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January 6, 2024 - The RightLine Report
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NOTES FROM THE EDITOR
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While many traders spend their time looking for the one "key" to success in the markets, there are actually several basic skills needed to flourish in this business. Some people pay an unnecessarily high price to acquire these skills through painfully tough "learning experiences." Obviously the best and most direct route is to actively seek a well-rounded education that prevents losing money during the process.
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"QUICK LIST"
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Stock 01/05 01/05 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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IPI 21.38 -0.25 22.12 20.5 1.62/0.81 2.42
MARA 24.12 -2.15 25.94 22.61 3.33/1.67 3.08
TRML 26.26 -0.32 27.42 2.56/1.28 2.86
PKOH 25.78 0.31 26.24 1.34/0.67 1.86
AEHR 22.49 -0.08 23.37 21.52 1.85/0.93 3.62
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 marginally positive, marking the first positive finish of 2024. However, this wasn't sufficient to extend the nine-week winning streak for major averages, and stocks experienced a decline for the week. The Nasdaq Composite, particularly impacted by rising Treasury yields, fell approximately 3.3% for the week. Monthly jobs data revealed the addition of 216,000 jobs, surpassing the expected 170,000, while the unemployment rate remained steady at 3.7%. Revisions also brought down hiring figures for October and November. Treasury yields rose, breaking a three-week streak of declines, while the dollar remained stable, and oil prices increased. Despite the Nasdaq 100 breaking its five-day losing streak and the S&P 500 snapping its four-day losing streak, major averages faced pressure throughout the day. Investors scaled back interest rate cut expectations for the year following robust jobs data. Looking ahead, significant company updates are anticipated next week, coinciding with three major conferences and key economic indicators. The ICR Conference (1/8-1/10) in Orlando, FL, will feature many retailers and consumer-related companies. The JP Morgan 42nd Annual Healthcare Conference (1/7-1/11) in San Francisco, CA, will provide substantial updates in Healthcare/Biotech. The tech sector will witness developments at the Consumer Electronics Show (CES) (1/9-1/12) in Las Vegas, NV. Earnings season begins next Friday (1/12) with Financials JPM, C, WFC, BLK, BX, UNH in Healthcare, and DAL in Transports. Looking further ahead, concerns about a potential partial government shutdown later in the month arise, with Congress addressing January 19 and February 2 deadlines for government spending. In conclusion, with jobs data now behind, the focus shifts to inflation, particularly with the December Consumer Price Index (CPI) on Thursday and the Producer Price Index (PPI) on Friday. Investors will closely scrutinize inflation data as the Federal Reserve assesses progress on prices while contemplating potential rate cuts, making CPI particularly impactful a day before the onset of earnings season. Friday On The Week
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Dow 37,466.11 25.77 -223.43 -0.59%
Nasdaq 14,524.07 13.77 -487.28 -3.25%
S&P 500 4,697.24 8.56 -72.59 -1.52%
NYSE Volume 3.85B
NYSE Advancers 1,527
NYSE Decliners 1,285
Nasdaq Volume 5.25B
Nasdaq Advancers 1,817
Nasdaq Decliners 2,384
New Highs/Lows
12/29 01/01 01/02 01/03 01/04 01/05
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NYSE New Highs 101 0 46 42 63 55
NYSE New Lows 9 0 10 10 14 17
Nasdaq New Highs 59 0 62 26 83 56
Nasdaq New Lows 37 0 39 38 87 95
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TRADER'S TIP:
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TRADER'S TIP: "What's It Worth?" Garfield Drew, a prominent technician sixty years ago said that "Stocks do not sell for what they are worth, but for what people THINK they are worth." It is generally recognized among technical analysts that prices in ALL markets at ALL times are based on trader psychology instead of company fundamentals. **************************
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 - 4697.24 January 5, 2024 52-Week High: 4793.30 52-Week Low: 3802.42 Daily Trend: DOWN Weekly trend: UP Weekly Pivot Levels Resistance 3: 4935.25 Resistance 2: 4828.92 Resistance 1: 4763.08 Pivot: 4722.59 Support 1: 4656.75 Support 2: 4616.26 Support 3: 4509.93 https://www.prorightline.com/rlch/010524SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, JAN. 8 3 pm Consumer credit TUESDAY, JAN. 9 8:30 am Trade deficit WEDNESDAY, JAN. 10 10 am Wholesale inventories 3:15 pm New York Fed President John Williams speaks THURSDAY, JAN.11 8:30 am Initial jobless claims 8:30 am CPI 8:30 am Core CPI 8:30 am CPI (year-over-year) 8:30 am Core CPI (year-over-year) 2:00 pm Budget statement FRIDAY, JAN. 12 8:30 am PPI 8:30 am Core PPI (year-over-year) 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: "Beta - What Is It?" Beta measures the level of risk, or price volatility of a stock in relation to the market as represented by the S&P 500. The market beta is always 1.0, so a stock with a beta of 1.0 means that the stock moves precisely with the market. When the market rises, the stock will rise on average to the same degree, and when the market drops, the stock will drop to the same extent. A beta of more than one indicates higher risk than the market, while a beta of less than one indicates lower risk than the market. For example, a beta of 0.6 means a stock price is likely to move up or down only 60% of the market change, but a beta of 1.40 means the stock is likely to move up or down 40% more than the market. Some stocks have a negative beta and are inversely correlated with the market. When the market goes up, they go down, and vice versa. Each stock writeup in the RightLine Report includes the Beta for that particular stock. ***********************************
STOCKS COVERED IN THIS ISSUE
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BASIC MATERIALS SECTOR Intrepid Potash, Inc. (IPI: Basic Materials/Agricultural Inputs) - SQUEEZE PLAY. Friday's trading action forced IPI'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 IPI 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 22.12 if IPI moves higher, and place your order to SELL short at 20.5 if price declines to that level. As usual follow your entry with a trailing stop, 1.62 should be sufficient. Reduce your stop to 0.81 on a 2.42 gain. IPI closed Friday at 21.38. Earnings Report Date: Mar 04, 2024. Beta: 2.22. Market-Cap: 281.288M. Optionable. FINANCIAL SERVICES SECTOR Marathon Digital Holdings, Inc. (MARA: Financial Services/Capital Markets) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into MARA. A move to the upside will trigger our BUY entry at 25.94, while a drop to 22.61 will trigger our SELL short entry. Follow your position with a 3.33 trailing stop. Tighten the stop to 1.67 once you have a 3.08 gain. MARA closed Friday at 24.12. Earnings Report Date: Mar 14, 2024. Beta: 5.23. Market-Cap: 5.37B. Optionable. HEALTHCARE SECTOR Tourmaline Bio, Inc. (TRML: Healthcare/Biotechnology) - 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. TRML's behavior on Friday could very well be a sign that a new bounce is underway. Place a BUY trigger at 27.42. In the event your trigger is met, also place a 2.56 trailing stop which can be trimmed down to 1.28 when you have a 2.86 profit. TRML closed Friday at 26.26. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 534.042M. Not Optionable. INDUSTRIALS SECTOR Park-Ohio Holdings Corp. (PKOH: Industrials/Specialty Industrial Machinery) - BULLISH BOUNCE. Some people hear of a stock that's performing nicely and then buy it without any regard for timing the entry. This approach usually leaves money on the table, money that could just as well be added to profits. The Bullish Bounce setup provides a well timed entry and reduces exposure to risk by placing both the entry trigger and exit stop near the bottom of the bounce. We have an opportunity to use this approach with PKOH which met our setup criteria on Friday. The BUY trigger for this trade is at 26.24, and the trailing stop is sized at 1.34. Resize the stop to 0.67 upon collecting a 1.86 point gain. PKOH closed Friday at 25.78. Earnings Report Date: Mar 13, 2024. Beta: 1.21. Market-Cap: 337.416M. Optionable. TECHNOLOGY SECTOR Aehr Test Systems (AEHR: Technology/Semiconductor Equipment & Materials) - SQUEEZE PLAY. AEHR 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. AEHR is now at 22.49. We can capture price action either way by placing a BUY trigger at 23.37 and a SELL short trigger at 21.52. Once AEHR 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 1.85. When you acquire a 3.62 profit, tighten the stop to 0.93. Earnings Report Date: Jan 09, 2024. Beta: 1.91. Market-Cap: 647.696M. 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. |