February 23, 2023 - The RightLine Report
Notes From The Editor
"Round-Number Resistance" is a quirky market phenomenon that occurs when a stock or index approaches a price level that ends with one or more zeros. Since stocks normally stay in double digits, "round" numbers like 20, 50, 80, tend to be the sticky points. With major indices like the Dow, Nasdaq, and S&P 500, multiples of zero are the most difficult hurdles to overcome.
Most folks probably wonder if round numbers really do matter, or if all the talk about "psychological barriers" is just another trader's tale. To find out, two finance researchers embarked on an intriguing investigation. The result of their work was published in 1993 under the title "Price Barriers in the Dow Jones Industrial Average." The results are quite remarkable.
Harold Kim of Princeton and Glen Donaldson of the University of British Columbia conjectured that if multiples of 100 or 1,000 did actually present mental barriers to investors, then the Dow's behavior near those price levels should differ from its behavior when it isn't near them.
Kim and Donaldson theorized that it should take longer - on average - for the Dow Industrials to move through multiples of 100 or 1,000 than through other levels. They also speculated that once a "round number" barrier is broken, the rate of price change for the Dow should be faster than normal.
Believe it or not, this is precisely what they found. To further test the results, Kim and Donaldson decided to apply the same line of study to a less popular index - the Wilshire 5000. It was an ideal choice, for relatively few investors know what it is and an even smaller number track its price level.
In contrast to the popular Dow Industrial Average, the researchers didn't find any unusual patterns when the Wilshire 5000 came close to a multiple of 100 or 1,000. This discovery supported their earlier conclusion; investor perception is the real reason for the behavior near round numbers.
Bottom Line: Research scientist Dr. John C. Lilly once wrote, "In the province of connected minds, what the network believes to be true, either is true or becomes true within certain limits to be found experientially and experimentally." As traders, it pays to find these limits in market crowd behavior, because of their impact on price movement.
Round Number Resistance is a confirmed "limit" that is extremely easy to anticipate. It may seem odd at first, but all price barriers are created by investor perception, and each one provides us with an opportunity to make money.
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 02/23 02/23 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
PARA 23.44 0.14 24.01 1.87/0.94 2.04
MLKN 23.92 0.29 24.37 1.6/0.8 1.5
SYNH 38.25 1.00 39.49 3.52/1.76 2.18
MATW 38.29 0.31 38.95 2.11/1.06 2.48
DMRC 20.86 0.40 21.31 19.82 1.49/0.75 1.92
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
The top major US stock indices closed higher on Thursday following news that jobless claims came in below expectations, fourth quarter GDP growth was revised lower and inflation components were well above estimates. Earnings season continues rolling along, as shares of Nvidia Corporation (NVDA $237) were higher after the micro-chip company topped estimates and offered an upbeat revenue outlook. In other equities news, eBay (EBAY $45) met profit forecasts, while Domino's Pizza (DPZ $308) stock dropped after the restaurant chain missed revenue forecasts and adjusted its guidance downward. Gold and treasury yields were lower, oil prices were higher, the USD/dollar finished near even.
Feb 22, 2023 Feb 23, 2023
-------------------- --------------------
Dow 33,045.09 -84.50 33,153.91 108.82
Nasdaq 11,507.07 14.77 11,590.40 83.33
S&P 500 3,991.05 -6.29 4,012.32 21.27
NYSE Volume 4.09B 3.97B
NYSE Advancers 1,673 2,023
NYSE Decliners 1,374 1,027
Nasdaq Volume 4.7B 4.74B
Nasdaq Advancers 2,165 2,634
Nasdaq Decliners 2,351 1,876
New Highs/Lows
02/16 02/17 02/20 02/21 02/22 02/23
--------------------------------------------
NYSE New Highs 80 62 0 38 32 57
NYSE New Lows 15 10 0 29 34 28
Nasdaq New Highs 96 89 0 50 46 83
Nasdaq New Lows 67 77 0 131 122 130
Stocks Covered Today Stock Splits
TRADER'S TIP: "Decisions, Decisions"
Trading successfully isn't rocket science, but it does take commitment. Just as you would review your trades and learn from them, take the time to review your attitudes, and adjust them to reflect a realistic winning attitude. Attitude is an acquired skill, just like every other aspect of trading and investing. When you decide you want to do it, you will. A wish changes nothing, but a decision changes everything!
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 - 4012.32 February 23, 2023
52-Week High: 4637.30
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4319.24
Resistance 2: 4207.42
Resistance 1: 4143.25
Pivot: 4095.60
Support 1: 4031.43
Support 2: 3983.78
Support 3: 3871.96
NASDAQ Composite - 11590.40 February 23, 2023
52-Week High: 14646.90
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 12640.08
Resistance 2: 12242.00
Resistance 1: 12014.63
Pivot: 11843.92
Support 1: 11616.55
Support 2: 11445.84
Support 3: 11047.76
Dow Industrials - 33153.91 February 23, 2023
52-Week High: 35492.22
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 35519.44
Resistance 2: 34705.70
Resistance 1: 34266.19
Pivot: 33891.96
Support 1: 33452.45
Support 2: 33078.22
Support 3: 32264.48
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Friday, February 24, 2023: 24-Feb 8:30 am Consumer spending (nominal) 24-Feb 8:30 am Personal income (nominal) 24-Feb 8:30 am PCE index 24-Feb 8:30 am Core PCE index 24-Feb 8:30 am Core PCE (year-over-year) 24-Feb 10 am New home sales 24-Feb 10 am Consumer sentiment (final) Monday, February 27, 2023: 20-Feb None scheduled Tuesday, February 28, 2023: 21-Feb 9:45 am 21-Feb 9:45 am 21-Feb 10:00 am Existing home sales Wednesday, March 01, 2023: 22-Feb 2 pm FOMC minutes of Feb.1 meeting Thursday, March 02, 2023: 23-Feb 8:30 am Initial jobless claims 23-Feb 8:30 am GDP 23-Feb 10:50 am Atlanta Fed President Bostic speaks 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 Primary Purpose Of Charts"
As stocks move, the resulting price action leaves footprints in the sand. These footprints are recorded on the price charts - valuable tools for traders. The primary purpose of charts is to identify the trend along with important support & resistance levels of a stock or market.
For more on the basics of charting, go to: http://www.rightline.net/education/charting.html
Stocks Covered in This Issue
COMMUNICATION SERVICES SECTOR
Paramount Global (PARA: Communication Services/Entertainment) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. PARA's current price action near moving average support signals a potential BUY entry at 24.01, followed by a 1.87 trailing stop which can be tightened to 0.94 upon earning 2.04. PARA closed Thursday at 23.44. Earnings Report Date: May 01, 2023. Beta: 1.65. Market-Cap: 15.382B. Optionable.
CONSUMER CYCLICAL SECTOR
MillerKnoll, Inc. (MLKN: Consumer Cyclical/Furnishings, Fixtures & Appliances) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 23.92, MLKN is on our radar for a BUY entry at 24.37. If you purchase shares of MLKN, be sure to also place a trailing stop of 1.6. Snug it up to 0.8 on a 1.5 gain. Earnings Report Date: Mar 27, 2023. Beta: 1.49. Market-Cap: 1.808B. Optionable.
HEALTHCARE SECTOR
Syneos Health, Inc. (SYNH: Healthcare/Diagnostics & Research) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. SYNH's reaction to support on Thursday created a Bullish Bounce setup with a BUY entry trigger at 39.49. Use a 3.52 trailing stop, which should work well with SYNH's typical daily range. Tighten it to 1.76 on a 2.18 profit. SYNH closed at 38.25 on Thursday. Earnings Report Date: Apr 27, 2023. Beta: 1.65. Market-Cap: 3.949B. Optionable.
INDUSTRIALS SECTOR
Matthews International Corporation (MATW: Industrials/Conglomerates) - NEW HIGH DIP. MATW's strong performance produced a new 52-week high several days ago. Since then we've been waiting for a pullback from that high in order to get on board with a low-risk entry. Thursday's reversal near Moving Average support provides us with a New High Dip setup. Set your BUY trigger at 38.95, and follow your purchase with a 2.11 trailing stop which can be tightened to 1.06 when you have a 2.48-point gain. MATW closed Thursday at 38.29. Earnings Report Date: Apr 26, 2023. Beta: 1.16. Market-Cap: 1.165B. Optionable.
TECHNOLOGY SECTOR
Digimarc Corporation (DMRC: Technology/Information Technology Services) - 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 DMRC's case we will enter a BUY should it reach the 21.31 level, or a SELL short trade if it drops to 19.82. As usual a trailing stop is essential, 1.49 which should be tightened to 0.75 on a 1.92 gain. DMRC closed Thursday at 20.86. Earnings Report Date: Mar 01, 2023. Beta: 1.53. Market-Cap: 417.951M. 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.
Disclaimer
The RightLine Report is an information service for investors and traders. It is not a solicitation nor a recommendation or offer to buy or sell securities. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. The publishers of The RightLine Report are not brokers or financial advisors, and are not acting in any way to influence the purchase or sale of any security. Stock picks, entry points and exit points should be considered an information resource to assist the trader in developing a trading plan and it is the sole responsibility of the reader to conduct his or her own due diligence before executing a trade. Trading securities should be considered speculative with a high degree of volatility and risk.
The publishers of The RightLine Report recommend that anyone trading securities should do so with caution, exercise prudent trading discipline and have a personal risk management strategy in place before doing so. It is possible at this or some subsequent date, the publishers and staff of The Pro Right Line Corp. may own, buy or sell securities presented. The Pro Right Line Corp. is not a financial advisory service. Its publishers, owners or investors, are not liable for any losses or damages, monetary or otherwise, that result from the content of The RightLine Report. Past RightLine Report performance may not be indicative of future performance.
All subscriptions and/or use of the RightLine.net website are subject to RightLine's "Terms of Use" and "Subscriber Terms & Conditions" which are posted at www.rightline.net.
Any REDISTRIBUTION of the above information, without The RightLine's written consent, is STRICTLY PROHIBITED.
Copyright / The Pro Right Line Corporation - All Rights Reserved
Click Here To Unsubscribe