January 5, 2023 - The RightLine Report
Notes From The Editor
The Major Market Averages - Which One Really Represents The Market?
At one time the Nasdaq Composite was the undisputed King of the market indexes. In fact, it often still shows many market leadership qualities. Its tech-centricity exhibits an energetic personality that's typical of a youthful leader. However, being one of the newest kids on the block doesn't mean that the Nasdaq makes directional decisions for the entire neighborhood.
Neither does the Dow Industrial Average, the old stalwart made up of thirty massive businesses. Despite all the attention the Dow and Nasdaq get from the media, much of their individual significance has been absorbed into the collective body that makes up the S&P 500 -- the current king of the averages.
Most people haven't noticed this change in leadership, nor would it mean much to them if they did. For the shift in the primary indices leader to be considered important, folks need to understand what the information means, plus have the skills to use it. A picture is worth a thousand words, so a regular review of the chart in the Technical Analyst section of the RightLine Report will help keep you up to speed.
All of the indices have value because they reflect the price action of different segments of the total market. Their movement can be analyzed and used to anticipate future movement in any time frame. Since the S&P 500 is arguably the most dominant depiction of the larger market, any time invested to learn it's personality and characteristics is worth the effort. It exerts a tremendous effect on most stocks. You can even trade it directly with the symbol SPY.
Bottom line: Many investors think the Dow IS the market. Some traders still feel that the Nasdaq is the leader. Historically the public hasn't paid much attention to the S&P, yet professional traders understand the tremendous value it offers when used properly.
Regardless of which index offers market leadership from year-to-year, they will all continue to evolve as people become more aware of their importance as trading tools. Learning how the movement of market averages affects individual stocks is one area where continuing education is worth its weight in gold.
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 01/05 01/05 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
BJRI 27.31 -0.55 26.38 1.97/0.99 2.24
OII 17.23 0.35 17.61 1.68/0.84 1.3
CRT 23.40 -0.01 24.32 22.36 1.96/0.98 2.32
TREE 21.54 -1.19 22.62 20.8 1.82/0.91 2.82
IMXI 22.87 0.27 23.3 2.04/1.02 1.14
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 US stock averages were lower on Thursday following the release of minutes from the Federal Open Market Commitee's December meeting suggesting that the Central Bank monetary policy will remain aggressive. Economic news included unemployment data pointing towards a tight labor market, with jobless claims lower than anticipated, which seems to be raising market expectations for more interest rate hikes from the Fed. In equities headlines, grocery & snacks firm Conagra (CAG $40) announced strong quarterly profits, beer company Constellation Brands (STZ $209) missed earnings estimates and lowered their outlook, and petro energy provider Exxon Mobil (XOM $109) presented mixed guidance for the fourth quarter. The USD/dollar and oil prices moved higher, treasury yields were mixed and gold declined.
Jan 4, 2023 Jan 5, 2023
-------------------- --------------------
Dow 33,269.77 133.40 32,930.08 -339.69
Nasdaq 10,458.76 71.78 10,305.24 -153.52
S&P 500 3,852.97 28.83 3,808.10 -44.87
NYSE Volume 4.43B 3.9B
NYSE Advancers 2,534 1,293
NYSE Decliners 611 1,831
Nasdaq Volume 5.1B 4.79B
Nasdaq Advancers 3,373 1,898
Nasdaq Decliners 1,229 2,715
New Highs/Lows
12/29 12/30 01/02 01/03 01/04 01/05
--------------------------------------------
NYSE New Highs 56 49 0 71 65 64
NYSE New Lows 84 72 0 36 19 37
Nasdaq New Highs 89 101 0 107 102 106
Nasdaq New Lows 209 181 0 94 57 91
Stocks Covered Today Stock Splits
TRADER'S TIP: "Charles Dow's Three Trends"
Charles Dow - who developed the Dow Jones Averages - taught that there are always three "trends" occurring in the stock market at the same time.
~ The first trend is the Primary Trend, which can be either bullish or bearish. These trends tend to last anywhere from a year up to several years, and can sometimes run for much longer.
~ The next trend is the Secondary Trend. These "counter trends" move in the opposite direction to the Primary Trend, and usually last anywhere from a week to a few months. They present themselves as rallies in Bear markets and pullbacks, or corrections in Bull markets. Secondary trends will often retrace between one-third to two-thirds of the most recent prior secondary trend.
~ The third trend is the Minor Trend. These are the very short-term intra and inter day trends that Dow referred to as "Tertiary Movements." Though it may seem like a paradox at first, it's easy to see these three separate trends at work simultaneously when looking at stock charts in monthly, weekly, daily, and intra-day time frames.
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 - 3808.10 January 5, 2023
52-Week High: 4748.83
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 3980.97
Resistance 2: 3903.56
Resistance 1: 3871.53
Pivot: 3826.15
Support 1: 3794.12
Support 2: 3748.74
Support 3: 3671.33
NASDAQ Composite - 10305.24 January 5, 2023
52-Week High: 15319.03
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 11010.84
Resistance 2: 10703.54
Resistance 1: 10585.01
Pivot: 10396.24
Support 1: 10277.70
Support 2: 10088.93
Support 3: 9781.63
Dow Industrials - 32930.08 January 5, 2023
52-Week High: 36952.65
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 34263.64
Resistance 2: 33689.99
Resistance 1: 33418.62
Pivot: 33116.34
Support 1: 32844.97
Support 2: 32542.69
Support 3: 31969.04
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Friday, January 06, 2023: 06-Jan 8:30 am Nonfarm payrolls 06-Jan 8:30 am Unemployment rate 06-Jan 8:30 am Average hourly earnings 06-Jan 8:30 am Labor force participation rate, ages 25-54 06-Jan 10 am ISM services index 06-Jan 10 am Factory orders 06-Jan 10 am Core equipment orders onday, January 09, 2023: 02-Jan New Year holiday. None scheduled. Tuesday, January 10, 2023: 03-Jan 9:45 am S&P U.S. manufacturing PMI 03-Jan 10 am Construction spending Wednesday, January 04, 2023: 04-Jan 10 am ISM manufacturing index 04-Jan 10 am Job openings 04-Jan 10 am Quits 04-Jan 2 pm FOMC minutes 04-Jan Varies Motor vehicle sales (SAAR) onday, January 09, 2023: 02-Jan New Year holiday. None scheduled. Tuesday, January 10, 2023: 03-Jan 9:45 am S&P U.S. manufacturing PMI 03-Jan 10 am Construction spending 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: "Paid Two Ways"
"When it comes to trading the stock market, everyone is paid two ways - in money and experiences. Learn from the experiences first, and the money will follow."
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
BJ's Restaurants, Inc. (BJRI: Consumer Cyclical/Restaurants) - BEARISH U-TURN. Shares of BJRI have experienced the pain of selling pressure for a while, yet a recent bounce has given shareholders some welcome yet perhaps temporary relief. On Thursday the upward bounce ran into a brick wall at a Moving Average. BJRI now appears ready to head lower again. A continuation of this bearish reversal would signal a retracement of the recent gains, so prepare for SHORT entries at 26.38, using a 1.97 stop. Tighten to 0.99 on a gain of 2.24. Thursday's closing tick was 27.31. Earnings Report Date: Feb 15, 2023. Beta: 1.81. Market-Cap: 638.838M. Optionable.
ENERGY SECTOR
Oceaneering International, Inc. (OII: Energy/Oil & Gas Equipment & Services) - BULLISH BOUNCE. Up-trending stocks like OII have a tendency to bounce their way skyward rather than travel higher in a straight line. After touching down to a moving average support level on Thursday, OII is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 17.61 if positive price action occurs. As always, follow your entry with a trailing stop. A 1.68 trailer should work well with OII. Tighten it to 0.84 on a 1.3 gainer. Earnings Report Date: Feb 22, 2023. Beta: 2.85. Market-Cap: 1.727B. Optionable.
Cross Timbers Royalty Trust (CRT: Energy/Oil & Gas E&P) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in CRT, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 24.32 and a SELL short entry at 22.36. Let CRT's price action determine your long or short entry. Once the order is filled, place a 1.96 trailing stop, and tighten it to 0.98 upon getting a 2.32 gain. CRT closed Thursday at 23.40. Earnings Report Date: N/A. Beta: 0.69. Market-Cap: 140.4M. Not Optionable.
FINANCIAL SERVICES SECTOR
LendingTree, Inc. (TREE: Financial Services/Financial Conglomerates) - SQUEEZE PLAY. Traders are feeling the pressure as TREE's intra-day price range on Thursday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 22.62 and a SELL short entry at 20.8. TREE's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.82 trailing stop. Tighten it to 0.91 after you get a 2.82 gain. TREE closed Thursday at 21.54. Earnings Report Date: Feb 23, 2023. Beta: 1.65. Market-Cap: 275.402M. Optionable.
TECHNOLOGY SECTOR
International Money Express, Inc. (IMXI: Technology/Software-Infrastructure) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, IMXI 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 22.87, plan to buy shares at 23.3 and use a 2.04 trailing stop. Tighten the stop to 1.02 on a 1.14 gain. Earnings Report Date: Mar 06, 2023. Beta: 0.53. Market-Cap: 847.617M. 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
---------------- ------- -------- ------- ------ -------
Copart CPRT 11/4/2022 11/4/2022 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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