Notes From The Editor

"The Anticipation Trading Advantage"

There's little question that traders who learn to anticipate when and where profitable price action is likely to occur are more successful than those who don't. Fortunately, this type of anticipation is a trading skill that can be quickly learned and then easily plugged into your current trading plan.

When it comes to anticipating good trading setups, it always pays to look both ways. First you simply look backward to locate price zones of support and resistance where significant reversals took place in the past. Then you look forward in anticipation of your stock reaching the same price zone in the days ahead.

A good way to do this is to review price charts in a longer period than your usual trading time frame. For example, if you normally trade daily charts, shift up to weekly charts to look for pivot highs and lows that will soon come into play. Take note that previous support and resistance levels dating as far back as weeks, months and even years will influence current price action.

Winning traders are skilled opportunists. Anticipating price movement gives you a distinct advantage in the market by making it easier to locate premium profit opportunities. However, to find the optimum setups you must get accustomed to periods of waiting.

Stocks spend a lot of time moving toward or away from previous price levels where significant support and resistance zones exist. You have to be willing to wait for price to move into these areas. Once a stock reaches one of these zones, the probability of either a reversal or rapid acceleration increases dramatically.

Typically a brief period of volatile price action takes place within the zone at a previously pivotal level. Following this heated skirmish, the stock will usually commit to moving in one direction. Once the price direction is established you can enter trades in the same direction with little risk.

Trade well!

- Thomas Sutton, Editor

Quick List

    
Stock     10/13     10/13      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

COCO      26.28      0.86     26.64     24.64              2/1      3.36
SDGR      23.45     -0.30     24.33     22.59        1.74/0.87      2.22
KIDS      24.21      0.00     24.58     22.75        1.83/0.92      1.98
SLNO      24.25     -0.22     24.79     22.88        1.91/0.96       4.9
QLYS     161.02      1.77    163.64                 10.64/5.32      6.08

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

Despite quarterly earnings results from several major US banks that were above expectations, stocks experienced a downswing on Friday, rounding off a turbulent week. Rising oil prices and escalating geopolitical tensions contributed to a cautious market sentiment. Nevertheless, the S&P 500 Index (SPX) managed to secure its second consecutive weekly gain, partially due to a reduction in Treasury yields.

JPMorgan Chase (JPM), a key industry player and the first major bank to report this quarter, posted profits and revenues that exceeded Wall Street's forecasts early Friday. CEO Jamie Dimon also expressed optimism about the economy, although he sounded warnings about inflation and high interest rates. Citigroup (C) and Wells Fargo (WFC) also reported robust results.

The market's fluctuation on Friday can be attributed to a logical "risk-off" approach adopted by investors, despite a promising start to third-quarter earnings. This market activity aligns with the risk-averse sentiment as investors prefer not to maintain their positions leading into the weekend, particularly amid the escalating crisis in Israel.

Looking ahead to the next week, while third-quarter earnings will certainly be significant, immediate attention will be directed towards heightened geopolitical risks and their potential impact on oil prices.

The most significant development Friday was the surge in oil prices, jumping by more than 5% to reach approximately $87 per barrel. This increase is compounded by concerns about the escalation of conflicts, but it's also influenced by the US imposing stricter sanctions on Russian crude exports. This tightening of sanctions contributed to the upward momentum in oil prices. In the short term, don't be surprised to see markets adopting a defensive posture if the conflict intensifies. The primary focus for traders and investors in the long run will likely revolve around decisions related to monetary policy and the trajectory of inflation.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 33,670.29    39.15      +262.71     0.79%
Nasdaq              13,407.23  -166.98       -24.11    -0.18%
S&P 500              4,327.78   -21.83       +19.28     0.45%

NYSE Volume                      3.57B                       
NYSE Advancers                   1,096                       
NYSE Decliners                   1,788                       

Nasdaq Volume                    4.26B                       
Nasdaq Advancers                 1,589                       
Nasdaq Decliners                 2,658                       

                                 New Highs/Lows

                   10/06  10/09  10/10  10/11  10/12  10/13
                 --------------------------------------------
NYSE New Highs        27     28     42     35     37     27
NYSE New Lows                99     27     52    166    162
Nasdaq New Highs      33     39     55     50     42     30
Nasdaq New Lows      314    321    179    210    331    347
   

TRADER'S TIP: "Sizzlin' Outside? Stay Cool!"

Has the stock market and the summer heat got your emotions running hot? Chill out, and remember that though we have no control over what the market does, we do have complete control over how we respond to it. Getting angry when the market doesn't co-operate with our wishes doesn't change price action, yet the emotional stress from anger has the potential to cloud our judgment and cause us to make unwise decisions.

To avoid this sort of reaction, we can accept the fact that the market is not trying to hurt us, and for that matter is not even aware that we exist. Our reaction won't change the market, but it WILL determine whether we ultimately win or lose money in the business of trading. Stay cool, and when things get too warm, relax by the pool!

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 - 4327.78 October 13, 2023

52-Week High: 4607.07
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4536.59
Resistance 2: 4434.53
Resistance 1: 4381.15
Pivot: 4332.47
Support 1: 4279.09
Support 2: 4230.41
Support 3: 4128.35

NASDAQ Composite - 13407.23 October 13, 2023

52-Week High: 14446.55
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 14339.60
Resistance 2: 13902.94
Resistance 1: 13655.08
Pivot: 13466.28
Support 1: 13218.42
Support 2: 13029.62
Support 3: 12592.96
        
Dow Industrials - 33670.29 October 13, 2023

52-Week High: 35679.13
52-Week Low: 29614.30
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 35035.29
Resistance 2: 34331.26
Resistance 1: 34000.77
Pivot: 33627.23
Support 1: 33296.74
Support 2: 32923.20
Support 3: 32219.17
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

MONDAY, OCT. 16					
8:30 am	Empire State manufacturing survey	
10:30 am	Philadelphia Fed President Patrick Harker speaks				
4:30 pm	Philadelphia Fed President Patrick Harker speaks	
			
TUESDAY, OCT. 17					
8:30 am	U.S. retail sales	
8:30 am	Retail sales minus autos	
9:15 am	Industrial production	
9:15 am	Capacity utilization	
10:30 am	Fed Gov. Michelle Bowman speaks				
10:00 am	Business inventories	Aug.	
10:00 am	Home builder confidence index	
10:45 am	Richmond Fed President Tom Barkin speaks				
10:30 am	Minneapolis Fed President Neel Kashkari speaks
				
WEDNESDAY, OCT. 18					
8:30 am	Housing starts	
8:30 am	Building permits	
12 pm	Fed Gov. Chris Waller speaks				
12:30 pm	New York Fed President John Williams speaks				
2:00 pm	Fed Beige Book				
6:55 pm	Fed Gov. Lisa Cook speaks
				
THURSDAY, OCT. 19					
8:30 am	Initial jobless claims	
8:30 am	Philadelphia Fed manufacturing survey	
10:00 am	Existing home sales			
10:00 am	U.S. leading economic indicators	
12:00 pm	Fed Chairman Jerome Powell speaks				
1:20 pm	Chicago Fed President Austan Goolsbee speaks				
1:30 pm	Fed Vice-Chair for Banking Michael Barr speaks				
4:00 pm	Atlanta Fed President Raphael Bostic speaks				
6:40 pm	Dallas Fed President Lorie Logan speaks
				
FRIDAY, OCT. 20					
12:15 pm	Cleveland Fed President Loretta Mester speaks

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

TRADER'S TIP: "When's The Next Flight To Vegas?"

Many traders are just gamblers - they throw money at the market with no real plan or method. Sometimes they win big, and sometimes they lose big, but ultimately they lose it all. Technical analysis and risk control gives us an edge that can be used within a disciplined routine to avoid the gambler's trap. There's no need for gambling or impulsive trading when your decision-making process is based on specific rules.

Stocks Covered in This Issue

CONSUMER DEFENSIVE SECTOR

The Vita Coco Company, Inc. (COCO: Consumer Defensive/Beverages - Non-Alcoholic) - SQUEEZE PLAY. COCO is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 26.64 and a SELL short entry at 24.64. Once your trade is filled, enter a 2 trailing stop. Tighten it to 1 after a 3.36 gain. COCO closed on Friday at 26.28. Earnings Report Date: Nov 07, 2023. Beta: N/A. Market-Cap: 1.483B. Optionable.

HEALTHCARE SECTOR

Schrodinger, Inc. (SDGR: Healthcare/Health Information Services) - SQUEEZE PLAY. SDGR 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. SDGR closed Friday at 23.45. The plan is to enter in the right direction by placing a BUY trigger at 24.33 and a SELL short trigger at 22.59. Once SDGR establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.74. After you've collected a 2.22 profit, tighten the stop to 0.87. Earnings Report Date: Nov 01, 2023. Beta: 1.36. Market-Cap: 1.686B. Optionable.

OrthoPediatrics Corp. (KIDS: Healthcare/Medical Devices) - SQUEEZE PLAY. The ticker for Friday's session shows KIDS 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 24.58 and a SELL short trigger at 22.75. When KIDS 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 1.83 trailing stop. Upon reaching a 1.98 profit, resize the stop to 0.92. Earnings Report Date: Oct 30, 2023. Beta: 0.90. Market-Cap: 565.342M. Optionable.

Soleno Therapeutics, Inc. (SLNO: Healthcare/Biotechnology) - SQUEEZE PLAY. Friday's trading session left SLNO in a very narrow price range after buyers and sellers fought to a near stalemate. Both sides are looking for some traction, and a breakout either way could provide a nice gain in the short term. To get aboard, set your BUY trigger at 24.79 and your SELL short trigger at 22.88. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.91 trailing stop. Once you have a 4.9 profit, reduce the stop to 0.96. Earnings Report Date: Nov 07, 2023. Beta: -1.58. Market-Cap: 669.37M. Not Optionable.

TECHNOLOGY SECTOR

Qualys, Inc. (QLYS: Technology/Software - Infrastructure) - BULLISH BOUNCE. Here is another example of a stock in an established uptrend that has recently experienced a counter-trend drop. The sliding price action has now found support near a moving average zone, bouncing upward during Friday's session to close at 161.02. Anticipate the rebound to continue, and be ready to buy QLYS at 163.64. Follow your entry with a trailing stop of 10.64 which can be tightened to 5.32 on a 6.08 profit. Earnings Report Date: Oct 31, 2023. Beta: 0.53. Market-Cap: 5.911B. 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  
---------------- -------     --------    -------     ------  -------   

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.

Trader's Corner

Trading the Stochastics Indicator

I used to think only price bars could predict the future. I started as a novice, experimenting with every indicator in the book. I could never get the markets to match my mathematics, so I finally gave up and became a pattern reader. In fact, my early writings are so pattern-centric they appear intolerant of all other trading techniques.

I've had a change of heart in recent years because of a tool that's saved my neck on a ton of trades -- the overused and underappreciated stochastics.

What exactly is the stochastics oscillator? It may seem like a simple question, but the answer isn't. The term describes a mathematical process that has an infinite progression of random variables. Let's dumb it down a bit. Stochastics measures how a market closes each price bar relative to its range over time.

This is urgent information for all types of traders. Scalpers use it to read the tempo as money flows through their one-minute charts. Investors use it to identify cycles as weekly stochastics alter the balance of power. But this valuable tool won't give up its secrets easily, and it requires thoughtful interpretation.



The settings you choose don't matter because stochastics print valid patterns with any set of inputs. Different settings will emit different levels of "noise" in the subsequent output. For example, notice how the five-, 13- and 21-day settings on the PetsMart chart affect crossovers at key turning points.

The approach here is to match your inputs with your trading style. For example, daytraders capitalize on subtle shifts in market direction and will benefit from short-term settings. On the other hand, long-term settings help position traders avoid false signals.



Many traders get fooled when stochastics flip to an extreme because they look for a reversal instead of trend continuation. Ironically, the most dynamic price movement often takes place right after these levels are breached. So how do you avoid bad signals and use stochastics for its intended purpose? Look at the unique patterns.

The stochastics middle ground tells you the trend is your friend. Watch when the fast line pulls away from the slow line in this zone. This reveals increasing momentum in the direction of the short-term trend.How can you use this information? Look to buy on the dip (rising) or sell on the bounce (falling) as long as the indicator doesn't roll over. One effective variation of this pattern is a 1-2-3 move where the indicator thrusts out of one extreme, pulls back a little and then thrusts again.



Take advantage of the price surge when stochastics break into an overbought or oversold level. Watch for the fast line to thrust away from the slow line right here. This tiny signal often corresponds with a final burst of buying or selling before a market reverses or goes flat.



Stand aside when stochastics flat line across the top or bottom of the indicator plot, but act quickly when they start breaking in the other direction. This Mesa reversal signal is often timed perfectly with the break of a key support or resistance level. One problem is you can't tell how far a move might carry from the indicator alone. Look at the price pattern to find natural targets for the subsequent swing.



My favorite oscillator patterns are double-tops and double-bottoms. As with price bars, I look for a lower second high to signal a top, and a higher second low to signal a bottom.

Be patient when this pattern develops and let the lines drop away from extreme levels to confirm the signal. This pattern is similar to the Mesa reversal described above, but with one key difference -- it often triggers more follow-through on the subsequent pivot because it reflects more underlying divergence.

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

This special guest article was written by Alan Farley, author of "The Master Swing Trader."