October 10, 2023 - The RightLine Report
Notes From The Editor
Welcome to Part II of our discussion about market internals. In a recent issue of the RightLine Report we talked about some of the basic indicators you can use to gauge both the "conviction" of big moves and the market's overall health.
Volume is the driving force behind price changes. One way to track those changes from day-to-day is On-Balance Volume (OBV) - a chart indicator that provides some insight into the direction and strength of a market move. OBV is useful because it strips away the raw numbers and gives a graphic representation of volume that's easily readable at a quick glance.
Another useful indicator is the aptly-named TICK, which measures the difference between up-ticking stocks and down-ticking stocks. TICK readings of +500 are seen as very bullish, while -500 is seen as very bearish. Readings of plus/minus 200 are viewed as neutral.
Now, up to this point we've talked about the common-sense use of market internals to judge the market's health. But here's where it gets really interesting: those same indicators, at extreme readings, are useful as "contrarian" indicators. The thinking is that when internals are heavily skewed in a certain direction, a reversal must not be far behind.
Imagine a day when the market is hit with huge losses. Stocks have already declined steadily over the previous week, and during this sell- off the dam really bursts. Down volume swamps up volume. Decliners beat advancers by a 5:1 margin. Dozens of 52-week lows are minted, with just a handful of new highs.
As ugly as that scenario is, it has all the characteristics of a "capitulation" sell-off that shakes out all remaining weak hands. As the saying goes, it's always darkest before dawn. As long as the market rebounded within the next few sessions, this session could be viewed as a positive development for Bulls. (The TICK, by the way, can be a great contrarian indicator too. When it exceeds plus/minus 1000, a market reversal usually isn't too far behind.)
This inverse is true of a market explodes to the upside after already being technically overextended. These "blow-off tops" are the product of a climate where buyers are rushing in with frenzied, reckless abandon. Market history has shown us, time-and-again, that when everyone is betting on one direction, momentum will inevitably confound everyone's expectations with a shift in the opposite direction.
Here's to profits!
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 10/10 10/10 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
CTRN 23.45 0.57 23.76 22.02 1.74/0.87 1.74
COCO 27.43 0.29 28.2 26.29 1.91/0.96 3.48
TRUP 26.18 0.29 26.93 24.76 2.17/1.09 2.52
IDYA 26.92 0.17 27.33 25.74 1.59/0.8 1.84
CLFD 26.96 0.01 27.84 25.99 1.85/0.93 1.92
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
A considerable decline in Treasury yields provided a strong boost to US equities on Tuesday, propelling both the S&P 500 Index (SPX) and the Nasdaq Composite (COMP) to their highest levels in three weeks. These gains occurred as investors closely monitored the Middle East conflict and prepared for upcoming monthly inflation reports.
The onset of the Israel-Hamas conflict prompted a "flight-to-safety," driving bond purchases and leading to a drop in the 10-year Treasury note yield (TNX) to nearly 4.62% earlier on Monday. This was a significant decrease from around 4.90% late in the previous week. It's worth noting that bond markets were closed on Monday for the Columbus Day holiday, so this pullback marked a substantial relief for investors.
In addition to the easing of crude oil prices, a decline in the USD/dollar further contributed to the positive momentum in the stock market. The focus of investors now turns to the upcoming Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday, both of which will provide insights into expectations for future interest rates. While the CPI report is expected to have a more significant impact on the market, valuable signals can also be gleaned from the components of the PPI.
Retailers, regional banks, and technology companies were among the top performers on Tuesday. The Philadelphia Semiconductor Index (SOX) witnessed an increase of more than 1%, reaching a three-week high. Small-cap stocks, represented by the Russell 2000 Index (RUT), posted an increase of around 1.5%, surpassing their larger-cap counterparts. WTI crude oil futures declined for the first time in three days, while the USD/dollar index (DXY) faced its fifth consecutive day of erosion, reaching its lowest level in over a week.
Oct 9, 2023 Oct 10, 2023
-------------------- --------------------
Dow 33,604.65 197.07 33,739.30 134.65
Nasdaq 13,484.24 52.90 13,562.84 78.60
S&P 500 4,335.66 27.16 4,358.24 22.58
NYSE Volume 3.18B 3.54B
NYSE Advancers 1,962 2,128
NYSE Decliners 912 764
Nasdaq Volume 3.84B 4.32B
Nasdaq Advancers 2,070 2,902
Nasdaq Decliners 2,154 1,378
New Highs/Lows
10/03 10/04 10/05 10/06 10/09 10/10
--------------------------------------------
NYSE New Highs 10 11 10 27 28 42
NYSE New Lows 443 265 221 99 27
Nasdaq New Highs 20 17 9 33 39 55
Nasdaq New Lows 562 216 93 314 321 179
Stocks Covered Today Stock Splits
TRADER'S TIP: "Adapting To A Changing Market"
One of the key attributes of a successful trader is the ability to adapt to changing markets. It isn't always easy, for change comes in many forms, and is caused by a wide range of economic, political, social, regulatory, and technical forces. It can occur slowly or abruptly, and sometimes affects a large number of investors, or just a small group. But no matter what the causes market change, and how fast it takes place, eventually everyone who participates in the market either learns to adapt, or pays the price. Even normal "bull to bear and back" market cycles require that we adapt to change, to recognize when the shift between up and down trends is taking place. And though many investors have been conditioned to think that the only defense against a bear market is to wait it out, strategies that take advantage of the inevitable short-term counter-trend rallies, and short stocks in the direction of the negative primary trend can turn a bear market into a bull!
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 - 4358.24 October 10, 2023
52-Week High: 4607.07
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4498.31
Resistance 2: 4390.66
Resistance 1: 4349.58
Pivot: 4283.01
Support 1: 4241.93
Support 2: 4175.36
Support 3: 4067.71
NASDAQ Composite - 13562.84 October 10, 2023
52-Week High: 14446.55
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 14231.41
Resistance 2: 13767.74
Resistance 1: 13599.54
Pivot: 13304.07
Support 1: 13135.87
Support 2: 12840.40
Support 3: 12376.73
Dow Industrials - 33739.30 October 10, 2023
52-Week High: 35679.13
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 34692.23
Resistance 2: 33981.48
Resistance 1: 33694.53
Pivot: 33270.73
Support 1: 32983.78
Support 2: 32559.98
Support 3: 31849.23
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, OCT 9 9:00 am Dallas Fed President Logan speaks 12:50 pm Fed Gov. Jefferson speaks TUESDAY, OCT 10 6:00 am NFIB optimism index 10:00 am Wholesale inventories WEDNESDAY, OCT 11 8:30 am Producer price index 8"30 am Core PPI 8:30 am PPI year over year 8:30 am Core PPI year over year 2:00 pm Minutes of Fed's September FOMC meeting THURSDAY, OCT 12 8:30 am Initial jobless claims 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 FRIDAY, OCT 13 8:30 am Import price index 8:30 am Import price index minus fuel 10:00 am Consumer sentiment (preliminary) 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: "Sometimes You Gotta . . ."
The fear of "missing out" can cloud a trader's judgment, so be sure to base all buy or sell decisions on careful planning instead of emotional reactions. The market is full of opportunities - there's plenty for everyone. Rushing in can lead to problems, so remember the old saying . . . "sometimes you gotta slow down to go fast!"
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Citi Trends, Inc. (CTRN: Consumer Cyclical/Apparel Retail) - SQUEEZE PLAY. CTRN is caught in a dilemma. The stock's compressed price range on Tuesday has resulted in a condition comparable to a wound up rubber band. We anticipate that this undecided equity will take off soon, but with the direction still in question we'll let upcoming market action tell us whether to buy shares or sell short. CTRN is now at 23.45. We can capture price action either way by placing a BUY trigger at 23.76 and a SELL short trigger at 22.02. Once CTRN reveals its direction, enter your triggered order and disregard the other one. As soon as your position is in place, follow up with a trailing stop of 1.74. When you acquire a 1.74 profit, tighten the stop to 0.87. Earnings Report Date: Nov 27, 2023. Beta: 2.28. Market-Cap: 200.827M. Optionable.
CONSUMER DEFENSIVE SECTOR
The Vita Coco Company, Inc. (COCO: Consumer Defensive/Beverages - Non-Alcoholic) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in COCO's narrowest trading range of the past seven sessions. With neither group able to take complete control on Tuesday, 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 28.2 and a SELL order at 26.29. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.91 trailing stop. Tighten the stop to 0.96 once you have a 3.48 gain. COCO closed Tuesday at 27.43. Earnings Report Date: Nov 07, 2023. Beta: N/A. Market-Cap: 1.548B. Optionable.
FINANCIAL SERVICES SECTOR
Trupanion, Inc. (TRUP: Financial Services/Insurance - Specialty) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into TRUP. A move to the upside will trigger our BUY entry at 26.93, while a drop to 24.76 will trigger our SELL short entry. Follow your position with a 2.17 trailing stop. Tighten the stop to 1.09 once you have a 2.52 gain. TRUP closed Tuesday at 26.18. Earnings Report Date: Nov 01, 2023. Beta: 1.61. Market-Cap: 1.083B. Optionable.
HEALTHCARE SECTOR
IDEAYA Biosciences, Inc. (IDYA: Healthcare/Biotechnology) - SQUEEZE PLAY. One interesting trait of price volatility is that it cycles back and forth through periods of expansion and contraction. Stocks that have recently seen their daily price range shift from an average or wide range to an extremely contracted state are ideal candidates for expansive price moves. In many cases the next move is relatively fast and covers a sizable amount of territory. To take advantage of these trades we use both a BUY and a SELL entry. This allows us to enter in whichever direction the breakout takes. In IDYA's case we will enter a BUY should it reach the 27.33 level, or a SELL short trade if it drops to 25.74. As usual a trailing stop is essential, 1.59 which should be tightened to 0.8 on a 1.84 gain. IDYA closed Tuesday at 26.92. Earnings Report Date: Nov 06, 2023. Beta: 0.77. Market-Cap: 1.549B. Optionable.
TECHNOLOGY SECTOR
Clearfield, Inc. (CLFD: Technology/Communication Equipment) - SQUEEZE PLAY. Trader indecision has put CLFD 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 27.84 and a SELL short entry at 25.99. Now it's up to CLFD to show us which entry will be filled. Once the trade is underway place a 1.85 trailing stop, which can be tightened to 0.93 after you achieve a 1.92 profit. CLFD closed on Tuesday at 26.96. Earnings Report Date: Nov 15, 2023. Beta: 1.40. Market-Cap: 411.458M. 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.
Disclaimer
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
Click Here To Unsubscribe