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January 15, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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The best traders are flexible. They know how to admit when they are wrong, get out of their losing positions quickly, and move ahead to the next trade. Though all traders aspire to be flexible, truth is many of us limit ourselves in ways we aren't even aware of.
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"QUICK LIST"
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Stock 01/14 01/14 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
RICK 84.95 0.43 86.38 5.95/2.98 6.82
BRBR 25.92 0.46 26.33 24.48 1.85/0.93 1.92
JXN 44.04 0.28 44.72 3.43/1.72 3.4
EVH 25.36 -0.81 26.45 24.41 2.04/1.02 1.74
FROG 26.19 -0.15 27.05 24.8 2.25/1.13 2.64
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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The major stock averages were mixed on Friday as the S&P 500 Index and the Nasdaq Composite moved higher, while the Dow Jones Industrial Average drifted lower in heavy trading volume. The Financial sector led the decliners following the release of mixed earnings results from Wells Fargo & Company (WFC $58), JP Morgan Chase (JPM $158) and Citigroup (C $67). Weak economic data was headlined by a sharp decline in December retail sales, a large drop in consumer sentiment and a modest dip in industrial production. Treasury yields, oil prices and the USD/dollar were higher, gold edged lower. Friday On The Week
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Dow 35,911.81 -201.81 -319.85 -0.88%
Nasdaq 14,893.75 86.94 -42.15 -0.28%
S&P 500 4,662.85 3.82 -14.18 -0.3%
NYSE Volume 4.35B
NYSE Advancers 1,348
NYSE Decliners 1,991
Nasdaq Volume 4.31B
Nasdaq Advancers 2,097
Nasdaq Decliners 2,483
New Highs/Lows
01/07 01/10 01/11 01/12 01/13 01/14
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NYSE New Highs 101 95 96 128 137 101
NYSE New Lows 105 205 57 64 103 199
Nasdaq New Highs 103 87 45 97 113 79
Nasdaq New Lows 338 740 172 169 431 683
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TRADER'S TIP:
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TRADER'S TIP: "Closing Positions Before Earnings And Getting Back In" Because price action immediately after earnings announcements often ends up surprising traders, we suggest closing positions before the company releases their earnings report. However, if a stock is moving in a solid trend - long or short - and earnings support that trend, you may want to jump back into the trade after the company reports earnings. This can be profitable at times, but don't chase the stock. If it has jumped more than 5% beyond your exit point, let it go. **************************
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 - 4662.85 January 14, 2022 52-Week High: 4818.62 52-Week Low: 3694.12 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 4997.82 Resistance 2: 4831.23 Resistance 1: 4747.04 Pivot: 4664.64 Support 1: 4580.45 Support 2: 4498.05 Support 3: 4331.46 https://www.prorightline.com/rlch/011422SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, January 17, 2022: 17-Jan None scheduled. Martin Luther King Jr. Day - Market Closed Tuesday, January 18, 2022: 18-Jan 8:30 am Empire state manufacturing index 18-Jan 10 am NAHB home builders index Wednesday, January 19, 2022: 19-Jan 8:30 am Building permits (SAAR) 19-Jan 8:30 am Housing starts (SAAR) 19-Jan 8:30 am Philadelphia Fed manufacturing survey Thursday, January 20, 2022: 20-Jan 8:30 am Initial jobless claims (regular state program) 20-Jan 8:30 am Continuing jobless claims (regular state program) 20-Jan 10 am Existing home sales (SAAR) Friday, January 21, 2022: 21-Jan 10 am Leading economic indicators 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: "Learn As You Earn" Short term trading is a great teaching vehicle. Through repetition we quickly learn how to select the correct number of shares for each position, and how to control risk using stops. We also rapidly learn how to trade in harmony with the trend, and become adept at managing each trade on its own merits. ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR RCI Hospitality Holdings, Inc. (RICK: Consumer Cyclical/Restaurants) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. RICK's reaction to support on Friday created a Bullish Bounce setup with a BUY entry trigger at 86.38. Use a 5.95 trailing stop, which should work well with RICK's typical daily range. Tighten it to 2.98 on a 6.82 profit. RICK closed at 84.95 on Friday. Earnings Report Date: Feb 07, 2022. Beta: 1.99. Market-Cap: 807.017M. Optionable. CONSUMER DEFENSIVE SECTOR BellRing Brands, Inc. (BRBR: Consumer Defensive/Packaged Foods) - SQUEEZE PLAY. Trader indecision has put BRBR squarely in the center of a Bull versus Bear standoff. This tight spot should soon give way to a clear winner in the short-term, and we want to be in position for the move. To do that we've set a BUY entry at 26.33 and a SELL short entry at 24.48. Now it's up to BRBR to show us which entry will be filled. Once the trade is underway place a 1.85 trailing stop, which can be tightened to 0.93 after you achieve a 1.92 profit. BRBR closed on Friday at 25.92. Earnings Report Date: Feb 02, 2022. Beta: 0.95. Market-Cap: 1.01B. Optionable. FINANCIAL SERVICES SECTOR Jackson Financial Inc. (JXN: Financial Services/Asset Management) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 44.04, JXN is on our radar for a BUY entry at 44.72. If you purchase shares of JXN, be sure to also place a trailing stop of 3.43. Snug it up to 1.72 on a 3.4 gain. Earnings Report Date: Mar 03, 2022. Beta: N/A. Market-Cap: 4.16B. Optionable. HEALTHCARE SECTOR Evolent Health, Inc. (EVH: Healthcare/Health Information Services) - 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 EVH's case we will enter a BUY should it reach the 26.45 level, or a SELL short trade if it drops to 24.41. As usual a trailing stop is essential, 2.04 which should be tightened to 1.02 on a 1.74 gain. EVH closed Friday at 25.36. Earnings Report Date: Feb 23, 2022. Beta: 2.11. Market-Cap: 2.267B. Optionable. TECHNOLOGY SECTOR JFrog Ltd. (FROG: Technology/Software-Application) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in FROG's narrowest trading range of the past seven sessions. With neither group able to take complete control on Friday, 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 27.05 and a SELL order at 24.8. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.25 trailing stop. Tighten the stop to 1.13 once you have a 2.64 gain. FROG closed Friday at 26.19. Earnings Report Date: Feb 10, 2022. Beta: N/A. Market-Cap: 2.524B. 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/ ***********************************
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 ---------------- ------- -------- ------- ------ ------- 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 For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
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"Market Breadth" Have you ever noticed that just a few stocks can have a huge affect on the overall market? Both the Dow and the NASDAQ are susceptible to making a big move based on just a few moving stocks. The Dow contains only 30 stocks, so a large drop in one of its components can really affect this index. Similarly, since the NASDAQ gives more weight to its largest companies, a big move by just a few heavy hitters can dramatically change the index's end of the day result. So how can we quickly find out whether a move in the market was driven by just a few stocks or by a majority of stocks? In other words, how can we determine market "breadth?" The most common measurement of market breadth compares the number of advancing stocks to the number of declining stocks. There are several indicators that present the results in various formats, but they all basically deliver the same data. Each of them is based on how many stocks were up on the day, and how many were down. The undisputed king of advancing and declining indicators is the Advance/Decline Line, or "A/D Line". When compared to the movement of a market index like the Dow or S&P 500, the A/D Line has proven to be an effective gauge of the stock market's breadth and strength. When more stocks are advancing than declining, the A/D Line moves up, and when decliners outnumber advancers, the A/D Line moves down. Many traders feel that the A/D Line is a better indication of market strength than more frequently used indices such as the Nasdaq, Dow, or S&P 500 Index. Charting the trend of the A/D Line allows you to determine if the strength of the overall market is rising or falling. One common way to use the A/D Line is to look for a difference of opinion between an index like the Dow and the A/D Line. Often, an end to a bear market can be anticipated when the A/D Line begins to flatten out and turn upward at the same time the Dow is still making new lows. Chart: https://prorightline.com/rlr/TC-NYAdvanceDecline_515Wx412H.jpg In the past, when a divergence develops between the Dow and the A/D Line, the Dow has typically reversed and followed the direction of the A/D Line. Sometimes a military example is used to explain the relationship between the A/D Line and the Dow. The idea is that when the soldiers (the A/D Line) refuse to follow their leaders (new highs in the Dow), then the leaders will follow the direction of the soldiers. Sort of a broad based mutiny! A typical case of the troops refusing to follow their leaders occurred in 1987. While the Dow was making new highs during the 12 months prior to the market crash in October, the A/D Line was unable to reach new highs. This type of sustained divergence usually results in the index price realigning with the A/D Line. Although there are AD lines for the Nasdaq and the Amex, the New York Stock Exchange (NYSE) is the most commonly used measure of market breadth. Keep in mind that the specific level of the AD line isn't important, it's the trend of the line that matters. Always check to see if it is trending in the same direction and a similar rate as the underlying market index. If the two lines aren't in sync, consider it a sign that a trend reversal may be in the near future. The A/D Line also helps to confirm whether the market has already bottomed. If the line stays flat while the market moves higher, the rally may just be a relief rally. In the best scenario, the line will rise too. Like all other indicators the A/D Line isn't fool proof. A market bottom may move in step with the A-D line, or it may not occur for months. The A/D Line certainly has value as a timing tool, but shouldn't be used as a stand-alone decision maker. It is always wise to consider a broad body of evidence when anticipating future price direction. ======================================================================
Best of luck and have a Great Week!
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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. |