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January 1, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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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.
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"QUICK LIST"
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Stock 12/31 12/31 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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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" 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/
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MARKET SUMMARY
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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
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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
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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
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TRADER'S TIP:
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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.
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THE TECHNICAL ANALYST
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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 - 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 https://www.prorightline.com/rlch/123121SPX.jpg--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" at this link: https://prorightline.com/index.php/economic-indicator-effects/
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TRADER'S TIP:
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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
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STOCKS COVERED IN THIS ISSUE
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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 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/
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STOCK SPLIT SUMMARY
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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
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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
For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/
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TRADER'S CORNER
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"The Squeeze Play" So are you Bullish or Bearish? When it comes to choosing trade setups, it doesn't always have to be one way or the other. Actually, in many cases you are much better off letting the market tell you whether to go long, or to go short, or just stand aside. This is what the Squeeze Play is all about. Not to be confused with a "short squeeze," the Squeeze Play gets its name from one of the trade setup conditions - an extremely narrow price range which indicates a dramatic drop in volatility. Due to the cyclical nature of volatility, powerful price moves often occur soon after these low-volatility situations. To begin, let's look at this type of trade setup in a different light than most traders would. Instead of trying to pre-determine which way price will move, we will assume that it could go either direction and plan for both. This means setting aside any expectations we may have for near-term price direction, and letting the upcoming price action determine which way we will enter the trade. Here is how it works. The Squeeze Play contains both a support and a resistance level which are used to set potential triggers for trade execution. For example, a buy entry is triggered if price moves up and breaks through resistance, while a short sale is triggered if price moves down and breaks below support. By selecting setups where there is a clearly defined narrow range between the support and resistance levels, we can enter in either direction with very little risk. The low risk comes from the fact that should the initial move fail - price doesn't have to go very far back to confirm that it's time to get out. Here is an example of a Squeeze Play setup: See Chart - https://prorightline.com/rlr/TCSqueezeAcopy.jpg Price volatility tends to go through repeating cycles of contraction and expansion. Once price has contracted and "squeezed" into a very narrow range, it invariably begins to expand. This expansion causes price to quickly "break out" of the narrow support & resistance boundaries, and often causes a short-term trend to develop in one direction or the other. Below is the same chart shown as above - only this one includes the short-term price action after breaking out of the range of the setup bar: See Chart - https://prorightline.com/rlr/TCSqueezeBcopy.jpg When you first look at a Squeeze Play setup you probably see it as either a long or a short. The only problem is that we don't know which way price will go, so the solution is to let the price action tell us. The narrow range setup bar gives a perfect opportunity to place a low risk stop. Although the example used in this article is a BUY, the concept works the same way for short sales. If price breaks down through support, then you would enter a SHORT and place an exit stop just above the top of the resistance level. Squeeze Plays make a trader's job easier because each pattern offers two potential trades. Though this method is very powerful, isn't complicated. The key is to locate low volatility price patterns with clear support & resistance levels that offer reasonable risk and reward potential in either direction. Then you set your entry triggers and stops a calculated distance beyond the S&R levels - simple as that!
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Best of luck and have a Great Week!
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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 800-737-4518. |