Notes From The Editor

One of the best aspects about being a market participant is that, for the most part, you make the rules. Trading can be geared to suit your own individual tastes in terms of risk-taking, goals, and timeframe. You make the call.

Timeframe is one of the factors that need to be nailed down before a successful trading strategy can be implemented. Without a clear idea of how long you plan to hold a trade, it becomes more difficult to develop a consistent approach.

There is no set definition of the various timeframes, but in general they are as follows:

Daytrading: Multiple trades per day, with a typical hold of hours, minutes, or even seconds (in the case of scalpers).

Swing Trading: Multiple trades per week, with a typical hold of 3-10 days. Occasionally extends up to 3 weeks or longer.

Intermediate-Term: A typical hold of 2 weeks to 3 months.

Long-term: A typical hold of at least three months.

So which one is right for you? Unless you're a dedicated hardcore trader who can spend hours in front of the computer, it's probably not daytrading. This is truly a "love it or leave it" approach - without intense study and dedication most daytraders either burn out or blow their accounts.

Swing Trading is far easier on the nerves. This is the approach utilized in most Rightline set-ups. We believe it represents the best of both worlds. Holding for several days gives time for trade set-ups to come to fruition, and offers more "wiggle-room" with wider stops.

On the other hand, swing trades also allow for more active trade management such as revising stops at the end of every trading day. This flexibility lends itself to a more pro-active strategy that can react to daily market changes.

A swing trade can turn into an intermediate-term trade when a stop level is not reached during the initial two weeks. This timeframe works well with slower moving stocks that display slow moving but reliable trends.

Long-term holds are self explanatory - but what is the difference between a long-term hold and an investment? The latter usually has no active trade management; a stock is held over several years with no stop and no clear profit-target. The long-term approach includes stop-losses and can react to changes in the market environment - for example when money is rotating from one sector to another.

Here's to profits,

Kent Barton
Senior Analyst

Quick List

    
Stock     01/04     01/04      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

M         28.09      0.71     28.62     26.55        2.07/1.04      2.74
PBH       61.88      1.26     62.78                  3.89/1.95       2.8
AUPH      22.25     -0.23     22.95     21.16         1.79/0.9      3.76
IMGO      25.00      0.17     26.12     23.74        2.38/1.19      6.12
SSD      135.76      1.76    138.36                   8.39/4.2      6.58

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.

Market Summary

The major market indexes were mixed on Tuesday, as the S&P 500 and the Dow Jones Industrial Average moved higher with heavy volume, while the Nasdaq Composite declined. Economic news included a read on manufacturing that was cooler than expected and an employment report showing fewer openings than were predicted. Equities headlines featured an agreement by Digital Realty Trust (DLR $169) to acquire Teraco, Africa's largest data-center operator, in a $3.5 billion. Oil prices, gold and the USD/dollar were higher, treasuries were mixed.

                        Jan 3, 2022            Jan 4, 2022    
                  --------------------   --------------------
Dow                 36,585.06   246.76     36,799.65   214.59
Nasdaq              15,832.80   187.83     15,622.72  -210.08
S&P 500              4,796.56    30.38      4,793.54    -3.02

NYSE Volume                      3.89B                  4.75B
NYSE Advancers                   1,945                  1,739
NYSE Decliners                   1,463                  1,639

Nasdaq Volume                    4.45B                   5.2B
Nasdaq Advancers                 3,328                  1,898
Nasdaq Decliners                 1,466                  2,736

                                 New Highs/Lows

                   12/28  12/29  12/30  12/31  01/03  01/04
                 --------------------------------------------
NYSE New Highs       167    157    164    131     96    132
NYSE New Lows         62     89     55     42     29     49
Nasdaq New Highs     157    126    108     84     98    148
Nasdaq New Lows      319    447    179    174     86    146
   

TRADER'S TIP: "Pros At The Close"

Wall Street regulars have a saying that "amateurs control the open, but pros control the close." The "amateurs" they are talking about represent the "retail" orders that brokerage firms place on behalf of Joe Q. Public the first thing every morning. While these early orders reflect what the average investor thinks about the prospects of the market, professionals will usually determine the market direction by day's end.

What happens on the close is very important, because it often gives a clue of what to expect the next session. The odds are strong that whatever happens at the close will continue into the following day. Bulls like to see the close occur at or near the high of the session, while Bears would rather see a slide into the final bell. Either way, it's always a good idea to check price action into the close.

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 - 4793.54 January 4, 2022

52-Week High: 4818.62
52-Week Low: 3694.12
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4919.58
Resistance 2: 4844.64
Resistance 1: 4805.41
Pivot: 4769.70
Support 1: 4730.46
Support 2: 4694.75
Support 3: 4619.81

NASDAQ Composite - 15622.72 January 4, 2022

52-Week High: 16212.23
52-Week Low: 12397.05
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 16245.18
Resistance 2: 15987.65
Resistance 1: 15816.31
Pivot: 15730.12
Support 1: 15558.78
Support 2: 15472.59
Support 3: 15215.06
        
Dow Industrials - 36799.65 January 4, 2022

52-Week High: 36934.84
52-Week Low: 29856.30
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 37773.99
Resistance 2: 37049.03
Resistance 1: 36693.66
Pivot: 36324.07
Support 1: 35968.70
Support 2: 35599.11
Support 3: 34874.15
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Tuesday, January 04, 2022:
04-Jan  10 am   ISM manufacturing index
04-Jan  10 am   Job openings
04-Jan  10 am   Job quits

Wednesday, January 05, 2022:
05-Jan  8:15 am   ADP employment report
05-Jan  9:45 am   Markit services PMI
05-Jan   2 pm   FOMC minutes

Thursday, January 06, 2022:
06-Jan  8:30 am   Initial jobless claims (regular state program)
06-Jan  8:30 am   Continuing jobless claims (regular state program)
06-Jan  8:30 am   Trade deficit
06-Jan  10 am   ISM services index
06-Jan  10 am   Factory orders

Friday, January 07, 2022:
07-Jan  8:30 am   Nonfarm payrolls
07-Jan  8:30 am   Unemployment rate
07-Jan  8:30 am   Average hourly earnings
07-Jan   3 pm   Consumer credit


For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Concentrate on Execution"

"The last thing you should have to worry about during market hours is where the market is going, and whether to be long or short. Your strategy will tell you all of this. You should not be concerned about the news, or even if you are making or losing money. You should not be concerned with analyzing the market, always reserve this for when the market is closed.

The only thing you should be doing during market hours is concentrating on effectively executing your strategy. If you can't execute your strategy effectively, there really is no point in trading. There are two sides to trading, strategy development and trading execution. During market hours is when you should concentrate on execution and nothing else."

~ Charlie Wright, Veteran Trader and Hedge Fund Manager

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Macy's, Inc. (M: Consumer Cyclical/Department Stores) - SQUEEZE PLAY. M 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 28.62 and a SELL short trigger at 26.55. When one of the orders is filled, cancel the remaining order and enter a 2.07 trailing stop. When you've reached a 2.74 paper profit, tighten the stop to 1.04. M closed at 28.09 on Tuesday. Earnings Report Date: Feb 21, 2022. Beta: 2.09. Market-Cap: 8.406B. Optionable.

HEALTHCARE SECTOR

Prestige Consumer Healthcare Inc. (PBH: Healthcare/Medical Distribution) - BULLISH BOUNCE. Another bullish bouncer, PBH 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 PBH reaches our entry trigger set at 62.78. Also place a 3.89 trailing stop which can be narrowed to 1.95 when you reach a 2.8 profit. PBH closed Tuesday at 61.88. Earnings Report Date: Feb 02, 2022. Beta: 0.69. Market-Cap: 3.1B. Optionable.

Aurinia Pharmaceuticals Inc. (AUPH: Healthcare/Biotechnology) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in AUPH's narrowest trading range of the past seven sessions. With neither group able to take complete control on Tuesday, 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 22.95 and a SELL order at 21.16. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.79 trailing stop. Tighten the stop to 0.9 once you have a 3.76 gain. AUPH closed Tuesday at 22.25. Earnings Report Date: Feb 22, 2022. Beta: 0.66. Market-Cap: 2.885B. Optionable.

Imago BioSciences, Inc. (IMGO: Healthcare/Biotechnology) - 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. IMGO 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 26.12 and a SELL short trigger at 23.74. 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 6.12 gain. IMGO closed Tuesday at 25.00. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 838.217M. Not Optionable.

INDUSTRIALS SECTOR

Simpson Manufacturing Co., Inc. (SSD: Industrials/Building Products & Equipment) - NEW HIGH DIP. Basking in the light of a recent new 52-week high, SSD shares have pulled back a bit as traders enjoy some nice profits. Now it looks like the Bull may be ready to resume the uptrend again. Tuesday's bounce from a Moving Average support zone provides us with solid setup, so be ready to enter when price reaches our BUY trigger at 138.36. Follow your long entry with a 8.39 stop, then tighten it to 4.2 after gaining 6.58. SSD ended the Tuesday session at 135.76. Earnings Report Date: Feb 07, 2022. Beta: 1.17. Market-Cap: 5.897B. 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.

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  
---------------- -------     --------    -------     ------  -------   
Arista Networks   ANET      11/1/2021   11/18/2021  4-for-1   Yes
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  1/10/2021   5-for-1   No 
Merchants Bancorp MBIN      11/17/2021  1/18/2022   2-for-1   No
    

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

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