Notes From The Editor

In a previous RightLine Report we looked at some of veteran trader Brett Steenbarger's thoughts on "Perfectionism." Brett is a licensed psychologist who has traded actively for the past 20 years, and writes extensively about the mental aspects of trading the markets.

Brett believes that one of the best ways to avoid negative trading habits is to become an observer of our own behaviors. Below you'll find a few excerpts from Brett's article, "The Three Vices of Trading." I certainly enjoyed reading his comments on "The Ego" and I hope you will too.

Trade well!

~ 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."

Quick List

    
Stock     02/15     02/15      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

BHP       67.52     -0.74     68.45                  4.38/2.19      2.66
CHGG      30.77      0.32     31.81     29.66        2.15/1.08      3.02
MS       103.43      0.86    105.72                   6.7/3.35      6.52
AGL       21.87      1.07     22.16     20.32        1.84/0.92      2.84
BASE      24.11      1.35     24.54                  2.24/1.12      4.02

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.

Market Summary

US stocks rallied on Tuesday despite concerns over hawkish Fed Bank monetary policy and rising inflation following news that January wholesale prices were up more than expected. In other economic headlines, manufacturing activity in the New York region bounced back into expansion territory after last month's decline into the contraction zone. On the equities front, Marriott International (MAR $181) solidly topped earnings estimates but noted that travel still remains below pre-pandemic levels, while Intel (INTC $48) announced they are purchasing Israeli chipmaker Tower Semiconductors in a $5.4-billion dollar deal. Gold, oil prices and the USD/dollar closed lower, treasuries were mixed.

                        Feb 14, 2022           Feb 15, 2022   
                  --------------------   --------------------
Dow                 34,566.17  -171.89     34,988.84   422.67
Nasdaq              13,790.92    -0.24     14,139.76   348.84
S&P 500              4,401.67   -16.97      4,471.07    69.40

NYSE Volume                      4.69B                   4.5B
NYSE Advancers                     939                  2,579
NYSE Decliners                   2,423                    786

Nasdaq Volume                    4.42B                  4.45B
Nasdaq Advancers                 1,476                  3,787
Nasdaq Decliners                 3,240                    970

                                 New Highs/Lows

                   02/08  02/09  02/10  02/11  02/14  02/15
                 --------------------------------------------
NYSE New Highs        58     91     86     67     24     34
NYSE New Lows        242    148    349    375    486    181
Nasdaq New Highs      71     64     61     54     38     52
Nasdaq New Lows      249    148    268    360    401    193
   

TRADER'S TIP: "Sunny Days"

Researchers at Ohio State and the University of Michigan found a positive correlation between the weather and the stock markets around the globe between 1982 and 1997. Specifically, the stock markets in 26 countries went up more than average when it was sunny in the cities where the markets were located, and declined more than average when it was cloudy.

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 - 4471.07 February 15, 2022

52-Week High: 4818.62
52-Week Low: 3723.34
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4847.26
Resistance 2: 4658.64
Resistance 1: 4538.64
Pivot: 4470.02
Support 1: 4350.02
Support 2: 4281.40
Support 3: 4092.78

NASDAQ Composite - 14139.76 February 15, 2022

52-Week High: 16212.23
52-Week Low: 12397.05
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 15564.09
Resistance 2: 14787.69
Resistance 1: 14289.42
Pivot: 14011.29
Support 1: 13513.02
Support 2: 13234.89
Support 3: 12458.49
        
Dow Industrials - 34988.84 February 15, 2022

52-Week High: 36952.65
52-Week Low: 30547.53
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 37468.47
Resistance 2: 36264.71
Resistance 1: 35501.38
Pivot: 35060.95
Support 1: 34297.62
Support 2: 33857.19
Support 3: 32653.43
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, February 14, 2022:
14-Feb          None scheduled

Tuesday, February 15, 2022:
15-Feb  8:30 am   Producer price index
15-Feb  8:30 am   Empire state manufacturing index

Wednesday, February 16, 2022:
16-Feb  8:30 am   Retail sales
16-Feb  8:30 am   Retail sales excluding autos
16-Feb  8:30 am   Import price index
16-Feb  9:15 am   Industrial production
16-Feb  9:15 am   Capacity utilization
16-Feb  10 am   Business inventories
16-Feb  10 am   NAHB home builders' index
16-Feb  2:30 pm   FOMC minutes

Thursday, February 17, 2022:
17-Feb  8:30 am   Initial jobless claims
17-Feb  8:30 am   Continuing jobless claims
17-Feb  8:30 am   Building permits (SAAR)
17-Feb  8:30 am   Housing starts (SAAR)
17-Feb  8:30 am   Philadelphia Fed manufacturing index

Friday, February 18, 2022:
18-Feb  10 am   Existing home sales (SAAR)
18-Feb  10 am   Leading economic indicators


For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Use More Than One Indicator"

Instead of relying on just one indicator to make trade decisions, use several as part of your overall strategy. Watch for a convergence of signals because it increases the odds of the expected outcome.

Stocks Covered in This Issue

BASIC MATERIALS SECTOR

BHP Group Limited (BHP: Basic Materials/Other Industrial Metals & Mining) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Tuesday BHP seemed intent on initiating a rebound. With moving average support nearby, BHP 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 68.45. Manage risk with a 4.38 stop. Tighten your stop to 2.19 when you have a 2.66 profit. BHP ended the day at 67.52. Earnings Report Date: N/A. Beta: 0.77. Market-Cap: 245.027B. Optionable.

CONSUMER DEFENSIVE SECTOR

Chegg, Inc. (CHGG: Consumer Defensive/Education & Training Services) - SQUEEZE PLAY. A look at CHGG's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 31.81 and a SELL short trigger at 29.66. Once CHGG shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 2.15 and tighten to 1.08 on a 3.02 gain. CHGG closed Tuesday at 30.77. Earnings Report Date: May 02, 2022. Beta: 0.96. Market-Cap: 4.134B. Optionable.

FINANCIAL SERVICES SECTOR

Morgan Stanley (MS: Financial Services/Capital Markets) - BULLISH BOUNCE. The charts for MS show that despite the downward pressure from sellers recently, the weekly uptrend is still going strong. Buyers showed up again on Tuesday, 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 105.72, and follow your entry with a trailing stop of 6.7. Tighten it to 3.35 when a 6.52 profit is reached. MS ended the latest session at 103.43. Earnings Report Date: Apr 14, 2022. Beta: 1.45. Market-Cap: 183.278B. Optionable.

HEALTHCARE SECTOR

agilon health, inc. (AGL: Healthcare/Medical Care Facilities) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in AGL, 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 22.16 and a SELL short entry at 20.32. Let AGL's price action determine your long or short entry. Once the order is filled, place a 1.84 trailing stop, and tighten it to 0.92 upon getting a 2.84 gain. AGL closed Tuesday at 21.87. Earnings Report Date: Mar 03, 2022. Beta: N/A. Market-Cap: 8.609B. Optionable.

TECHNOLOGY SECTOR

Couchbase, Inc. (BASE: Technology/Software-Infrastructure) - BULLISH BOUNCE. BASE's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Tuesday 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 BASE back in step with the bullish weekly trend, so our BUY entry trigger is set at 24.54. Once you hold a position, trail a stop of 2.24. Tighten it to 1.12 on a 4.02 gain. BASE closed at 24.11 on Tuesday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.051B. 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.

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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