February 2, 2023 - The RightLine Report
Notes From The Editor
Charts: An Important Key To Successful Stock Trading
Technical trading is a powerful method used by many successful stock traders. However, the idea of trading the stock market using charts and indicators doesn't always make sense to newbies. A close look at what actually takes place in the "real world" makes it easy to see how price and volume action on a stock chart reveals more information than most people would ever imagine.
Let's start with the concept that sooner or later all news and fundamentals about a company are reflected in the stock price. The stock market accomplishes this process relatively fast, especially now that most investors are going online for information.
Company insiders are the first to know when events are underway that will impact the company's stock - THEIR stock. Although SEC regulations do govern what insiders can say and do with the information they obtain, the fact remains that people do talk and bend the rules.
What starts out as quiet chatter among key employees soon spreads beyond the company's inner circle. These conversations quickly make their way to friends and acquaintances, who in turn share this inside news with others. As more and more people hear about these "secrets" many will buy or sell the stock to take advantage. As a result the stock chart begins to signal that something significant is taking place.
Serious chart readers learn to recognize the signs of change. They watch closely to see if an opportunity exists to profit from the developing situation. This group includes what is commonly referred to as "smart money," traders with deep pockets who recognize what is going on and take action. Due to the size involved, their stock trading always shows up on the charts.
Also involved in this process are several thousand semi-pro traders who according to CNBC, make up over 80% of the total daily online stock market trading volume. They are extremely active, trading an average of 50 times each session. Their days are spent moving in and out of the market, banging into support and resistance levels to see what, if anything, gives.
After reading the strength of these pivotal chart areas, they quickly decide to either hold onto their stock positions, or reverse and head in the other direction. In one sense they play the role of stock market "scouts" who push and pull at any possible weakness to find which direction prices are willing to go.
These ever-active players are also the oil that lubricates the stock market online trading machine. They create constant price movement at the same time other less-active groups are sitting on the sidelines.
It doesn't take long for the impact on price and volume draws patterns on the charts. These are powerful clues about where a specific stock - and on a larger scale the entire stock market - is ultimately headed.
Anyone trading the stock market online should take note that charting works effectively in all markets in all time frames. This applies to short-term trading and long term investing alike.
There is nothing new about all this. It has been used effectively by Japanese rice traders for hundreds of years. In fact, every major investment firm on Wall Street employs technical analysts to provide their traders with this type of information. Those of us who use stock charts as part of our trading strategy locate the pivotal levels, then go with the flow as price movement unfolds. While it does take effort to learn how to do this, it's certainly one skill that anyone trading the stock market should be aware of.
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 02/03 02/03 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
BILI 25.66 -0.59 26.34 24.39 1.95/0.98 3.18
PFG 92.87 0.79 94.33 6.25/3.13 3.58
BMA 21.83 0.28 22.26 20.59 1.67/0.84 2.5
FGEN 24.85 0.46 25.26 23.37 1.89/0.95 2.38
RELL 23.64 0.72 24.3 22.52 1.78/0.89 3.2
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
Questions? Send us an email using our Contact Form.
Stocks Covered Today Stock Splits
Market Summary
US stocks closed out Thursday's session mixed, as the S&P 500 and Nasdaq added to Wednesday's rally following a reduced rate hike indicating that the Fed Bank may be close to the end of its tightening cycle. In equities, shares of FaceBook owner Meta Platform (META $189) surged higher after releasing positive guidance, while Eli Lilly and Company (LLY $331) came under pressuer after posting soft revenue growth. The economic calendar contained some positive news, with unemployment claims continuing to decline and productivity showing more strength than expected in the fourth quarter. Oil and gold finished lower, the USD/dollar was higher and treasury yields held steady.
Feb 1, 2023 Feb 2, 2023
-------------------- --------------------
Dow 34,092.96 6.92 34,053.94 -39.02
Nasdaq 11,816.32 231.77 12,200.82 384.50
S&P 500 4,119.21 42.61 4,179.76 60.55
NYSE Volume 4.87B 5.67B
NYSE Advancers 2,227 2,197
NYSE Decliners 855 914
Nasdaq Volume 6.39B 7.1B
Nasdaq Advancers 3,173 3,306
Nasdaq Decliners 1,405 1,291
New Highs/Lows
01/26 01/27 01/30 01/31 02/01 02/02
--------------------------------------------
NYSE New Highs 117 115 66 104 177 203
NYSE New Lows 11 6 8 4 8 5
Nasdaq New Highs 124 127 89 138 190 199
Nasdaq New Lows 42 40 20 31 34 27
Stocks Covered Today Stock Splits
TRADER'S TIP: "Consolidation Means Anticipation"
The longer a stock trades within a specific range, the more likely it is that a breakout - either up OR down - will result. One reason is that as support and resistance build through regular successful tests, more traders note that a move OUTSIDE of the regular range is a significant event. Consequently, volume tends to pick up and generate momentum in the direction of the breakout when it does finally occur. Also, risk is limited since stops can be placed just inside the trading range in case the breakout fails. It pays to learn how to recognize this powerful charting tactic, which can be very effective in both the long and short terms.
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 - 4179.76 February 2, 2023
52-Week High: 4637.30
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3096.77
Resistance 2: 2916.88
Resistance 1: 1458.44
Pivot: 2736.99
Support 1: 1278.55
Support 2: 2557.10
Support 3: 2377.21
NASDAQ Composite - 12200.82 February 2, 2023
52-Week High: 14646.90
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 9648.04
Resistance 2: 8767.03
Resistance 1: 4383.51
Pivot: 7886.03
Support 1: 3502.51
Support 2: 7005.02
Support 3: 6124.01
Dow Industrials - 34053.94 February 2, 2023
52-Week High: 35824.28
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 24145.26
Resistance 2: 23391.98
Resistance 1: 11695.99
Pivot: 22638.70
Support 1: 10942.71
Support 2: 21885.42
Support 3: 21132.14
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, January 30, 2023: 30-Jan None scheduled Tuesday, January 31, 2023: 31-Jan 8:30 am Employment cost index 31-Jan 9 am 31-Jan 9 am FHFA home price index (SAAR) 31-Jan 9:45 am Chicago business barometer 31-Jan 10 am Consumer confidence index 31-Jan 10 am Rental vacancy rate Wednesday, February 01, 2023: 01-Feb 8:15 am ADP employment report 01-Feb 9:45 am 01-Feb 10 am ISM manufacturing index 01-Feb 10 am Job openings 01-Feb 10 am Quits 01-Feb 10 am Construction spending 01-Feb 2 pm Federal funds rate 01-Feb 2 pm Federal funds projection 01-Feb 2:30 pm Fed Chair Jerome Powell news conference 01-Feb Varies Motor vehicle sales (SAAR) Thursday, February 02, 2023: 02-Feb 8:30 am Initial jobless claims 02-Feb 8:30 am Continuing jobless claims 02-Feb 8:30 am Productivity, first estimate (SAAR) 02-Feb 8:30 am Unit labor costs, first estimate (SAAR) 02-Feb 10 am Factory orders 02-Feb 8:30 am Core capital goods orders Friday, February 03, 2023: 03-Feb 8:30 am Nonfarm payrolls 03-Feb 8:30 am Unemployment rate 03-Feb 8:30 am Average hourly earnings 03-Feb 8:30 am Labor-force participation rate, 25-54 year-olds 03-Feb 9:45 am 03-Feb 10 am ISM services index 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: "In Sync with the Trend = More Winners"
It's much easier to make money when we're in sync with the trend - yet even the best setups don't always produce a profit. A review of the "All Time Top Ten" mechanical trading systems tested by Futures Truth revealed that the best winning rate was 57.5%, while several were less than 50%. The key to the success of these systems is that winning trades outperformed losers by a wide margin. The stock market can be a finicky creature at times. Always use Risk Control to protect your profits and capital. One big winner can offset several small losers, so always cut losses quickly and let the winners grow.
Stocks Covered in This Issue
COMMUNICATION SERVICES SECTOR
Bilibili Inc. (BILI: Communication Services/Electronic Gaming & Multimedia) - 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. BILI 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 26.34 and a SELL short trigger at 24.39. When BILI 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 1.95 trailing stop. After you've got a 3.18 profit, tighten the stop to 0.98. BILI closed at 25.66 on Thursday. Earnings Report Date: Mar 01, 2023. Beta: 1.04. Market-Cap: 9.826B. Optionable.
FINANCIAL SERVICES SECTOR
Principal Financial Group, Inc. (PFG: Financial Services/Asset Management) - 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 PFG which met our setup criteria on Thursday. The BUY trigger for this trade is at 94.33, and the trailing stop is sized at 6.25. Resize the stop to 3.13 upon collecting a 3.58 point gain. PFG closed Thursday at 92.87. Earnings Report Date: Apr 26, 2023. Beta: 1.30. Market-Cap: 22.614B. Optionable.
Banco Macro S.A. (BMA: Financial Services/Banks-Regional) - SQUEEZE PLAY. Thursday's trading session left BMA 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 22.26 and your SELL short trigger at 20.59. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.67 trailing stop. Once you have a 2.5 profit, reduce the stop to 0.84. Earnings Report Date: N/A. Beta: 1.77. Market-Cap: 2.876B. Optionable.
HEALTHCARE SECTOR
FibroGen, Inc. (FGEN: Healthcare/Biotechnology) - SQUEEZE PLAY. FGEN 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. FGEN closed Thursday at 24.85. The plan is to enter in the right direction by placing a BUY trigger at 25.26 and a SELL short trigger at 23.37. Once FGEN establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.89. After you've collected a 2.38 profit, tighten the stop to 0.95. Earnings Report Date: Feb 27, 2023. Beta: 0.72. Market-Cap: 2.335B. Optionable.
TECHNOLOGY SECTOR
Richardson Electronics, Ltd. (RELL: Technology/Electronic Components) - SQUEEZE PLAY. The ticker for Thursday's session shows RELL 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 24.3 and a SELL short trigger at 22.52. When RELL 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 1.78 trailing stop. Upon reaching a 3.2 profit, resize the stop to 0.89. Earnings Report Date: Apr 04, 2023. Beta: 0.79. Market-Cap: 332.726M. 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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