January 14, 2020 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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Momentum can be a trader's best friend. Once a stock has established a reliable trend, price action seems to develop a life of its own. Jumping on that trend at the right point - when there are no immediate support/resistance levels to get in to the way - is a great way to take advantage of the sustained movement.

But what about those cases when a stock is almost going vertical? In strong Bull markets this is a common occurrence. A stock generates so much momentum that it rises nearly every day. It's human nature to see a rocketing equity and think "hey, I've got to get in on that!" The problem with this approach is that the unbridled momentum can suddenly shift without warning, leaving you with a loss and the dubious distinction of having bought at the top.

There are some good rules of thumb to avoid this. The first is to simply step away if the stock has shown some huge recent gains. For instance, a 20% rally over the past week or so sharply increases the likelihood of a profit-taking pullback. Traders who follow the daily stochastic indicator can quantify this; if the stochastics are pushed to the overbought extreme, with no more room to move, the short-term upside potential may be maxed out.

Also avoid rallying equities that are approaching areas of historical resistance or congestion. While levels dating back several years may seem irrelevant, they're often used as profit-targets for traders who have already been in the stock for awhile. Bears also use these as logical areas to regroup and mount a counter-offensive.

The best approach to trade a rocketing stock is to wait for a pullback to a key support level or moving average. Positive momentum increases the likelyhood of a rebound at these junctions, and profitable realignment with the upward trend. Scan through charts of rallying stocks to find examples of this breakout/pullback/reversal pattern. Accompanied by a solid risk management strategy, this can be a powerful tool in your arsenal of trade set-ups.

Here's to profits,

Kent Barton
Senior Analyst 

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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 
------  --------  --------  --------  --------  ---------------  --------

PTCT      50.06      1.67     50.95                  4.53/2.27      2.54
XOMA      24.60      0.93     25.26                  2.16/1.08      2.50
PING      27.50      0.63     27.97     25.89        2.08/1.04      2.38
PLT       32.32      0.42     32.99     30.93        2.06/1.03      1.86
CNXN      52.50     -0.65     53.65     50.48        3.17/1.58      2.56


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 www.rightline.net/education/using-quicklist.html. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to www.RightLine.net and login to the Member's area.

To learn more about controlling risk go to the RightLine Risk Control System at http://www.rightline.net/education/riskcontrol.html

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                           MARKET SUMMARY
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The three major averages closed mixed on Tuesday after setting new intra-day record highs on the news that the USA and China are scheduled to sign a "phase one" trade deal" on Wednesday. The Dow finished slightly higher, while the S&P 500 and Nasdaq both closed slightly lower following good earnings announcements from Citigroup (C $83) and JPMorgan Chase & Co (JPM $140). Shares of Wells Fargo & Company (WFC $50) came under pressure due to disappointing profit and revenue numbers. Consumer price inflation met expectations and small business optimism declined a bit. Oil prices, treasury yields and the USD/dollar were all higher, gold finished lower. 


                       Jan 13, 2020           Jan 14, 2020   
                  --------------------   --------------------
Dow                    28,907   +83.28        28,940   +32.62
Nasdaq                  9,274   +95.07      9,251.33   -22.60
S&P 500                 3,288   +22.78         3,283    -4.98

NYSE Volume                      3.54B                  3.78B
NYSE Advancers                    2053                   1678
NYSE Decliners                     864                   1251

Nasdaq Volume                    2.58B                  2.61B
Nasdaq Advancers                  2054                   1678
Nasdaq Decliners                  1189                   1542

                                 New Highs/Lows

                   01/07  01/08  01/09  01/10  01/13  01/14
                 --------------------------------------------
NYSE New Highs       131    213    241    218    243    230
NYSE New Lows         11     11     13     20     23      8
Nasdaq New Highs     144    212    259    216    279    295
Nasdaq New Lows       20     19     17     29     34     27


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                              TRADER'S TIP:  
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TRADER'S TIP: "Behavioral Economics"

Dr. Daniel Kahneman - a professor at Princeton University - won the Nobel Prize for Economics in 2002. His studies in the field of behavioral economics reveal that investors are generally irrational, but predictably so. This is due to the fact they usually make the same mistakes again and again. One of the most repeated quirks is a common inability to take a loss. In fact, Dr. Kahneman's work shows that taking a loss is so painful to most people that they simply avoid it.

Rule One: Take losses while they're small, it's much easier that way. 
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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: www.rightline.net/education/how_to_use_rlr_technical_analyst.html. 
S&P 500 - 3283.15 January 14, 2020

52-Week High: 3294.25
52-Week Low: 2606.36
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

http://www.rightline.net/rlch/011420SPX.jpg

NASDAQ Composite - 9251.33 January 14, 2020

52-Week High: 9298.33
52-Week Low: 6928.12
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 - 28939.67 January 14, 2020

52-Week High: 29054.16
52-Week Low: 23887.93
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

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                             MARKET CALENDAR
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--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" at this link: http://www.rightline.net/education/economic.html 
 
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                              TRADER'S TIP: 
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TRADER'S TIP: "What's Important to Top Traders?"

When discussing the keys to success in the stock market, top traders generally don't talk much about what most folks might expect them to; namely, methods for locating high-probability trade setups. Instead, the conversation often centers around techniques for limiting drawdowns, deciding how many shares to include in a position and the importance of staying with their trading plan. 

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                      STOCKS COVERED IN THIS ISSUE    
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HEALTHCARE SECTOR

PTC Therapeutics, Inc. (PTCT: Healthcare/Biotechnology) - NEW HIGH DIP. PTCT is still showing the bullish strength that gave this stock a new 12-month high just a few days ago. Tuesday's intra-day price action near moving average support tells us that another run to the high-mark may be in the works. Get ready to BUY shares if PTCT reaches our trigger price of 50.95, and enter a 4.53 trailing stop. The stop can be resized to 2.27 once you have a 2.54 profit. PTCT closed Tuesday at 50.06. Earnings Report Date: Feb 25, 2020. Beta: 1.92. Market-Cap: 3.085B. Optionable.

XOMA Corporation (XOMA: Healthcare/Biotechnology) - BULLISH BOUNCE. Another bullish bouncer, XOMA appears ready to resume trading in an uptrend after recent selling forced the stock lower for several days. Tuesday's positive price action near Moving Average support says it's time to BUY shares if XOMA reaches our entry trigger set at 25.26. Also place a 2.16 trailing stop which can be narrowed to 1.08 when you reach a 2.50 profit. XOMA closed Tuesday at 24.60. Earnings Report Date: N/A. Beta: 1.22. Market-Cap: 215.435M. Not Optionable.

TECHNOLOGY SECTOR

Ping Identity Holding Corp. (PING: Technology/Software-Infrastructure) - SQUEEZE PLAY. PING is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 27.97 and a SELL short entry at 25.89. Once your trade is filled, enter a 2.08 trailing stop. Tighten it to 1.04 after a 2.38 gain. PING closed on Tuesday at 27.50. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 2.19B. Not Optionable.

Plantronics, Inc. (PLT: Technology/Communication Equipment) - SQUEEZE PLAY. Traders are feeling the pressure as PLT's intra-day price range on Tuesday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 32.99 and a SELL short entry at 30.93. PLT's price movement will decide which entry is filled. As soon as you're in the trade, enter a 2.06 trailing stop. Tighten it to 1.03 after you get a 1.86 gain. PLT closed Tuesday at 32.32. Earnings Report Date: Feb 02, 2020. Beta: 1.40. Market-Cap: 1.29B. Optionable.

PC Connection, Inc. (CNXN: Technology/Electronics & Computer Distribution) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in CNXN, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 53.65 and a SELL short entry at 50.48. Let CNXN's price action determine your long or short entry. Once the order is filled, place a 3.17 trailing stop, and tighten it to 1.58 upon getting a 2.56 gain. CNXN closed Tuesday at 52.50. Earnings Report Date: Feb 04, 2020. Beta: 1.15. Market-Cap: 1.382B. 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: http://www.rightline.net/education/riskcontrol.html

Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels.
Link: http://www.rightline.net/education/gap-adjusted.html 

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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  
---------------- -------     --------    -------     ------  -------   

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

For a closer look at the different stages of a Stock Split go to: http://www.rightline.net/splits/index.html/#split-stages 
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