|
February 3, 2024 - The RightLine Report
**********************************
NOTES FROM THE EDITOR
**********************************
Psychologist Robert Zajonc once wrote, "We sometimes delude ourselves that we proceed in a rational manner and weigh all of the pros and cons of various alternatives. But this is seldom the case. Quite often "I decided in favor of X" is no more than "I liked X" ... We buy the cars we "like," choose the jobs and houses we find "attractive," and then justify these choices by various reasons."
***********************************
"QUICK LIST"
***********************************
Stock 02/02 02/02 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
INBK 30.17 -0.22 30.73 2.24/1.12 2.4
TBBK 42.66 0.29 43.86 3.33/1.67 2.16
KURA 21.13 0.10 21.73 20.04 1.69/0.85 1.32
GTLB 72.35 0.01 74.48 6.96/3.48 5.2
AMPL 13.15 0.14 13.38 1.01/0.51 0.76
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 https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/
*****************************
MARKET SUMMARY
*****************************
Stocks closed higher on Friday as the US jobs report pleasantly surprised the markets. Consequently, Treasury yields surged, with the 10-year yield climbing to 4.02%. The 2-year Treasury yield, often regarded as a barometer of the fed funds rate over time, rose to approximately 4.36%. Remarkably, despite this substantial yield increase, stocks managed to rally. The tech-dominated Nasdaq remained particularly robust, advancing over 1.7% on Friday, courtesy of impressive earnings from mega-cap tech giants like Meta (formerly Facebook) and Amazon. In a broader context, both the S&P 500 and Nasdaq have registered gains of around 4.0% year-to-date, despite recent market fluctuations and the strong performance witnessed in 2023. The jobs report for January continues to paint a picture of a robust labor market in the United States. The addition of 353,000 jobs significantly outperformed the anticipated 185,000, echoing the upwardly revised figure of 333,000 from the previous month. While the unemployment rate was predicted to climb to 3.8%, it held steady at 3.7%, mirroring last month's reading. Labor force participation also remained stable at 62.5%, still hovering near a post-pandemic peak. Of particular note for investors, as a potential signal of inflation, were average hourly earnings, or wage gains, which reached 4.5% year-over-year, exceeding both last month's reading and the expected 4.1%. Although this wage growth uptick may exert some upward pressure on services inflation, the Fed and investors will likely adopt a cautious stance, preferring to observe additional data trends before making significant conclusions. This cautious approach seems especially pertinent after experiencing several months of declining wage gains, following a high of 5.9% in March 2022. All in all, we believe that this robust jobs report and the higher-than-anticipated wage-gains figure will prompt the Fed to remain on the sidelines during its March meeting, as it continues to monitor incoming data for indications that inflation is continuing to moderate, particularly in the run-up to its May and June meetings. The technology sector has been significantly influenced by earnings reports from a host of mega-cap technology firms over the past week, including Meta, Amazon, and Apple, which reported their results on Thursday evening. Despite the high expectations leading into earnings season, these companies have been rewarding investors with impressive results, particularly when they've exceeded these high expectations. Thursday's performance by Meta serves as a prime example. Not only did the company report a 25% surge in sales and profits that tripled in the fourth quarter, along with promising guidance, but it also introduced its first-ever quarterly dividend and augmented its share buyback program by $50 billion.Consequently, Meta's stock rose over 15% on Friday, significantly contributing to the Nasdaq's upward trajectory. Overall, this quarter's earnings have been mixed, with around 45% of S&P companies having already reported. Among these, approximately 75% have recorded earnings that exceeded expectations, in line with historical norms. In our assessment, while the 2023 S&P 500 earnings growth was relatively modest, there's potential for 2024 earnings to increase by 5% to 10%, which bodes well for stock returns also. Friday On The Week
-------------------- --------------------
Dow 38,654.42 134.58 +544.99 1.43%
Nasdaq 15,628.95 267.31 +173.59 1.12%
S&P 500 4,958.61 52.42 +67.64 1.38%
NYSE Volume 3.98B
NYSE Advancers 910
NYSE Decliners 1,933
Nasdaq Volume 4.81B
Nasdaq Advancers 1,636
Nasdaq Decliners 2,589
New Highs/Lows
01/26 01/29 01/30 01/31 02/01 02/02
--------------------------------------------
NYSE New Highs 143 161 206 179 148 172
NYSE New Lows 12 22 17 28 31 49
Nasdaq New Highs 137 237 207 131 108 159
Nasdaq New Lows 75 98 94 126 128 161
***********************************
TRADER'S TIP:
***********************************
TRADER'S TIP: "Get Rich Quick" Only an extremely tiny percentage of individuals who enter the stock market to get rich quick ever accomplish that goal. Most of them bust our rather quickly. This is due to the tendency for "get rich quick" folks to accept way too much risk - usually by putting too much of their account into one position. **************************
THE TECHNICAL ANALYST
**************************
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: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ https://www.prorightline.com/rlch/020224SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, FEB. 5 9:45 am S&P final U.S. services PMI 10:00 am Chicago Fed President Austan Goolsbee TV appearance 10:00 am ISM services 2:00 pm Atlanta Fed President Raphael Bostic gives welcoming remarks TUESDAY, FEB. 6 12:00 pm Cleveland Fed President Loretta Mester speaks 1:00 pm Minneapolis Fed President Neel Kashkari speaks 2:00 pm Boston Fed President Susan Collins speaks 7:00 pm Philadelphia Fed President Patrick Harker speaks WEDNESDAY, FEB. 7 8:30 am U.S. trade deficit 11:00 am Fed Gov. Adriana Kugler speaks 11:30 am Boston Fed President Susan Collins speaks 12:30 pm Richmond Fed President Tom Barkin speaks 2:00 pm Fed Gov. Michelle Bowman speaks 3:00 pm Consumer credit 3:00 pm CBO briefing on budget and economic outlook THURSDAY, FEB. 8 8:30 am Initial jobless claims 10:00 am Wholesale inventories 12:05 pm Richmond Fed President Tom Barkin speaks FRIDAY, FEB. 9 8:30 am CPI seasonal factor revisions 1:30 pm Dallas Fed President Lorie Logan speaks For a chart of typical Up or Down market reactions to specific major US economic reports, go to "Economic Indicator Effects" at this link: https://prorightline.com/index.php/economic-indicator-effects/
***********************************
TRADER'S TIP:
***********************************
TRADER'S TIP: "The Four Stages of Market Action" A study of price charts reveals that all markets have the same basic movements. First is the accumulation or consolidation stage, which occurs at the bottom of a market; this is often referred to as a "base building" period. The second stage is the rally or run-up stage that occurs when stocks trend higher. The third stage is the distribution stage, another form of consolidation that signals the top of a market. The fourth stage is the sell off, or declining stage. Most markets spend over 80% of the time in the consolidation stages, when it is usually best to trade for short-term profits. ***********************************
STOCKS COVERED IN THIS ISSUE
***********************************
FINANCIAL SERVICES SECTOR First Internet Bancorp (INBK: Financial Services/Banks - Regional) - NEW HIGH DIP. The best stocks move steadily higher in a two-steps-forward and one-step-back series of repetitive new highs. INBK reached a new 52-week high a few days ago and has since retreated into Friday's encounter with moving average support. A bounce appears to be in the making, so prepare to pick up a few shares should INBK move up to our BUY trigger at 30.73. Post a 2.24 trailing stop which should be tightened to 1.12 after gaining 2.4. Earnings Report Date: Apr 24, 2024. Beta: 0.70. Market-Cap: 260.803M. Optionable. The Bancorp, Inc. (TBBK: Financial Services/Banks - Regional) - NEW HIGH DIP. Another high-flyer, TBBK just recently set a new 12-month max price. Having dipped since then, TBBK's bullish response to an encounter with moving average support on Friday shows that the stock may be ready for another move skyward. Now at 42.66, an upward push to 43.86 will signal a BUY entry. Once in the trade, place a 3.33 trailing stop which can be tightened to 1.67 once you've gained 2.16. Earnings Report Date: Apr 25, 2024. Beta: 1.47. Market-Cap: 2.27B. Optionable. HEALTHCARE SECTOR Kura Oncology, Inc. (KURA: Healthcare/Biotechnology) - SQUEEZE PLAY. Friday's trading session left KURA 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 21.73 and your SELL short trigger at 20.04. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.69 trailing stop. Once you have a 1.32 profit, reduce the stop to 0.85. Earnings Report Date: Feb 21, 2024. Beta: 0.86. Market-Cap: 1.598B. Optionable. TECHNOLOGY SECTOR GitLab Inc. (GTLB: Technology/Software - Application) - NEW HIGH DIP. Confident in its ability to continue trending skyward, GTLB's pullback from a new 52-week high sets the stage for a return to that peak. Price activity on Friday provided a setup, with the BUY trigger ready at 74.48 should GTLB reach that level. Follow up your entry with a 6.96 trailing stop. Tighten it to 3.48 when you have a 5.2-point gain. GTLB closed Friday at 72.35. Earnings Report Date: Mar 11, 2024. Beta: 0.50. Market-Cap: 11.265B. Optionable. Amplitude, Inc. (AMPL: Technology/Software - Application) - BULLISH BOUNCE. Here is another example of a stock in an established uptrend that has recently experienced a counter-trend drop. The sliding price action has now found support near a moving average zone, bouncing upward during Friday's session to close at 13.15. Anticipate the rebound to continue, and be ready to buy AMPL at 13.38. Follow your entry with a trailing stop of 1.01 which can be tightened to 0.51 on a 0.76 profit. Earnings Report Date: Feb 20, 2024. Beta: 1.45. Market-Cap: 1.566B. 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: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/ ***********************************
STOCK SPLIT SUMMARY
***********************************
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 ---------------- ------- -------- ------- ------ ------- 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. For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
**********************************
Overbought/Oversold Overload Analysts love to show off by proclaiming that the markets have become overbought or oversold. Unfortunately, few of us seem to understand what these terms really mean or what we should do when these moments of truth arise. Should we run for the hills because a market is overbought, or perhaps load up the boat because it's oversold? And how do we know when one of our trades might fall prey to one of these extreme conditions? The best way to understand overbought or oversold markets is to study the nature of supply and demand. At any given moment, a finite pool of buyers and sellers is available to take action on a particular stock. The trading activity of this crowd usually stays within fairly narrow boundaries. But imbalances develop over time and force one side to pull the trigger, sometimes prematurely. This "uses up" that side of the market and awakens price mechanics that favor the other side. Bollinger Bands offer an effective tool for measuring overbought/oversold conditions. Notice how Nvidia (NVDA) triggers a short-term reversal each time price bars thrust outside the extremes of the 20-day Bollinger Bands. These outer bands tell swing traders to expect a reversal before real evidence appears on the price chart. This allows them to take high-profit exits while the rest of the crowd is caught in the moment. See chart: https://prorightline.com/rlr/TCnvda032203.gif It's important to note that overbought/oversold markets are relative to a trader's time frame. In the NVDA chart, some reversals were simple pullbacks in the underlying trend, while others represented major market turns. It is vitally important for traders to define their holding period before reacting to short-term price swings. Major profits will be lost by planning the trade in one time frame but executing it in another. Stochastics represents the classic overbought/oversold oscillator. Unfortunately, most traders don't understand how to interpret the information it provides. The worst thing you can do is jump ship just because stochastics hits a high or low extreme. Most swing-trading profits are booked in the early stages of overbought or oversold markets. Of course, that's where most of the risk is as well. See chart: https://prorightline.com/rlr/TCnq02h032203.gif Use simple double-top or double-bottom patterns to pinpoint reversals driven by overbought or oversold conditions. The best signals come when stochastics makes a lower high (or higher low) and expands in the opposite direction. This type of pattern will often complete ahead of price change, and should be acted upon without waiting for further confirmation. A single price bar can change everything. Stocks trade with an average high-low range through most market conditions. When this range expands sharply after an extended trend, it issues a loud overbought-oversold signal. See chart: https://prorightline.com/rlr/TCover032203.gif What exactly does this mean? First off, when a price bar expands in a new breakout, it's the beginning of something and not a reversal signal. But when a stock ramps from one price level to another, and then pops an expansion bar, get ready to close up shop in a hurry. Traders must deal with the relativity of overbought/oversold markets. A longer-term Wilder's relative strength index (RSI) really drives home this vital point. It captures broad cycles of market movement, and it can stay at overbought or oversold levels for extended time periods. See chart: https://prorightline.com/rlr/TCqcom032203.gif As with the stochastics indicator, hold your ground until RSI shows definite signs of moving in the other direction. This usually comes when it drops below (lifts above) the extension line. Even then, compare RSI with the price pattern to determine whether a major turn, or simple pullback, is under way. *********************************** This special guest article was written by Alan Farley, author of "The Master Swing Trader." ======================================================================
Best of luck and have a Great Week!
**********
If you prefer to receive this report in html with color and
graphics, or have any questions, send us an email using our contact
form at:https://prorightline.com/index.php/contact-us/
======================================================================
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 To Unsubscribe, send an email to cs@prorightline.com or call 1-312-248-4241. |