January 21, 2020 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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I remember reading about three mountain bikers who were air lifted to safety in a rescue helicopter after getting lost in the San Bernardino National Forest. The next day they decided to go back into the woods and get their bicycles. Unfortunately, the three young men got lost and had to be rescued ... again!

Although this sort of behavior may seem bizarre, it's quite common among traders and investors. No, we rarely get lost in the woods twice in twenty-four hours, yet many of us continue to repeat the same mistakes over and over again. When it comes to trading the markets, losing money rarely results from what others do to us. Problems usually come up because of what we do to ourselves.

I suppose we all have blind spots in our trading field of vision - things that we just don't see because of our psychological makeup. Most new traders have little or no training in the markets, yet still expect to be successful without anyone to guide them. Experienced traders know that rules are important, so we set rules and then we break them.

The reasons for "dim-witted" behavior are embedded deep in our brains. Today's actions are largely the result of early childhood conditioning that established habits and beliefs long before we even knew what they were. As young children we were unaware to how silly we probably looked to our older friends and family when we tried to avoid responsibility for our actions.

It always seemed like a good idea at the time, though now we can see that maybe it wasn't. In the same way, our current trading behavior always seems the right thing to do - at least at the time we do it.

"Oh, the market did that to me" is actually just a way of saying "I'm a big part of the reason it happened." Have you ever noticed how most investors are reluctant to admit that they are responsible for their losses, yet they're proud to take credit for their gains?

At first glance it seems natural to be ashamed of our mistakes and proud of our accomplishments. However, our blunders usually teach us much more than our achievements - if we are willing to learn from them. The only truly bad mistakes are the ones that we deny or don't learn from. It takes courage to own up to them, much less accept them as valuable learning experiences to be embraced.

The good news is that we can change our old habits and beliefs by taking responsibility - even when it hurts. A trading mistake can cost quite a bit in terms of cash, so it's always wise to get at least the same amount of value in experience. Just remember that bad judgment leads to experience, and experience leads to good judgment.

Trade well!

~ Thomas Sutton, Editor 

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                           "QUICK LIST"
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Stock     01/21     01/21      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

YY        65.03     -1.06     65.93                  4.44/2.22      3.42
LK        47.66     -2.36     49.59     45.27        4.32/2.16      4.82
CAR       34.64     -0.35     35.58     33.20        2.38/1.19      1.70
UPLD      40.90      0.23     41.60     39.24        2.36/1.18      2.10


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 first session of the holiday shortened week ended in the red as a light economic calendar gave traders little incentive to buy. The S&P 500 gave back 9 points to close at 3,321, the Dow Jones Industrial Average dropped 152 points to 29,196 and the Nasdaq declined 18 points to 9,371. In equities, oil services company Halliburton (HAL $24) disappointed investors with a net loss for the quarter after analysts had predicted a profit. HAL closed lower. Treasury yields, gold and oil prices all slid a bit, while the USD/dollar ended the day near even. 


                       Jan 20, 2020           Jan 21, 2020   
                  --------------------   --------------------
Dow                    CLOSED        0        29,196  -152.06
Nasdaq                 CLOSED        0         9,371   -18.14
S&P 500                CLOSED        0         3,321    -8.83

NYSE Volume                          0                  4.26B
NYSE Advancers                       0                   1160
NYSE Decliners                       0                   1788

Nasdaq Volume                        0                  2.76B
Nasdaq Advancers                     0                   1253
Nasdaq Decliners                     0                   2007

                                 New Highs/Lows

                   01/14  01/15  01/16  01/17  01/20  01/21
                 --------------------------------------------
NYSE New Highs       230    271    298    339      0    259
NYSE New Lows          8      7      6      7      0     27
Nasdaq New Highs     295    287    379    394      0    234
Nasdaq New Lows       27     24     14     16      0     42


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                              TRADER'S TIP:  
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TRADER'S TIP: "Practice vs. Prediction"

"There is a huge difference between trading correctly and making an accurate market prediction. In the final analysis, predicting the market is not what's important. What is important is using sound trading practices. And if sound trading habits are all that is important, there is no reason to try to predict the markets in the first place."

~ Charlie Wright, Veteran Trader and Hedge Fund Manager 
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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 - 3320.79 January 21, 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/012120SPX.jpg

NASDAQ Composite - 9370.81 January 21, 2020

52-Week High: 9397.58
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 - 29196.04 January 21, 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: "Makes You Wanna Trade"

"Imagine you risk 2% of your equity in any one trade. Allowing for the fact that your account size drops on each occasion, your initial equity would be down 50 percent after 34 consecutive losses. What are the chances of 34 consecutive losses? Well, if there is a 50-50 chance of profit on any one trade, then the chances of 34 consecutive losses would be 0.5 to the 34th power, or one in 17 billion. Makes you wanna trade doesn't it?"

~ Alpesh Patel, Trader & Author of the book, "Net-Trading" 

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                      STOCKS COVERED IN THIS ISSUE    
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COMMUNICATION SERVICES SECTOR

JOYY Inc. (YY: Communication Services/Internet Content & Information) - BULLISH BOUNCE. YY's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Tuesday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move YY back in step with the bullish weekly trend, so our BUY entry trigger is set at 65.93. Once you hold a position, trail a stop of 4.44. Tighten it to 2.22 on a 3.42 gain. YY closed at 65.03 on Tuesday. Earnings Report Date: Mar 01, 2020. Beta: 1.13. Market-Cap: 5.249B. Optionable.

CONSUMER CYCLICAL SECTOR

Luckin Coffee Inc. (LK: Consumer Cyclical/Restaurants) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. LK found itself in this condition on Tuesday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 49.59 and a SELL short trigger at 45.27. When LK moves outside of Tuesday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 4.32 trailing stop. After you've got a 4.82 profit, tighten the stop to 2.16. LK closed at 47.66 on Tuesday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 11.572B. Optionable.

INDUSTRIALS SECTOR

Avis Budget Group, Inc. (CAR: Industrials/Rental & Leasing Services) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. CAR traders reached this state of stand-off on Tuesday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 35.58 and a SELL short trigger at 33.20. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 2.38 which can be tightened to 1.19 on a 1.70 gain. CAR closed Tuesday at 34.64. Earnings Report Date: Feb 17, 2020. Beta: 2.10. Market-Cap: 2.557B. Optionable.

TECHNOLOGY SECTOR

Upland Software, Inc. (UPLD: Technology/Software-Application) - SQUEEZE PLAY. UPLD traders on both sides of the fence are now locked in a head-to-head shootout. Tuesday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 41.60 and a SELL short trigger at 39.24. When one of the orders is filled, cancel the remaining order and enter a 2.36 trailing stop. When you've reached a 2.10 paper profit, tighten the stop to 1.18. UPLD closed at 40.90 on Tuesday. Earnings Report Date: N/A. Beta: 0.53. Market-Cap: 1.033B. 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  
---------------- -------     --------    -------     ------  -------   

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 
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