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March 5, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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Getting to Break-Even
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"QUICK LIST"
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Stock 03/04 03/04 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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DKNG 20.69 -0.22 22.4 19.82 2.58/1.29 3.26
RUTH 23.50 -0.44 24.11 2.11/1.06 1.62
AMLX 27.39 1.39 27.93 3.19/1.6 4.84
TMCI 20.48 0.06 20.96 3.42/1.71 2.92
TCMD 20.69 0.35 20.97 19.44 1.53/0.77 1.48
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 US stock markets were lower on Friday as the geopolitical crisis in Ukraine continued to cause bearish sentiment. In addition, expectations are high for a tightening monetary policy after Fed Chairman Jerome Powell said he will propose a 25 basis-point hike at the next FOMC meeting in two weeks. Light economic news featured a second straight month of improved labor data. In the earnings department, Costco Wholesale (COST $526) and Broadcom (AVGO $596) beat analysts' profit forecasts, while Gap (GPS $14) reported a smaller loss than predicted, but came up short on same-store sales. Oil prices surged upward, the USD/dollar, treasuries and gold were all higher.
Friday On The Week
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Dow 33,614.80 -179.86 -443.95 -1.3%
Nasdaq 13,313.44 -224.50 -381.18 -2.78%
S&P 500 4,328.87 -34.62 -55.78 -1.27%
NYSE Volume 5.84B
NYSE Advancers 1,071
NYSE Decliners 2,252
Nasdaq Volume 5.31B
Nasdaq Advancers 1,250
Nasdaq Decliners 3,415
New Highs/Lows
02/25 02/28 03/01 03/02 03/03 03/04
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NYSE New Highs 44 68 109 127 104 137
NYSE New Lows 73 104 133 99 126 275
Nasdaq New Highs 47 62 67 77 59 64
Nasdaq New Lows 135 185 229 215 315 542
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TRADER'S TIP:
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TRADER'S TIP: "CAUTION: Options Expiration Just Ahead" The third Friday of every month is often a turbulent session due to index and stock options expirations. The actual expiration date is Saturday, but all trading has to be finished by Friday's close. So what does it actually mean? For traders, it means increased volatility as those options and futures become subject to exercise or roll-over, two processes that require trading transactions. While you don't have to trade options to take advantage of the movement in stocks resulting from these "Witching" days, it is wise to at least be aware of when these abnormal market sessions are about to occur.
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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 - 4328.87 March 4, 2022 52-Week High: 4818.62 52-Week Low: 3730.19 Daily Trend: DOWN Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 4616.20 Resistance 2: 4478.96 Resistance 1: 4403.91 Pivot: 4341.72 Support 1: 4266.67 Support 2: 4204.49 Support 3: 4067.25 https://www.prorightline.com/rlch/030422SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, March 07, 2022: 07-Mar 3 pm Consumer credit Tuesday, March 08, 2022: 08-Mar 6 am NFIB small-business index 08-Mar 8:30 am Foreign trade deficit 08-Mar 10 am Wholesale inventories (revision) Wednesday, March 09, 2022: 09-Mar 10 am Job openings 09-Mar 10 am Quits Thursday, March 10, 2022: 10-Mar 8:30 am Initial jobless claims 10-Mar 8:30 am Continuing jobless claims 10-Mar 8:30 am Consumer price index 10-Mar 8:30 am Core CPI 10-Mar 8:30 am CPI (year-over-year 10-Mar 8:30 am Core CPI (year-over-year) 10-Mar 1 pm Real domestic nonfinancial debt (SAAR) 10-Mar 1 pm Real household wealth (SAAR) 10-Mar 2 pm Federal budget deficit Friday, March 11, 2022: 11-Mar 10 am UMich consumer sentiment index (preliminary) 11-Mar 10 am Five-year inflation expectations (preliminary) 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: "Too Flexible?" As traders we need to be flexible, yet that doesn't mean we should attempt too many methods at the same time. The best approach is to use a relatively simple strategy that contains enough tactical setups to take advantage of price movement in any market environment. For example, a good place to start is with a combination of Bullish Bounces for uptrends, Bearish U-Turns for downtrends, and Squeeze Plays for sideways or choppy market periods. While you can always add additional types of setups as your trading skills improve, it's always wise to start with the basics. And repetition is the key, so remember to practice, practice, practice!
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STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR DraftKings Inc. (DKNG: Consumer Cyclical/Gambling) - SQUEEZE PLAY. DKNG shareholders know what it feels like to be squeezed. Friday's slim price range reveals uncertainty on both sides of the table, a situation which often resolves itself by either Bears or Bulls quickly gaining a clear advantage. The question is "who will win?" Near-term market action tell us whether we should sell short or we should buy shares instead. DKNG closed Friday at 20.69. The plan is to enter in the right direction by placing a BUY trigger at 22.4 and a SELL short trigger at 19.82. Once DKNG establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 2.58. After you've collected a 3.26 profit, tighten the stop to 1.29. Earnings Report Date: May 05, 2022. Beta: 1.96. Market-Cap: 8.456B. Optionable. Ruth's Hospitality Group, Inc. (RUTH: Consumer Cyclical/Restaurants) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday RUTH seemed intent on initiating a rebound. With moving average support nearby, RUTH 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 24.11. Manage risk with a 2.11 stop. Tighten your stop to 1.06 when you have a 1.62 profit. RUTH ended the day at 23.50. Earnings Report Date: May 05, 2022. Beta: 2.16. Market-Cap: 789.02M. Optionable. HEALTHCARE SECTOR Amylyx Pharmaceuticals, Inc. (AMLX: Healthcare/Biotechnology) - BULLISH BOUNCE. Here is another example of a stock in an established uptrend that has recently experienced a counter-trend drop. The sliding price action has now found support near a moving average zone, bouncing upward during Friday's session to close at 27.39. Anticipate the rebound to continue, and be ready to buy AMLX at 27.93. Follow your entry with a trailing stop of 3.19 which can be tightened to 1.6 on a 4.84 profit. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.547B. Not Optionable. Treace Medical Concepts, Inc. (TMCI: Healthcare/Medical Devices) - BULLISH BOUNCE. Up-trending stocks like TMCI have a tendency to bounce their way skyward rather than travel higher in a straight line. After touching down to a moving average support level on Friday, TMCI is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 20.96 if positive price action occurs. As always, follow your entry with a trailing stop. A 3.42 trailer should work well with TMCI. Tighten it to 1.71 on a 2.92 gainer. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.103B. Optionable. Tactile Systems Technology, Inc. (TCMD: Healthcare/Medical Devices) - SQUEEZE PLAY. The ticker for Friday's session shows TCMD is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 20.97 and a SELL short trigger at 19.44. When TCMD starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 1.53 trailing stop. Upon reaching a 1.48 profit, resize the stop to 0.77. Earnings Report Date: Apr 06, 2022. Beta: 1.38. Market-Cap: 411.414M. 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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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
SMART Global Hold SGH 1/4/2022 2/2/2022 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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"Position Size Matters" by Alexander Elder, MD The owner of a stock-trading firm in a suburb of New York had asked me to run a psychological training group for his traders. The traders were shocked at the idea of a psychiatrist coming in and loudly insisted they 'weren't crazy.' The group got filled only after the manager told his worst performers they had to join or else. Our results were such that six weeks later we had a waiting list for the second group. The firm had it's own proprietary day-trading system, which worked well enough for the two top traders to make millions. Others trading the same system made less and quite a few lost money. We met once a week for two hours and focused on psychology and money management. In one of our first meetings a trader complained that he had lost money each day for the past 13 days. His manager confirmed that he was following the firm's system but could not make any money. I said that my hat was off for anyone who could lose for 13 days straight and have the intestinal fortitude to come in and trade the next morning. I then asked how many shares he traded, since the firm set a maximum for each trader. He was permitted to buy or sell 700 shares per trade, but voluntarily reduced it to 500 while on his losing streak. I told him to drop down to 100 shares until he had two profitable weeks during which he had more winning days than losing. Once he cleared that hurdle, he could go up to 200 shares. Then, after another 2-week profitable period, he could go up to 300 shares, and so on. He was allowed a 100 share increment after two weeks or profitable trading. If he had a single losing week, he'd have to drop back to the previous week's level until he had a new profitable 2-week period. In other words, he had to start small, go up in size slowly, and drop down fast in case of trouble. That trader loudly objected that 100 shares was not enough - he would not be able to make any money. I told him to stop kidding himself, since trading a bigger size only let him lose more money, and he agreed to my plan. When we met a week later he reported sheepishly that he had four profitable days out of five and was profitable overall. He made very little money because his trading size was so small, but for the first time in weeks he was ahead of the game. He continued to make money during the next week and then stepped up to 200 shares. In the next meeting he asked, 'Do you think it could be psychological?' - and the group roared. How come a man who lost money trading 500 shares made money trading 100? As the group pondered, I took a $10 bill out of my pocket and asked whether anyone would like to earn it by climbing on top our long narrow conference table and walking on it from one end to the other. Several hands went up. Well, said I, then let me offer $1,000 to anyone who'll come up with me to the roof of our 10-story office building and use a board as wide as the table to walk above the street to the roof of another 10-story building. No one volunteered. I started egging on the group - the board will be as wide and sturdy as the conference table, we'll do it a windless day, I'll pay $1,000 cash on the spot. Still no takers. Why? Both challenges involved walking a short distance on a two-foot wide board - but the size of the trade went up, both the reward and the risk. If you lost your balance on the conference table, you'd jump down a couple of feet and land on the carpet. If you lost your balance between two rooftops, you'd hit the asphalt 10 floors below. When the level of risk goes up, our ability to perform goes down. Beginners often make money on small trades. They become a little more experienced and confident, increase their trading size - and lose. Their system hasn't changed, but bigger size makes them stiffer and less nimble. Most beginners are in a hurry to make a killing, and guess who gets killed. Overtrading means trading a size that's too large for you. Some stockbrokers outside the US offer a 'shoulder' of 10:1, allowing you to buy $10 worth of stock for every $1 you deposit with the firm. Some currency houses offer a shoulder of 1:100. Overtrading generates big commissions in a hurry. Poor futures traders look for brokers with the lowest margin requirements. If the minimum margin in gold is $2,000, an eager beaver with $10,000 may buy five contracts. Each includes 100 oz of gold, making his account swing $500 for every $1 move in gold. His equity swings 5% for every $1 change! If gold goes against him, he is cooked. If it goes his way, that beginner will be convinced he's discovered a great new way of making money, continue to trade recklessly and bust out on the next trade. When a scuba diver puts on his tank and rolls off the side of the boat, clenching his mouthpiece, he has a device called an octopus attached to his air tank. It consists of several tubes, one leading to his mouthpiece, another to the flotation vest, and yet another to an instrument that shows how much air he has left in his tank. While enjoying the reef and the fish, he keeps glancing at the gauge to see how much air he has left. If it goes too low, he may not have enough to get back to the surface or else he may have to come up so fast his blood will boil. Scuba diving is a deadly sport for illiterates and hotheads. Putting on a trade is like diving for treasure. There are fortunes down on the ocean floor, there is gold between the rocks. As you scoop it up, remember to glance at your air gauge. Will you calculate how much gold you can afford to take without endangering your survival? The ocean floor is littered with the remains of divers who saw great opportunities. They reached for them without thinking whether they had enough air to return to the boat. A professional diver thinks about his air supply first. If he doesn't get any gold today, he'll go for it tomorrow. All he needs to do is survive and dive again. Beginners kill themselves by reaching for more than they can carry and running out of air. The lure of free gold on the ocean floor is too strong. Free gold! It reminds me of a Russian saying - "the only free thing is the cheese in a mousetrap." Greed is a common emotion, not limited to humans. There are tribes in Africa that catch monkeys by putting tidbits of food into jars with narrow necks, tied to stakes in the ground. A monkey wiggles its hand into a jar, grabs a tidbit, but cannot pull it out because only an open hand can go through the narrow neck. The monkey is still tugging at the bait with its fist stuck in the jar when the hunters come to pick it up it. Monkeys do themselves in because of their greed, grabbing and refusing to let go. Think of them when you feel tempted to put on a large trade with no stop. Simply knowing how to analyze markets will not make you a winner. A professional trader needs strong money management skills. All successful traders survive and prosper thanks to their discipline. The 2% Rule will keep you safe from the sharks, the 6% Rule from the piranhas. Then, if you have a halfway decent trading system, you'll be ahead of the game.
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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 800-737-4518. |