January 9, 2020 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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In today's age of instant information, technical traders have access to an endless variety of data to help them make decisions. Stock charts, while still combining the same basic features they always have, offer more and more indicators every year. Then there's the matter of deciding which intervals to use. At times it can seem daunting!

When it comes to chart intervals for swing trading, we've found the daily chart to be highly effective. Anything smaller, such as the 30- minute or 15-minute, tends to reveal short-lived trends that are difficult to capitalize on for those who aren't daytraders.

As for weekly charts, it might stand to reason that those are best left to long-term traders and investors. Swing traders, however, can also take advantage of the weekly interval. This is especially true during Bull markets, when hundreds of stocks are rising with the broader market and have been lifted to their highest point on the daily chart. When you run across one of these, you very well might be looking at an equity that's trading at all-time highs. This has bullish implications, since a breakout into bluesky territory can attract strong and sustained buying.

On the other hand, a stock might be trading at multi-year highs, but just a few points away from strong historical resistance or congestion. The weekly chart reveals these levels, giving you a clear sense for the potential risk/reward and allowing you to gauge upside targets. When considering a long play in a stock that's trading at a long-term peak, always pull back to the weekly to see how far it might run.

Whenever contemplating a trade set-up, it never hurts to take a quick glance at the weekly even if a stock isn't breaking to long-term highs. During pullbacks you may notice that price action is approaching a key moving average. You'll often find that stocks stage strong reversals from these levels (typically the 50-week and 200-week MA's), especially when they converge with other bounce points such as horizontal support or a rising trendline.

As for the indicators, momentum oscillators like the MACD and stochastics can be predictive on weekly charts. However, swing traders should pay more attention to what these are doing on the daily interval. A weekly stochastic reversal, for example, might take a relatively long time to play itself out, whereas a daily stochastic reversal can start to produce results within a matter of days.

Here's to profits!

Kent Barton
Senior Analyst 

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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 
------  --------  --------  --------  --------  ---------------  --------

PVAC      30.44     -0.16     30.95                  1.98/0.99      2.52
CSTL      33.32      0.31     34.15     31.48        2.67/1.33      4.18
RAPT      27.68     -0.85     28.92     25.77        3.15/1.57      6.00
PHAT      33.73      0.50     34.95     31.92        3.03/1.51      6.04


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 www.rightline.net/education/using-quicklist.html. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to www.RightLine.net and login to the Member's area.

To learn more about controlling risk go to the RightLine Risk Control System at http://www.rightline.net/education/riskcontrol.html

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                           MARKET SUMMARY
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US stocks continued to rally on Thursday as recent USA-versus-Iran war concerns faded in the light of positive economic data. Included in the upbeat news was a bigger drop in unemployment claims than expected, another indication of a very strong labor market. Equity headlines featured disappointing earnings announcements and same-store sales numbers from Bed Bath & Beyond (BBBY $13) and Kohl's (KSS $45), while Costco Wholesale (COST $299) reported excellent same-store sales results. Gold and treasury yields declined, the USD/dollar moved higher, oil closed near even. 


                       Jan 8, 2020            Jan 9, 2020    
                  --------------------   --------------------
Dow                    28,745  +161.41        28,957  +211.81
Nasdaq                  9,129   +60.66         9,203   +74.18
S&P 500                 3,253   +15.87         3,275   +21.65

NYSE Volume                      3.74B                  3.70B
NYSE Advancers                    1743                   1642
NYSE Decliners                    1197                   1289

Nasdaq Volume                    2.48B                  2.56B
Nasdaq Advancers                  1922                   1871
Nasdaq Decliners                  1310                   1337

                                 New Highs/Lows

                   01/02  01/03  01/06  01/07  01/08  01/09
                 --------------------------------------------
NYSE New Highs       214    145    125    131    213    241
NYSE New Lows          5      9      8     11     11     13
Nasdaq New Highs     265    109    100    144    212    259
Nasdaq New Lows       17     13     28     20     19     17


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                              TRADER'S TIP:  
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TRADER'S TIP: "Hot Zones"

While up and down price behavior reflects the impact of news and sentiment, heavy hitters like market makers and institutional traders use technical analysis to locate potential breakout and reversal zones. Some of these areas are easy to see, for they line up with previous high and low pivot points. Others are less obvious. Trend lines, Bollinger Bands, Fibonacci overlays, and other technical tools are used to locate the hot spots. Where two or more of these converge, support or resistance is stronger. Bullish moves beyond these limits occur when sellers give in and join the buyers. Bearish moves occur in the same fashion, only in reverse.

As traders we can anticipate these points, and manage positions by preparing for possible breakouts or reversals at these junctions. It doesn't pay to be stubborn! If a trade tells us it wants to break through support or resistance, we can play it that way. If it decides to reverse, we can follow along. One measure of a trader's strength is the ability to quickly adapt and go with the current price flow. To a large degree, this is what is meant by the saying, "let the market tell you what 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: www.rightline.net/education/how_to_use_rlr_technical_analyst.html. 
S&P 500 - 3274.70 January 9, 2020

52-Week High: 3275.58
52-Week Low: 2570.41
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3327.22
Resistance 2: 3281.11
Resistance 1: 3257.98
Pivot: 3235.00
Support 1: 3211.87
Support 2: 3188.89
Support 3: 3142.78

http://www.rightline.net/rlch/010920SPX.jpg

NASDAQ Composite - 9203.43 January 9, 2020

52-Week High: 9215.95
52-Week Low: 6877.08
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 9376.27
Resistance 2: 9192.03
Resistance 1: 9106.40
Pivot: 9007.79
Support 1: 8922.16
Support 2: 8823.55
Support 3: 8639.31

Dow Industrials - 28956.90 January 9, 2020

52-Week High: 28988.01
52-Week Low: 23703.25
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 29620.76
Resistance 2: 29124.40
Resistance 1: 28879.63
Pivot: 28628.03
Support 1: 28383.27
Support 2: 28131.67
Support 3: 27635.31

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                             MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern): 
Monday, January 06, 2020:
06-Jan  1:15 pm   John Williams speaks
06-Jan  9:45 am   Markit services PMI

Tuesday, January 07, 2020:
07-Jan  8:30 am   Trade deficit
07-Jan  10 am   ISM nonmanufacturing index
07-Jan  10 am   Factory orders

Wednesday, January 08, 2020:
08-Jan  8:15 am   ADP employment
08-Jan   3 pm   Consumer credit

Thursday, January 09, 2020:
09-Jan   8 am   Richard Clarida speaks
09-Jan  8:30 am   Weekly jobless claims
09-Jan  8:30 am   Philly Fed annual revision
09-Jan  1:20 pm   Charles Evans speaks
09-Jan   2 pm   James Bullard speaks

Friday, January 10, 2020:
10-Jan  8:30 am   Nonfarm payrolls
10-Jan  8:30 am   Unemployment rate
10-Jan  8:30 am   Average hourly earnings
10-Jan  10 am   Wholesale 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: http://www.rightline.net/education/economic.html 
 
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                              TRADER'S TIP: 
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TRADER'S TIP: "Victory!"

Regardless of what some "experts" have to say, trading isn't war. If you consider trading the same thing as combat, you may wind up being stressed, or even worse, hostile. Those who view trading as a matter of life and death usually take things very personally and tend to hold onto losses way too long. If you choose to use a military model for your trading approach, keep in mind that throughout history successful military leaders knew when to take a small loss on the battlefield. When outnumbered, they often retreated so they could return to fight another day. 

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                      STOCKS COVERED IN THIS ISSUE    
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ENERGY SECTOR

Penn Virginia Corporation (PVAC: Energy/Oil & Gas E&P) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. PVAC's reaction to support on Thursday created a Bullish Bounce setup with a BUY entry trigger at 30.95. Use a 1.98 trailing stop, which should work well with PVAC's typical daily range. Tighten it to 0.99 on a 2.52 profit. PVAC closed at 30.44 on Thursday. Earnings Report Date: Feb 25, 2020. Beta: 1.39. Market-Cap: 460M. Optionable.

HEALTHCARE SECTOR

Castle Biosciences, Inc. (CSTL: Healthcare/Diagnostics & Research) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in CSTL's narrowest trading range of the past seven sessions. With neither group able to take complete control on Thursday, 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 34.15 and a SELL order at 31.48. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.67 trailing stop. Tighten the stop to 1.33 once you have a 4.18 gain. CSTL closed Thursday at 33.32. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 583M. Not Optionable.

RAPT Therapeutics, Inc. (RAPT: Healthcare/Biotechnology) - 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. RAPT traders reached this state of stand-off on Thursday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 28.92 and a SELL short trigger at 25.77. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 3.15 which can be tightened to 1.57 on a 6.00 gain. RAPT closed Thursday at 27.68. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 604M. Not Optionable.

Phathom Pharmaceuticals, Inc. (PHAT: Healthcare/Biotechnology) - SQUEEZE PLAY. PHAT traders on both sides of the fence are now locked in a head-to-head shootout. Thursday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 34.95 and a SELL short trigger at 31.92. When one of the orders is filled, cancel the remaining order and enter a 3.03 trailing stop. When you've reached a 6.04 paper profit, tighten the stop to 1.51. PHAT closed at 33.73 on Thursday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 827M. Not 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: http://www.rightline.net/education/riskcontrol.html

Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels.
Link: http://www.rightline.net/education/gap-adjusted.html 

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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  
---------------- -------     --------    -------     ------  -------   

Penns Woods Banc   PWOD    09/03/2019  10/01/2019   3-for-2   No
Equity Lifestyle   ELS     09/20/2019  10/16/2019   2-for-1   Yes
Middlefield Banc   MBCN    10/07/2019  11/12/2019   2-for-1   No

For a closer look at the different stages of a Stock Split go to: http://www.rightline.net/splits/index.html/#split-stages 
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