February 4, 2023 - The RightLine Report ********************************** NOTES FROM THE EDITOR **********************************
One of the terms you'll sometimes see in the Rightline Report is "converging." It's root is "converge," which means "to tend toward or approach an intersecting point." From a technical perspective, this is a very powerful word. It's revolves around the simple logic that two (or more) support levels are better than one.
*********************************** "QUICK LIST" *********************************** Stock 02/03 02/03 Buy Short Trailing Stops Gain Symbol Price +/- Entry Entry Initial/Tighten Amount ------ -------- -------- -------- -------- --------------- -------- MSB 21.75 0.90 22.24 2.51/1.26 1.5 PBT 23.50 0.50 24.18 22.48 1.7/0.85 3.1 RCUS 20.51 -0.65 21.55 19.71 1.84/0.92 2.6 SBLK 22.18 0.05 22.68 1.68/0.84 1.42 WLDN 21.12 -0.33 22 20.43 1.57/0.79 1.62 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 ***************************** The major US stock indices were lower on Friday following the release of the January labor report and some anemic earnings results from large tech companies. Nonfarm payroll additions topped estimates, the unemployment rate declined, and domestic services sector activity shifted into expansion territory. The tight job market data along with persistent inflation have been factors in the Federal Open market Committee's (FOMC) agressive rate hike campaign. In equities, Apple (AAPL $155) fell short of estimates and reported its first quarterly revenues decline since 2019. Amazon (AMZN $107) and Google owner Alphabet (GOOGL $106) also announced disappointing quarterly results, while Qualcomm (QCOM $137) beat earnings per share (EPS) estimates by one cent, but missed on the revenue side. Treasury yields and the USD/dollar closed higher, gold and oil ended the session lower. Friday On The Week -------------------- -------------------- Dow 33,926.01 -127.93 -52.07 -0.15% Nasdaq 12,006.95 -193.86 +385.24 3.31% S&P 500 4,136.48 -43.28 +65.92 1.62% NYSE Volume 4.72B NYSE Advancers 837 NYSE Decliners 2,248 Nasdaq Volume 5.98B Nasdaq Advancers 1,715 Nasdaq Decliners 2,867 New Highs/Lows 01/27 01/30 01/31 02/01 02/02 02/03 -------------------------------------------- NYSE New Highs 115 66 104 177 203 121 NYSE New Lows 6 8 4 8 5 4 Nasdaq New Highs 127 89 138 190 199 142 Nasdaq New Lows 40 20 31 34 27 24 *********************************** TRADER'S TIP: *********************************** TRADER'S TIP: "The Market Trend: A Friend That's Too Big To Push Around" "The manipulation of the primary trend is not possible. When large amounts of money are at stake, the temptation to manipulate is bound to be present. Speculators, specialists or anyone else involved in the markets could manipulate the prices, but it is not possible to manipulate the primary trend. Intraday, day-to-day and possibly even secondary movements could be prone to manipulation. These short movements, from a few hours to a few weeks, could be subject to manipulation by large institutions, speculators, breaking news or rumors. Individual shares could be manipulated, but manipulations usually end the same way: the security continues the primary trend. But it would be virtually impossible to manipulate the market as a whole. The market is simply too big for this to occur." ~ William Hamilton, the Dow theory ************************** 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/ S&P 500 - 4136.48 February 3, 2023 52-Week High: 4637.30 52-Week Low: 3491.58 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 4475.60 Resistance 2: 4295.71 Resistance 1: 4216.09 Pivot: 4115.82 Support 1: 4036.20 Support 2: 3935.93 Support 3: 3756.04 https://www.prorightline.com/rlch/020323SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, February 06, 2023: 06-Feb None scheduled Tuesday, February 07, 2023: 07-Feb 8:30 am International trade deficit 07-Feb 11 am NY Fed 1-year inflation expectations 07-Feb 11 am NY Fed 5-year inflation expectations 07-Feb 3 pm Consumer credit Wednesday, February 08, 2023: 08-Feb 10 am Wholesale inventories (revision) Thursday, February 09, 2023: 09-Feb 8:30 am Initial jobless claims 09-Feb 8:30 am Continuing jobless claims Friday, February 10, 2023: 10-Feb 10 am UMich consumer sentiment index (early) 10-Feb 10 am UMich 1-year inflation expectations (early) 10-Feb 10 am UMich 5-year inflation expectations (early) 10-Feb 2 pm Federal budget balance 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: "Slippage" "Price slippage" is the difference in the price of the stock that appears on the ticker at the time you place a trade, and the price at which your order is actually filled. "Transaction slippage" is the difference between estimated and actual transaction costs. To control slippage, always trade liquid stocks, avoid low volume issues, and use limit orders whenever possible. *********************************** STOCKS COVERED IN THIS ISSUE *********************************** BASIC MATERIALS SECTOR Mesabi Trust (MSB: Basic Materials/Steel) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. MSB's behavior on Friday could very well be a sign that a new bounce is underway. Place a BUY trigger at 22.24. In the event your trigger is met, also place a 2.51 trailing stop which can be trimmed down to 1.26 when you have a 1.5 profit. MSB closed Friday at 21.75. Earnings Report Date: Apr 25, 2023. Beta: 0.91. Market-Cap: 285.36M. Optionable. ENERGY SECTOR Permian Basin Royalty Trust (PBT: Energy/Oil & Gas Midstream) - SQUEEZE PLAY. Friday's narrow price range has created a potentially profitable setup in PBT, 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 24.18 and a SELL short entry at 22.48. Let PBT's price action determine your long or short entry. Once the order is filled, place a 1.7 trailing stop, and tighten it to 0.85 upon getting a 3.1 gain. PBT closed Friday at 23.50. Earnings Report Date: N/A. Beta: 0.94. Market-Cap: 1.095B. Optionable. HEALTHCARE SECTOR Arcus Biosciences, Inc. (RCUS: Healthcare/Biotechnology) - SQUEEZE PLAY. RCUS is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 21.55 and a SELL short entry at 19.71. Once your trade is filled, enter a 1.84 trailing stop. Tighten it to 0.92 after a 2.6 gain. RCUS closed on Friday at 20.51. Earnings Report Date: Feb 21, 2023. Beta: 0.86. Market-Cap: 1.485B. Optionable. INDUSTRIALS SECTOR Star Bulk Carriers Corp. (SBLK: Industrials/Marine Shipping) - BULLISH BOUNCE. Another bullish bouncer, SBLK appears ready to resume trading in an uptrend after recent selling forced the stock lower for several days. Friday's positive price action near Moving Average support says it's time to BUY shares if SBLK reaches our entry trigger set at 22.68. Also place a 1.68 trailing stop which can be narrowed to 0.84 when you reach a 1.42 profit. SBLK closed Friday at 22.18. Earnings Report Date: Feb 16, 2023. Beta: 1.04. Market-Cap: 2.278B. Optionable. Willdan Group, Inc. (WLDN: Industrials/Engineering & Construction) - SQUEEZE PLAY. Traders are feeling the pressure as WLDN's intra-day price range on Friday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 22 and a SELL short entry at 20.43. WLDN's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.57 trailing stop. Tighten it to 0.79 after you get a 1.62 gain. WLDN closed Friday at 21.12. Earnings Report Date: Mar 08, 2023. Beta: 1.26. Market-Cap: 280.788M. 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 ********************************** "Market Liquidity and Fund Flows" You may remember from high school economics that business operates on the basic principle of "supply and demand." If there is a lot of demand for a limited amount of supply, prices will go higher, if there is more supply than demand, than prices will go lower. In the stock market, the principle works the same way. If there are more people who want to buy (demand) than there are people who want to sell (supply) prices will head higher, and visa versa. Successfully forecasting short-term supply/demand for stocks can improve our odds as traders, but is it possible to do it? To find out, let's take a look at the providers of mutual fund flows and liquidity numbers to see how they can be helpful to traders. - Who Provides the Mutual Fund Flow Data? There are three premier companies that specialize in tracking flows in and out of mutual funds: Trim Tabs, AMG Data (Lipper), and the Investment Company Institute. Even though each company provides its own specific interpretation of the data, they all understand how important these flows are to the market. At RightLine, we primarily use the TrimTabs reports. Trim Tabs Fund Flows report attempts to reliably forecast the Investment Company Institute's results by taking a sampling of approximately 850 statistically significant funds. The ICI numbers are more comprehensive, but are not always released as quickly as Trim Tabs. - Trim Tabs Trim Tabs is the only independent research service that publishes daily and weekly in-depth coverage of stock market liquidity going back to 1990. Charles Biderman, a former Barron's Financial Weekly editor, is the originator of the "Liquidity Theory". This view is based on the premise that the total market capitalization - price - is a function of liquidity, and has nothing to do with value. The Mutual Fund Flows provided by TrimTabs is very popular with the media, but the Liquidity Report really gives a much broader picture of how money is shifting in and out of the market. TrimTabs considers liquidity a "coincident indicator" to stock prices. In other words, if we know where liquidity is heading, then we'll know where stock prices are heading at the same time. The "Mutual Fund Flows" are the net amount of money either going in or out of mutual funds. Trim Tabs surveys over 850 equity and bond funds daily to calculate this figure. The flows are categorized as follows: ~ Total Equity Funds are made up of US Equity funds and International funds. ~ The US Equity funds include "Aggressive Growth", "Growth", and "Growth and Income" funds. ~ The Total Bond funds include Hybrid (stock and bond) funds, Government and GNMA bonds, Municipal Bonds, Corporate/Income/Global bond funds, and High Yield funds. If US Equity funds show a significant inflow, the individual fund managers scramble to put the money to work in the market by buying stock. On the other hand, if there are major outflows from mutual funds, the fund managers liquidate stock to fulfill redemption requests from fund shareholders. - Trim Tabs Liquidity Calculation Liquidity is the difference between inflows and outflows of cash in the stock market over a given period of time. Trim Tabs calculates liquidity by adding US Equity Fund Inflows, two-thirds of newly announced cash takeovers, one-third of completed cash takeovers and subtracting new offerings. Cash takeovers of publicly traded companies are considered a new inflow of cash into the market. On the other hand, new offerings (IPOs) are considered a drain on liquidity because they "use" money that would have been available for investing in the "previously-existing" stocks. Liquidity tends to run higher during tax refund season and year-end bonus time, and lower near dates when people and companies have to pay their taxes. The Trim Tabs website can be seen at https://www.trimtabs.com/. - Investment Company Institute The Investment Company Institute gets its data from ICI members, which represent 95 percent of the total investment company industry's assets. The ICI web site shows similar information as the Trim Tabs Fund Flows, but as mentioned above, it covers a wider number of sources and isn't released as quickly. ICI reports the assets of money market funds to the Federal Reserve Board each week and makes this data available to the public on a weekly basis. The Institute also reports monthly on three broad categories of funds. They are: (1) Short-term funds which include tax-exempt money market funds; (2) Taxable retail and institutional money market funds; and (3) All funds other than money market funds - such as stock, income, corporate bond and municipal bond funds. For more information you can visit ICI's website at: https://www.ici.org/research/stats. - AMG Data (Lipper) AMG Data (Lipper) is another respected company that provides mutual fund flow information. They offer weekly aggregate and fund specific Money Flow reports on just about any sector. They maintain an archive of historical fund flow reports and year-end statistical data dating back to 1992 on all AMG sectors. AMG collects and reports the numbers for all fund groups as soon as each company releases data. Vanguard, Fidelity, and American Funds report month-end numbers early the following month. Information on weekly reporting funds is for each week ended Wednesday. Monthly flows are calculated by combining weekly reported flows and monthly reported flows for each month. AMG's "Cash Track" describes the rate at which money is coming into or going out of a sector. Most funds report weekly, and some report monthly, so AMG uses a 4-week moving average across the entire set of funds, even those that report less often. Weekly reporting funds include 93% of the share classes, which represent 75% of the total fund assets. The AMG Data (Lipper) Services website is at https://www.lipperusfundflows.com. Bottom Line: In conclusion, market liquidity and fund flow reports have historically been a timely indicator of investor sentiment and current demand. While liquidity and fund flows aren't something you would necessarily consider before each trade, this information can give you valuable insight into the market's current supply and demand situation. ====================================================================== 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. 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