November 2, 2023 - The RightLine Report
Notes From The Editor
Earnings season is winding down, so it's a good time for a quick review of an important factor that impacts your trading during this period. I'm referring to the unpredictable nature of earnings reports. Even though there's always a lot of attention given to earnings announcements, predicting the market's reaction to these quarterly reports can be tricky.
Trading earnings events can be very profitable, yet there is always an element of risk. This risk is primarily due to the fact that each stock tends to react differently regardless of whether their numbers are good or bad.
Every earnings report includes a minimum of information. Actual revenue and profits are reported, along with a forecast for performance in the months ahead. Although traders tend to focus on current numbers, forecasts of future results are now more important than ever. This is because the SEC - Security and Exchange Commission - doesn't allow companies to discuss estimates privately with stock analysts.
Wall Street tends to look several months ahead. This usually means that whenever a company forecast - or guidance - turns out to be significantly different from earnings estimates, the market will consider the difference between the two more important than actual earnings results for the prior quarter.
It's a good idea to keep this bit of insight in mind when considering the purchase of a stock immediately after a "good" earnings announcement.
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 11/02 11/02 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
LGND 51.81 -1.49 50.13 4.54/2.27 3.32
RXST 22.95 0.65 23.64 21.91 1.73/0.87 2.04
SLNO 23.77 -0.24 24.39 22.81 1.58/0.79 4.12
ENV 37.49 0.49 36.21 2.52/1.26 2.96
CLS 24.83 0.69 25.47 23.82 1.65/0.83 1.96
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.
Stocks Covered Today Stock Splits
Market Summary
On Thursday, investors collectively breathed a sigh of relief, believing that the Federal Reserve might have completed its interest rate hikes. This positive sentiment acted as a strong driving force for the market, resulting in a broad rally that lifted the S&P 500 Index (SPX) and Nasdaq Composite (COMP) to their highest levels in over two weeks.
These gains were a continuation of the late market upswing that began Wednesday when the Federal Open Market Committee (FOMC) concluded its latest meeting. As widely expected, the FOMC decided to keep its benchmark funds rate unchanged. Fed Chair Jerome Powell's post-FOMC statements were perceived as rather moderate, instilling hope that the central bank had raised rates to a level capable of curbing the upward march of inflation. This shift in market sentiment pushed the 10-year Treasury yield (TNX) down to a three-week low.
Now, the market's focus pivots to the upcoming October employment report, set to be released on Friday morning. Expectations are that this report will indicate a slowdown in both job creation and wage growth.
Thursday's rally witnessed broad participation across nearly every sector. Leading the pack of gainers were banks and other financial institutions, with the KBW Regional Banking Index (KRX) surging by more than 5%. Energy and retail stocks also demonstrated considerable strength. Small-cap stocks managed to outperform their larger counterparts, with the Russell 2000 Index (RUT) soaring by 2.5%.
Nov 1, 2023 Nov 2, 2023
-------------------- --------------------
Dow 33,274.58 221.71 33,839.08 564.50
Nasdaq 13,061.47 210.23 13,294.19 232.72
S&P 500 4,237.86 44.06 4,317.78 79.92
NYSE Volume 4.23B 4.69B
NYSE Advancers 1,943 2,592
NYSE Decliners 954 341
Nasdaq Volume 4.56B 5B
Nasdaq Advancers 2,317 3,332
Nasdaq Decliners 1,954 1,045
New Highs/Lows
10/26 10/27 10/30 10/31 11/01 11/02
--------------------------------------------
NYSE New Highs 16 20 15 15 29 66
NYSE New Lows 297 369 238 119 138 55
Nasdaq New Highs 25 20 25 18 26 43
Nasdaq New Lows 515 615 421 302 328 161
Stocks Covered Today Stock Splits
TRADER'S TIP: "Consolidation Means Anticipation"
The longer a stock trades within a specific range, the more likely it is that a breakout - either up OR down - will result. One reason is that as support and resistance build through regular successful tests, more traders note that a move OUTSIDE of the regular range is a significant event. Consequently, volume tends to pick up and generate momentum in the direction of the breakout when it does finally occur. Also, risk is limited since stops can be placed just inside the trading range in case the breakout fails. It pays to learn how to recognize this powerful charting tactic, which can be very effective in both the long and short terms.
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 - 4317.78 November 2, 2023
52-Week High: 4607.07
52-Week Low: 3698.15
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4471.37
Resistance 2: 4315.77
Resistance 1: 4216.57
Pivot: 4160.17
Support 1: 4060.97
Support 2: 4004.57
Support 3: 3848.97
NASDAQ Composite - 13294.19 November 2, 2023
52-Week High: 14446.55
52-Week Low: 10207.47
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 14038.81
Resistance 2: 13412.28
Resistance 1: 13027.64
Pivot: 12785.75
Support 1: 12401.11
Support 2: 12159.22
Support 3: 11532.69
Dow Industrials - 33839.08 November 2, 2023
52-Week High: 35679.13
52-Week Low: 31429.82
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 34562.30
Resistance 2: 33617.31
Resistance 1: 33017.45
Pivot: 32672.32
Support 1: 32072.46
Support 2: 31727.33
Support 3: 30782.34
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, OCT. 30 None scheduled TUESDAY, OCT. 31 8:30 am Employment cost index 9:45 am Chicago Business Barometer 10:00 am Consumer confidence WEDNESDAY, NOV. 1 8:15 am ADP employment 9:45 am S&P U.S. manufacturing PMI 10:00 am Job openings 10:00 am ISM manufacturing 10:00 am Construction spending 2:00 pm Federal Reserve decision on interest rates 2:30 pm Fed Chairman Powell press conference THURSDAY, NOV. 2 8:30 am Initial jobless claims 8:30 am U.S. productivity 10:00 am Factory orders FRIDAY, NOV. 3 8:30 am U.S. nonfarm payroll 8:30 am U.S. unemployment rate 8:30 am U.S. hourly wages 8:30 am Hourly wages year over year 9:45 am S&P U.S. services PMI 10:00 am ISM services For a chart of typical Up or Down market reactions to specific major US economic reports go to: Economic Indicator Effects
Stocks Covered Today Stock Splits
TRADER'S TIP: "Trading for Instant Wealth"
Looking for a short cut to riches? Join the crowd. Many novice traders catch the "get rich quick" bug, and more than a few resort to questionable tactics in a futile attempt to fulfill their fantasies. One such tactic is known as "St. Pete's Paradox," an old gambling scheme that utilizes a distorted version of a common Black Jack strategy - "doubling down." Here's a simple example of how St. Pete's Paradox works;
You bet $1000 on a coin flip, and if you win you quit with a $1000 gain. If you lose you double your last bet and put $2000 on the result of another flip of the coin. If you win, you quit - but if you lose, you double your bet again - this time to $4000. If you win on the third attempt, you quit with $1000 profit. If you lose, you continue to double the bet until you do win.
The good news is that if you have an unlimited amount of money you will ultimately win. The bad news is that it's unlikely that you have access to an infinite supply of cash, which means you will eventually go bankrupt if you try this extremely risky method. As for the paradox...it may sound strange, but the results don't depend on having a fair coin toss.
Stocks Covered in This Issue
HEALTHCARE SECTOR
Ligand Pharmaceuticals Incorporated (LGND: Healthcare/Biotechnology) - BEARISH U-TURN. The weight of LGND's declining weekly trend was lightened recently when shares began to move upward. However, like a swimmer against the tide LGND encountered strong resistance on Thursday. Price action indicates a likely return to the previous downtrend, so plan to short LGND upon reaching our SELL trigger at 50.13. Set a 4.54 trailing stop which can be tightened to 2.27 after you have a 3.32 gain. LGND ended the latest session at 51.81. Earnings Report Date: Nov 08, 2023. Beta: 0.79. Market-Cap: 899.178M. Optionable.
RxSight, Inc. (RXST: Healthcare/Medical Devices) - 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. RXST found itself in this condition on Thursday 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 23.64 and a SELL short trigger at 21.91. When RXST moves outside of Thursday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.73 trailing stop. After you've got a 2.04 profit, tighten the stop to 0.87. RXST closed at 22.95 on Thursday. Earnings Report Date: Nov 09, 2023. Beta: 0.73. Market-Cap: 818.023M. Optionable.
Soleno Therapeutics, Inc. (SLNO: Healthcare/Biotechnology) - SQUEEZE PLAY. SLNO shareholders know what it feels like to be squeezed. Thursday'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. SLNO closed Thursday at 23.77. The plan is to enter in the right direction by placing a BUY trigger at 24.39 and a SELL short trigger at 22.81. Once SLNO establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.58. After you've collected a 4.12 profit, tighten the stop to 0.79. Earnings Report Date: Nov 07, 2023. Beta: -1.58. Market-Cap: 724.45M. Not Optionable.
TECHNOLOGY SECTOR
Envestnet, Inc. (ENV: Technology/Software - Application) - BEARISH U-TURN. Despite the fact that Bears have shown the ability to force ENV into a painful downtrend, recent bullish action has provided shareholders with some welcome relief. However, the upward reprieve may now be about to end. Thursday's intra-day price reaction near Moving Average resistance signals an increased probability that ENV will head lower in the near term. ENV now sits at 37.49. Prepare to sell shares SHORT if the weakening price reaches our trigger at 36.21. Place a 2.52 trailing stop after you enter, then reduce it to 1.26 when you've gained 2.96. Earnings Report Date: Nov 08, 2023. Beta: 1.28. Market-Cap: 2.044B. Optionable.
Celestica Inc. (CLS: Technology/Electronic Components) - SQUEEZE PLAY. The ticker for Thursday's session shows CLS 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 25.47 and a SELL short trigger at 23.82. When CLS 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 1.65 trailing stop. Upon reaching a 1.96 profit, resize the stop to 0.83. Earnings Report Date: Jan 23, 2024. Beta: 2.24. Market-Cap: 2.964B. 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.
Stocks Covered Today Stock Splits
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
---------------- ------- -------- ------- ------ -------
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.
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.
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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