January 19, 2023 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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Cashing Out: When should you take profits?

The short answer, of course, is that it's always okay to take profits. But here at RightLine we're firm believers in minimizing our losses and letting the winners run. So with this in mind, let's review three basic methods for ending a profitable trade.

The first option tends to come en vogue during blistering Bull markets, and it's by far the most haphazard strategy. With no plan in mind, the trader simply rides the winning trade until they get some kind of "gut feel" for cashing out. The combination of greed (craving even more profits) and fear (of missing out on more profits) can paralyze the trader from taking action. The end result, more often than not, is that most of those gains wind up being eventually retraced. The trader is left with only a small profit - or worse yet, a loss.

The second option is to start each trade with a clear profit-target. While traders should always have some idea of a stock's realistic upside/downside potential before they pull the trigger, this method ends the trade as soon as the target is reached. The problem, of course, is that this approach can cut out winning trades prematurely. Rigid profit targets also fail to take the stock's volatility into account.

The best of both worlds is to begin each set-up with a trailing stop that's tightened as the trade becomes more profitable. This guarantees a profit (barring the rare overnight gap in the opposite direction) while giving the stock enough breathing room to perform and keep moving. To make this approach even more effective, it's a good idea to factor in the stock's daily volatility into both the initial and trailing stops. RightLine's stops, for example, take the equity's Average True Range (ATR) into account.

One exception is the occasional unexpected windfall - say, a large gap that turns your trade in a huge winner overnight. Because gaps are often filled, cashing in these trades is never a bad idea. Others may prefer to hold on with a tightened stop, hoping for a continuation of the gap.

Finally, keep in mind that the trailing stop approach applies to both long and short trades. Up or down, and regardless of the broader market's underlying trend, this strategy can (and should) always be applied to maximize each stock's potential.

Here's to profits - and intelligent profit-taking!

Kent Barton
Senior Analyst 

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                           "QUICK LIST"
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Stock     01/19     01/19      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

RS       211.88      1.19    215.36                 13.63/6.82      9.02
BBW       22.89      0.34     23.26     21.62        1.64/0.82      2.06
RGNX      22.67     -0.27     23.31     21.75        1.56/0.78      2.46
OM        27.00     -0.16      27.6     25.61           1.99/1      2.92
GFF       38.36     -0.21     39.02                  3.07/1.54      2.24


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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US stocks closed lower on Thursday following a round of mixed economic data, as unemployment claims unexpectedly declined, housing starts were above estimates, building permits were below forecasts, and Philadelphia manufacturing output increased more than analysts anticipated but remains in a contraction phase. Earnings season continues to roll forward, as Discover Financial Services (DFS $102) beat quarterly profit estimates but presented a cautious outlook due to charge offs. Procter & Gamble (PG $142) met forecasts, while Allstate Corporation (ALL $125) released a profit warning. The USD/dollar finished the session lower, gold, oil prices and treasury yeilds all advanced higher.


                       Jan 18, 2023           Jan 19, 2023   
                  --------------------   --------------------
Dow                 33,296.96  -613.89     33,044.56  -252.40
Nasdaq              10,957.01  -138.10     10,852.27  -104.74
S&P 500              3,928.86   -62.11      3,898.85   -30.01

NYSE Volume                       4.3B                  4.01B
NYSE Advancers                   1,077                  1,245
NYSE Decliners                   2,041                  1,822

Nasdaq Volume                     5.3B                  4.68B
Nasdaq Advancers                 1,546                  1,698
Nasdaq Decliners                 3,108                  2,888

                                 New Highs/Lows

                   01/12  01/13  01/16  01/17  01/18  01/19
                 --------------------------------------------
NYSE New Highs       108    104      0    126    101     40
NYSE New Lows         12      6      0     10      8     18
Nasdaq New Highs     139    122      0    136    115     72
Nasdaq New Lows       26     20      0     23     27     35

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                              TRADER'S TIP:  
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TRADER'S TIP: "Volume . . . High or Low?"

"High" and "low" volume are relative terms. "High" volume for one stock is often considered "low" for another. Generally, "high" volume for any given stocks is at least 25% above the 10-day average, and "low" volume is at least 25% below the average. 
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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: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ 
S&P 500 - 3898.85 January 19, 2023

52-Week High: 4637.30
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4213.43
Resistance 2: 4086.77
Resistance 1: 4042.93
Pivot: 3960.11
Support 1: 3916.27
Support 2: 3833.45
Support 3: 3706.79
https://www.prorightline.com/rlch/011923SPX.jpg

NASDAQ Composite - 10852.27 January 19, 2023

52-Week High: 14646.90
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 11906.42
Resistance 2: 11412.00
Resistance 1: 11245.58
Pivot: 10917.58
Support 1: 10751.16
Support 2: 10423.16
Support 3: 9928.74


Dow Industrials - 33044.56 January 19, 2023

52-Week High: 35824.28
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 35863.28
Resistance 2: 34942.76
Resistance 1: 34622.68
Pivot: 34022.24
Support 1: 33702.16
Support 2: 33101.72
Support 3: 32181.20


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                             MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern): 
Monday, January 16, 2023:
16-Jan          None scheduled. Martin Luther King Jr. Day

Tuesday, January 17, 2023:
17-Jan  8:30 am   Empire state manufacturing index

Wednesday, January 18, 2023:
18-Jan  8:30 am   Retail sales
18-Jan  8:30 am   Retail sales ex motor vehicles
18-Jan  8:30 am   Producer price index, final demand
18-Jan  9:15 am   Industrial production
18-Jan  9:15 am   Capacity utilization
18-Jan  10 am   NAHB home builders' index
18-Jan  10 am   Business inventories (revision)
18-Jan   2 pm   Beige Book

Thursday, January 19, 2023:
19-Jan  8:30 am   Initial jobless claims
19-Jan  8:30 am   Continuing jobless claims
19-Jan  8:30 am   Building permits (SAAR)
19-Jan  8:30 am   Housing starts (SAAR)
19-Jan  8:30 am   Philadelphia Fed manufacturing index

Friday, January 20, 2023:
20-Jan  10 am   Existing home sales (SAAR)

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: "Hot Zones"

While up and down price behavior reflects the impact of news and sentiment, heavy hitters like market makers and institutional traders use technical analysis to locate potential breakout and reversal zones. Some of these areas are easy to see, for they line up with previous high and low pivot points. Others are less obvious. Trend lines, Bollinger Bands, Fibonacci overlays, and other technical tools are used to locate the hot spots.

Where two or more of these converge, support or resistance is stronger. Bullish moves beyond these limits occur when sellers give in and join the buyers. Bearish moves occur in the same fashion, only in reverse. As traders we can anticipate these points, and manage positions by preparing for possible breakouts or reversals at these junctions.

It doesn't pay to be stubborn! If a trade tells us it wants to break through support or resistance, we can play it that way. If it decides to reverse, we can follow along. One measure of a trader's strength is the ability to quickly adapt and go with the current price flow. To a large degree, this is what is meant by the saying, "let the market tell you what to do." 

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                      STOCKS COVERED IN THIS ISSUE    
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BASIC MATERIALS SECTOR

Reliance Steel & Aluminum Co. (RS: Basic Materials/Steel) - NEW HIGH DIP. Confident in its ability to continue trending skyward, RS's pullback from a new 52-week high sets the stage for a return to that peak. Price activity on Thursday provided a setup, with the BUY trigger ready at 215.36 should RS reach that level. Follow up your entry with a 13.63 trailing stop. Tighten it to 6.82 when you have a 9.02-point gain. RS closed Thursday at 211.88. Earnings Report Date: Feb 16, 2023. Beta: 0.88. Market-Cap: 12.435B. Optionable.

CONSUMER CYCLICAL SECTOR

Build-A-Bear Workshop, Inc. (BBW: Consumer Cyclical/Specialty Retail) - SQUEEZE PLAY. Thursday's trading action forced BBW'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 BBW 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 23.26 if BBW moves higher, and place your order to SELL short at 21.62 if price declines to that level. As usual follow your entry with a trailing stop, 1.64 should be sufficient. Reduce your stop to 0.82 on a 2.06 gain. BBW closed Thursday at 22.89. Earnings Report Date: Mar 08, 2023. Beta: 1.89. Market-Cap: 337.637M. Optionable.

HEALTHCARE SECTOR

REGENXBIO Inc. (RGNX: Healthcare/Biotechnology) - SQUEEZE PLAY. RGNX is caught in a dilemma. The stock's compressed price range on Thursday 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. RGNX is now at 22.67. We can capture price action either way by placing a BUY trigger at 23.31 and a SELL short trigger at 21.75. Once RGNX 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 1.56. When you acquire a 2.46 profit, tighten the stop to 0.78. Earnings Report Date: Feb 27, 2023. Beta: 1.06. Market-Cap: 981.466M. Optionable.

Outset Medical, Inc. (OM: Healthcare/Medical Devices) - 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 OM. A move to the upside will trigger our BUY entry at 27.6, while a drop to 25.61 will trigger our SELL short entry. Follow your position with a 1.99 trailing stop. Tighten the stop to 1 once you have a 2.92 gain. OM closed Thursday at 27.00. Earnings Report Date: Feb 14, 2023. Beta: 1.49. Market-Cap: 1.304B. Optionable.

INDUSTRIALS SECTOR

Griffon Corporation (GFF: Industrials/Conglomerates) - NEW HIGH DIP. Another high-flyer, GFF just recently set a new 12-month max price. Having dipped since then, GFF's bullish response to an encounter with moving average support on Thursday shows that the stock may be ready for another move skyward. Now at 38.36, an upward push to 39.02 will signal a BUY entry. Once in the trade, place a 3.07 trailing stop which can be tightened to 1.54 once you've gained 2.24. Earnings Report Date: Jan 30, 2023. Beta: 1.52. Market-Cap: 2.189B. 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/ 

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

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.

For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ 
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Best of luck and have a Great Week!
 
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