January 30, 2024 - The RightLine Report
Notes From The Editor
In previous articles I've mentioned how important it is to pick one trading method and then stick with it long enough to find out how well it works. In this issue I'd like to elaborate just a bit on what is meant by "method," how to determine yours, and then take a brief look at the method we use in the RightLine Report.
"Method" simply refers to the detailed procedures used in any trading routine. This includes everything you do from start to finish - your general trading plan, how you select stocks to trade, your setup and entry criteria, how you manage and exit each trade, and the records you keep. It's no surprise that most traders have never clearly defined their method. If you find yourself in this group, then it might be a good time to clarify exactly what is involved in you personal trading strategy.
To do this you'll need to outline the general procedures you use, then fill in the details. The easiest way is to keep a rough diary long enough to include all of the entry and exit tactics along with other components that you use. A couple of weeks is usually sufficient if you trade several times a week, a month or two may be required if you only trade a few times each month or so.
The idea is to write down everything you do when "trading." This will give you the information you need to determine and evaluate your method. Most traders find that their approach is way too broad, making it virtually impossible to tell what actually works and what doesn't.
One solution is to use an established method like the RightLine Report. Our approach includes all of the components that we feel are necessary for a complete short-term trading method. For example, the strategy includes entry tactics based primarily on Technical Analysis. This approach increases the probability that each trade will meet expectations. Technical Analysis works in all time frames, so it is a great tool for everyone from short-term traders to long-term investors.
Our approach also utilizes a Risk Management module, a very powerful tool that will improve results for almost any trading strategy that doesn't use one. Every trade recommended in the RightLine Report lists specific entry price points, or triggers. Each one is based on a technical setup selected by our analysts. Every suggested position also includes an exit plan using trailing stops to prevent losses and lock in gains.
We suggest that traders follow the RightLine method by trading as many of the setups as possible. If this isn't practical due to capital or time constraints, then you may want to commit to an alternate regular routine.
This could mean trading all of the recommended setups in the weekend issue, or one of the weekday issues depending on your schedule. You might even trade the first one or two setups in each Quick List. Regardless of the routine you choose, commit to a consistent approach that allows you to simplify the process so you can measure your results.
Trade well,
~ Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 01/30 01/30 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
DMLP 31.79 0.09 32.23 1.85/0.93 1.26
CBAY 23.65 -0.09 24.08 22.47 1.61/0.81 2.14
LUV 30.19 -0.02 30.88 1.97/0.99 1.56
AMRC 21.37 -1.41 22.34 20.54 1.8/0.9 2.74
LYTS 14.01 0.07 14.29 0.86/0.43 0.66
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
Stocks closed Tuesday with mixed results, buoyed by better-than-expected consumer confidence and JOLTS - a report published by the US Bureau of Labor Statistics - that showed job openings figures above expectations. The S&P 500 ended the day relatively unchanged, while the NASDAQ, which is weighted towards technology companies, lagged behind with a decline of over 0.7%. In overseas markets, European equities finished on a positive note, driven by preliminary fourth-quarter eurozone GDP data. Eurozone GDP exhibited flat quarter-over-quarter growth to close out 2023, narrowly avoiding two consecutive quarters of negative GDP growth.
Short-term yields saw an increase following the upbeat economic indicators. The 2-year Treasury yield rose to 4.36%, while the 10-year yield remained relatively stable at around 4.05%. This upward movement in short-term yields suggests that the market perceives the positive economic data as a reason for the Federal Reserve to exercise caution in implementing interest-rate cuts.
Favorable labor-market conditions have contributed to robust consumer spending, as evident in the fourth-quarter GDP report released last week, which showed a 2.8% increase in personal consumption quarter-over-quarter. The expectation is for labor-market conditions to ease in 2024, although without a significant spike in the unemployment rate. While perhaps less of a driving force than in previous quarters, it is anticipated that labor-market conditions will continue to provide support for consumer spending. Looking ahead, the remainder of the week will offer additional labor-market data, commencing with the ADP employment survey on Wednesday and culminating with the nonfarm-payrolls report on Friday.
The upcoming week holds a plethora of pivotal macroeconomic events and corporate earnings releases. The Fed Bank's Open Market Comittee (FOMC) will convene on Wednesday, with predictions leaning towards the Fed maintaining policy rates at 5.25% - 5.5%. Much attention will be placed on the post-meeting press conference by Fed Chair Jerome Powell to gauge policymakers' perspectives on the timing of future rate cuts. During the December meeting, median Fed projections suggested potential rate cuts of roughly 0.75% in 2024. Nevertheless, the market has been more aggressive in pricing in rate cuts, with approximately 1.5% of cuts projected by year-end. Our perspective leans towards the likelihood of the Fed implementing three or four 0.25% rate cuts in 2024, with the initial cut possibly occurring around midyear.
Shifting focus to corporate developments, the market will digest various critical earnings reports. With slightly over 25% of S&P 500 companies having reported thus far, the outlook is for fourth-quarter earnings to exhibit a year-over-year decline of 2% to 3%, a decrease from November 2023 estimates indicating approximately 3% growth. Looking ahead to full-year forecasts for 2024, S&P 500 earnings are anticipated to witness year-over-year growth of roughly 11%
Jan 29, 2024 Jan 30, 2024
-------------------- --------------------
Dow 38,333.45 224.02 38,467.31 133.86
Nasdaq 15,628.04 172.68 15,509.90 -118.15
S&P 500 4,927.93 36.96 4,924.97 -2.96
NYSE Volume 3.53B 3.84B
NYSE Advancers 2,062 1,364
NYSE Decliners 788 1,467
Nasdaq Volume 5B 4.74B
Nasdaq Advancers 3,018 1,521
Nasdaq Decliners 1,290 2,722
New Highs/Lows
01/23 01/24 01/25 01/26 01/29 01/30
--------------------------------------------
NYSE New Highs 93 141 122 143 161 206
NYSE New Lows 8 11 21 12 22 17
Nasdaq New Highs 147 246 141 137 237 207
Nasdaq New Lows 96 101 132 75 98 94
Stocks Covered Today Stock Splits
TRADER'S TIP: "Eyes On the Prize"
Have you set goals for your trading? While all of us are playing to win, it's important to have specific targets to aim for. This begins at the most basic level by identifying potential profit targets for individual trades. As a general rule of thumb, setups should only be taken if the potential for reward is at least twice the amount being risked. For longer-term success, set weekly, monthly, and yearly targets for your overall account. This wider perspective makes it easier to measure progress and gauge the effectiveness of your trading strategy.
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".
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, JAN. 29 None scheduled TUESDAY, JAN. 30 9:00 am S&P Case-Shiller home price index 10:00 am Job openings 10:00 am Consumer confidence WEDNESDAY, JAN. 31 8:15 am ADP employment 8:30 am Employment cost index 9:45 am Chicago Business Barometer (PMI) 2:00 pm Fed interest-rate decision THURSDAY, FEB. 1 8:30 am Initial jobless claims 8:30 am U.S. productivity Q4 9:45 am S&P U.S. manufacturing PMI (final) 10:00 am ISM manufacturing FRIDAY, FEB. 2 8:30 am U.S. nonfarm payrolls 8:30 am U.S. unemployment rate 8:30 am U.S. hourly wages 8:30 am Hourly wages year over year 10:00 am Factory orders 10:00 am Consumer sentiment (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: "Successful Trading: In Search of the Rules"
Assuming a new trader doesn't quit early in the game, they will gradually begin to realize that there are certain rules that can't be violated without severe consequence. When they accept this, much of the stress and frustration they have felt disappears. Unfortunately the majority of new traders give up before discovering that they lost their money because they were breaking most if not all of the rules.
Once a trader opens up to the possibility that there are some very important aspects of trading that they must know to be successful, it becomes much easier for them to recognize what the rules are.
Stocks Covered in This Issue
ENERGY SECTOR
Dorchester Minerals, L.P. (DMLP: Energy/Oil & Gas E&P) - BULLISH BOUNCE. Positive price behavior near moving average support on Tuesday qualifies DMLP for a Bullish Bounce setup. After several sessions of declining prices, DMLP should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if DMLP moves up to our entry trigger set at 32.23. You can also enter a 1.85 trailing stop, to be replaced with a 0.93 trailing stop when you obtain a 1.26 profit. DMLP closed Tuesday at 31.79. Earnings Report Date: Feb 21, 2024. Beta: 1.13. Market-Cap: 1.258B. Optionable.
HEALTHCARE SECTOR
CymaBay Therapeutics, Inc. (CBAY: Healthcare/Biotechnology) - SQUEEZE PLAY. CBAY 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 24.08 and a SELL short trigger at 22.47. When one of the orders is filled, cancel the remaining order and enter a 1.61 trailing stop. When you've reached a 2.14 paper profit, tighten the stop to 0.81. CBAY closed at 23.65 on Tuesday. Earnings Report Date: Mar 14, 2024. Beta: 0.29. Market-Cap: 2.682B. Optionable.
INDUSTRIALS SECTOR
Southwest Airlines Co. (LUV: Industrials/Airlines) - BULLISH BOUNCE. Another bullish bouncer, LUV appears ready to resume trading in an uptrend after recent selling forced the stock lower for several days. Tuesday's positive price action near Moving Average support says it's time to BUY shares if LUV reaches our entry trigger set at 30.88. Also place a 1.97 trailing stop which can be narrowed to 0.99 when you reach a 1.56 profit. LUV closed Tuesday at 30.19. Earnings Report Date: Apr 25, 2024. Beta: 1.19. Market-Cap: 17.997B. Optionable.
Ameresco, Inc. (AMRC: Industrials/Engineering & Construction) - 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. AMRC 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 22.34 and a SELL short trigger at 20.54. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.8 which can be tightened to 0.9 on a 2.74 gain. AMRC closed Tuesday at 21.37. Earnings Report Date: Feb 26, 2024. Beta: 1.54. Market-Cap: 1.116B. Optionable.
TECHNOLOGY SECTOR
LSI Industries Inc. (LYTS: Technology/Electronic Components) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. LYTS's behavior on Tuesday could very well be a sign that a new bounce is underway. Place a BUY trigger at 14.29. In the event your trigger is met, also place a 0.86 trailing stop which can be trimmed down to 0.43 when you have a 0.66 profit. LYTS closed Tuesday at 14.01. Earnings Report Date: Apr 25, 2024. Beta: 0.82. Market-Cap: 405.189M. 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.
Disclaimer
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.
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