Notes From The Editor

It's been said that for every expert there's an opinion, and for every opinion there's an expert. The perfect example of this observation arrives annually during the weeks surrounding the New Year. Without fail a never-ending lineup of experts will present a steady stream of authoritative market predictions. Not surprisingly, many of these gurus offer opposing viewpoints and expectations for the next twelve months.

While all of the commotion creates a whirl of buy and sell activity for brokerage firms, it typically provides little if any real value for traders and investors. The biggest quandary is that most experts recommend their favorite stocks or funds - all different of course - and give no specific buy and sell details, time frame or exit plan. Each one makes a good case for their particular selection, but then so does the next "expert" in the lineup.

The general theme of all this advice is for viewers to hold onto their purchases for the "long term." Unfortunately, not only do the experts fail to tell us if that means months, years, or decades, next year these same experts may propose an entirely different stock or fund because their previous year's forecast fell flat on its face.

Usually the only specifics offered are what to buy. Rarely are investors told how long they should anticipate holding the position, and they never get a specific exit price to use if the stock or fund implodes.

I guess our friendly experts want us to buy and hold their recommendations for the "long term," whatever that may be. I suppose if the stock or fund tanks during that period of time the shareholder should just hang on and hope it will bounce back. Apparently no other trade management skills are required.

With friends like that, who needs enemies?

Happy New Year!

- Thomas Sutton, Editor

Quick List

    
Stock     12/31     12/31      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

MYTE      21.17      0.04     21.78     20.43        1.35/0.68      3.28
FLWS      23.37     -0.30     24.16     22.56          1.6/0.8      2.98
SMLP      22.19     -0.05     22.94     21.19        1.75/0.88      4.54
CEIX      22.71     -0.27      23.1     21.59        1.51/0.76      2.78
PNTG      23.08      0.12      23.6     22.05        1.55/0.78       3.2

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.

Market Summary

On Friday the US stock markets ended the year 2021 slightly lower, yet all three of the major indices recorded sizable gains on an annual basis for the third consecutive year. Corporate news and economic reports were in short supply due to many in the financial community taking an un-official New Year's Eve holiday break. As expected, trading volume was below average as investors continue to contemplate economic and earnings growth, rising inflation numbers, and Federal Reserve Bank tightening of monetary policy. The USD/dollar and oil prices declined, gold advanced in value and treasuries were mostly higher.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 36,338.30   -59.78      +387.74     1.08%
Nasdaq              15,644.97   -96.59         -8.4    -0.05%
S&P 500              4,766.18   -12.55       +40.39     0.85%

NYSE Volume                      2.68B                       
NYSE Advancers                   2,045                       
NYSE Decliners                   1,335                       

Nasdaq Volume                    3.39B                       
Nasdaq Advancers                 2,136                       
Nasdaq Decliners                 2,573                       

                                 New Highs/Lows

                   12/23  12/27  12/28  12/29  12/30  12/31
                 --------------------------------------------
NYSE New Highs       101    134    167    157    164    131
NYSE New Lows         28     43     62     89     55     42
Nasdaq New Highs      80    130    157    126    108     84
Nasdaq New Lows      121    198    319    447    179    174
   

TRADER'S TIP: "Up or Down?"

It doesn't matter which way the market goes as long as long as we keep our opinions about direction from blinding us to the opportunity at hand. Traders can increase profitability in all market conditions by following a few time proven guidelines:

1) Locate the trend, and trade in harmony with it. This dramatically shifts the odds of winning into your favor.

2) Never risk more than 2% on any one trade.

3) Use stops to protect against unplanned losses.

4) Be confident, but keep your ego in check. Respect your emotions; yet don't let them prevent you from following your trading plan while you are in a trade.

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 - 4766.18 December 31, 2021

52-Week High: 4808.93
52-Week Low: 3662.71
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4919.58
Resistance 2: 4844.64
Resistance 1: 4805.41
Pivot: 4769.70
Support 1: 4730.46
Support 2: 4694.75
Support 3: 4619.81

NASDAQ Composite - 15644.97 December 31, 2021

52-Week High: 16212.23
52-Week Low: 12397.05
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 16245.18
Resistance 2: 15987.65
Resistance 1: 15816.31
Pivot: 15730.12
Support 1: 15558.78
Support 2: 15472.59
Support 3: 15215.06
        
Dow Industrials - 36338.30 December 31, 2021

52-Week High: 36679.44
52-Week Low: 29856.30
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 37773.99
Resistance 2: 37049.03
Resistance 1: 36693.66
Pivot: 36324.07
Support 1: 35968.70
Support 2: 35599.11
Support 3: 34874.15
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

MONDAY, JAN. 3
9:45 am Markit manufacturing PMI (final)
10 am Construction spending

TUESDAY, JAN. 4
8:15 am Job quits
10 am ISM manufacturing index
10 am Job openings

WEDNESDAY, JAN. 5
9:45 am ADP employment report
2 pm Markit services PMI
8:30 am FOMC minutes

THURSDAY, JAN. 6
8:30 am Initial jobless claims (regular state program)
8:30 am Continuing jobless claims (regular state program)
10 am Trade deficit
10 am ISM services index
8:30 am Factory orders

FRIDAY, JAN. 7
8:30 am Nonfarm payrolls
8:30 am Unemployment rate
3 pm Average hourly earnings
3 pm   Consumer credit


For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "The Accuracy of an Economist"

"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today."

- Laurence J. Peter

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

MYT Netherlands Parent B.V. (MYTE: Consumer Cyclical/Luxury Goods) - SQUEEZE PLAY. A look at MYTE's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 21.78 and a SELL short trigger at 20.43. Once MYTE shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.35 and tighten to 0.68 on a 3.28 gain. MYTE closed Friday at 21.17. Earnings Report Date: Feb 23, 2022. Beta: N/A. Market-Cap: 1.789B. Optionable.

1-800-FLOWERS.COM, Inc. (FLWS: Consumer Cyclical/Specialty Retail) - 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 FLWS's case we will enter a BUY should it reach the 24.16 level, or a SELL short trade if it drops to 22.56. As usual a trailing stop is essential, 1.6 which should be tightened to 0.8 on a 2.98 gain. FLWS closed Friday at 23.37. Earnings Report Date: Jan 26, 2022. Beta: 1.69. Market-Cap: 1.521B. Optionable.

ENERGY SECTOR

Summit Midstream Partners, LP (SMLP: Energy/Oil & Gas Midstream) - SQUEEZE PLAY. Friday's trading action forced SMLP's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction SMLP will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 22.94 if SMLP moves higher, and place your order to SELL short at 21.19 if price declines to that level. As usual follow your entry with a trailing stop, 1.75 should be sufficient. Reduce your stop to 0.88 on a 4.54 gain. SMLP closed Friday at 22.19. Earnings Report Date: N/A. Beta: 3.12. Market-Cap: 159.099M. Not Optionable.

CONSOL Energy Inc. (CEIX: Energy/Thermal Coal) - SQUEEZE PLAY. CEIX is caught in a dilemma. The stock's compressed price range on Friday has resulted in a condition comparable to a wound up rubber band. We anticipate that this undecided equity will take off soon, but with the direction still in question we'll let upcoming market action tell us whether to buy shares or sell short. CEIX is now at 22.71. We can capture price action either way by placing a BUY trigger at 23.1 and a SELL short trigger at 21.59. Once CEIX reveals its direction, enter your triggered order and disregard the other one. As soon as your position is in place, follow up with a trailing stop of 1.51. When you acquire a 2.78 profit, tighten the stop to 0.76. Earnings Report Date: Feb 07, 2022. Beta: 2.60. Market-Cap: 783.045M. Optionable.

HEALTHCARE SECTOR

The Pennant Group, Inc. (PNTG: Healthcare/Medical Care Facilities) - 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 PNTG. A move to the upside will trigger our BUY entry at 23.6, while a drop to 22.05 will trigger our SELL short entry. Follow your position with a 1.55 trailing stop. Tighten the stop to 0.78 once you have a 3.2 gain. PNTG closed Friday at 23.08. Earnings Report Date: Feb 22, 2022. Beta: 2.43. Market-Cap: 657.251M. 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.

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  
---------------- -------     --------    -------     ------  -------   
Arista Networks   ANET      11/1/2021   11/18/2021  4-for-1   Yes
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  1/10/2021   5-for-1   No 
Merchants Bancorp MBIN      11/17/2021  1/18/2022   2-for-1   No
    

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.

Trader's Corner

"How To Draft A Trading Plan"

"Plan Your Trade and Trade Your Plan" is a mantra that we repeat on a regular basis. Why? Because we have found that traders who carefully plan each trade have a much better chance of winning in the stock market than those who don't. In fact, properly planning a trade can literally be the difference between making money and losing money.

A successful Trading Plan doesn't have to be complicated. Many traders draft their trading plans in a notebook or on index cards, while others use word processors and spreadsheets. Regardless of the method you choose, every trading plan must contain certain components to be effective. But before we get into the "essentials," let's take a quick look at a few dynamics behind "Planning Your Trade."

Before drafting a plan of action, traders will want to decide what style of trading they prefer. A broad generalization of "buy and sell stocks" doesn't work - the criteria needs to be specific. Successful traders make money in different ways, but each has a well-defined method. On the other hand, a losing trader's plan is always vague and ambiguous. In trading, it pays to be precise, so decide what you like to do and build your plan around that style.

Don't worry about getting locked in to a certain approach; you can always change it later as you gain experience. You can even draft more than one plan if you enjoy different types of trading. The best plans include a set of solid rules that never get broken, and a few elastic rules that allow for real-time decisions to be made when managing live trades. Our judgment improves as we gain experience, so it's good to allow some flexibility in less critical areas of your plan. At the same time, maintain unyielding rules in the more sensitive parts - such as Risk Control.

Okay, now let's layout the essential ingredients to include in your personal trading plan.

~ Determine Your Time Frame

The type of trading you prefer usually defines the time frame. Short term traders who enjoy a fast paced style won't find much action in weekly or monthly time frames, while less active traders generally find that the extremely short time horizons require too much time at the computer. Decide which style best suits your personality, and then select the corresponding time frame. It's usually a good idea to start by spending a few minutes each day. Begin by managing the trades using daily charts, then see if you want to shorten or lengthen the time frame. The RightLine Report offers a variety of stocks in different time frames. Due to the way these stocks are selected and the type of exit strategy used, most of the picks will work for traders who plan to hold positions anywhere from a few hours to a few weeks.

~ Locate The Best Stocks to Trade

Choose a method to determine which stocks to trade. If you are experienced in the markets you probably already have a number of ideas and sources. To make it easier for our subscribers, the Right Line Report presents a wide variety of good stock choices in every issue. They are based on an assortment of trading strategies and tactics that take advantage of predictable market behaviors.

You may also want to develop your own new methods for locating stocks. The educational section on our website at www.rightline.net presents numerous market concepts to help traders understand the nature of price movement, identify trends in every time frame, and choose the tools needed to capture profits.

~ Determine Entry Points

This can be a challenge, for there are almost as many different ways to determine entries, as there are stocks. Again, in an effort to make it easier for our subscribers, the Right Line Report presents specific entry points for every stock in each issue. The exact level to buy or sell short is based on a wide range of technical factors used by our analysts to reduce risk and optimize the potential gain. If you choose to select your own entry points, we provide a large assortment of articles to assist you in developing your own personal methods.

~ Use An Intelligent Method to Select the Number of Shares to Trade

Very few traders and investors realize the importance of balanced "Position Sizing." Most make the mistake of ignoring the size of their trading account when taking on new positions. As a result, many unknowingly join the ranks of high-risk over-traders, and soon find themselves in big trouble. Don't worry, it's easy to avoid when you have the RightLine Risk Manager to help! This simple tool is free to subscribers, but if you prefer to do the math yourself, here are the basics:

"Never risk more than 2% of your trading capital in a single trade or more than 6% of your capital at a time. For example, if you have $100,000 in your trading account, the most you should be willing to risk is $2,000. Before buying a stock, review the chart to locate the best place to put a stop loss order. If you determine that the stock requires 5-points to keep you in the trade while it is trending up, the maximum number of shares that you can afford is 400. ($2,000 maximum risk divided by 5-points = 400 shares.)"

You can see that although doing the calculation isn't terribly hard, the Risk Manager makes the job a whole lot easier!

~ Manage Risk With Stops

You may already know, but a "stop" is an order to buy at a price above or sell at a price below the current market price. Stops, or stop orders, are used to protect our capital and lock in profits. Placing stops is easy, but locating the best place to put them can be quite challenging. To assist traders with stop placement, every stock entry in the RightLine Report includes a suggested stop level. And of course, we offer plenty of help on our website for anyone who wants to learn more about managing risk with stops.

~ Determine Your Exit Strategy

After you've entered a position in a stock and it starts moving, then what? Traders have a lot of different choices when it comes to exiting trades, and the method used can make a world of difference. Some traders routinely use "trailing" stops as their exit strategy of choice, while others choose to exit when the stock hits a certain price, or breaks through a support level, or approaches a resistance level. Other traders will choose to exit based on intra-day swings or expected news releases. Some traders sell half when their target is met and let the other half ride with a trailing stop. Others sell to recover all invested capital, and only keep the stock earned with profits - essentially called free stock. This one is a wealth builder, but results in a lot of positions to manage.

When making a trading plan, remember to plan not only for the upside, but the downside too. The exit strategy is one of the most important parts of any trading plan, and it is fundamental for traders to select an exit plan before entering a trade.

Trade Planning is one of the most important skills that a trader can learn. Make it your strength and you will be well on your way to trading successfully.

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.

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