February 8, 2022 - The RightLine Report
Notes From The Editor
Do you tend to feel like you're always too late or too early on your trades? Some psychologists suggest that a solution to this predicament may be found by looking inside ourselves.
Apparently there are several important components in our mental and emotional makeup that must be in balance before our investment efforts translate into consistent winning.
One in particular has a huge influence on how well we perform. It often causes us to take action when we should wait, and causes us to wait when we should take action. It's our "ego."
Webster's dictionary defines the ego as "One of the three divisions of the psyche in psychoanalytic theory that serves as the organized conscious mediator between the person and reality, especially by functioning both in the perception of and adaptation to reality."
That's quite a mouthful. In simpler terms, the "ego" evaluates whatever is going on around us. There are two ways that our ego does this.
1) It compares current events to the past
2) It compares current events to our expectations of the future.
Oddly, our ego regularly exhibits the amazing ability to ignore the most important time frame of all - the present. This is really important, since our ego has a big influence on the quality of our decisions. Some behavioral biologists believe that this tendency results from our genetic makeup. They propose that our ancestors survived by learning a very vital lesson; past events often occurred again.
Those who did not use the past to predict the future didn't survive long enough to reproduce. This leads to the possible conclusion that we are here today because our ancestors successfully used the past to predict the future. We seem to be wired to believe that the same approach works just as well in an artificial environment - like the stock market - as it does in our natural environment.
Bottom Line: Using the past to predict the future does have some beneficial application in the stock market. However, it isn't very effective when it comes at the cost of giving up a clear view of the present.
Finding a balanced perspective requires that we take all three time frames into account ... the past, the present, and the future. They are all important. However, since the ego tends to undervalue the present - the only one of the three in which we can take action - it can have a huge effect on the outcome of our efforts.
Although discipline and patience are required, it is possible to train ourselves to accept the importance of the present reality - such as when price action tells us the time has come to enter or exit a trade. If you find that you are hesitating or second-guessing your actions, just remember this; Use the past to plan for the future. When you get there, stay in the moment.
Trade well!
~Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 02/08 02/08 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
UAN 101.00 -0.05 103.34 96.54 6.8/3.4 10.76
RENN 21.78 0.50 22.17 1.63/0.82 3.2
FLO 28.47 0.20 28.95 1.56/0.78 1.2
XP 32.17 0.19 32.7 2.58/1.29 3.38
BCO 70.00 0.37 71.05 67.35 3.7/1.85 4.14
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 rallied on Tuesday depite a widening trade deficit and a drop in small business optimism to the lowest level in 11 months. In earnings news, Harley-Davidson (HOG $42)announced a 32% jump in revenues for the quarter, while Pfizer (PFE $52) topped earnings expectations but fell short in the revenue department. Gold and the USD/dollar finished higher, oil pricess were lower. Treasuries were also lower as yields went up across the board.
Feb 7, 2022 Feb 8, 2022
-------------------- --------------------
Dow 35,091.13 1.39 35,462.78 371.65
Nasdaq 14,015.67 -82.34 14,194.45 178.79
S&P 500 4,483.87 -16.66 4,521.54 37.67
NYSE Volume 4.29B 4.43B
NYSE Advancers 1,801 2,025
NYSE Decliners 1,566 1,311
Nasdaq Volume 4.3B 4.26B
Nasdaq Advancers 2,709 2,957
Nasdaq Decliners 2,016 1,726
New Highs/Lows
02/01 02/02 02/03 02/04 02/07 02/08
--------------------------------------------
NYSE New Highs 63 76 56 67 53 58
NYSE New Lows 48 55 150 265 199 242
Nasdaq New Highs 57 56 38 45 50 71
Nasdaq New Lows 123 114 237 347 237 249
Stocks Covered Today Stock Splits
TRADER'S TIP: "Key Split Dates"
There are several dates to understand in the life cycle of a split.
~ The Announcement Date is the date that the stock split is announced.
~ The Record Date is the date that owners of the stock are technically entitled to the stock dividend or split.
~ The Pay Date is the date that owners of record are paid the stock dividend or split.
~ The Execution Date - usually one business day after the Pay Date - is the date that the stock price adjusts for the split on its respective exchange.
Simple enough, but in addition to these definitions there is further date distinction between which shareholders receive dividends vs splits. To receive a cash dividend you must own the stock ON the Record Date. Any time thereafter you will still receive the dividend even if you have sold the stock before its pay date. In the case of a stock split, as long as you buy the stock BEFORE the Execution Date you will see the effect of the split in your account; the date of record has no bearing. As traders, we are primarily interested in the announcement and execution dates. These dates have stock price movements associated with them. The Date of Record has relevance and often can be a turning point in the trend of the stock. However, it doesn't affect whether you are entitled to the split on the Execution Date.
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 - 4521.54 February 8, 2022
52-Week High: 4818.62
52-Week Low: 3723.34
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4865.86
Resistance 2: 4684.57
Resistance 1: 4592.55
Pivot: 4503.28
Support 1: 4411.26
Support 2: 4321.99
Support 3: 4140.70
NASDAQ Composite - 14194.45 February 8, 2022
52-Week High: 16212.23
52-Week Low: 12397.05
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 15597.73
Resistance 2: 14860.62
Resistance 1: 14479.31
Pivot: 14123.51
Support 1: 13742.20
Support 2: 13386.40
Support 3: 12649.29
Dow Industrials - 35462.78 February 8, 2022
52-Week High: 36952.65
52-Week Low: 30547.53
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 37454.54
Resistance 2: 36271.44
Resistance 1: 35680.59
Pivot: 35088.34
Support 1: 34497.49
Support 2: 33905.24
Support 3: 32722.14
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, February 07, 2022: 07-Feb 3 pm Consumer credit Tuesday, February 08, 2022: 08-Feb 6 am NFIB small-business index 08-Feb 8:30 am International trade 08-Feb 11 am Real household debt (year-over-year) Wednesday, February 09, 2022: 09-Feb 10 am Wholesale inventories (revision) Thursday, February 10, 2022: 10-Feb 8:30 am Initial jobless claims 10-Feb 8:30 am Continuing jobless claims 10-Feb 8:30 am Consumer price index (month-to-month) 10-Feb 8:30 am Core CPI (month-to-month) 10-Feb 8:30 am Consumer price index (year-to-year) 10-Feb 8:30 am Core CPI (year-to-year) 10-Feb 2 pm Federal budget Friday, February 11, 2022: 11-Feb 10 am UMich consumer sentiment index (preliminary) 11-Feb 10 am UMich 5-year inflation expectations (preliminary) 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: "Accredited Investor"
This is the SEC term for a person or entity meeting any of the criteria listed below. Certain restricted offerings, hedge funds, limited partnerships, and angel investor networks are open only to accredited investors.
1) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer or general partner of a general partner of that issuer.
2) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000.
3) Any natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
4) Any trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase of the securities is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.
5) Any organization that was not formed for the purpose of acquiring the securities being sold, with total assets in excess of $5,000,000.
6) Any entity in which all of the equity owners are Accredited Investors.
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
CVR Partners, LP (UAN: Basic Materials/Agricultural Inputs) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. UAN traders reached this state of stand-off on Tuesday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 103.34 and a SELL short trigger at 96.54. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 6.8 which can be tightened to 3.4 on a 10.76 gain. UAN closed Tuesday at 101.00. Earnings Report Date: Feb 22, 2022. Beta: 1.66. Market-Cap: 1.079B. Optionable.
CONSUMER CYCLICAL SECTOR
Renren Inc. (RENN: Consumer Cyclical/Auto & Truck Dealerships) - 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 RENN which met our setup criteria on Tuesday. The BUY trigger for this trade is at 22.17, and the trailing stop is sized at 1.63. Resize the stop to 0.82 upon collecting a 3.2 point gain. RENN closed Tuesday at 21.78. Earnings Report Date: N/A. Beta: 1.60. Market-Cap: 523.143M. Optionable.
CONSUMER DEFENSIVE SECTOR
Flowers Foods, Inc. (FLO: Consumer Defensive/Packaged Foods) - BULLISH BOUNCE. Another bullish bouncer, FLO appears ready to resume trading in an uptrend after recent selling forced the stock lower for several days. Tuesday's positive price action near Moving Average support says it's time to BUY shares if FLO reaches our entry trigger set at 28.95. Also place a 1.56 trailing stop which can be narrowed to 0.78 when you reach a 1.2 profit. FLO closed Tuesday at 28.47. Earnings Report Date: Feb 10, 2022. Beta: 0.26. Market-Cap: 6.018B. Optionable.
FINANCIAL SERVICES SECTOR
XP Inc. (XP: Financial Services/Capital Markets) - 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. XP's behavior on Tuesday could very well be a sign that a new bounce is underway. Place a BUY trigger at 32.7. In the event your trigger is met, also place a 2.58 trailing stop which can be trimmed down to 1.29 when you have a 3.38 profit. XP closed Tuesday at 32.17. Earnings Report Date: Feb 21, 2022. Beta: 1.64. Market-Cap: 18.001B. Optionable.
INDUSTRIALS SECTOR
The Brink's Company (BCO: Industrials/Security & Protection Services) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in BCO's narrowest trading range of the past seven sessions. With neither group able to take complete control on Tuesday, the stock's short term destiny is up for grabs. You can capitalize on this unusually tight condition by placing both a BUY order at 71.05 and a SELL order at 67.35. Regardless of which order is triggered, cancel the other one and follow your entry with a 3.7 trailing stop. Tighten the stop to 1.85 once you have a 4.14 gain. BCO closed Tuesday at 70.00. Earnings Report Date: Feb 23, 2022. Beta: 1.56. Market-Cap: 3.441B. 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
---------------- ------- -------- ------- ------ -------
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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