January 27, 2022 - The RightLine Report
Notes From The Editor
Regardless of what is said about it being "impossible" to time the markets, everyone - including those who think it can't be done - are at the very least attempting to do it. There's only one major difference between traders who accept "timing" as a normal part of their strategy, and investors who simply "buy and hold" with no real regard for timing their entries and exits.
Traders use timing consciously, while buy-and-holders use it unconsciously.
Okay, we know how traders do it - by intentionally choosing to enter and exit positions in their chosen time frame based on a predetermined strategy. Traders use a variety of strategies, some based on charts with technical indicators, others on fundamentals, or a combination of both.
Investors unknowingly use timing to enter and exit too - only their strategies usually include timing decisions based on arbitrary reasons. Like payroll deduction purchases, which happens to occur on a particular day of the week or month. That's when their strategy tells them to buy. Whether they realize it or not, that is timing.
This typical investor "entry" strategy is based on little more than traditional Wall Street reasoning that encourages people to let the "experts" decide what is best for them. In addition, tax laws promote limited investing options through 401Ks and IRAs via payroll deduction plans - in which case investors usually have very few choices. And when it comes to exiting positions the strategies are even worse.
Investors usually time their "exits" to take place in direct relation to their retirement. In other words, instead of basing the most important aspect of investing - which is taking profits - on criteria that is relevant to the markets, the exit timing decision is dependant entirely on chance. If someone happens to retire in the best possible years, they're in good shape. I suppose those who aren't so lucky just take what they can get.
Trade well!
~ Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 01/27 01/27 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
MSB 30.89 -0.69 32.1 29.58 2.52/1.26 2.7
NOTV 27.18 1.12 27.93 25.53 2.4/1.2 4.84
TGH 36.53 0.05 38 35.19 2.81/1.41 1.96
TSAT 21.48 -0.53 22.45 20.66 1.79/0.9 2.86
NRP 35.44 0.00 36.41 33.73 2.68/1.34 3.2
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
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Stocks Covered Today Stock Splits
Market Summary
The major stock averages finished lower on Thursday as the market continues to evaluate the economic picture in light of better GDP growth than expected for the prior quarter and Wednesday's monetary decision by the US Federal Bank suggesting a potentially aggressive tightening campaign starting in March followed by reduction of its balance sheet. In other news, initial jobless claims were lower than expected, durable goods orders were mixed and pending home sales disappointed analysts. In equities, McDonald's (MCD $249) fell short of earnings expectations due to labor and commodity costs, Tesla (TSLA $829) topped profit projections yet the stock price dropped sharply after the company warned of supply chain challenges, while Mastercard (MA $351) exceeded profit predictions and restated its previous performance goals. The Treasury yield curve flattened as rates for the near term surged higher, while yields on the mid-to-long term declined. Gold and oil prices were lower, the USD/dollar ended the session higher.
Jan 26, 2022 Jan 27, 2022
-------------------- --------------------
Dow 34,168.09 -129.64 34,160.78 -7.31
Nasdaq 13,542.12 2.82 13,352.78 -189.34
S&P 500 4,349.93 -6.52 4,326.51 -23.42
NYSE Volume 5.66B 5.21B
NYSE Advancers 1,081 942
NYSE Decliners 2,323 2,476
Nasdaq Volume 5.79B 5.16B
Nasdaq Advancers 1,577 1,041
Nasdaq Decliners 3,199 3,858
New Highs/Lows
01/20 01/21 01/24 01/25 01/26 01/27
--------------------------------------------
NYSE New Highs 32 8 7 18 44 36
NYSE New Lows 264 525 792 159 193 429
Nasdaq New Highs 26 22 18 25 34 22
Nasdaq New Lows 682 1,316 1,755 280 376 846
Stocks Covered Today Stock Splits
TRADER'S TIP: "Sector Timeframes"
When trading with the flow of sector rotation, it's wise to keep a clear view of the strategic timeframe being used for a holding period. On a micro scale, money flows across the trading floor rapidly throughout the day, moving in and out of specific industries as the Street looks for direction. Some days the morning session strongly favors one sector, only to abandon that same industry by midday as more attractive opportunities arise.
It's fast paced, and following that price movement intra-day is for short-term traders with real-time tools and considerable experience. Longer-term investors, on the other hand, are usually better off watching support and resistance areas for the index as a whole (such as watching the $SOX when monitoring semiconductors). A chart of the index reads much like individual stocks, and often sheds light on the group's future direction.
The bottom line is that we can all follow sector rotation and take advantage of the opportunities generated, as long as we keep an appropriate timeframe.
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 - 4326.51 January 27, 2022
52-Week High: 4818.62
52-Week Low: 3694.12
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 5025.78
Resistance 2: 4755.96
Resistance 1: 4576.95
Pivot: 4486.14
Support 1: 4307.13
Support 2: 4216.32
Support 3: 3946.50
NASDAQ Composite - 13352.78 January 27, 2022
52-Week High: 16212.23
52-Week Low: 12397.05
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 16410.44
Resistance 2: 15277.02
Resistance 1: 14522.97
Pivot: 14143.60
Support 1: 13389.55
Support 2: 13010.18
Support 3: 11876.76
Dow Industrials - 34160.78 January 27, 2022
52-Week High: 36952.65
52-Week Low: 29856.30
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 38364.27
Resistance 2: 36597.36
Resistance 1: 35431.36
Pivot: 34830.46
Support 1: 33664.46
Support 2: 33063.55
Support 3: 31296.64
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, January 24, 2022: 24-Jan 9:45 am Markit manufacturing PMI (flash) 24-Jan 9:45 am Markit services PMI (flash) Tuesday, January 25, 2022: 25-Jan 9 am 25-Jan 9 am FHFA national home price index (year-over-year change) 25-Jan 10 am Consumer confidence index Wednesday, January 26, 2022: 26-Jan 8:30 am Advance report on trade in goods 26-Jan 10 am New home sales starts (SAAR) 26-Jan 2 pm FOMC statement 26-Jan 2:30 pm Fed Chair Jerome Powell news conference Thursday, January 27, 2022: 27-Jan 8:30 am Initial jobless claims (regular state program) 27-Jan 8:30 am Continuing jobless claims (regular state program) 27-Jan 8:30 am Gross domestic product (SAAR) 27-Jan 8:30 am Final sales of domestic product (SAAR) 27-Jan 8:30 am Durable goods orders 27-Jan 8:30 am Core capital equipment orders 27-Jan 10 am Pending home sales index Friday, January 28, 2022: 28-Jan 8:30 am Real disposable incomes 28-Jan 8:30 am Real consumer spending 28-Jan 8:30 am PCE inflation (month-to-month change) 28-Jan 8:30 am Core PCE inflation (month-to-month change) 28-Jan 8:30 am PCE inflation (year-over-year change) 28-Jan 8:30 am Core PCE inflation (year-over-year change) 28-Jan 8:30 am Personal income (nominal) 28-Jan 8:30 am Consumer spending (nominal) 28-Jan 8:30 am Employment cost index 28-Jan 10 am UMich consumer sentiment index (final) 28-Jan 10 am UMich 5-year inflation expectations (final) 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: "A Bane or Boon?"
Volatility can be a double-edged sword when trading, but a few reminders can help keep things in perspective. First of all, recall that volatility is what creates trading opportunities, so as long as we focus on the short term, share prices that move dramatically should be welcomed. Secondly, risk management is a must when volatile conditions prevail. Make absolutely certain that exit strategies are pre-planned in order to avoid unwanted losses. And finally, use the Gap Open Strategy to help determine buy and sell points. You'll be glad you did! For more on the Gap Open Strategy go to: http://www.rightline.net/education/gapopen.html
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
Mesabi Trust (MSB: Basic Materials/Steel) - SQUEEZE PLAY. MSB 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. MSB is now at 30.89. We can capture price action either way by placing a BUY trigger at 32.1 and a SELL short trigger at 29.58. Once MSB 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 2.52. When you acquire a 2.7 profit, tighten the stop to 1.26. Earnings Report Date: Apr 25, 2022. Beta: N/A. Market-Cap: 405.277M. Optionable.
HEALTHCARE SECTOR
Inotiv, Inc. (NOTV: Healthcare/Diagnostics & Research) - SQUEEZE PLAY. Thursday's trading action forced NOTV'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 NOTV 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 27.93 if NOTV moves higher, and place your order to SELL short at 25.53 if price declines to that level. As usual follow your entry with a trailing stop, 2.4 should be sufficient. Reduce your stop to 1.2 on a 4.84 gain. NOTV closed Thursday at 27.18. Earnings Report Date: Feb 07, 2022. Beta: 2.05. Market-Cap: 671.216M. Optionable.
INDUSTRIALS SECTOR
Textainer Group Holdings Limited (TGH: Industrials/Rental & Leasing Services) - 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 TGH's case we will enter a BUY should it reach the 38 level, or a SELL short trade if it drops to 35.19. As usual a trailing stop is essential, 2.81 which should be tightened to 1.41 on a 1.96 gain. TGH closed Thursday at 36.53. Earnings Report Date: Feb 15, 2022. Beta: 1.27. Market-Cap: 1.799B. Optionable.
TECHNOLOGY SECTOR
Telesat Corporation (TSAT: Technology/Communication Equipment) - SQUEEZE PLAY. A look at TSAT'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 22.45 and a SELL short trigger at 20.66. Once TSAT shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.79 and tighten to 0.9 on a 2.86 gain. TSAT closed Thursday at 21.48. Earnings Report Date: Mar 07, 2022. Beta: N/A. Market-Cap: 258.669M. Optionable.
N/A SECTOR
Natural Resource Partners L.P. (NRP: N/A/N/A) - 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 NRP. A move to the upside will trigger our BUY entry at 36.41, while a drop to 33.73 will trigger our SELL short entry. Follow your position with a 2.68 trailing stop. Tighten the stop to 1.34 once you have a 3.2 gain. NRP closed Thursday at 35.44. Earnings Report Date: Mar 14, 2022. Beta: 0.68. Market-Cap: 437.73M. 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
---------------- ------- -------- ------- ------ -------
ePlus PLUS 11/9/2021 12/14/2021 2-for-1 Yes
NAPCO Security NSSC 12/8/2021 1/5/2022 2-for-1 Yes
AeroCentury Corp ACY 12/17/2021 1/10/2022 5-for-1 No
Merchants Bancorp MBIN 11/17/2021 1/18/2022 2-for-1 No
SMART Global Hold SGH 1/4/2022 2/2/2022 2-for-1 Yes
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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