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January 8, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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Many traders love Bull markets because entry points appear more frequently. Breakouts are particularly common. However, Bull markets also require discipline. All breakouts are not created equal.
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"QUICK LIST"
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Stock 01/07 01/07 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
NOG 22.58 -0.16 23.35 21.64 1.71/0.86 2.02
LPRO 20.32 0.01 20.88 19.3 1.58/0.79 2.7
AHCO 22.25 0.03 22.58 20.92 1.66/0.83 2.14
CNM 25.45 0.10 26.18 24.28 1.9/0.95 3.06
CDR 24.72 0.67 25.21 2.05/1.03 1.54
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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The major US indices were lower on Friday as stocks kicked off 2022 with a weekly loss. However, the weekly uptrend remains postitive despite the loss and market concerns over inflation, along with the possibility that the Federal Reserve Bank may increase their rate of monetary policy tightening. Economic headlines featured another mixed payroll report showing December job growth missed forecasts, yet the unemployment rate dropped much more than expected. In equity news, T-Mobile US (TMUS $110) reported strong subscriber growth for the quarter along with cautious comments, while GameStop (GME $141) shares rallied following reports that the company will soon launch a division to establish cryptocurrency partnerships and develop a market for NFTs. NFTs are Non-Fungible Tokens, digital assets that represent real-world objects like art, music, in-game items and videos. The USD/dollar and oil prices were lower, treasuries were mixed and gold was higher. Friday On The Week
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Dow 36,231.66 -4.81 -353.4 -0.97%
Nasdaq 14,935.90 -144.96 -896.9 -5.66%
S&P 500 4,677.03 -19.02 -119.53 -2.49%
NYSE Volume 4.25B
NYSE Advancers 1,700
NYSE Decliners 1,600
Nasdaq Volume 4.27B
Nasdaq Advancers 1,970
Nasdaq Decliners 2,710
New Highs/Lows
01/03 01/04 01/05 01/05 01/06 01/07
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NYSE New Highs 96 132 132 112 64 101
NYSE New Lows 29 49 118 38 185 105
Nasdaq New Highs 98 148 123 104 90 103
Nasdaq New Lows 86 146 406 138 612 338
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TRADER'S TIP:
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TRADER'S TIP: "Efficient Execution" How well do you execute your trading plan? You can judge your effectiveness by how skillfully you move in and out of the market each time you act on an entry or exit signal. Preparation and practice is necessary to avoid delays or mistakes at the point of action. It is helpful to write down the exact required steps in advance, so you will know exactly what to do before you need to do it. When the time arrives, don't wait; always be decisive. Keep records of your results so you can correct any glitches that may arise. This disciplined approach keeps you focused on a repetitive process to prevent execution errors and produce favorable results over time. **************************
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 - 4677.03 January 7, 2022 52-Week High: 4818.62 52-Week Low: 3694.12 Daily Trend: DOWN Weekly trend: UP Weekly Pivot Levels Resistance 3: 5031.22 Resistance 2: 4875.34 Resistance 1: 4776.18 Pivot: 4719.46 Support 1: 4620.30 Support 2: 4563.58 Support 3: 4407.70 https://www.prorightline.com/rlch/010722SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, January 10, 2022: 10-Jan 10 am Wholesale inventories (revision) Tuesday, January 11, 2022: 11-Jan 6 am NFIB small-business index Wednesday, January 12, 2022: 12-Jan 8:30 am Consumer price index 12-Jan 8:30 am Core CPI 12-Jan 2 pm Federal budget 12-Jan 2 pm Beige book Thursday, January 13, 2022: 13-Jan 8:30 am Initial jobless claims (regular state program) 13-Jan 8:30 am Continuing jobless claims (regular state program) 13-Jan 8:30 am Producer price index Friday, January 14, 2022: 14-Jan 8:30 am Retail sales 14-Jan 8:30 am Retail sales excluding autos 14-Jan 8:30 am Import price index 14-Jan 9:15 am Industrial production 14-Jan 9:15 am Capacity utilization 14-Jan 10 am UMich consumer sentiment index (preliminary) 14-Jan 10 am Business inventories 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: "100% Guaranteed Winner!" When it comes to the stock market, everybody wants a sure thing. Some traders will go to any length to be absolutely certain that their next trade is a winner. Unfortunately there's no way to do that. It doesn't matter how great the company is or how many analysts recommend you buy it, there is no way to be certain that your next trade will be a home run. In the world of stocks, certainty is a myth. Instead of struggling toward the impossible goal of certainty, focus your efforts on finding the best trade setups and executing your trading plan. ***********************************
STOCKS COVERED IN THIS ISSUE
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ENERGY SECTOR Northern Oil and Gas, Inc. (NOG: Energy/Oil & Gas E&P) - SQUEEZE PLAY. A look at NOG'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 23.35 and a SELL short trigger at 21.64. Once NOG shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.71 and tighten to 0.86 on a 2.02 gain. NOG closed Friday at 22.58. Earnings Report Date: Mar 10, 2022. Beta: 2.39. Market-Cap: 1.743B. Optionable. FINANCIAL SERVICES SECTOR Open Lending Corporation (LPRO: Financial Services/Credit Services) - SQUEEZE PLAY. LPRO is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 20.88 and a SELL short entry at 19.3. Once your trade is filled, enter a 1.58 trailing stop. Tighten it to 0.79 after a 2.7 gain. LPRO closed on Friday at 20.32. Earnings Report Date: Mar 07, 2022. Beta: 0.33. Market-Cap: 2.564B. Optionable. HEALTHCARE SECTOR AdaptHealth Corp. (AHCO: Healthcare/Medical Devices) - SQUEEZE PLAY. Friday's narrow price range has created a potentially profitable setup in AHCO, 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 22.58 and a SELL short entry at 20.92. Let AHCO's price action determine your long or short entry. Once the order is filled, place a 1.66 trailing stop, and tighten it to 0.83 upon getting a 2.14 gain. AHCO closed Friday at 22.25. Earnings Report Date: Mar 02, 2022. Beta: 0.14. Market-Cap: 2.942B. Optionable. INDUSTRIALS SECTOR Core & Main, Inc. (CNM: Industrials/Industrial Distribution) - SQUEEZE PLAY. Traders are feeling the pressure as CNM's intra-day price range on Friday 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 26.18 and a SELL short entry at 24.28. CNM's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.9 trailing stop. Tighten it to 0.95 after you get a 3.06 gain. CNM closed Friday at 25.45. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 4.074B. Optionable. REAL ESTATE SECTOR Cedar Realty Trust, Inc. (CDR: Real Estate/REIT-Retail) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday CDR seemed intent on initiating a rebound. With moving average support nearby, CDR is at a logical place for Bulls to regroup and extend the familiar uptrend that shareholders have become accustomed to. On continued buying, plan on taking long entries with a BUY at 25.21. Manage risk with a 2.05 stop. Tighten your stop to 1.03 when you have a 1.54 profit. CDR ended the day at 24.72. Earnings Report Date: Feb 02, 2022. Beta: 1.45. Market-Cap: 337.69M. 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 ---------------- ------- -------- ------- ------ ------- 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 1/10/2022 5-for-1 No Merchants Bancorp MBIN 11/17/2021 1/18/2022 2-for-1 No 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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"Buying The Pullback" Buying the pullback makes good sense after a strong rally, but it's a great way to lose money if you jump in too early or too late. How can you find perfect timing when it comes to this classic play? The key lies in reading the clues of the charting landscape. It's natural for markets to correct after big rallies. This countertrend move lowers the emotional fires and sets up the ideal conditions for a swing back to higher prices. But any pullback can turn into a reversal and trap your position in a downward spiral. So let's look at the types of pullbacks we want to buy and those that should be avoided at all costs. Volume presents important evidence about a stock's intentions when it starts to pull back. Look for selling to contract when bars test lower prices. The most bullish volume shows a steady downslope in the histograms under the price bars. This suggests shareholders are hanging tough because they believe in higher prices. Alternatively, big red volume spikes show fear and may signal important tops. See Chart - https://prorightline.com/rlr/TCment070304.gif Don't trade a pullback against a gap. There are two types of gaps you need to worry about. The first shows up on a high-volume move near the end of the rally. This corresponds with an exhaustion gap that warns traders a reversal is near. It also marks resistance after a stock finds support on the pullback and starts to rally again. Second, don't buy into a gap down when the stock is pulling back unless it gets filled the same day. This is a tough one because falling stocks often find support right after the longs give up and sell into a gap down opening. The problem comes when the gap doesn't fill by day's end. This prints a bearish reversal on the price chart and attracts more selling. See Chart - https://prorightline.com/rlr/TCdish070304.gif The simplest entry comes from a pullback into a strong support level. Trend lines, old highs and Bollinger Bands ease selling pressure, and allow buyers to carry the market back in the other direction. The biggest problem with these falling-knife entries is usually psychological. The trader loses confidence while watching the intensity of the selloff and fails to act when it's time to pull the trigger. See Chart - https://prorightline.com/rlr/TCyhoo-a070304.gif A trip down to the 50-day moving average offers an excellent opportunity for dip buyers who want to hold positions for a few days or a few weeks. This price zone usually marks strong support after a rally. A market pulling back here also suggests early dip buyers got beat up on the ride down. Pullbacks tend to feed on traders who buy too early. In other words, they buy and the market drops, stopping them out and forcing prices even lower. This downward spiral continues until prices reach a large pool of buying interest. This fresh demand often sits right at the 50- day moving average. See Chart - https://prorightline.com/rlr/TCplcm070304.gif Many traders use Fibonacci retracements to uncover hidden support on a pullback. But this is a lot harder than it looks. Stocks commonly drop to three different retracement levels, and you can lose a lot of money when you pick the wrong one. Fortunately there are ways to focus in and locate the most likely support level. Put the odds squarely in your favor by standing aside until price reaches a deep retracement that corresponds with other types of support. This means the safest strategy is to focus on the 62% retracement and look for intermediate averages or old highs at the same prices. This process is called cross-verification. It works because it's self- fulfilling. Different traders look for different types of support in various pullback scenarios. Finding convergence of multiple support types at narrow price levels taps into this broad set of buying signals. See Chart - https://prorightline.com/rlr/TCyhoo-b070304.gif The intraday chart holds the key to pullback profits. Often, it's hard to make sense of a market pulling back on a daily chart. Fortunately trends evolve in all time frames, and traders can use the intraday chart to uncover hidden support and resistance levels. Focus on the 60-minute chart because this gives you many days of intraday price bars to work with. Pull one up when you see a correction in progress, and start searching for common patterns, such as bull flags or double bottoms. These inflection points reveal low- risk entry prices for positions taken in much longer time frames. This special guest article was written by Alan Farley, author of "The Master Swing Trader." ======================================================================
Best of luck and have a Great Week!
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