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January 18, 2020 - The RightLine Report
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NOTES FROM THE EDITOR
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Win/Loss vs. Profit/Loss
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"QUICK LIST"
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Stock 01/17 01/17 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
AUPH 20.08 0.25 20.52 19.09 1.43/0.71 2.20
DRNA 21.35 0.17 21.87 20.46 1.41/0.70 2.40
PNTG 27.13 -0.21 27.99 26.07 1.92/0.96 4.44
SLGL 13.99 -0.10 14.61 1.48/0.74 2.70
KEX 90.46 -0.17 92.12 5.13/2.56 3.12
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 For a glossary of terms unique to The RightLine Report go to: http://www.rightline.net/education/glossary.html Problems? If you have any difficulty viewing this report, the link below will take you to a page where you will find a list of items that may affect normal viewing within your email client. http://www.rightline.net/home/reportprob.html Questions? Send us an email using our contact form at: http://www.rightline.net/home/contact.html
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MARKET SUMMARY
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The S&P 500 stock market index set another all-time high on Friday and posted a second consecutive weekly gain. Mixed economic news included an unexpected dip in consumer sentiment and a more rapid contraction than predicted in industrial production. The first week of earnings season ended with less than stellar results from J.B. Hunt Transport Services (JBHT $114) and CSX (CSX $77), while Expeditors International of Washington (EXPD $77) issued a warning for its upcoming fourth quarter profits. Shares of all three companies declined. Gold, the USD/dollar and treasury yields were all higher, oil prices were lower. Jan 16, 2020 Jan 17, 2020
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Dow 29,298 +267.42 29,348 +50.46
Nasdaq 9,357 +98.44 9,388.94 +31.81
S&P 500 3,317 +27.52 3,330 +12.81
NYSE Volume 3.62B 3.78B
NYSE Advancers 2046 1479
NYSE Decliners 851 1430
Nasdaq Volume 2.35B 2.56B
Nasdaq Advancers 2370 1422
Nasdaq Decliners 846 1778
New Highs/Lows
01/10 01/13 01/14 01/15 01/16 01/17
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NYSE New Highs 218 243 230 271 298 339
NYSE New Lows 20 23 8 7 6 7
Nasdaq New Highs 216 279 295 287 379 394
Nasdaq New Lows 29 34 27 24 14 16
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TRADER'S TIP:
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TRADER'S TIP: "Selling Short" "It takes real knowledge and market know-how as well as lots of courage to sell, and particularly to sell short, because you will make many mistakes. However, I don't see how anyone could really do well in the market and protect assets if they don't learn how, when, and why stocks should be sold." ~ William J. O'Neil, author and trader **************************
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 - 3329.62 January 17, 2020
52-Week High: 3329.88
52-Week Low: 2612.86
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3432.21
Resistance 2: 3370.76
Resistance 1: 3350.19
Pivot: 3309.31
Support 1: 3288.74
Support 2: 3247.85
Support 3: 3186.40
http://www.rightline.net/rlch/011720SPX.jpg
NASDAQ Composite - 9388.94 January 17, 2020
52-Week High: 9393.48
52-Week Low: 6953.23
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 9726.00
Resistance 2: 9525.58
Resistance 1: 9457.26
Pivot: 9325.16
Support 1: 9256.84
Support 2: 9124.74
Support 3: 8924.32
Dow Industrials - 29348.10 January 17, 2020
52-Week High: 29373.62
52-Week Low: 24244.31
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 30288.76
Resistance 2: 29734.57
Resistance 1: 29541.33
Pivot: 29180.38
Support 1: 28987.14
Support 2: 28626.19
Support 3: 28072.00
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MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern):
Monday, January 20, 2020: 20-Jan None scheduled Martin Luther King Jr. Holiday Tuesday, January 21, 2020: 21-Jan None scheduled Wednesday, January 22, 2020: 22-Jan 8:30 am Chicago Fed national index 22-Jan 10 am Existing home sales Thursday, January 23, 2020: 23-Jan 8:30 am Weekly jobless claims 23-Jan 10 am Leading economic indicators Friday, January 24, 2020: 24-Jan 9:45 am Markit manufacturing PMI (flash) 24-Jan 9:45 am Markit services PMI (flash) 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: "After Hours" Participation by Market Makers in after hours trading is strictly voluntary, which as a result may offer less liquidity and inferior prices. Because of this limited liquidity, the prices you see provide little information as to how the stock will perform during the following session. ***********************************
STOCKS COVERED IN THIS ISSUE
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HEALTHCARE SECTOR Aurinia Pharmaceuticals Inc. (AUPH: Healthcare/Biotechnology) - 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 AUPH. A move to the upside will trigger our BUY entry at 20.52, while a drop to 19.09 will trigger our SELL short entry. Follow your position with a 1.43 trailing stop. Tighten the stop to 0.71 once you have a 2.20 gain. AUPH closed Friday at 20.08. Earnings Report Date: N/A. Beta: 1.59. Market-Cap: 2.188B. Optionable. Dicerna Pharmaceuticals, Inc. (DRNA: Healthcare/Biotechnology) - 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 DRNA's case we will enter a BUY should it reach the 21.87 level, or a SELL short trade if it drops to 20.46. As usual a trailing stop is essential, 1.41 which should be tightened to 0.70 on a 2.40 gain. DRNA closed Friday at 21.35. Earnings Report Date: Mar 08, 2020. Beta: 2.39. Market-Cap: 1.461B. Optionable. The Pennant Group, Inc. (PNTG: Healthcare/Medical Care Facilities) - SQUEEZE PLAY. Trader indecision has put PNTG 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 27.99 and a SELL short entry at 26.07. Now it's up to PNTG to show us which entry will be filled. Once the trade is underway place a 1.92 trailing stop, which can be tightened to 0.96 after you achieve a 4.44 profit. PNTG closed on Friday at 27.13. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 755.484M. Optionable. Sol-Gel Technologies Ltd. (SLGL: Healthcare/Biotechnology) - BULLISH BOUNCE. Positive price behavior near moving average support on Friday qualifies SLGL for a Bullish Bounce setup. After several sessions of declining prices, SLGL should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if SLGL moves up to our entry trigger set at 14.61. You can also enter a 1.48 trailing stop, to be replaced with a 0.74 trailing stop when you obtain a 2.70 profit. SLGL closed Friday at 13.99. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 287.465M. Not Optionable. INDUSTRIALS SECTOR Kirby Corporation (KEX: Industrials/Marine Shipping) - NEW HIGH DIP. Stocks in the early stages of a bounce tend to move higher. This is especially true when a strong performer in an established uptrend dips to a well-known support level. KEX fits this model perfectly. After setting a new 52-week high a few days back, the stock dipped for several sessions due to profit taking. Now the price action is signaling there is a reversal underway. Plan to buy this dip if the bounce lifts KEX to our entry level BUY trigger at 92.12. Set a trailing stop of 5.13 and tighten to 2.56 on a 3.12 gain. KEX closed Friday at 90.46. Earnings Report Date: Jan 29, 2020. Beta: 1.09. Market-Cap: 5.433B. 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 ***********************************
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 ---------------- ------- -------- ------- ------ ------- Currently there are no upcoming stock splits on the major US exchanges. For a closer look at the different stages of a Stock Split go to: http://www.rightline.net/splits/index.html/#split-stages **********************************
TRADER'S CORNER
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"Two-Way Trading" Years ago I attended a trading seminar that featured a simulated trading contest. There were approximately thirty traders who participated, with experience ranging from beginner to top professional. The larger group was randomly divided into seven or eight smaller groups, and each team competed for the top prize. A daily stock chart with several weeks of data was displayed on the screen at the front of the room. The chart had no symbol or date - only price, volume, and a MACD histogram. There was no way to tell how old the chart was or what time period it covered. The contest rules were simple. Everyone was given a few minutes to review and discuss the chart in their small group, then write down whether they would go long, short, or stand aside. Each team had to give the specific setup for their entry - such as "if price rises to 20, then buy shares and place a 1-point trailing stop" or perhaps "if price drops down to the 50 day moving average, then rises to close above the high of that same bar, enter a buy order .25 above the close and place a 2-point trailing stop. About a dozen charts were reviewed, each team's criteria were applied, and the results were calculated. There were various degrees of success, but one team's performance went well beyond the rest. Oddly, the top team was made up of three beginners who had absolutely no experience trading, and one veteran trader who had been in the business for many years. It was obvious that the three "rookies" didn't come up with the winning strategy, so later that day I asked the veteran trader if we could get together and talk about the different aspects of his approach and why it was so effective. What I learned during that meeting and in follow up conversations had a huge positive impact on my personal trading. When it comes to evaluating trade setups, it doesn't always have to be one way or the other. Actually, in many cases you are much better off if you let the market decide whether you should go long, or go short, or stand aside. This is what I call "two-way trading." To begin, you have to look at trade setups in a different light. Instead of trying to pre-determine which way price will move, assume that it could go in either direction and plan for both. This requires us to set aside our directional expectations. When you look at a price pattern you probably see it as either a long or a short, but the odds are good that it will work in either direction. The only problem is that we don't know which way it will go, so the solution is to let the price action tell us. Here is how it works. The best price patterns usually contain two distinct support and resistance levels, or what some traders call pivot points. "Two-Way Trading" considers both of these levels when setting triggers for trade execution. For example, a buy entry is triggered if prices move up and break through resistance, while a short sale is triggered if prices move down and break below support. By selecting setups where the support and resistance levels are clearly defined, the trade can be entered with very little risk. The low risk comes from the fact that should the initial move fail, price doesn't have to move very far back to confirm that it's time to get out. The support and resistance levels can be either horizontal or trending - both work very well. Some of the best setups occur when prices are squeezed within a narrowing range of support and resistance, such as in a triangle formation. These sorts of trending Support and Resistance levels aren't as obvious to the untrained eye, but they can provide excellent opportunities that most traders miss. The potential up-moves and down-moves for each Two-Way Trade contain different reward/risk ratios, and in most cases a move in one direction offers considerably more profit potential than the other. I sometimes come across setups where one side appears to have a superior chance of being triggered but there is very little reward potential, while a move in the opposite direction appears unlikely but would be a huge winner if it did take place. Two-Way Trading makes a trader's job easier because each pattern offers two potential trades. Though this method is very powerful, it isn't overly complicated. You locate price patterns with clear support and resistance levels that offer reasonable risk and solid reward potential in either direction, then set your entry triggers and stops near the Support and Resistance levels - simple as that! ~ Thomas Sutton ======================================================================
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