January 7, 2023 - The RightLine Report
Notes From The Editor
"Speaking of Money"
Although most traders spend a lot of time thinking about money, you're much better off to forget about the cash while you're actually trading. Instead of dwelling on potential profits, it's better to put your attention on maintaining a positive state of mind and making intelligent choices.
You make a decision each time you enter or exit a trade. Every decision you make is an opportunity to grow - IF you give your experiences the value they deserve. On the other hand, if you view your experiences simply as "mistakes" and harshly judge yourself for not always making "perfect" choices, your confidence - and your money - goes down instead of up.
Attitude is important because it affects everything. It flows from beliefs, which in turn create actions. Beliefs are like binoculars and blindfolds. They either help us to see opportunity, or keep us from seeing it at all.
Trading conditions are rarely optimum, so we usually make decisions under less than ideal circumstances. Don't be too hard on yourself. Always steer clear of severe self-criticism, while at the same time taking full responsibility for your actions.
You are on the only person who can set the real value for each trading experience you have. How much are yours worth? Most people tend to underestimate the importance and value of their personal experiences.
Give yourself a reappraisal, and don't sell yourself short. Be sure to rate your experiences high enough to adequately support your basic needs along the journey of successful trading.
Make the choice to build your beliefs and improve your esteem by considering every trading experience valuable. Money is just a by-product of wise choices. Focus on trading intelligently and the money will follow.
Trade well,
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits Trader's Corner
Quick List
Stock 01/06 01/06 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
BBW 25.00 0.51 25.39 23.66 1.73/0.87 2.44
ACDC 22.38 0.58 23.47 21.24 2.23/1.12 2.1
RNA 19.83 0.43 20.89 2.42/1.21 3.92
AGCO 136.29 1.56 139.04 9.14/4.57 7.58
CIR 24.23 0.63 24.61 22.84 1.77/0.89 1.96
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 Trader's Corner
Market Summary
US stocks rallied on Friday as the market responded positively to the release of December's key nonfarm payroll report and its possible implications on future Federal Reserve monetary policy, specifically interest rate hikes. Job growth remained healthy, the unemployment rate dropped, and wage increases continued to slow. In other economic news, domestic services sector activity fell into the contraction zone for the first time since May of 2020, and factory orders declined more than expected. In equities, Tesla (TSLA $113) was front page news again after the electric car company said it will slash prices in China, Bed Bath & Beyond (BBBY $1) is reportedly bankrupt, while Costco (COST $483) announced strong net sales. The USD/dollar and treasury yields were lower, gold and oil prices finished the session higher.
Friday On The Week
-------------------- --------------------
Dow 33,630.61 700.53 +483.36 1.46%
Nasdaq 10,569.29 264.05 +102.81 0.98%
S&P 500 3,895.08 86.98 +55.58 1.45%
NYSE Volume 3.95B
NYSE Advancers 2,717
NYSE Decliners 433
Nasdaq Volume 5.25B
Nasdaq Advancers 3,371
Nasdaq Decliners 1,314
New Highs/Lows
12/30 01/02 01/03 01/04 01/05 01/06
--------------------------------------------
NYSE New Highs 49 0 71 65 64 79
NYSE New Lows 72 0 36 19 37 25
Nasdaq New Highs 101 0 107 102 106 130
Nasdaq New Lows 181 0 94 57 91 101
Stocks Covered Today Stock Splits Trader's Corner
TRADER'S TIP: "Unbiased Trading"
Unbiased trading is a powerful tool; it allows us to take advantage of price movement that may not make sense from a news or fundamental perspective. Think about it for a second. Instead of missing out on a rally just because we don't agree that it should be taking place, isn't it better set our prejudices aside and let the market tell us what IT wants to do?
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 - 3895.08 January 6, 2023
52-Week High: 4748.83
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4088.92
Resistance 2: 3977.06
Resistance 1: 3936.07
Pivot: 3865.20
Support 1: 3824.21
Support 2: 3753.34
Support 3: 3641.48
NASDAQ Composite - 10569.29 January 6, 2023
52-Week High: 15319.03
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 11178.50
Resistance 2: 10830.48
Resistance 1: 10699.88
Pivot: 10482.46
Support 1: 10351.86
Support 2: 10134.44
Support 3: 9786.42
Dow Industrials - 33630.61 January 6, 2023
52-Week High: 36952.65
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 35181.19
Resistance 2: 34282.86
Resistance 1: 33956.73
Pivot: 33384.53
Support 1: 33058.40
Support 2: 32486.20
Support 3: 31587.87
Stocks Covered Today Stock Splits Trader's Corner
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, January 09, 2023: 09-Jan 11 am NY Fed 1-year inflation expectations 09-Jan 11 am NY Fed 5-year inflation expectations 09-Jan 12:30 pm Atlanta Fed President Raphael Bostic speaks 09-Jan 3 pm Consumer credit Tuesday, January 10, 2023: 10-Jan 6 am NFIB small-business index 10-Jan 10 am Wholesale inventories (revision) Wednesday, January 11, 2023: 11-Jan None scheduled Thursday, January 12, 2023: 12-Jan 8:30 am Consumer price index 12-Jan 8:30 am Core CPI 12-Jan 8:30 am CPI (year-over-year) 12-Jan 8:30 am Core CPI (year-over-year) 12-Jan 8:30 am CPI excluding shelter (3-month SAAR) 12-Jan 8:30 am Initial jobless claims 12-Jan 8:30 am Continuing jobless claims 12-Jan 2 pm Federal budget Friday, January 13, 2023: 13-Jan 8:30 am Import price index 13-Jan 10 am UMich consumer sentiment index (early) 13-Jan 10 am UMich 1-year consumer inflation expections 13-Jan 10 am UMich 5-year consumer inflation expections 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 Corner
TRADER'S TIP: "Let The Trade Come To You"
It rarely pays to chase a stock, so don't chase it - let the trade come to you. You have two options when you realize a move is already underway. Either forget the trade and look for another one, or wait for the price to move back to support or resistance THEN enter on the rebound. Waiting for a pullback usually provides a relatively low risk entry - because you can place a tight stop just beyond the support or resistance level. Remember - don't worry if you miss a trade, there is always another.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Build-A-Bear Workshop, Inc. (BBW: Consumer Cyclical/Specialty Retail) - 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 BBW. A move to the upside will trigger our BUY entry at 25.39, while a drop to 23.66 will trigger our SELL short entry. Follow your position with a 1.73 trailing stop. Tighten the stop to 0.87 once you have a 2.44 gain. BBW closed Friday at 25.00. Earnings Report Date: Mar 08, 2023. Beta: 1.87. Market-Cap: 368.76M. Optionable.
ENERGY SECTOR
ProFrac Holding Corp. (ACDC: Energy/Oil & Gas Equipment & Services) - SQUEEZE PLAY. A look at ACDC's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 23.47 and a SELL short trigger at 21.24. Once ACDC shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 2.23 and tighten to 1.12 on a 2.1 gain. ACDC closed Friday at 22.38. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.208B. Optionable.
HEALTHCARE SECTOR
Avidity Biosciences, Inc. (RNA: Healthcare/Biotechnology) - BULLISH BOUNCE. RNA 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 RNA 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 20.89. Set a trailing stop of 2.42, tightening to 1.21 on a 3.92 profit. RNA closed at 19.83 on Friday. Earnings Report Date: Feb 27, 2023. Beta: -0.04. Market-Cap: 1.318B. Optionable.
INDUSTRIALS SECTOR
AGCO Corporation (AGCO: Industrials/Farm & Heavy Construction Machinery) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. AGCO's current price action near moving average support signals a potential BUY entry at 139.04, followed by a 9.14 trailing stop which can be tightened to 4.57 upon earning 7.58. AGCO closed Friday at 136.29. Earnings Report Date: Feb 06, 2023. Beta: 1.44. Market-Cap: 10.167B. Optionable.
CIRCOR International, Inc. (CIR: Industrials/Specialty Industrial Machinery) - SQUEEZE PLAY. Friday's trading action forced CIR'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 CIR 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 24.61 if CIR moves higher, and place your order to SELL short at 22.84 if price declines to that level. As usual follow your entry with a trailing stop, 1.77 should be sufficient. Reduce your stop to 0.89 on a 1.96 gain. CIR closed Friday at 24.23. Earnings Report Date: N/A. Beta: 2.18. Market-Cap: 493.405M. 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 Trader's Corner
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.
Stocks Covered Today Stock Splits Trader's Corner
Trader's Corner
The Squeeze Play
So are you Bullish or Bearish? When it comes to choosing trade setups, it doesn't always have to be one way or the other. Actually, in many cases you are much better off letting the market tell you whether to go long, or to go short, or just stand aside. This is what the Squeeze Play is all about.
Not to be confused with a "short squeeze," the Squeeze Play gets its name from one of the trade setup conditions - an extremely narrow price range which indicates a dramatic drop in volatility. Due to the cyclical nature of volatility, powerful price moves often occur soon after these low-volatility situations.
To begin, let's look at this type of trade setup in a different light than most traders would. Instead of trying to pre-determine which way price will move, we will assume that it could go either direction and plan for both. This means setting aside any expectations we may have for near-term price direction, and letting the upcoming price action determine which way we will enter the trade.
Here is how it works. The Squeeze Play contains both a support and a resistance level which are used to set potential triggers for trade execution. For example, a buy entry is triggered if price moves up and breaks through resistance, while a short sale is triggered if price moves down and breaks below support.
By selecting setups where there is a clearly defined narrow range between the support and resistance levels, we can enter in either direction with very little risk. The low risk comes from the fact that should the initial move fail - price doesn't have to go very far back to confirm that it's time to get out.
Here is an example of a Squeeze Play setup:
Price volatility tends to go through repeating cycles of contraction and expansion. Once price has contracted and "squeezed" into a very narrow range, it invariably begins to expand. This expansion causes price to quickly "break out" of the narrow support & resistance boundaries, and often causes a short-term trend to develop in one direction or the other.
Below is the same chart shown as above - only this one includes the short-term price action after breaking out of the range of the setup bar:
When you first look at a Squeeze Play setup you probably see it as either a long or a short. The only problem is that we don't know which way price will go, so the solution is to let the price action tell us. The narrow range setup bar gives a perfect opportunity to place a low risk stop.
Although the example used in this article is a BUY, the concept works the same way for short sales. If price breaks down through support, then you would enter a SHORT and place an exit stop just above the top of the resistance level.
Squeeze Plays make a trader's job easier because each pattern offers two potential trades. Though this method is very powerful, isn't complicated. The key is to locate low volatility price patterns with clear support & resistance levels that offer reasonable risk and reward potential in either direction. Then you set your entry triggers and stops a calculated distance beyond the S&R levels - simple as that!
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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