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January 29, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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Quantum Trading
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"QUICK LIST"
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Stock 01/28 01/28 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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CONN 23.85 0.50 24.19 1.93/0.97 2.42
DKS 113.19 1.26 114.78 9.16/4.58 9.52
RENN 21.08 0.26 21.68 19.67 2.01/1.01 2.34
NCBS 91.71 0.47 92.91 5.81/2.91 3.48
PGR 108.71 1.06 110.16 6.55/3.28 3.66
GDRX 22.02 0.35 22.68 20.49 2.19/1.1 3.38
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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A welcome Friday rally enabled stocks to end a volatile week higher despite uncertainty surrounding a potentially aggressive Fed Bank rate tightening campaign. Economic headlines highlighted improving employment costs for the fourth quarter compared to the third quarter's record high pace, a slower than expected increase in personal income, a decrease in spending and a surprise revision lowering recent consumer sentiment. In equities, Visa (V $228) and Apple (AAPL $170) topped earnings estimates, while Chevron (CVX $131) missed profit expectations. Treasuries and oil prices moved higher, gold was lower and the USD/dollar finished the session near even. Friday On The Week
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Dow 34,725.47 564.69 +460.1 1.34%
Nasdaq 13,770.57 417.79 +1.65 0.01%
S&P 500 4,431.85 105.34 +33.91 0.77%
NYSE Volume 5.05B
NYSE Advancers 2,265
NYSE Decliners 1,130
Nasdaq Volume 4.98B
Nasdaq Advancers 3,175
Nasdaq Decliners 1,627
New Highs/Lows
01/21 01/24 01/25 01/26 01/27 01/28
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NYSE New Highs 8 7 18 44 36 10
NYSE New Lows 525 792 159 193 429 542
Nasdaq New Highs 22 18 25 34 22 20
Nasdaq New Lows 1,316 1,755 280 376 846 1,152
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TRADER'S TIP:
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TRADER'S TIP: "Changing Horses In The Middle Of The Stream" Here's another good reason to avoid changing rules in the middle of a trade. Waiting to finish the trade before making rule changes emphasizes the importance of having a "formal" set of trading procedures. Including a rule that regulates how and when you change your rules implies that you respect for your own rules. This one rule alone will improve your bottom line and set you apart from casual traders with no consistent methods. **************************
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 - 4431.85 January 28, 2022 52-Week High: 4818.62 52-Week Low: 3694.12 Daily Trend: DOWN Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 4830.45 Resistance 2: 4599.84 Resistance 1: 4515.84 Pivot: 4369.23 Support 1: 4285.23 Support 2: 4138.62 Support 3: 3908.01 https://www.prorightline.com/rlch/012822SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, January 31, 2022: 31-Jan 9:45 am Chicago PMI Tuesday, February 01, 2022: 01-Feb 9:45 am Markit manufacturing PMI (final) 01-Feb 10 am ISM manufacturing index 01-Feb 10 am Job openings 01-Feb 10 am Job quits 01-Feb 10 am Construction spending Wednesday, February 02, 2022: 02-Feb 8:15 am ADP employment report 02-Feb 10 am Home ownership rate Thursday, February 03, 2022: 03-Feb 8:30 am Initial jobless claims 03-Feb 8:30 am Continuing jobless claims 03-Feb 9:45 am Markit services PMI (final) 03-Feb 10 am ISM services index 03-Feb 10 am Factory orders 03-Feb 10 am Core capital equipment orders (revision) Friday, February 04, 2022: 04-Feb 8:30 am Nonfarm payrolls (month to month) 04-Feb 8:30 am Unemployment rate 04-Feb 8:30 am Average hourly earnings (month-to-month) 04-Feb 8:30 am Labor-force participation rate 25-54 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: "Looking for a Good Fortune Teller?" You don't really need a psychic if you plan each position with a "what if" approach. Before entering any trade always ask - "What will I do if price moves in my favor, and what will I do if it moves against me?" Since most traders and investors never consider these questions at all, simply writing down specific answers will put you WAY ahead of the game. Remember to set any bias aside, and play the hand that's dealt. ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR Conn's, Inc. (CONN: Consumer Cyclical/Specialty Retail) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, CONN fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 23.85, plan to buy shares at 24.19 and use a 1.93 trailing stop. Tighten the stop to 0.97 on a 2.42 gain. Earnings Report Date: Mar 29, 2022. Beta: 2.50. Market-Cap: 703.971M. Optionable. DICK'S Sporting Goods, Inc. (DKS: Consumer Cyclical/Specialty Retail) - BULLISH BOUNCE. DKS 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 DKS 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 114.78. Set a trailing stop of 9.16, tightening to 4.58 on a 9.52 profit. DKS closed at 113.19 on Friday. Earnings Report Date: Mar 07, 2022. Beta: 1.74. Market-Cap: 9.802B. Optionable. Renren Inc. (RENN: Consumer Cyclical/Auto & Truck Dealerships) - SQUEEZE PLAY. Trader indecision has put RENN squarely in the center of a Bull versus Bear standoff. This tight spot should soon give way to a clear winner in the short-term, and we want to be in position for the move. To do that we've set a BUY entry at 21.68 and a SELL short entry at 19.67. Now it's up to RENN to show us which entry will be filled. Once the trade is underway place a 2.01 trailing stop, which can be tightened to 1.01 after you achieve a 2.34 profit. RENN closed on Friday at 21.08. Earnings Report Date: N/A. Beta: 1.89. Market-Cap: 506.329M. Optionable. FINANCIAL SERVICES SECTOR Nicolet Bankshares, Inc. (NCBS: Financial Services/Banks-Regional) - NEW HIGH DIP. Another high-flyer, NCBS just recently set a new 12-month max price. Having dipped since then, NCBS's bullish response to an encounter with moving average support on Friday shows that the stock may be ready for another move skyward. Now at 91.71, an upward push to 92.91 will signal a BUY entry. Once in the trade, place a 5.81 trailing stop which can be tightened to 2.91 once you've gained 3.48. Earnings Report Date: Apr 18, 2022. Beta: 0.69. Market-Cap: 1.283B. Optionable. The Progressive Corporation (PGR: Financial Services/Insurance-Property & Casualty) - NEW HIGH DIP. Confident in its ability to continue trending skyward, PGR's pullback from a new 52-week high sets the stage for a return to that peak. Price activity on Friday provided a setup, with the BUY trigger ready at 110.16 should PGR reach that level. Follow up your entry with a 6.55 trailing stop. Tighten it to 3.28 when you have a 3.66-point gain. PGR closed Friday at 108.71. Earnings Report Date: Feb 16, 2022. Beta: N/A. Market-Cap: 63.53B. Optionable. HEALTHCARE SECTOR GoodRx Holdings, Inc. (GDRX: Healthcare/Health Information Services) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in GDRX's narrowest trading range of the past seven sessions. With neither group able to take complete control on Friday, the stock's short term destiny is up for grabs. You can capitalize on this unusually tight condition by placing both a BUY order at 22.68 and a SELL order at 20.49. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.19 trailing stop. Tighten the stop to 1.1 once you have a 3.38 gain. GDRX closed Friday at 22.02. Earnings Report Date: Mar 09, 2022. Beta: N/A. Market-Cap: 8.783B. 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 ---------------- ------- -------- ------- ------ ------- 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 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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"How Important Is A High Percentage of Winners?" I sometimes see advertisements for trading services that proudly proclaim an ultra-high percentage of winners. These ads remind me of my early trading days. Like most rookies, I thought that a high percentage of wins was necessary to be successful. A lot of water has flowed under the trading bridge since then. I've learned that things aren't always as they seem - especially in the stock market! Here's an example of what I mean - pretend for a minute that we're at the local county fair. As we walk down the fairway there are two games of chance side by side. The guy at the first booth leans over the counter and says, "Give it a try - a dollar a play, four out of 10 winners every time!" At the next booth the fellow behind the counter shouts, "Step right up - a buck a play, six out of 10 winners guaranteed." Assuming that we're there to have fun (and make a little money if we get lucky), which game should we play? At first glance it looks simple. Both games cost the same per play, but one has a higher percentage of winners. Of course we would take the six-out-of-ten game over the four-out-of-ten-game. But what if we took a step closer and found that the lower odds game paid out $4 for each winner, but the second game paid only $2. How would that affect our choice? Now lets do the math. The first game costs $10 for ten plays, with four winners at $4 each. That's 4 times $4, or $16 in winnings. Subtract the $10 to play and we're left with $6 profit. The second game costs the same to play, but we end up with six winners. That's 6 times the $2 payoff for each winner, or $12 total minus the $10 to play leaves us with $2. It's clear in this case that the lower percentage game pays off the most because each winner is twice the amount as in game two. In other words, the same amount invested in a lower percentage game produced three times the profits because the payoff per winner is higher. It's obvious in this example that the higher reward to risk ratio in the first game was a very important component in the profitability of the game. That exact same aspect is true in trading stocks. While our intuition may tell us that a trading method with a very high percentage of winners is always "better," logic indicates otherwise. Not only should we consider the percentage of winners when deciding which strategy to use, but we should also consider the reward to risk ratio. All things being equal, a high percentage approach will produce higher profits. However, there is a severe penalty for pushing too hard toward a high percentage of wins. The unpredictable and relatively efficient nature of the stock market insures that traders who follow this approach will be forced into two very damaging situations - smaller profits and larger losses. To maintain the high number of winners, traders are forced to limit the reward for each trade and take quick profits. Strategies that depend on small profits are capable of high winning percentages, yet to achieve this high win-to-loss ratio they also have to take on more risk per trade. If they limit the amount of risk or loss per trade, the percentage of winners drops too. A study of different trading systems by Keener Capital Management show that higher winning percentages are characteristic of the worst performing strategies. By contrast, strategies with lower winning percentages were the most profitable. In summary, a high percentage of wins don't necessarily mean more profit. Robust trading strategies require risk control tactics that include reasonable stop placement. Instead of trying to maintain a very high win-to-loss ratio, traders will benefit more by focusing on trade management to arrive at a profitable balance between risk and reward. A simple yet extremely effective guideline is to: - Limit losses to reasonable amounts - Use trailing stops to lock in accumulating profits - Let the winners grow! ======================================================================
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 800-737-4518. |