Notes From The Editor

"How To Turn Short-Term Wins Into Long-Term Winners"

Every veteran trader is fully aware of the consequences of keeping a losing position that should have been stopped out with a small loss. Despite knowing that hanging on to a dud is a really bad idea, the temptation to convert these short-term losers into long-term "investments" is painfully real. Believe me, I know ...

Fortunately there is a little known yet extremely positive counterpart to this tendency. Instead of holding onto losers longer than you should, this new method inverts the process. The result is that your winners run longer. This simple "Up-Shift" tactic can transform small short-term GAINERS into even bigger longer-term winners. Here it is ..

"How To Up-Shift" Your Trades

1) Enter buy positions near qualified support levels in a short time frame. In this example we'll use hourly charts.

2) Place your safety stops at support levels below your entry price.

3) Manage each trade in the short-term time frame with trailing stops until the position becomes profitable, or is sold with a minor loss.

4) Allow the profits in the wins to grow to a comfortable margin.

5) Chart the developing trend lines in the next higher time frame. In this example we'll shift to daily charts. Place your stops at a reasonable distance below the trend lines. Use these up-trend lines as support levels to manage the trades until stopped out.

This Five-Step process allows you to "Up-Shift" the trade from a shorter time frame to a longer time frame. The good news is that you still maintain the low-risk quality of the shorter-term trade.

In effect, steps One through Four are similar to planting seeds. They either grow, or are quickly eliminated based on their own performance. Step Five transfers each successful trade from one time horizon up to the next. There is limited risk due to the built in profit cushion.

The process constantly regenerates itself. Each small loss is immediately replaced with a new "seed" trade. The winners continue to grow from one time horizon to the next. Eventually they are harvested by a trailing stop, which is regularly adjusted to work within the current time frame.

You can see how easily the Up-Shift concept can be adapted to short selling too. The most important consequence of using this strategy for both longs and shorts is that you are always in the market when the big moves occur.

Trade well!

Thomas Sutton, Editor

Quick List

    
Stock     11/18     11/18      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

GLBE      20.42     -0.31      21.6     19.62        1.98/0.99       3.6
PTLO      20.70      0.22     21.13     19.46        1.67/0.84      1.98
OSH       20.23      0.45     20.71     18.66        2.05/1.03      2.46
CSTL      21.00      1.00     21.43     19.37        2.06/1.03      4.36
FLYW      20.99      0.06     21.76     20.06         1.7/0.85      2.54

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" and always use the RightLine Risk Control Calculator before entering any position.

For more on controlling risk go to the RightLine Risk Control System

For a glossary of terms unique to The RightLine Report go to: Glossary

Questions? Send us an email using our Contact Form.

Market Summary

The American stock markets were higher on Friday as traders dealt with mixed earnings news and some dreary economic data. Economic reports were flat, with existing home sales dropping in the face of rising interest rates, and the Leading Economic Index declining twice as much as predicted. In equities headlines, Gap (GPS $14) posted a profit due to a tax benefit, which made it unclear whether or not earnings were comparable to forecasts, while Williams-Sonoma (WSM $122) enjoyed record earnings growth but did not reach expectations, and Applied Materials (AMAT $105) readily beat forecasts and raised its outlook. The USD/dollar and treasury yields were up, oil and gold closed lower.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 33,745.69   199.37        -2.17    -0.01%
Nasdaq              11,146.06     1.10      -177.27    -1.57%
S&P 500              3,965.34    18.78       -27.59    -0.69%

NYSE Volume                      4.08B                       
NYSE Advancers                   1,902                       
NYSE Decliners                   1,250                       

Nasdaq Volume                    4.21B                       
Nasdaq Advancers                 2,479                       
Nasdaq Decliners                 2,205                       

                                 New Highs/Lows

                   11/11  11/14  11/15  11/16  11/17  11/18
                 --------------------------------------------
NYSE New Highs        81     54     65     53     34     70
NYSE New Lows         35     24     28     55     69     42
Nasdaq New Highs     110     83    107     68     63     73
Nasdaq New Lows      152    113    124    166    198    186
   

TRADER'S TIP: "Oh Well"

Taking a planned loss is a calculated part of doing business. Don't let it bother you - just shrug it off and go forward. Not taking a loss as planned can cause damage to both your trading account and your morale. Remember that many traders are incredibly successful with less than a 50% winning trade ratio. It's not that you have a loser; it's how you manage the trade that is important. Another good reason to plan your trade and stick with it!

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Improve Your Trading With Moving Averages".

S&P 500 - 3965.34 November 18, 2022

52-Week High: 4818.62
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4211.50
Resistance 2: 4089.20
Resistance 1: 4027.27
Pivot: 3966.90
Support 1: 3904.97
Support 2: 3844.60
Support 3: 3722.30

NASDAQ Composite - 11146.06 November 18, 2022

52-Week High: 16212.23
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 12187.78
Resistance 2: 11701.37
Resistance 1: 11423.71
Pivot: 11214.96
Support 1: 10937.30
Support 2: 10728.55
Support 3: 10242.14
        
Dow Industrials - 33745.69 November 18, 2022

52-Week High: 36952.65
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 35152.11
Resistance 2: 34404.81
Resistance 1: 34075.25
Pivot: 33657.50
Support 1: 33327.94
Support 2: 32910.19
Support 3: 32162.88
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, November 21, 2022:
21-Nov  8:30 am   Chicago Fed national activity index

Tuesday, November 22, 2022:
22-Nov          None scheduled

Wednesday, November 23, 2022:
23-Nov  8:30 am   Durable goods orders
23-Nov  8:30 am   Core capital equipment orders
23-Nov  8:30 am   Initial jobless claims
23-Nov  8:30 am   Continuing jobless claims
23-Nov  9:45 am   
23-Nov  9:45 am   
23-Nov  10 am   UMich consumer sentiment index (final)
23-Nov  10 am   UMich 5-year inflation expectations (final)
23-Nov  10 am   New home sales (SAAR)
23-Nov   2 pm   FOMC minutes

Thursday, November 24, 2022:
24-Nov          Thanksgiving Day holiday. None scheduled.

Friday, November 25, 2022:
25-Nov          None scheduled


For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Accredited Investor"

This is the SEC term for a person or entity meeting any of the criteria listed below. Certain restricted offerings, hedge funds, limited partnerships, and angel investor networks are open only to accredited investors.

1) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer or general partner of a general partner of that issuer.

2) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000.

3) Any natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

4) Any trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase of the securities is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.

5) Any organization that was not formed for the purpose of acquiring the securities being sold, with total assets in excess of $5,000,000.

6) Any entity in which all of the equity owners are Accredited Investors.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Global-e Online Ltd. (GLBE: Consumer Cyclical/Internet Retail) - 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. GLBE traders reached this state of stand-off on Friday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 21.6 and a SELL short trigger at 19.62. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.98 which can be tightened to 0.99 on a 3.6 gain. GLBE closed Friday at 20.42. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 3.195B. Optionable.

Portillo's Inc. (PTLO: Consumer Cyclical/Restaurants) - SQUEEZE PLAY. PTLO traders on both sides of the fence are now locked in a head-to-head shootout. Friday'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 21.13 and a SELL short trigger at 19.46. When one of the orders is filled, cancel the remaining order and enter a 1.67 trailing stop. When you've reached a 1.98 paper profit, tighten the stop to 0.84. PTLO closed at 20.70 on Friday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 877.744M. Optionable.

HEALTHCARE SECTOR

Oak Street Health, Inc. (OSH: Healthcare/Medical Care Facilities) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in OSH'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 20.71 and a SELL order at 18.66. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.05 trailing stop. Tighten the stop to 1.03 once you have a 2.46 gain. OSH closed Friday at 20.23. Earnings Report Date: N/A. Beta: 2.32. Market-Cap: 4.914B. Optionable.

Castle Biosciences, Inc. (CSTL: Healthcare/Diagnostics & Research) - SQUEEZE PLAY. CSTL 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. CSTL closed Friday at 21.00. The plan is to enter in the right direction by placing a BUY trigger at 21.43 and a SELL short trigger at 19.37. Once CSTL establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 2.06. After you've collected a 4.36 profit, tighten the stop to 1.03. Earnings Report Date: N/A. Beta: 1.07. Market-Cap: 553.384M. Optionable.

TECHNOLOGY SECTOR

Flywire Corporation (FLYW: Technology/Information Technology Services) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. FLYW found itself in this condition on Friday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 21.76 and a SELL short trigger at 20.06. When FLYW moves outside of Friday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.7 trailing stop. After you've got a 2.54 profit, tighten the stop to 0.85. FLYW closed at 20.99 on Friday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 2.288B. Optionable.

IMPORTANT: Before entering any positions, always use the Risk Control System to determine the level of acceptable risk and the maximum number of shares to buy. Use Gap Adjusted Entries to reset the Entry Price for stocks that gap beyond recommended entry levels.

Stock Splits

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 (Effective 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  
---------------- -------     --------    -------     ------  -------   
Copart            CPRT       11/4/2022 11/4/2022     2-for-1   Yes    

Split details are also available online at the RightLine Online Stock Split Calendar. For a detailed look at the different stages of a Stock Split, Click Here.

Trader's Corner

"Loose Lips Sink Ships" By Chuck LeBeau

In browsing around the web I often encounter discussions of the merits of a particular trade and opinions about the direction of a market. I know that the traders who voice these opinions have good intentions and much of the discussions could be helpful to the person receiving the information. However the provider of the opinion must be very careful that he doesn't start believing too strongly in his position because he has made the mistake of going public with it.

This is an important psychological issue that I seldom see discussed. Taking losses is always difficult and the reluctance to promptly acknowledge that we are on the wrong side of the market is probably the single most costly error a trader can make. Even under the best of conditions we hate to take losses. Publicly advocating a particular trade or the direction of a market just makes being wrong all the more painful and harder to accept. If we make it a policy to go around advocating the merits of our trades it will only make it harder to recognize when we are wrong.

Many years ago when I was a young futures broker at E. F. Hutton and Company, the firm decided that it would be a good idea to send our commodity research analysts on the road whenever they came up with a well researched idea that appeared to have great potential. Let's assume for a minute that our sugar analyst has decided that sugar is going to make a big move to the upside over the next six months. After publishing his research he would be sent from city to city where he would speak at meetings for brokers and clients suggesting why everyone should be buying sugar.

At first the analyst road shows seemed like a great idea. The clients received the benefit of hearing about a well-researched idea straight from the analyst himself and also had the opportunity to ask questions and engage the analyst in a discussion of the details of the sugar market. The clients enjoyed the meetings and a lot of new commodity business was generated as a result.

However, it turns out that the objectivity of the analysts was completely lost after the story had been told and the bullish scenario presented a dozen times or more. The analyst felt obligated to the firm and to the clients. The firm had spent a lot of money to send the analyst on the road and to host these meeting all over the country. As a result of the meetings the clients now knew the analysts by name and his personal and professional reputation was clearly on the line. This analyst was now committed and he was going to be bullish on sugar regardless of what happened in the market or what new information came to light.

From the point of the tours onward the analyst would only look for information to support his opinion. To ever admit that he was wrong would be such public humiliation that the analyst would tend to ignore any contrary information and would stick to his original position through thick and thin. We eventually learned that the talented Hutton research analysts did a much better job when they were free to change their minds as new facts were revealed without the pressure and responsibility generated by their repeated espousing of a particular position on a specific trade.

Discretionary traders should learn from this example and avoid discussing their open positions or their opinion about the direction of a market. It will only distort their objectivity and make it harder to take a loss promptly when that is the best course of action. Losses that only we know about are tough enough but losses that everyone knows about become much harder to stomach and we tend to postpone our exits in hope that the market will eventually turn around and prove us right.

Remember that the best discretionary traders are usually very neutral about their positions and tend to take their guidance from the price action and the flow of new information. Its OK to listen to others talk about their positions, but don't make it a habit of discussing your open trades. It will only cost you money - especially if you repeat your opinions often enough that you might actually start believing what you are saying.

**************************************************

This article was taken from an earlier work written by author and trading veteran Chuck LeBeau. It was originally titled "Discretionary Traders - Don't Talk About Your Open Positions." Chuck is the co- author of "Computer Analysis of the Futures Market" (McGraw-Hill 1992).

A simple yet powerful tool, the Risk Control Calculator helps you manage risk by recommending a maximum number of shares to purchase. Available in the RightLine Member's Area.

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