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January 28, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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Common Trading Mistakes...And How to Avoid Them (Part III)
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"QUICK LIST"
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Stock 01/27 01/27 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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BOOM 21.34 -0.20 21.94 20.06 1.88/0.94 2.4
INGN 22.85 0.06 23.3 1.68/0.84 1.78
SDGR 22.97 0.07 23.59 1.65/0.83 2.36
VERV 22.42 0.40 23.22 21.12 2.1/1.05 2.58
AME 143.90 0.34 146.32 8.38/4.19 5.08
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 higher on Friday, ending a positive week as traders sorted out another full day of economic and earnings news. In equities, credit card company Visa (V $231)beat profit projections, while American Express (AXP $172) fell short of forecasts yet offered a positive outlook. Semi-conducter manufacturer Intel (INTC $28) disappointed shareholders with a fourth-consecutive quarter of declining sales and warned of future losses. Economic news was upbeat, as pending home sales chalked up a gain, personal income rose, and consumer sentiment was revised upward. The USD/dollar and treasury yields moved higher, oil and gold prices ended the session lower. Friday On The Week
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Dow 33,978.08 28.67 +602.59 1.81%
Nasdaq 11,621.71 109.30 +481.28 4.32%
S&P 500 4,070.56 10.13 +97.95 2.47%
NYSE Volume 3.92B
NYSE Advancers 1,798
NYSE Decliners 1,278
Nasdaq Volume 6.34B
Nasdaq Advancers 2,580
Nasdaq Decliners 1,930
New Highs/Lows
01/20 01/23 01/24 01/25 01/26 01/27
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NYSE New Highs 47 86 98 70 117 115
NYSE New Lows 16 8 25 13 11 6
Nasdaq New Highs 86 116 113 97 124 127
Nasdaq New Lows 28 35 35 43 42 40
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TRADER'S TIP:
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TRADER'S TIP: "EMAs, SMAs, or DMAs?" Did you know that EMAs - Exponential Moving Averages - are calculated based on "yesterday's" EMA? That's where the "exponential" part comes in. This means that if you're looking at a 200 Daily EMA based on 500 days of data vs. 2000 days of data, the results will be different. This explains why various charts programs display differing EMAs for the same stock. Though this calculation also affects the shorter moving averages like the 22 and 50 DMA (Daily Moving Average), it is not as dramatic as with the 200 EMA. For daily charts the most widely used 200 MA is the 200 SMA (Simple Moving Average). However, in recent years some traders have begun using 200 EMAs because of the default settings in the charting packages. It pays to know which you are viewing. For the record, at RightLine we use EMAs for all moving averages except the 200 DMA, for which we use the SMA. One powerful feature found in RightLine and some other charting programs is the ability to change the time frame referenced on the chart. While this is a very helpful feature, be aware that changing this setting will affect any displayed EMAs (Exponential Moving Average) lines. **************************
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 - 4070.56 January 27, 2023 52-Week High: 4637.30 52-Week Low: 3491.58 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 4328.24 Resistance 2: 4183.09 Resistance 1: 4126.82 Pivot: 4037.94 Support 1: 3981.67 Support 2: 3892.79 Support 3: 3747.64 https://www.prorightline.com/rlch/012723SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, January 30, 2023: 30-Jan None scheduled Tuesday, January 31, 2023: 31-Jan 8:30 am Employment cost index 31-Jan 9 am 31-Jan 9 am FHFA home price index (SAAR) 31-Jan 9:45 am Chicago business barometer 31-Jan 10 am Consumer confidence index 31-Jan 10 am Rental vacancy rate Wednesday, February 01, 2023: 01-Feb 8:15 am ADP employment report 01-Feb 9:45 am 01-Feb 10 am ISM manufacturing index 01-Feb 10 am Job openings 01-Feb 10 am Quits 01-Feb 10 am Construction spending 01-Feb 2 pm Federal funds rate 01-Feb 2 pm Federal funds projection 01-Feb 2:30 pm Fed Chair Jerome Powell news conference 01-Feb Varies Motor vehicle sales (SAAR) Thursday, February 02, 2023: 02-Feb 8:30 am Initial jobless claims 02-Feb 8:30 am Continuing jobless claims 02-Feb 8:30 am Productivity, first estimate (SAAR) 02-Feb 8:30 am Unit labor costs, first estimate (SAAR) 02-Feb 10 am Factory orders 02-Feb 8:30 am Core capital goods orders Friday, February 03, 2023: 03-Feb 8:30 am Nonfarm payrolls 03-Feb 8:30 am Unemployment rate 03-Feb 8:30 am Average hourly earnings 03-Feb 8:30 am Labor-force participation rate, 25-54 year-olds 03-Feb 9:45 am 03-Feb 10 am ISM services index 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: "For Dessert? Profit Pie" Entering "long" positions just above support, and "short" positions just below resistance delivers a larger slice of the potential profit "pie" when the trade is favorable, and quick, small losses when it isn't. ***********************************
STOCKS COVERED IN THIS ISSUE
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ENERGY SECTOR DMC Global Inc. (BOOM: Energy/Oil & Gas Equipment & Services) - SQUEEZE PLAY. Friday's trading action forced BOOM'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 BOOM 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 21.94 if BOOM moves higher, and place your order to SELL short at 20.06 if price declines to that level. As usual follow your entry with a trailing stop, 1.88 should be sufficient. Reduce your stop to 0.94 on a 2.4 gain. BOOM closed Friday at 21.34. Earnings Report Date: Feb 22, 2023. Beta: 1.63. Market-Cap: 416.762M. Optionable. HEALTHCARE SECTOR Inogen, Inc. (INGN: Healthcare/Medical Devices) - BULLISH BOUNCE. INGN has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Friday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return INGN to the previously established uptrend. The Bullish Bounce set-up is the basis for our BUY entry, so be ready to go long on a rise to our trigger at 23.3. Set a trailing stop of 1.68, tightening to 0.84 on a 1.78 profit. INGN closed at 22.85 on Friday. Earnings Report Date: Feb 23, 2023. Beta: 0.93. Market-Cap: 523.745M. Optionable. Schrodinger, Inc. (SDGR: Healthcare/Health Information Services) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. SDGR's current price action near moving average support signals a potential BUY entry at 23.59, followed by a 1.65 trailing stop which can be tightened to 0.83 upon earning 2.36. SDGR closed Friday at 22.97. Earnings Report Date: Feb 28, 2023. Beta: 0.89. Market-Cap: 1.636B. Optionable. Verve Therapeutics, Inc. (VERV: Healthcare/Biotechnology) - SQUEEZE PLAY. VERV is caught in a dilemma. The stock's compressed price range on Friday 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. VERV is now at 22.42. We can capture price action either way by placing a BUY trigger at 23.22 and a SELL short trigger at 21.12. Once VERV 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 2.1. When you acquire a 2.58 profit, tighten the stop to 1.05. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.381B. Optionable. INDUSTRIALS SECTOR AMETEK, Inc. (AME: Industrials/Specialty Industrial Machinery) - NEW HIGH DIP. As a rule of thumb, outstanding stocks like AME continue to perform well for extended periods of time. The recent pullback from a new 52-week high gives us a chance to enter a position without taking much risk. AME's price behavior on Friday points to another move higher, so prepare to BUY shares at the trigger price of 146.32. Once in, follow the purchase with a 8.38 trailing stop. Change the stop to 4.19 upon gaining 5.08 points. AME closed Friday at 143.90. Earnings Report Date: Feb 02, 2023. Beta: 1.23. Market-Cap: 33.047B. 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/ ***********************************
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/ **********************************
TRADER'S CORNER
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"The Gap Primer" Gaps are shock events that jolt price up or down and leave an "open window" to the last bar. Market folklore (such as the infamous "gaps Get filled") seems to offer guidance, but in reality it has little value. After all, many gaps never get filled. So how can we use these one-bar wonders to make good trades and increase profits? The first thing to do is figure out what kind of gap you're dealing with. It should fall into one of these three categories: ~ Breakaway gaps appear as markets break out into new trends, up or down. ~ Continuation gaps print about halfway through trends, when enthusiasm or fear overpowers reason. ~ Exhaustion gaps burn out trends with one last surge of emotion. See chart - https://prorightline.com/rlr/TCwcom060703.gif Certain trades work best with each gap type, so proper identification is extremely important. Use relative location and key characteristics to place them into the right category. There is also a psychological aspect to recognizing the correct gap. Breakaway gaps "surprise" because they appear suddenly on charts you've ignored. Continuation gaps "frustrate" because they pop up where you think price should reverse. Exhaustion gaps "relieve" because they print after you hold on for too long. Trade the trend on the first pullback to a breakaway or continuation gap. In other words, buy the decline after a rally, or sell the rally after a decline. The odds favor a reversal back in the primary direction, even if these gaps fill. However, the pullback trade often requires great patience. Markets retest breakout gaps right after they occur, but many bars can pass before price returns to test a continuation gap. See chart - https://prorightline.com/rlr/TCamd060703.gif Use the continuation gap to target major reversals. The first test usually occurs after closure of the exhaustion gap. But you can't trade it if you can't find it, so here's a trick: Wait until you can count three price moves, up or down. Then place a Fibonacci grid across the entire trend and look for a continuation gap at the 50% level. If you find one, place a limit order within the gap and wait for a test to occur. The retracement should provide enough support or resistance to force a reversal. Once the gap is filled, place a trailing stop and keep it close behind current price action. Modern markets fill many continuation gaps for a bar or two before they reverse. If you're a defensive trader, place your order within this extreme price level. Many times you won't get filled, but you'll save yourself whipsaws from entering too early. Keep in mind the filled gap presents low risk only when volume remains flat and price doesn't gap back through the old gap to get there. See chart - https://prorightline.com/rlr/TCyhoo060703.gif Exhaustion gaps print blowoffs that end a trend. This last burst of energy can occur on high volume, but the lack of it doesn't change the outcome. Exhaustion gaps fill easily, with price often heading lower in a hurry. After this reversal, use multiple time frame analysis to plan your next move. For example, an exhaustion gap may also print a continuation gap in the next larger time frame. Be patient if this sounds confusing. Seeing this three-dimensional landscape requires a sharp eye and a lot of charting experience. *************** This instructive article was written by Alan Farley, author of "The Master Swing Trader." ======================================================================
Best of luck and have a Great Week!
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The RightLine Report is an information service for investors and traders. It is not a solicitation nor a recommendation or offer to buy or sell securities. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. The publishers of The RightLine Report are not brokers or financial advisors, and are not acting in any way to influence the purchase or sale of any security. Stock picks, entry points and exit points should be considered an information resource to assist the trader in developing a trading plan and it is the sole responsibility of the reader to conduct his or her own due diligence before executing a trade. Trading securities should be considered speculative with a high degree of volatility and risk. The publishers of The RightLine Report recommend that anyone trading securities should do so with caution, exercise prudent trading discipline and have a personal risk management strategy in place before doing so. It is possible at this or some subsequent date, the publishers and staff of The Pro Right Line Corp. may own, buy or sell securities presented. The Pro Right Line Corp. is not a financial advisory service. Its publishers, owners or investors, are not liable for any losses or damages, monetary or otherwise, that result from the content of The RightLine Report. Past RightLine Report performance may not be indicative of future performance. All subscriptions and/or use of the RightLine.net website are subject to RightLine's "Terms of Use" and "Subscriber Terms & Conditions" which are posted at www.rightline.net. Any REDISTRIBUTION of the above information, without The RightLine's written consent, is STRICTLY PROHIBITED. Copyright / The Pro Right Line Corporation - All Rights Reserved To Unsubscribe, send an email to cs@prorightline.com or call 1-312-248-4241. |