January 16, 2024 - The RightLine Report
Notes From The Editor
In this previously published article, Analyst Kent Barton prescribes several helpful remedies for common trading ailments. I hope you enjoy Kent's light-hearted medical metaphors as much as I did!
~Thomas Sutton, Editor
It happens every year with sickening regularity. Cold and flu season is a boon for the makers of Kleenex and NyQuil, and a major nuisance for nearly everyone else. Without a definite way to avoid the sneezing and watery eyes afflicting many folks, maybe it's time to stock up on Vitamin C!
As traders, we're prone to a few unique ailments that hamper our profitability. Left untreated, they'll lead to high blood pressure, profuse sweating, insomnia, and a bleeding account. Let's take a look at some of the most common conditions, and how they can be dealt with:
Analysis Paralysis - We've all been hit with this affliction at one time or another. A good setup presents itself, but the trader's hand hovers hesitantly over the mouse. Second-guessing and self-doubt creep in as contrary signals suddenly make the trade less appealing. To make matters worse, stock analysts might be on TV touting contrary opinions. Frozen by indecision, the trader misses the setup and watches in frustration as the stock behaves just as they initially expected.
Too much information can be a bad thing. Imagine a stock chart overlaid with multiple retracements, moving averages, and oscillators. While all of these indicators are valuable tools, we need to be careful to not add too much noise to the equation. A "keep-it-simple" approach using a few reliable indicators or techniques eliminates this problem and encourages a focus on what really counts: price action.
As for those talking heads in the media, remind yourself that those analysts are often dead wrong! Many of them are the same "experts" who were hyping Internet stocks at the height of the tech bubble or calling for a long-term Bear market a few years ago. There's nothing wrong with listening to others' opinions - just remember to weigh their advice against your own observations.
Mad Bull Disease - A highly contagious condition that causes a loss of reason and rationality. It can sweep across the entire market, specific sectors, or even certain equities. Once in awhile you'll run across a stock chart that's going vertical. Day after day, it rockets higher without any regard to the law of gravity. This is one of the hallmarks of "MBD."
There's an old trading axiom: "In a Bull market, everyone's a genius." Drunk with success, investors throw caution - and good risk management - to the wind. Their blind devotion to a buy-side bias works out fine for a while... until the bottom inevitably drops out. Investors who jumped in near the top are left holding the bag as massive profit- taking begins. To make matters worse, losses can mount as dip-buying entries repeatedly fail.
Flexibility is one of the traits of a good trader; the ability to adapt to changing market conditions is a major factor in successful trading. There's nothing wrong with playing stocks that are rocketing higher. In fact, it can be a highly profitable strategy.
Aggressive traders target breakouts, while those with a more conservative approach target pullbacks to trendlines or moving average support. But in either case, risk management and position sizing should always be used to protect against large losses. Complacency can lead to disaster if the stock loses its momentum.
Post-Trade Stress Disorder - Fear is the source of this condition. After a string of losses, traders sometimes become convinced that any position they take is destined to fail. The natural reaction is to stop trading altogether. Like many biological immune responses, this is a good safety mechanism. Consecutive losses can be a sign that your strategy needs some modifications. On the other hand, you may have simply run into a streak of bad luck where your stocks just didn't cooperate. This happens with even the most successful traders.
How can you tell the difference? The best method is to step back and spend some time paper-trading. Oftentimes you'll find that your strategy is perfectly fine - those consecutive losses were just an aberration. If losses continue, it might be time to make some changes. Apply set-ups to different stocks in different sectors. Take notes of broader market trends. Breakdown entries, for instance, tend to be less effective when the major indices are trending lower. These observations can help fine-tune your approach.
Once your paper trades show a pattern of profitability, it's time to go "live" and use real money again. Armed with a fine-tuned strategy, you'll have the confidence to take positions when entries present themselves.
Itchy Trigger-Finger - A hyperactive disorder where nearly every potential trade is jumped at with blind enthusiasm. This often stems from a fear of missing the next "big move." Frustration can mount in rising markets where it seems like everyone else is scoring profits. But trades taken haphazardly aren't as likely to succeed. Even with tight stop-losses, accounts can be nickel-and-dimed to death by overtrading.
The cure is a healthy dose of relaxation. While few things are certain when it comes to stocks, you can count on new trading opportunities every day. Investing guru Warren Buffet summed it up best: "In this game, the market has to keep pitching, but you don't have to swing. You can stand there with the bat on your shoulder...until you get a fat pitch." Don't fret if a good trade passes you buy. With new opportunities coming along every day, you can afford to be selective!
It's human nature to suffer from these ailments from time to time; nobody's immune to the effects of greed, fear, and hope. The major trouble arises when the emotional forces trigger a brutal cycle: traders attempt to make up for losses by over-trading and over- leveraging. The end result is a shrinking trading account.
Fortunately, a solid game plan helps to keep emotions in check. A game plan includes pre-determined conditions that have to be met before a trade is activated. With position size and stop-losses also calculated in advance, you'll know exactly how much you stand to lose if the trade goes sour. Fear of the unknown subsides, confidence is boosted, and the road to success before much smoother.
Healthy trading!
Kent Barton,
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 01/16 01/16 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
SYRE 21.80 0.39 22.71 2.28/1.14 3.8
VRDN 22.11 -0.03 22.58 20.93 1.65/0.83 2.64
GH 23.55 -0.65 24.11 22.35 1.76/0.88 2.86
VSAT 24.01 -0.50 24.7 23.17 1.53/0.77 2.24
GYRE 23.13 0.61 23.75 21.33 2.42/1.21 4.94
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.
Stocks Covered Today Stock Splits
Market Summary
Stocks ended the Tuesday session on a weaker note, but the semiconductor index (SOX), propelled by AMD, AVGO, and NVDA, helped mitigate losses in the Nasdaq. However, the Smallcap Russell 2000 experienced a decline of over 1%, and the Dow lagged, affected by BA weakness. Ten out of the eleven S&P sectors were in negative territory, with Energy, Industrials, and Materials leading the declines
Early in the morning, stocks were on an upward trajectory, especially in the tech sector. However, turbulence ensued after Fed Governor Christopher Waller commented that the US is "within striking distance" of the Federal Reserve's 2% inflation goal. Despite this, he suggested a cautious approach, emphasizing that the central bank should not rush toward cuts in its benchmark interest rate unless it's clear that lower inflation will be sustained. Waller advocated for a methodical and careful strategy, avoiding the rapid and substantial reductions used in economic bailouts. Consequently, U.S. short-term interest-rate futures indicated less than a 60% chance of a Fed rate cut in March, compared to the over 70% chance seen before Waller's speech. While Treasury yields initially rose on Waller's comments, reaching 4.05%, they later dipped briefly before moving higher, albeit without surpassing the highs around 4.12% observed two weeks ago.
Despite the market's modest dip, it held up relatively well. The USD/ dollar reached a one-month high as Treasury yields climbed, fueled by speculation that the Federal Reserve might not implement aggressive rate cuts. Airlines faced challenges after a Federal judge terminated the SAVE/JBLU merger.
This week promises more earnings follow-through in the banking/financial sector (SCHW, USB, CFG following MS, GS), setting the stage for the upcoming tech earnings onslaught next week. The World Economic Forum in Davos, opening on Monday, features an intensive agenda for the next three days before concluding on Friday noon. The event is set to host over 2,800 leaders from 120 countries, with more than 60 heads of state participating. Major averages maintain strength, with no significant pullbacks thus far in 2024. Notably, the S&P 500 has not experienced a decline of 2% or more for 225 consecutive trading days, marking the longest streak since the 351-day stretch from September 2016 to February 2018.
Jan 15, 2024 Jan 16, 2024
-------------------- --------------------
Dow Closed 0 37,361.12 -231.86
Nasdaq Closed 0 14,944.35 -28.41
S&P 500 Closed 0 4,765.98 -17.85
NYSE Volume 0 4.27B
NYSE Advancers 0 648
NYSE Decliners 0 2,207
Nasdaq Volume 0 6.43B
Nasdaq Advancers 0 1,182
Nasdaq Decliners 0 3,115
New Highs/Lows
01/09 01/10 01/11 01/12 01/15 01/16
--------------------------------------------
NYSE New Highs 44 69 71 107 0 56
NYSE New Lows 24 39 35 23 0 68
Nasdaq New Highs 74 106 106 134 0 87
Nasdaq New Lows 72 96 134 86 0 207
Stocks Covered Today Stock Splits
TRADER'S TIP: "Get Rich Quick"
Only an extremely tiny percentage of individuals who enter the stock market to get rich quick ever accomplish that goal. Most of them bust our rather quickly. This is due to the tendency for "get rich quick" folks to accept way too much risk - usually by putting too much of their account into one position.
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 - 4765.98 January 16, 2024
52-Week High: 4802.42
52-Week Low: 3808.86
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4967.17
Resistance 2: 4864.59
Resistance 1: 4824.21
Pivot: 4762.01
Support 1: 4721.63
Support 2: 4659.43
Support 3: 4556.85
NASDAQ Composite - 14944.35 January 16, 2024
52-Week High: 15150.07
52-Week Low: 10804.57
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 15872.34
Resistance 2: 15368.93
Resistance 1: 15170.84
Pivot: 14865.52
Support 1: 14667.43
Support 2: 14362.11
Support 3: 13858.70
Dow Industrials - 37361.12 January 16, 2024
52-Week High: 37825.27
52-Week Low: 31429.82
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 38707.88
Resistance 2: 38131.85
Resistance 1: 37862.41
Pivot: 37555.82
Support 1: 37286.38
Support 2: 36979.79
Support 3: 36403.76
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, JAN. 15 Martin Luther King Jr. holiday, none scheduled TUESDAY, JAN. 16 8:30 am Empire State manufacturing survey 11:00 am Fed Gov. Christopher Waller speaks WEDNESDAY, JAN. 17 8:30 am Import price index % 8:30 am Import price index minus fuel 8:30 am U.S. retail sales 8:30 am Retail sales minus autos 9:00 am Fed Vice Chair for Supervision Michael Barr speaks 9:00 am Fed Gov. Michelle Bowman speaks 9:15 am Industrial production 9:15 am Capacity utilization 9:15 am Business inventories 2:00 pm Fed Beige Book 3:00 pm New York Fed President John Williams delivers opening remarks THURSDAY, JAN. 18 7:30 am Atlanta Fed President Raphael Bostic speaks 8:30 am Initial jobless claims J 8:30 am Philadelphia Fed manufacturing survey 8:30 am Housing starts 8:30 am Building permits 12:05 pm Atlanta Fed President Raphael Bostic speaks FRIDAY, JAN. 19 10:00 am Consumer sentiment (prelim) 10:00 am Existing home sales 1:00 pm Fed Vice Chair for Supervision Michael Barr speaks 4:15 pm San Francisco Fed President Mary Daly speaks For a chart of typical Up or Down market reactions to specific major US economic reports go to: Economic Indicator Effects
Stocks Covered Today Stock Splits
TRADER'S TIP: "Choose Courage"
"Being a successful trader also takes courage; the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough."
~ Michael Marcus
Stocks Covered in This Issue
HEALTHCARE SECTOR
Spyre Therapeutics, Inc. (SYRE: Healthcare/Biotechnology) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Tuesday SYRE seemed intent on initiating a rebound. With moving average support nearby, SYRE is at a logical place for Bulls to regroup and extend the familiar uptrend that shareholders have become accustomed to. On continued buying, plan on taking long entries with a BUY at 22.71. Manage risk with a 2.28 stop. Tighten your stop to 1.14 when you have a 3.8 profit. SYRE ended the day at 21.80. Earnings Report Date: Mar 04, 2024. Beta: 2.85. Market-Cap: 785.258M. Optionable.
Viridian Therapeutics, Inc. (VRDN: Healthcare/Biotechnology) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in VRDN, 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 22.58 and a SELL short entry at 20.93. Let VRDN's price action determine your long or short entry. Once the order is filled, place a 1.65 trailing stop, and tighten it to 0.83 upon getting a 2.64 gain. VRDN closed Tuesday at 22.11. Earnings Report Date: Mar 06, 2024. Beta: 1.06. Market-Cap: 1.163B. Optionable.
Guardant Health, Inc. (GH: Healthcare/Diagnostics & Research) - SQUEEZE PLAY. Tuesday's trading action forced GH'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 GH 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 24.11 if GH moves higher, and place your order to SELL short at 22.35 if price declines to that level. As usual follow your entry with a trailing stop, 1.76 should be sufficient. Reduce your stop to 0.88 on a 2.86 gain. GH closed Tuesday at 23.55. Earnings Report Date: Feb 21, 2024. Beta: 0.99. Market-Cap: 2.861B. Optionable.
TECHNOLOGY SECTOR
Viasat, Inc. (VSAT: Technology/Communication Equipment) - SQUEEZE PLAY. VSAT is caught in a dilemma. The stock's compressed price range on Tuesday 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. VSAT is now at 24.01. We can capture price action either way by placing a BUY trigger at 24.7 and a SELL short trigger at 23.17. Once VSAT 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 1.53. When you acquire a 2.24 profit, tighten the stop to 0.77. Earnings Report Date: Feb 05, 2024. Beta: 1.40. Market-Cap: 2.989B. Optionable.
N/A SECTOR
Gyre Therapeutics, Inc. (GYRE: N/A/N/A) - SQUEEZE PLAY. A look at GYRE'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 23.75 and a SELL short trigger at 21.33. Once GYRE shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 2.42 and tighten to 1.21 on a 4.94 gain. GYRE closed Tuesday at 23.13. Earnings Report Date: Mar 28, 2024. Beta: N/A. Market-Cap: N/A. 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.
Stocks Covered Today Stock Splits
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
---------------- ------- -------- ------- ------ -------
NOTE: The number of stock split announcments goes up during Bull markets,
and goes down during Bear market cycles. There are currently no upcoming
stock splits that meet RightLine's proprietary criteria for split ratio,
trading volume and price action.
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.
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.
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