Consumer price index (year-to-year) 10-Feb 8:30 am Core CPI (year-to-year) 10-Feb 2 pm Federal budget Friday, February 11, 2022: 11-Feb 10 am UMich consumer sentiment index (preliminary) 11-Feb 10 am UMich 5-year inflation expectations (preliminary) 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: "Always Plan For Three Possibilities"
As traders and investors we've learned not to spend too much time speculating on market direction, but to focus on careful planning and trade management. It's far better to prepare and have a specific plan ready for any possible price action than to become so devoted to our expectations that we fail to plan for the opposite of what we expect to happen.
The market, and our chosen stocks can really only do three simple things that affect price: (1) move up, (2) move down, or (3) stay the same. Unless our trading plan includes specific instructions on what we will do in the event any one of these three scenarios occur, the plan is incomplete.
Stocks Covered in This Issue
FINANCIAL SERVICES SECTOR
PCB Bancorp (PCB: Financial Services/Banks-Regional) - NEW HIGH DIP. PCB is still showing the bullish strength that gave this stock a new 12-month high just a few days ago. Thursday's intra-day price action near moving average support tells us that another run to the high-mark may be in the works. Get ready to BUY shares if PCB reaches our trigger price of 24.93, and enter a 1.89 trailing stop. The stop can be resized to 0.95 once you have a 2.08 profit. PCB closed Thursday at 24.26. Earnings Report Date: N/A. Beta: 0.77. Market-Cap: 360.644M. Not Optionable.
TriCo Bancshares (TCBK: Financial Services/Banks-Regional) - 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. TCBK 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 44.98 and a SELL short trigger at 42.33. When TCBK 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 2.65 trailing stop. After you've got a 2.56 profit, tighten the stop to 1.33. TCBK closed at 43.90 on Thursday. Earnings Report Date: Apr 26, 2022. Beta: 0.57. Market-Cap: 1.305B. Optionable.
Palomar Holdings, Inc. (PLMR: Financial Services/Insurance-Property & Casualty) - SQUEEZE PLAY. PLMR 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. PLMR closed Thursday at 54.15. The plan is to enter in the right direction by placing a BUY trigger at 55.47 and a SELL short trigger at 51.45. Once PLMR establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 4.02. After you've collected a 5.84 profit, tighten the stop to 2.01. Earnings Report Date: Feb 16, 2022. Beta: 0.11. Market-Cap: 1.376B. Optionable.
UMB Financial Corporation (UMBF: Financial Services/Banks-Regional) - SQUEEZE PLAY. The ticker for Thursday's session shows UMBF 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 105.55 and a SELL short trigger at 99.18. When UMBF 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 6.37 trailing stop. Upon reaching a 7 profit, resize the stop to 3.19. Earnings Report Date: Apr 25, 2022. Beta: 0.99. Market-Cap: 4.979B. Optionable.
TECHNOLOGY SECTOR
Red Violet, Inc. (RDVT: Technology/Software-Application) - SQUEEZE PLAY. RDVT traders on both sides of the fence are now locked in a head-to-head shootout. Thursday'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 26.84 and a SELL short trigger at 25.13. When one of the orders is filled, cancel the remaining order and enter a 1.71 trailing stop. When you've reached a 4.2 paper profit, tighten the stop to 0.86. RDVT closed at 26.38 on Thursday. Earnings Report Date: Mar 08, 2022. Beta: 0.98. Market-Cap: 353.977M. 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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