October 13, 2022 - The RightLine Report
Notes From The Editor
One of the unique benefits of trading stocks is the opportunity to make money in any market. While traditional investor profits are limited to up-trends during bull market conditions, active traders with shorting skills can easily find opportunities in both bullish and bearish environments.
There are a number of reasons that investors normally don't short stocks. Most have never heard of it and have no idea what is involved. Anyone fortunate enough to hear about it is usually told that shorting is too hard or too risky.
In truth, shorting stocks is neither difficult nor dangerous. Over the years two major fear tactics have been used to keep investors from learning how to short stocks:
1) "It's just too hard to short stocks because of the up-tick rule."
2) "It's too risky to short stocks because a loss can continue to grow indefinitely."
First ... the main objection to shorting is outdated. The old rule that you could only go short on an up-tick no longer applies. The defunct rule required that the short must be either at a price above the last traded price of the stock, or at the last traded price if that price was higher than the price in the previous trade.
In July 2007 the SEC eliminated the short sale "tick test" rule. You no longer have to wait for a stock's price to be moving up to get a short order filled. As a side note, the SEC can reinstate the rule any time they wish, but in fact it isn't difficult to short stocks even when an uptick is required.
Second, who would let a losing trade go on forever? You can easily set price alerts to avoid this type of thing. Theoretically a perpetual loss could occur, but it actually never does. Brokerages monitor shorting activities very carefully and will quickly pull the plug on a short sale before it gets completely out of control.
Bottom Line: Things never stay the same. To be competitive we all have to be flexible and embrace change. If you've ever thought about learning how to short, now is a good time to get started.
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 10/13 10/13 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
GSUN 20.62 -0.67 21.77 19.14 2.63/1.32 21.12
RVNC 26.97 -1.12 27.69 2.26/1.13 3.06
DGII 34.75 -0.05 35.31 4.55/2.28 2.72
MODN 33.63 0.50 34.17 2.95/1.48 1.96
AGYS 53.27 0.61 54.2 5.1/2.55 4.3
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
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Stocks Covered Today Stock Splits
Market Summary
US stocks were significantly higher on Thursday despite the release of a consumer price index (CPI) report showing inflation is higher than expected. The news raised expectations that the Federal Reserve Bank will maintain it's current agressive monetary policy tightening policy. In other economic news, unemployment claims were up more than predicted. In equities, earnings season is underway again, with Dow Index component Walgreens Boots Alliance (WBA $34) beating forecasts and releasing a stronger outlook than expected, while Delta Air Lines (DAL $30) fell short of forecasts yet increased guidance. Treasury yields and oil prices were up, the USD/dollar and gold finished lower.
Oct 12, 2022 Oct 13, 2022
-------------------- --------------------
Dow 29,210.85 -28.34 30,038.72 827.87
Nasdaq 10,417.10 -9.09 10,649.15 232.05
S&P 500 3,577.03 -11.81 3,669.91 92.88
NYSE Volume 4.01B 5.04B
NYSE Advancers 1,223 2,317
NYSE Decliners 1,974 951
Nasdaq Volume 4.1B 5.32B
Nasdaq Advancers 2,124 3,153
Nasdaq Decliners 2,435 1,509
New Highs/Lows
10/06 10/07 10/10 10/11 10/12 10/13
--------------------------------------------
NYSE New Highs 28 19 25 14 8 29
NYSE New Lows 163 397 426 580 464 934
Nasdaq New Highs 41 40 56 40 31 71
Nasdaq New Lows 163 401 658 824 613 958
Stocks Covered Today Stock Splits
TRADER'S TIP: "Up or Down?"
It doesn't matter which way the market goes as long as long as we keep our opinions about direction from blinding us to the opportunity at hand. Traders can increase profitability in all market conditions by following a few time proven guidelines:
1) Locate the trend, and trade in harmony with it. This dramatically shifts the odds of winning into your favor.
2) Never risk more than 2% on any one trade.
3) Use stops to protect against unplanned losses.
4) Be confident, but keep your ego in check. Respect your emotions; yet don't let them prevent you from following your trading plan while you are in a trade.
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 - 3669.91 October 13, 2022
52-Week High: 4818.62
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4087.79
Resistance 2: 3885.81
Resistance 1: 3762.73
Pivot: 3683.83
Support 1: 3560.75
Support 2: 3481.85
Support 3: 3279.87
NASDAQ Composite - 10649.15 October 13, 2022
52-Week High: 16212.23
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 12125.34
Resistance 2: 11472.79
Resistance 1: 11062.59
Pivot: 10820.24
Support 1: 10410.04
Support 2: 10167.69
Support 3: 9515.14
Dow Industrials - 30038.72 October 13, 2022
52-Week High: 36952.65
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 32733.92
Resistance 2: 31134.71
Resistance 1: 30215.75
Pivot: 29535.50
Support 1: 28616.54
Support 2: 27936.29
Support 3: 26337.08
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Wednesday, October 12, 2022: 12-Oct 8:30 am Producer price index, final demand 12-Oct 2 pm FOMC minutes Thursday, October 13, 2022: 13-Oct 8:30 am Consumer price index 13-Oct 8:30 am Core CPI 13-Oct 8:30 am Core CPI (three-month SAAR) 13-Oct 8:30 am CPI (year-on-year) 13-Oct 8:30 am Core CPI (year-on-year) 13-Oct 8:30 am Initial jobless claims 13-Oct 8:30 am Continuing jobless claims Friday, October 14, 2022: 14-Oct 8:30 am Retail sales 14-Oct 8:30 am Retail sales ex-motor vehicles 14-Oct 8:30 am Import price index 14-Oct 10 am UMich consumer sentiment index (early) 14-Oct 10 am UMich 5-year inflation expectations 14-Oct 10 am Business inventories 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: "Trendlines & Volume"
When expanding volume accompanies price action in the direction of a trendline, it confirms the trend. The same is true when volume dries up as prices retreat back to the trendline. However, if volume increases as prices pull back to a trendline, or if volume drops when prices pull away from a trendline, consider it a warning that the trendline may be in trouble.
Stocks Covered in This Issue
CONSUMER DEFENSIVE SECTOR
Golden Sun Education Group Limited (GSUN: Consumer Defensive/Education & Training Services) - 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 GSUN. A move to the upside will trigger our BUY entry at 21.77, while a drop to 19.14 will trigger our SELL short entry. Follow your position with a 2.63 trailing stop. Tighten the stop to 1.32 once you have a 21.12 gain. GSUN closed Thursday at 20.62. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 353.113M. Not Optionable.
HEALTHCARE SECTOR
Revance Therapeutics, Inc. (RVNC: Healthcare/Biotechnology) - NEW HIGH DIP. "Buy the dip" is usually good advice when applied to an up-trending stock. This is expecially true when a new 52-week high has recently made its mark on the charts. RVNC meets the setup requirements, so get ready to BUY if shares reach our trigger price of 27.69. Once you've confirmed that your order is filled, follow it with a 2.26 trailing stop which can be changed to 1.13 when you have a 3.06-point gain. RVNC closed Thursday at 26.97. Earnings Report Date: Nov 07, 2022. Beta: 0.65. Market-Cap: 2.271B. Optionable.
TECHNOLOGY SECTOR
Digi International Inc. (DGII: Technology/Communication Equipment) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, DGII fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 34.75, plan to buy shares at 35.31 and use a 4.55 trailing stop. Tighten the stop to 2.28 on a 2.72 gain. Earnings Report Date: Nov 10, 2022. Beta: 1.23. Market-Cap: 1.226B. Optionable.
Model N, Inc. (MODN: Technology/Software-Application) - BULLISH BOUNCE. MODN has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Thursday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return MODN 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 34.17. Set a trailing stop of 2.95, tightening to 1.48 on a 1.96 profit. MODN closed at 33.63 on Thursday. Earnings Report Date: Nov 07, 2022. Beta: 0.62. Market-Cap: 1.266B. Optionable.
Agilysys, Inc. (AGYS: Technology/Software-Application) - 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. AGYS's current price action near moving average support signals a potential BUY entry at 54.2, followed by a 5.1 trailing stop which can be tightened to 2.55 upon earning 4.3. AGYS closed Thursday at 53.27. Earnings Report Date: Oct 24, 2022. Beta: 0.99. Market-Cap: 1.333B. 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
---------------- ------- -------- ------- ------ -------
Nasdaq Inc NDAQ 7/20/2022 8/29/2022 3-for-1 Yes
Tesla TSLA 8/5/2022 8/25/2022 3-for-1 Yes
Palo Alto Net PANW 8/23/22 9/14/22 3-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.
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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