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January 9, 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 01/09 01/09 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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PENN 24.54 -0.84 25.31 23.6 1.71/0.86 2.12
WMT 159.29 1.03 161.43 8.48/4.24 3.9
RILY 22.40 0.00 23.02 21.2 1.82/0.91 5.66
WCN 147.30 0.33 149.66 7.67/3.84 4.94
NVEI 24.63 -1.12 25.57 23.79 1.78/0.89 1.52
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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Stocks experienced fluctuations between gains and losses Tuesday afternoon following a period of morning weakness, reflecting the market's current choppy state as it anticipates crucial Consumer Price Index (CPI) inflation data scheduled for release this Thursday. Investors are eager to gain insights into the potential timing and intensity of interest rate cuts, widely expected from the Federal Reserve in March. Despite concerns that market expectations might be overly optimistic regarding the number of forecasted rate cuts in 2024, majoraverages remain robust, with the S&P 500 just shy of 2% from its record highs ahead of the CPI results. In addition to economic concerns, market indicators such as the Santa Claus Rally and the First Five Days indicator have shown negative signals, adding to the cautious sentiment. The start of earnings season, beginning this Friday with major banks reporting, including JPMorgan, Citigroup, and Wells Fargo, is also contributing to the market's uncertainty. The market's upward momentum is notably driven by the dominance of major tech companies. The so-called "Magnificent 7" - Amazon, Apple, Alphabet, Microsoft, Meta Platforms, Tesla, and Nvidia - collectively hold an astounding $12 trillion market cap, constituting 28% of the S&P 500 and nearly 23% of the entire stock market. This concentration emphasizes the outsized influence of a handful of tech giants. While small-cap stocks underperformed on Tuesday, the sector holds potential for a 9% increase over in the next six months for the Russell 2000 Smallcaps, and a 15% upside in the next 12 months. The current low valuations and an upbeat economic forecast suggests that the Russell 2000 small-cap index is poised for outperformance. Tuesday On The Week
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Dow 37,525.16 -157.85 -189.88 -0.5%
Nasdaq 14,857.71 13.94 +91.77 0.62%
S&P 500 4,756.50 -7.04 +13.67 0.29%
NYSE Volume 3.54B
NYSE Advancers 848
NYSE Decliners 1,964
Nasdaq Volume 5.09B
Nasdaq Advancers 1,537
Nasdaq Decliners 2,659
New Highs/Lows
01/02 01/03 01/04 01/05 01/08 01/09
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NYSE New Highs 46 42 63 55 61 44
NYSE New Lows 10 10 14 17 25 24
Nasdaq New Highs 62 26 83 56 108 74
Nasdaq New Lows 39 38 87 95 94 72
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TRADER'S TIP:
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TRADER'S TIP: "Trends vs. Trading Ranges" "Money management tactics are different in trends and trading ranges. It pays to put on a smaller position in a trend but use a wider stop. Then you will be less likely to get shaken out by reactions while you keep risk under control. You may put on a bigger position in a trading range but use a tighter stop." ~ Alex Elder **************************
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 - 4756.50 January 9, 2024 52-Week High: 4793.30 52-Week Low: 3808.86 Daily Trend: UP 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/010924SPX.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: "Ten Feet Tall and Bullet Proof" The height of a support or resistance zone determines its strength. For example a thick congestion zone is more resistant than a thin one. As a rule of thumb a zone height equal to 1% of the current price is considered minor, 3% is intermediate, and 7% or more is major support or resistance. ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR PENN Entertainment, Inc. (PENN: Consumer Cyclical/Resorts & Casinos) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in PENN's narrowest trading range of the past seven sessions. With neither group able to take complete control on Tuesday, the stock's short term destiny is up for grabs. You can capitalize on this unusually tight condition by placing both a BUY order at 25.31 and a SELL order at 23.6. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.71 trailing stop. Tighten the stop to 0.86 once you have a 2.12 gain. PENN closed Tuesday at 24.54. Earnings Report Date: Feb 15, 2024. Beta: 2.18. Market-Cap: 3.724B. Optionable. CONSUMER DEFENSIVE SECTOR Walmart Inc. (WMT: Consumer Defensive/Discount Stores) - BULLISH BOUNCE. WMT's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Tuesday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move WMT back in step with the bullish weekly trend, so our BUY entry trigger is set at 161.43. Once you hold a position, trail a stop of 8.48. Tighten it to 4.24 on a 3.9 gain. WMT closed at 159.29 on Tuesday. Earnings Report Date: Feb 19, 2024. Beta: 0.48. Market-Cap: 428.845B. Optionable. FINANCIAL SERVICES SECTOR B. Riley Financial, Inc. (RILY: Financial Services/Financial Conglomerates) - SQUEEZE PLAY. Trader indecision has put RILY squarely in the center of a Bull versus Bear standoff. This tight spot should soon give way to a clear winner in the short-term, and we want to be in position for the move. To do that we've set a BUY entry at 23.02 and a SELL short entry at 21.2. Now it's up to RILY to show us which entry will be filled. Once the trade is underway place a 1.82 trailing stop, which can be tightened to 0.91 after you achieve a 5.66 profit. RILY closed on Tuesday at 22.40. Earnings Report Date: Feb 20, 2024. Beta: 1.59. Market-Cap: 685.057M. Optionable. INDUSTRIALS SECTOR Waste Connections, Inc. (WCN: Industrials/Waste Management) - BULLISH BOUNCE. Positive price behavior near moving average support on Tuesday qualifies WCN for a Bullish Bounce setup. After several sessions of declining prices, WCN should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if WCN moves up to our entry trigger set at 149.66. You can also enter a 7.67 trailing stop, to be replaced with a 3.84 trailing stop when you obtain a 4.94 profit. WCN closed Tuesday at 147.30. Earnings Report Date: Feb 13, 2024. Beta: 0.68. Market-Cap: 37.951B. Optionable. TECHNOLOGY SECTOR Nuvei Corporation (NVEI: Technology/Software - Infrastructure) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. NVEI traders reached this state of stand-off on Tuesday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 25.57 and a SELL short trigger at 23.79. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.78 which can be tightened to 0.89 on a 1.52 gain. NVEI closed Tuesday at 24.63. Earnings Report Date: Mar 06, 2024. Beta: 3.29. Market-Cap: 3.423B. 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. |