February 9, 2023 - The RightLine Report
Notes From The Editor
One of the most fascinating aspects of the human mind is the ability to find order in what appears to be chaos. Everyday life is full of these experiences - whether it's gazing at clouds and picking out shapes of animals, hearing organized melodies and beats in frantic music, or noticing patterns in the floor tile.
The other day I found myself absently-mindedly gazing at my desktop. The randomly arranged icons on the screen suddenly took on an eye-pleasing geometric aesthetic. It's amazing what the brain can do when it's left to its own devices.
Pattern recognition, of course, is what technical analysis is all about. Nothing seems more chaotic than stock prices, which zip up and down and change direction without notice. Attempting to buy a stock for a profitable short-term trade would be a crap shoot without the ability to detect and use patterns. While prior price action is no guarantee of future movement, it does have predictive quality that can boost your odds of a successful trade.
Imagine a stock that's rebounded from its 200 DMA - Daily Moving Average - during the past month. A subsequent reversal would provide an entry point with better than 50/50 odds for success. Applied consistently, those improved odds translate to long-term profits.
Why do chart patterns work? Mass psychological plays the biggest role. When thousands of market participants are anticipating a reversal or bounce from a certain level, it creates a sort of self-fulfilling prophecy. Supply and demand is a major factor as well - particularly on breakouts and breakdowns, when a stock moves into a price vacuum.
Active traders often come across patterns in the course of their everyday market-watching. Individual equities can develop intra-day trends - finishing strong after a weak open, rising during the lunch hour, and so on. The first instinct when you discover a pattern is to trade it. Before committing any money, however, note how often that pattern fails to produce results. It may even be a good idea to paper trade it for a day or two before putting your money down. And as always, use risk management when taking a position.
Also bear in mind that in this ever-changing market, patterns can suddenly cease to produce results. When this happens simply walk away and shift your attention to other stocks. With such a vast market universe, high-odds entry points present themselves on a daily basis.
Here's to profits!
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 02/09 02/09 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
ATGE 39.37 0.57 40.28 2.58/1.29 1.84
PLRX 31.98 0.23 32.91 2.4/1.2 3.86
FDMT 20.31 -0.23 21.09 19.47 1.62/0.81 2.94
ISEE 21.14 0.09 21.85 20.13 1.72/0.86 1.7
RDWR 21.68 1.09 22.03 1.94/0.97 1.22
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
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Stocks Covered Today Stock Splits
Market Summary
The top major US stock indices were lower on Thursday dsipite some upbeat earnings news from PepsiCo (PEP $173) and Walt Disney (DIS $110). The latter announced a restructuring plan that includes laying off 7000 employees. A light economic calendar showed initial jobless claims were higher than expected compared to the previous week. The USD/dollar, oil and gold all finished the session lower, treasury yields were higher.
Feb 8, 2023 Feb 9, 2023
-------------------- --------------------
Dow 33,949.01 -207.68 33,699.88 -249.13
Nasdaq 11,910.52 -203.27 11,789.58 -120.94
S&P 500 4,117.86 -46.14 4,081.50 -36.36
NYSE Volume 4.06B 4.28B
NYSE Advancers 1,009 807
NYSE Decliners 2,047 2,253
Nasdaq Volume 5.08B 5.55B
Nasdaq Advancers 1,416 1,340
Nasdaq Decliners 3,148 3,199
New Highs/Lows
02/02 02/03 02/06 02/07 02/08 02/09
--------------------------------------------
NYSE New Highs 203 121 61 85 66 87
NYSE New Lows 5 4 12 8 6 10
Nasdaq New Highs 199 142 92 103 100 93
Nasdaq New Lows 27 24 32 43 47 67
Stocks Covered Today Stock Splits
TRADER'S TIP: "Inside the RSI"
Simply stated, the RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses on a scale from 0 to 100. It is usually considered bullish for the underlying stock when the RSI rises above 30, and bearish when it falls below 70. A powerful way to use the RSI is to look for a divergence. An indication of an impending price reversal takes place when a stock or market reaches a new high, yet the RSI doesn't reach its previous high. A "failure swing" is said to confirm the impending reversal whenever the RSI drops below its most recent "valley."
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 - 4081.50 February 9, 2023
52-Week High: 4637.30
52-Week Low: 3491.58
Daily Trend: DOWN
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
NASDAQ Composite - 11789.58 February 9, 2023
52-Week High: 14646.90
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 13650.36
Resistance 2: 12769.35
Resistance 1: 12388.15
Pivot: 11888.34
Support 1: 11507.14
Support 2: 11007.33
Support 3: 10126.32
Dow Industrials - 33699.88 February 9, 2023
52-Week High: 35824.28
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 35453.93
Resistance 2: 34700.65
Resistance 1: 34313.33
Pivot: 33947.37
Support 1: 33560.05
Support 2: 33194.09
Support 3: 32440.81
Stocks Covered Today Stock Splits
Market Calendar
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
Stocks Covered Today Stock Splits
TRADER'S TIP: "Position Sizing"
"Position sizing is the most important part of your system in determining how much you are likely to make trading the system."
~ Van K. Tharp, from "Trade Your Way To Financial Freedom"
Stocks Covered in This Issue
CONSUMER DEFENSIVE SECTOR
Adtalem Global Education Inc. (ATGE: Consumer Defensive/Education & Training Services) - 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. ATGE's current price action near moving average support signals a potential BUY entry at 40.28, followed by a 2.58 trailing stop which can be tightened to 1.29 upon earning 1.84. ATGE closed Thursday at 39.37. Earnings Report Date: May 03, 2023. Beta: 1.01. Market-Cap: 1.789B. Optionable.
HEALTHCARE SECTOR
Pliant Therapeutics, Inc. (PLRX: Healthcare/Biotechnology) - BULLISH BOUNCE. PLRX has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Thursday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return PLRX to the previously established uptrend. The Bullish Bounce set-up is the basis for our BUY entry, so be ready to go long on a rise to our trigger at 32.91. Set a trailing stop of 2.4, tightening to 1.2 on a 3.86 profit. PLRX closed at 31.98 on Thursday. Earnings Report Date: Feb 27, 2023. Beta: 1.42. Market-Cap: 1.866B. Optionable.
4D Molecular Therapeutics, Inc. (FDMT: Healthcare/Biotechnology) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into FDMT. A move to the upside will trigger our BUY entry at 21.09, while a drop to 19.47 will trigger our SELL short entry. Follow your position with a 1.62 trailing stop. Tighten the stop to 0.81 once you have a 2.94 gain. FDMT closed Thursday at 20.31. Earnings Report Date: Mar 27, 2023. Beta: 2.56. Market-Cap: 657.89M. Optionable.
IVERIC bio, Inc. (ISEE: Healthcare/Biotechnology) - 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 ISEE's case we will enter a BUY should it reach the 21.85 level, or a SELL short trade if it drops to 20.13. As usual a trailing stop is essential, 1.72 which should be tightened to 0.86 on a 1.7 gain. ISEE closed Thursday at 21.14. Earnings Report Date: Feb 22, 2023. Beta: 1.10. Market-Cap: 2.834B. Optionable.
TECHNOLOGY SECTOR
Radware Ltd. (RDWR: Technology/Software-Infrastructure) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, RDWR fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 21.68, plan to buy shares at 22.03 and use a 1.94 trailing stop. Tighten the stop to 0.97 on a 1.22 gain. Earnings Report Date: May 01, 2023. Beta: N/A. Market-Cap: 972.149M. 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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