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November 11, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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My first efforts at trading were almost laughable. I had no training, no plan and no method - just a brand-new brokerage account and a good feeling about Caterpillar stock. To this day I don't know why the yellow industrial equipment maker was so appealing. Maybe the life size construction toys resonated with my inner child. Whatever the attraction, it's clear now that I was trading on pure emotion.
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"QUICK LIST"
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Stock 11/10 11/10 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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RCKY 21.88 -0.25 22.22 20.71 1.51/0.76 1.38
OLLI 78.66 0.80 79.71 5.63/2.82 4.64
UPST 20.87 -0.25 21.6 19.24 2.36/1.18 3.38
BLTE 39.34 0.34 40.3 2.93/1.47 4.38
ED 89.35 0.09 91.05 4.85/2.43 3.48
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 week closed with a surprising surge in US stocks, marking the S&P 500's highest levels since late September. The unexpected rally, rising up to 1.6%, defied a lack of positive news or data. The S&P 500 surpassed the 4,400 level, with a broad-based rally, and the Nasdaq 100 (QQQ) showed a 10% increase since its closing low on October 26. Key sectors, particularly Technology (XLK), Communication (XLC), and Consumer Discretionary (XLY), which have been consistently strong throughout the year, led the charge once again. Technology surged by 2.5%, Communication rose by 1.4%, and Consumer Discretionary increased by 1.5%. Despite the overall positive trend, some sectors, such as Utilities (XLU), Consumer Staples (XLP), Healthcare (XLV), REITs (XLRE), and Energy (XLE), remained in negative territory for the year. Big tech companies witnessed substantial gains in the past two weeks, exemplified by NVIDIA's recovery from an 18% drawdown to being just 2% away from an all-time closing high. AMD extended its gains, rising above $119, marking a 21% increase since October 31. Microsoft demonstrated remarkable strength, reaching new all-time highs. Despite this positive market reaction, Nasdaq breadth has reached all-time lows, with only a few companies pushing the index higher. Friday On The Week
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Dow 34,283.10 391.16 +221.78 0.65%
Nasdaq 13,798.11 276.66 +319.83 2.37%
S&P 500 4,415.24 67.89 +56.9 1.31%
NYSE Volume 3.67B
NYSE Advancers 2,095
NYSE Decliners 755
Nasdaq Volume 4.73B
Nasdaq Advancers 2,593
Nasdaq Decliners 1,645
New Highs/Lows
11/03 11/06 11/07 11/08 11/09 11/10
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NYSE New Highs 82 36 30 38 44 44
NYSE New Lows 18 24 54 66 92 105
Nasdaq New Highs 63 45 48 50 46 60
Nasdaq New Lows 91 112 145 205 319 353
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TRADER'S TIP:
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TRADER'S TIP: "Measuring Opinion" The largely unpredictable nature of the market is due to the ever-changing consensus of opinion among investors and traders. Every trader should have some specific means of determining when it is likely that the consensus of opinion has changed within their chosen time frame. Technical Analysis can be very helpful in this area. **************************
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 - 4415.24 November 10, 2023 52-Week High: 4607.07 52-Week Low: 3764.49 Daily Trend: UP Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 4540.58 Resistance 2: 4466.49 Resistance 1: 4440.86 Pivot: 4392.40 Support 1: 4366.77 Support 2: 4318.31 Support 3: 4244.22 https://www.prorightline.com/rlch/111023SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, NOV. 13 2:00 pm Monthly U.S. federal budget TUESDAY, NOV. 14 6:00 am NFIB optimism index 8:30 am Consumer price index 8:30 am Core CPI 8:30 am CPI year over year 8:30 am Core CPI year over year 12:45 pm Chicago Fed President Austan Goolsbee speaks WEDNESDAY, NOV. 15 8:30 am Producer price index Oct. 8"30 am Core PPI 8:30 am PPI year over year 8:30 am Core PPI year over year 8:30 am U.S. retail sales 8:30 am Retail sales minus autos 8:30 am Empire State manufacturing survey 10:00 am Business inventories THURSDAY, NOV. 16 8:30 am Initial jobless claims 8:30 am Import price index 8:30 am Import price index minus fuel 8:30 am Philadelphia Fed manufacturing survey 9:15 am Industrial production 9:15 am Capacity utilization 9:25 am New York Fed President John Williams speaks 10:00 am Home builder confidence index FRIDAY, NOV. 17 8:30 am Housing starts 8:30 am Building permits 9:45 am Chicago Fed President Goolsbee speaks 10:00 am San Francisco Fed President Daly speaks 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: "Average Down?" "While most investors buy stocks that have performed well, investors who already own a stock are more likely to buy additional shares if the price is lower than their original purchase price." ~University of California at Davis -Odean Study (1998) Question: Should I average down? Answer: Buying more shares just because the price has dropped usually isn't a good idea. As a rule of thumb, only add shares to an existing position when the trade has moved in your favor. ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR Rocky Brands, Inc. (RCKY: Consumer Cyclical/Footwear & Accessories) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in RCKY's narrowest trading range of the past seven sessions. With neither group able to take complete control on Friday, 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 22.22 and a SELL order at 20.71. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.51 trailing stop. Tighten the stop to 0.76 once you have a 1.38 gain. RCKY closed Friday at 21.88. Earnings Report Date: N/A. Beta: 1.31. Market-Cap: 161.172M. Not Optionable. CONSUMER DEFENSIVE SECTOR Ollie's Bargain Outlet Holdings, Inc. (OLLI: Consumer Defensive/Discount Stores) - NEW HIGH DIP. New highs always reflect stocks that are doing exceptionally well. This is the case with OLLI, which has pulled back a bit after setting a new 52-week high just a few days ago. Friday's bounce from Moving Average support tells us this stock may be ready to move back up to blue sky territory. OLLI now rests at 78.66, and we're anticipating a move up to our BUY trigger at 79.71. Be ready to buy shares at that point and follow your entry with a 5.63 trailing stop. Decrease the stop to 2.82 on a 4.64 gain. Earnings Report Date: Dec 05, 2023. Beta: 0.96. Market-Cap: 4.854B. Optionable. FINANCIAL SERVICES SECTOR Upstart Holdings, Inc. (UPST: Financial Services/Credit Services) - SQUEEZE PLAY. Trader indecision has put UPST 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 21.6 and a SELL short entry at 19.24. Now it's up to UPST to show us which entry will be filled. Once the trade is underway place a 2.36 trailing stop, which can be tightened to 1.18 after you achieve a 3.38 profit. UPST closed on Friday at 20.87. Earnings Report Date: N/A. Beta: 2.09. Market-Cap: 1.775B. Optionable. HEALTHCARE SECTOR Belite Bio, Inc (BLTE: Healthcare/Biotechnology) - BULLISH BOUNCE. BLTE 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 BLTE 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 40.3. Set a trailing stop of 2.93, tightening to 1.47 on a 4.38 profit. BLTE closed at 39.34 on Friday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.071B. Not Optionable. UTILITIES SECTOR Consolidated Edison, Inc. (ED: Utilities/Utilities - Regulated Electric) - 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. ED's current price action near moving average support signals a potential BUY entry at 91.05, followed by a 4.85 trailing stop which can be tightened to 2.43 upon earning 3.48. ED closed Friday at 89.35. Earnings Report Date: N/A. Beta: 0.38. Market-Cap: 30.845B. 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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"Frequency of Trading is Critical" By Chuck LeBeau When building or evaluating trading systems the many benefits of systems that trade very frequently are often overlooked. A system that trades frequently has many advantages over less active systems that appear to be more desirable because they have better performance ratios. If a strategy is profitable the more it trades the more money we should make. I apologize for stating what should be obvious but you would be surprised at how often I hear discussions about selecting systems with the highest level of "expectancy" or highest "profit factor" without relating these measurements to the system's trading frequency. Simply stated, our goal should be to show the most profit with the least amount of risk and trading frequency plays a critical role in maximizing profitability and controlling our risk. Trading frequency represents opportunity for profit. The more opportunities we can find the more profit we should expect. For example, a strategy that has a very high profit factor of 4 (profit factor is total profits divided by total losses) may not produce as much profit as a more active system that has a profit factor of only 2. Since the strategy with the lower profit factor is profitable and it has many more opportunities it may easily produce more total profit than the system with the much higher profit factor. Active systems should give us a higher confidence level when analyzing our test data. In addition to increasing total profits, a very active system gives us much more data to analyze when doing our preliminary research. If we have a long-term trend-following strategy that produces only 50 trades over five years of data our positive results may not be nearly as reliable as the results from analyzing a more active strategy that produced 1000 trades over the same data sample. I would be willing to bet that the system with the larger sample of trades is more likely to produce profitable results in the future because our level of confidence must relate to the number of samples in our testing. Active systems should produce more reliable results and a smoother equity curve. If we flip a coin only ten times our odds of having 50% heads and 50% tails are not very good. However if we flip the coin one thousand times we are likely to come much closer to obtaining 50% heads and 50% tails. The same logic applies to our real-time trading. If we have a large sample of real trades then our results should come closer to our expectations than if we only have one or two trades. The active system will approach our expectations much quicker than the system that trades infrequently. If we have 50 or more trades per month with a good system we might reasonably expect to be profitable every month. However if we have a system that is only producing two or three trades per month then our monthly results will less predictable and inconsistent. The infrequent trading system might be expected to produce a profit every year but it would not be realistic to expect it to show a profit every month because the sample size in a month will be very small. ----------------------- This article is part of a larger work of the same title. The author - Chuck LeBeau - also co-wrote the book "Computer Analysis of the Futures Market." Chuck has traded the markets for many years. He specializes in trading system development and related research. ======================================================================
Best of luck and have a Great Week!
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