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January 7, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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"Speaking of Money"
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"QUICK LIST"
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Stock 01/06 01/06 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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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" 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 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
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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
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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
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TRADER'S TIP:
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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?
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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 - 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 https://www.prorightline.com/rlch/010623SPX.jpg--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" 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: "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.
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STOCKS COVERED IN THIS ISSUE
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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 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/
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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
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Copart CPRT 11/4/2022 11/4/2022 2-for-1 Yes
For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/
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TRADER'S CORNER
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"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: See Chart - https://prorightline.com/rlr/TCSqueezeAcopy.jpg 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: See Chart - https://prorightline.com/rlr/TCSqueezeBcopy.jpg 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!
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Best of luck and have a Great Week!
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