Notes From The Editor

Futures trader Linda Bradford published a list of classic trading rules that she believes have "withstood the test of time." Below are a few of them that I've found to be extremely helpful when trading stocks.

1. The difference between winners and losers isn't so much native ability as it is discipline exercised in avoiding mistakes.

2. Continually strive for patience, perseverance, determination, and rational action.

3. Lose your opinion - not your money.

4. Keep a positive attitude, no matter what happens.

5. Don't take the market home.

6. Assimilate into your very bones a set of trading rules that works for you.

7. Place the stop at the time you make your trade.

8. Never get into the market because you are anxious from waiting.

9. Losses make the trader studious - not profits. Take advantage of every loss to improve your knowledge of market action.

10. The most difficult task in speculation is not prediction but self-control. You are the most important element in the equation for success.

11. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.

12. Always discipline yourself by following a pre-determined set of rules.

13. A key to successful trading is knowing yourself and your stress point.

14. You must have a program, you must know your program, and you must follow your program.

15. Split your profits right down the middle and never risk more than 50% of them again in the market.

Trade well!

Thomas Sutton, Editor

Quick List

    
Stock     01/10     01/10      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

REGI      25.28     -0.03     25.89     24.36        1.53/0.77      2.88
COLL      23.30      0.11     23.96     22.31        1.65/0.82      1.78
BTAI      14.24      1.98     15.41                  3.53/1.76      1.70
XGN       24.14     -0.05     25.40     23.31        2.09/1.04      4.72
SSTI      26.53     -0.14     27.13     25.21        1.92/0.96      1.98

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 access to the Risk Calculator, go to http://www.rightline.net and login to the Member's area.

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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Market Summary

On Friday the Dow rallied above the 29,000 mark for the first time ever, then reversed course and closed lower for the session. In economic news, the US economy added 145,000 jobs in December, a strong number though 15,000 less than expected. Average hourly earnings were up and the unemployment rate remained at the historically low level of 3.5%. On the equities front, Synnex Corporation (SNX $146) and KB Home (KBH $36) both announced excellent quarterly earnings results. Gold and treasury yields were higher, oil prices and the USD/dollar declined.

                        Jan 9, 2020            Jan 10, 2020   
                  --------------------   --------------------
Dow                    28,957  +211.81        28,824  -133.13
Nasdaq                  9,203   +74.18         9,179   -24.57
S&P 500                 3,275   +21.65         3,265    -9.35

NYSE Volume                      3.70B                  3.29B
NYSE Advancers                    1642                   1364
NYSE Decliners                    1289                   1565

Nasdaq Volume                    2.56B                  2.42B
Nasdaq Advancers                  1871                   1377
Nasdaq Decliners                  1337                   1846

                                 New Highs/Lows

                   01/03  01/06  01/07  01/08  01/09  01/10
                 --------------------------------------------
NYSE New Highs       145    125    131    213    241    218
NYSE New Lows          9      8     11     11     13     20
Nasdaq New Highs     109    100    144    212    259    216
Nasdaq New Lows       13     28     20     19     17     29
   

TRADER'S TIP: "Intuition"

Intuition - we've all learned to rely on it in different areas of our lives. When it comes to trading the markets, trusting our intuition exclusively is a process that often leads to financial harm. As a rule of thumb, it's best to use your intuition to develop your methodology - not to decide when to enter or exit a trade.

For example, you may find that you intuitively prefer to trade one type of trade instead of another. Following your intuition in this manner will often lead you to better setups, resulting in bigger profits. Intuition that causes you to fine tune and test your trading methods is much more effective than using it as an entry or exit strategy.

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Boost Your Profits With Moving Averages".

S&P 500 - 3265.35 January 10, 2020

52-Week High: 3282.99
52-Week Low: 2570.41
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3391.02
Resistance 2: 3322.67
Resistance 1: 3294.01
Pivot: 3254.32
Support 1: 3225.66
Support 2: 3185.97
Support 3: 3117.62


NASDAQ Composite - 9178.86 January 10, 2020

52-Week High: 9235.20
52-Week Low: 6887.48
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 9702.58
Resistance 2: 9410.88
Resistance 1: 9294.87
Pivot: 9119.18
Support 1: 9003.17
Support 2: 8827.48
Support 3: 8535.78
        
Dow Industrials - 28823.77 January 10, 2020

52-Week High: 29009.07
52-Week Low: 23765.24
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 29931.37
Resistance 2: 29340.93
Resistance 1: 29082.35
Pivot: 28750.49
Support 1: 28491.91
Support 2: 28160.05
Support 3: 27569.61
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, January 13, 2020:
13-Jan  10 am   Eric Rosengren speaks
13-Jan  12:40pm   Raphael Bostic speaks
13-Jan   2 pm   Federal budget

Tuesday, January 14, 2020:
14-Jan   6 am   NFIB small business index
14-Jan  8:30 am   Consumer price index
14-Jan  8:30 am   Core CPI
14-Jan   9 am   John Williams speaks
14-Jan   1 pm   Esther George speaks

Wednesday, January 15, 2020:
15-Jan  8:30 am   Producer price index
15-Jan  8:30 am   Empire state index
15-Jan  11 am   Patrick Harker speaks
15-Jan  12 noon   Rob Kaplan speaks
15-Jan   2 pm   Beige Book

Thursday, January 16, 2020:
16-Jan  8:30 am   Weekly jobless claims
16-Jan  8:30 am   Retail sales
16-Jan  8:30 am   Retail sales ex-autos
16-Jan  8:30 am   Philly Fed
16-Jan  8:30 am   Import price index
16-Jan  10 am   Business inventories
16-Jan  10 am   NAHB home builders' index

Friday, January 17, 2020:
17-Jan  8:30 am   Housing starts
17-Jan  8:30 am   Building permits
17-Jan   9 am   Patrick Harker speaks
17-Jan  9:15 am   Industrial production
17-Jan  9:15 am   Capacity utilization
17-Jan  10 am   Consumer sentiment index
17-Jan  10 am   Job openings

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

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

ENERGY SECTOR

Renewable Energy Group, Inc. (REGI: Energy/Oil & Gas Refining & Marketing) - SQUEEZE PLAY. The ticker for Friday's session shows REGI is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 25.89 and a SELL short trigger at 24.36. When REGI starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 1.53 trailing stop. Upon reaching a 2.88 profit, resize the stop to 0.77. Earnings Report Date: N/A. Beta: 1.23. Market-Cap: 985M. Optionable.

HEALTHCARE SECTOR

Collegium Pharmaceutical, Inc. (COLL: Healthcare/Drug Manufacturers-Specialty & Generic) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. COLL found itself in this condition on Friday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 23.96 and a SELL short trigger at 22.31. When COLL moves outside of Friday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.65 trailing stop. After you've got a 1.78 profit, tighten the stop to 0.82. COLL closed at 23.30 on Friday. Earnings Report Date: N/A. Beta: 0.80. Market-Cap: 851M. Optionable.

BioXcel Therapeutics, Inc. (BTAI: Healthcare/Biotechnology) - 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 BTAI which met our setup criteria on Friday. The BUY trigger for this trade is at 15.41, and the trailing stop is sized at 3.53. Resize the stop to 1.76 upon collecting a 1.70 point gain. BTAI closed Friday at 14.24. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 214M. Not Optionable.

Exagen Inc. (XGN: Healthcare/Diagnostics & Research) - SQUEEZE PLAY. XGN shareholders know what it feels like to be squeezed. Friday's slim price range reveals uncertainty on both sides of the table, a situation which often resolves itself by either Bears or Bulls quickly gaining a clear advantage. The question is "who will win?" Near-term market action tell us whether we should sell short or we should buy shares instead. XGN closed Friday at 24.14. The plan is to enter in the right direction by placing a BUY trigger at 25.40 and a SELL short trigger at 23.31. Once XGN establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 2.09. After you've collected a 4.72 profit, tighten the stop to 1.04. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 308M. Not Optionable.

TECHNOLOGY SECTOR

ShotSpotter, Inc. (SSTI: Technology/Software-Application) - SQUEEZE PLAY. Friday's trading session left SSTI in a very narrow price range after buyers and sellers fought to a near stalemate. Both sides are looking for some traction, and a breakout either way could provide a nice gain in the short term. To get aboard, set your BUY trigger at 27.13 and your SELL short trigger at 25.21. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.92 trailing stop. Once you have a 1.98 profit, reduce the stop to 0.96. Earnings Report Date: N/A. Beta: 2.63. Market-Cap: 305M. Not 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  
---------------- -------     --------    -------     ------  -------   

Penns Woods Banc   PWOD    09/03/2019  10/01/2019   3-for-2   No
Equity Lifestyle   ELS     09/20/2019  10/16/2019   2-for-1   Yes
Middlefield Banc   MBCN    10/07/2019  11/12/2019   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

Pivot Points

During each trading session Nasdaq Market makers and floor traders on the NYSE refer to a set of pivot points based on the previous day's high, low, and closing prices. These pivotal levels are used as support and resistance that trigger buy or sell decisions when they are broken. Penetration of these pivots causes a shift in perceived valuation and the entry of new players into the marketplace.

There are times when pivot points are able to hold price within their boundaries, and then other times they don't. It's wise for traders to know where these import zones are located, for it's at these junctions that many high-volume traders will enter or exit positions.

In "The Technical Analyst" section of the RightLine Report you'll find Pivot Points based on weekly price data. These longer term Weekly Pivot Points are more more useful to traders who hold positions for several days, weeks, or longer.

Here are the common names and symbols for the basic pivot points:

Center Pivot Point ------ P
First Resistance Point -- R1
First Support Point ----- S1
Second Resistance Point - R2
Second Support Point ---- S2

The calculations to arrive at the pivot points are based on support and resistance levels. Here are the daily and weekly formulas used by most professionals:

Center Pivot Point P = (H1 plus L1 plus C1) divided by 3
First Resistance Point R1 = (2xP) minus L1
First Support Point S1 = (2xP) minus H1
Second Resistance Point R2 = P plus (R1 minus S1)
Second Support Point S2 = P minus (R1 minus S1)

Daily Pivot Points:
C1 is yesterday's closing price
H1 is yesterday's high
L1 is yesterday's low

Weekly Pivot Points:
C1 is last week's closing price
H1 is last week's high
L1 is last week's low

~ How Pivot Points are Used

Local floor traders tend to control trading on days when there is little news to influence the stock market. Generally Price range for the current day is expected to stay between the Central Pivot Point (P) and the First Resistance & Support Points (S1 & S2). Price moves beyond these points indicate a shift in momentum between bulls and bears. When these initial pivot points are exceeded, more traders with longer time frames are drawn into the market due to the widening price range.

When the first support and/or resistance levels are broken they will usually reverse their function - previous support becomes resistance and previous resistance becomes support. As a rule these points are then tested to confirm whether they will hold their new status.

Any successful breach of first support or resistance gets the attention of traders using longer time frames. Once the range of trading expands beyond the first points, the second support or resistance levels come into play and go through the same process. If they are penetrated, more longer-term traders are attracted by the price movement and participate in the action. More times than not, this leads to the formation of a new short-term trend.

Awareness of the price levels at which new traders are likely to enter the market can help off-floor traders determine when market makers and floor traders have shifted from buyer to sellers, or vice versa. This information is very valuable whenever there is little news influencing the market and the "locals" are running the show.

Floor traders typically are satisfied to push the market up and down within these daily limits. To avoid getting jerked around, traders with longer time frames than intra-day can place orders beyond the pivot points, or they use pivot points based on weekly data instead of daily. Not only does this help avoid "whiplash," but also increases the likelihood of catching a ride on a new trend as it emerges from the current session range. Traders who usually hold positions for several days or weeks will usually prefer to use weekly pivot points instead of daily.

Pivot points are very popular with stock exchange floor traders, but many times major news items and other market moving events will create enough pressure to drive prices beyond the support and resistance levels. However, pivot points often provide meaningful direction while allowing low risk entries and exits at highly probable reversal junctions.

As with any tactical tool, they are most effectively used as part of a clearly defined trading plan. Pivot points work exceptionally well in strategies designed to capture intraday profits on those boring summer days with little news, when the market seems to be drifting. In fact, that drift usually offers "pivot conscious" traders a chance to turn a profit while the less-informed are asleep at the wheel!

A simple yet powerful tool, the Risk Control Calculator helps you manage risk by recommending a maximum number of shares to purchase. Available to all RightLine subscribers. For access, go to http://www.rightline.net and login to the Member's area.

Disclaimer

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