January 2, 2024 - The RightLine Report
Notes From The Editor
Here's an easy yet extremely effective way to approach the stock market. Instead of worrying about what may or may not happen, spend your time planning what you will do specifically in response to the "one thing" that the market always does.
The job of a trader distills down to a very basic task. Our primary objective is to capture price movement. While trying to predict price direction may seem like the logical first step in capturing movement, it actually overcomplicates the process. Studies show that it is virtually if not literally impossible to consistently predict the direction of price movement. Attempting to do it is usually an unwise investment in time and energy.
Okay, back to the "one thing." The one thing that the market always does can be stated in one word; MOVE. When it comes to the stock market the most important quality is an action - price movement, for it's in the price movement that profits are made.
There are only three specific ways that the market can move. Up, down, or sideways. Instead of trying to predetermine which of these three will occur next, it's much easier to use a strategy that captures movement regardless of direction.
There are a number of methods that work well with this approach, but we won't go into the details of specific setup and entry requirements today. However, we can start to lay the foundation for understanding this strategy by asking ourselves two simple questions within the context of the three possible ways the market can move - "What" and "When."
What and When should always be considered in advance of entering any position to arrive at specific entry and exit instructions for these possible scenarios:
Entries:
a) price goes up
b) price goes down
c) price moves sideways
Exits:
a) the trade moves in your favor,
b) the trade moves against you,
c) the trade doesn't move at all.
"What & When." As far as these two are concerned, details matter. It isn't a good idea to approximate, or wait until you "get there" to decide what to do. Plan ahead, put it in writing, and always include the specific conditions and/or price levels for entries and exits. When using a trailing stop method to lock in gains, make certain that you plan in advance exactly when the trailing stop will be adjusted.
Bottom line: Always ask, "What & When" BEFORE you put money in the market.
Trade well,
~ Thomas Sutton
Stocks Covered Today Stock Splits
Quick List
Stock 01/02 01/02 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
SGA 22.61 0.35 23.06 21.17 1.89/0.95 1.74
SEZL 21.40 0.97 22.74 19.9 2.84/1.42 2.46
DSGR 31.23 -0.33 31.72 2.14/1.07 1.92
SKYW 51.69 -0.51 53.09 4.05/2.03 3.26
GNE 28.42 0.29 28.82 2.14/1.07 2.32
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
US stocks commenced the year on a subdued note, marked by a significant decline in Apple (AAPL) stock that exerted downward pressure on the technology sector. Investors opted to cash in profits following an unexpectedly robust 2023, resulting in the S&P 500 index (SPX) closing at its lowest level in nearly two weeks.
Apple witnessed a 3.6% drop, closing at its lowest point since mid-November, prompted by Barclays downgrading the stock from "equal weight" to "underweight." The rationale behind the downgrade cited "lackluster" iPhone 15 sales. The impact of Apple's weakness, coupled with a downturn in semiconductor shares, contributed to the Nasdaq Composite (COMP) reaching a three-week low.
The declines observed on Tuesday are a confluence of profit-taking and investor "rotation" into sectors that underperformed in the previous year, notably energy, health care, and utilities. Considering the S&P 500's impressive 24% gain in 2023, a tepid start to the new year wasn't entirely unexpected.
This kind of rotation is typical early in the year, influenced by factors like tax-loss selling and portfolio managers engaging in 'window dressing,' which tends to cap the performance of last year's underachievers. Frequently, investors wait for the calendar to turn to realize capital gains on the winners from the previous year. This behavior was likely accentuated by an exceptionally strong rally in stocks as the year drew to a close.
Jan 1, 2024 Jan 2, 2024
-------------------- --------------------
Dow Closed 0 37,715.04 25.50
Nasdaq Closed 0 14,765.94 -245.41
S&P 500 Closed 0 4,742.83 -27.00
NYSE Volume 0 3.74B
NYSE Advancers 0 1,347
NYSE Decliners 0 1,496
Nasdaq Volume 0 5.8B
Nasdaq Advancers 1,812
Nasdaq Decliners 0 2,418
New Highs/Lows
12/26 12/27 12/28 12/29 01/01 01/02
--------------------------------------------
NYSE New Highs 222 235 133 101 0 46
NYSE New Lows 3 4 7 9 0 10
Nasdaq New Highs 392 398 255 59 0 62
Nasdaq New Lows 65 80 60 37 0 39
Stocks Covered Today Stock Splits
TRADER'S TIP: "Trend Line Breaks"
A broken trend line indicates that the dominant market crowd has lost its power. A trend line break is only valid when prices close on the other side of the trend line.
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 - 4742.83 January 2, 2024
52-Week High: 4793.30
52-Week Low: 3794.33
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4879.77
Resistance 2: 4823.19
Resistance 1: 4796.51
Pivot: 4766.61
Support 1: 4739.93
Support 2: 4710.03
Support 3: 4653.45
NASDAQ Composite - 14765.94 January 2, 2024
52-Week High: 15150.07
52-Week Low: 10265.04
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 15475.42
Resistance 2: 15252.47
Resistance 1: 15131.91
Pivot: 15029.51
Support 1: 14908.95
Support 2: 14806.55
Support 3: 14583.59
Dow Industrials - 37715.04 January 2, 2024
52-Week High: 37790.08
52-Week Low: 31429.82
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 38599.12
Resistance 2: 38089.10
Resistance 1: 37889.32
Pivot: 37579.07
Support 1: 37379.29
Support 2: 37069.04
Support 3: 36559.01
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, JAN 1 New Year's holiday, markets closed TUESDAY, JAN 2 9:45 am S&P final U.S. manufacturing PMI Dec. 10:00 am Construction spending Nov. WEDNESDAY, JAN 3 10:00 am U.S. job openings Nov. 10:00 am ISM manufacturing Dec. 2 pm Minutes of Fed's December meeting TBA Auto sales Dec. THURSDAY, JAN 4 8:15 am ADP employment Dec. 8:30 am Initial jobless claims Dec. 30 9:45 am S&P final U.S. services PMI Dec. FRIDAY, JAN 5 8:30 am U.S. employment report Dec. 8:30 am U.S. unemployment rate Dec. 8:30 am U.S. hourly wages Dec. 8:30 am Hourly wages (year over year) 10:00 am ISM services Dec. 10:00 am Factory orders Nov. 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: "Successful Traders Are Usually Risk-Averse"
Unlike the public perception that stock traders are wild and free gamblers who love to take risks, most successful professionals are just the opposite. A good example of a successful trader is Bernard Oppetit, Global Head of Equity Derivatives at Paribas, part of the international wholesale bank Groupe Paribas with assets of over $250 Billion. Here's what he has to say about risk in an interview with trader and author Alpesh Patel.
"I am very risk-averse. I would definitely take the certainty of making $10,000 than the 10% chance of making $100,000."
"The important thing is to look at risk in a rational way."
"Even though I know I will get out after a certain loss, I consider the amount I have risked as the whole amount invested. Also, I look to see what percentage probability there is of a certain percentage rise and I compare that to the risk I am taking. I would look at some kind of distribution of possible outcomes, such as a 50% chance of doing something special, or a 50% chance of doing nothing in particular, or a 50% chance of a small loss against a 50% chance of a great gain. There has to be some idea of the distribution of outcomes."
"There is a joke about an economics professor who is walking in New York with a friend. His friend notices a $100 bill on the sidewalk and points to the bill and says, "Look professor, a $100 bill." The economics professor replies, "No that can not be so, if that was a $100 bill somebody would have picked it up already." Still I believe there are opportunities to make money with very little risk."
Stocks Covered in This Issue
COMMUNICATION SERVICES SECTOR
Saga Communications, Inc. (SGA: Communication Services/Broadcasting) - SQUEEZE PLAY. SGA 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 23.06 and a SELL short entry at 21.17. Once your trade is filled, enter a 1.89 trailing stop. Tighten it to 0.95 after a 1.74 gain. SGA closed on Tuesday at 22.61. Earnings Report Date: Mar 07, 2024. Beta: 0.48. Market-Cap: 138.453M. Not Optionable.
FINANCIAL SERVICES SECTOR
Sezzle Inc. (SEZL: Financial Services/Credit Services) - SQUEEZE PLAY. Tuesday's trading session left SEZL in a very narrow price range after buyers and sellers fought to a near stalemate. Both sides are looking for some traction, and a breakout either way could provide a nice gain in the short term. To get aboard, set your BUY trigger at 22.74 and your SELL short trigger at 19.9. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 2.84 trailing stop. Once you have a 2.46 profit, reduce the stop to 1.42. Earnings Report Date: Feb 26, 2024. Beta: 3.82. Market-Cap: 121.878M. Not Optionable.
INDUSTRIALS SECTOR
Distribution Solutions Group, Inc. (DSGR: Industrials/Industrial Distribution) - NEW HIGH DIP. DSGR 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 DSGR reaches our trigger price of 31.72, and enter a 2.14 trailing stop. The stop can be resized to 1.07 once you have a 1.92 profit. DSGR closed Tuesday at 31.23. Earnings Report Date: Mar 07, 2024. Beta: N/A. Market-Cap: 1.463B. Optionable.
SkyWest, Inc. (SKYW: Industrials/Airlines) - NEW HIGH DIP. New highs always reflect stocks that are doing exceptionally well. This is the case with SKYW, which has pulled back a bit after setting a new 52-week high just a few days ago. Tuesday's bounce from Moving Average support tells us this stock may be ready to move back up to blue sky territory. SKYW now rests at 51.69, and we're anticipating a move up to our BUY trigger at 53.09. Be ready to buy shares at that point and follow your entry with a 4.05 trailing stop. Decrease the stop to 2.03 on a 3.26 gain. Earnings Report Date: Jan 31, 2024. Beta: 1.94. Market-Cap: 2.116B. Optionable.
UTILITIES SECTOR
Genie Energy Ltd. (GNE: Utilities/Utilities - Regulated Electric) - NEW HIGH DIP. Tuesday's price action is telling us that GNE is preparing to move back up to the 52-week high that was set just a few days ago. Our BUY trigger at 28.82 is ready to take advantage of a likely bounce from the current support level. Once your order is filled, enter a trailing stop of 2.14. Resize the stop to 1.07 after you reach a 2.32 profit. Earnings Report Date: Mar 11, 2024. Beta: 0.38. Market-Cap: 779.22M. 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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