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October 15, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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Over the years I've talked and corresponded with a wide range of traders. I've noticed that some of them tend to jump from one trading system to another. They never seem spend enough time with one method to find out if it really works. While this quick-change approach to trading stocks can be very entertaining, it is usually as dangerous as it is stimulating.
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"QUICK LIST"
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Stock 10/14 10/14 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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PLCE 38.66 0.34 40.3 37.27 3.03/1.52 4.52
REPX 23.10 -0.68 24.42 22.06 2.36/1.18 3.72
BTU 25.86 -0.84 26.9 24.59 2.31/1.16 3.1
DAWN 20.88 0.32 21.51 19.95 1.56/0.78 2.6
MRUS 22.00 -0.26 22.73 21.01 1.72/0.86 2.78
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" at https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/
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MARKET SUMMARY
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The major US stock indices were lower on Friday as earnings season gets underway with mixed results from a few banking heavyweights. Citigroup (C $43) and JPMorgan Chase (JPM $111) each topped profit estimates, while Morgan Stanley (MS $75) and Wells Fargo (WFC $44) both fell short of forecasts. Economic news was mixed as well, with flat September retail sales, a bigger decline in import prices than expected, increased business inventories and a surprising uptick in consumer sentiment. The USD/dollar and treasury yields were up, gold and oil prices ended thew session lower. Friday On The Week
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Dow 29,634.83 -403.89 +338.04 1.15%
Nasdaq 10,321.39 -327.76 -331.01 -3.11%
S&P 500 3,583.07 -86.84 -56.59 -1.55%
NYSE Volume 4.28B
NYSE Advancers 605
NYSE Decliners 2,597
Nasdaq Volume 4.41B
Nasdaq Advancers 1,175
Nasdaq Decliners 3,346
New Highs/Lows
10/07 10/10 10/11 10/12 10/13 10/14
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NYSE New Highs 19 25 14 8 29 29
NYSE New Lows 397 426 580 464 934 218
Nasdaq New Highs 40 56 40 31 71 61
Nasdaq New Lows 401 658 824 613 958 336
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TRADER'S TIP:
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TRADER'S TIP: "Pros At The Close" Wall Street regulars have a saying that "amateurs control the open, but pros control the close." The "amateurs" they are talking about represent the "retail" orders that brokerage firms place on behalf of Joe Q. Public the first thing every morning. While these early orders reflect what the average investor thinks about the prospects of the market, professionals will usually determine the market direction by day's end. What happens on the close is very important, because it often gives a clue of what to expect the next session. The odds are strong that whatever happens at the close will continue into the following day. Bulls like to see the close occur at or near the high of the session, while Bears would rather see a slide into the final bell. Either way, it's always a good idea to check price action into the close. **************************
THE TECHNICAL ANALYST
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This section contains important technical data for the three major market averages -- the S&P 500, the Nasdaq Comp Index, and the Dow Industrial Average. For guidance on how to use this information, go to: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ S&P 500 - 3583.07 October 14, 2022 52-Week High: 4818.62 52-Week Low: 3491.58 Daily Trend: DOWN Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 4036.39 Resistance 2: 3815.97 Resistance 1: 3699.51 Pivot: 3595.55 Support 1: 3479.09 Support 2: 3375.12 Support 3: 3154.70 https://www.prorightline.com/rlch/101422SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, October 17, 2022: 17-Oct 8:30 am Empire State manufacturing index Tuesday, October 18, 2022: 18-Oct 9:15 am Industrial production index 18-Oct 9:15 am Capacity utilization rate 18-Oct 10 am NAHB home builders' index Wednesday, October 19, 2022: 19-Oct 8:30 am Building permits (SAAR) 19-Oct 8:30 am Housing starts (SAAR) 19-Oct 2 pm Beige Book Thursday, October 20, 2022: 20-Oct 8:30 am Initial jobless claims 20-Oct 8:30 am Continuing jobless claims 20-Oct 8:30 am Philadelphia Fed manufacturing index 20-Oct 10 am Existing home sales (SAAR) 20-Oct 10 am Leading economic indicators Friday, October 21, 2022: 21-Oct 12 noon Index of common inflation expectations, 5-10 years 21-Oct 12 noon Index of common inflation expectations, 10 year For a chart of typical Up or Down market reactions to specific major US economic reports, go to "Economic Indicator Effects" at this link: https://prorightline.com/index.php/economic-indicator-effects/
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TRADER'S TIP:
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TRADER'S TIP: "Trade With The TICK" Intraday traders should always trade in harmony with the TICK, not against it. You can even draw trendlines or channels on the TICK chart to insure that your position is always aligned with the money flow. This helps you to anticipate where the next big move will occur and allows the current to work for you. ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR The Children's Place, Inc. (PLCE: Consumer Cyclical/Apparel Retail) - 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. PLCE 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 40.3 and a SELL short trigger at 37.27. When PLCE 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 3.03 trailing stop. After you've got a 4.52 profit, tighten the stop to 1.52. PLCE closed at 38.66 on Friday. Earnings Report Date: Nov 16, 2022. Beta: 2.00. Market-Cap: 503.674M. Optionable. ENERGY SECTOR Riley Exploration Permian, Inc. (REPX: Energy/Oil & Gas E&P) - 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. REPX 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 24.42 and a SELL short trigger at 22.06. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 2.36 which can be tightened to 1.18 on a 3.72 gain. REPX closed Friday at 23.10. Earnings Report Date: Dec 12, 2022. Beta: N/A. Market-Cap: 458.918M. Optionable. Peabody Energy Corporation (BTU: Energy/Thermal Coal) - SQUEEZE PLAY. BTU 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 26.9 and a SELL short trigger at 24.59. When one of the orders is filled, cancel the remaining order and enter a 2.31 trailing stop. When you've reached a 3.1 paper profit, tighten the stop to 1.16. BTU closed at 25.86 on Friday. Earnings Report Date: Oct 26, 2022. Beta: 0.98. Market-Cap: 3.721B. Optionable. HEALTHCARE SECTOR Day One Biopharmaceuticals, Inc. (DAWN: Healthcare/Biotechnology) - SQUEEZE PLAY. Trader indecision has put DAWN 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 21.51 and a SELL short entry at 19.95. Now it's up to DAWN to show us which entry will be filled. Once the trade is underway place a 1.56 trailing stop, which can be tightened to 0.78 after you achieve a 2.6 profit. DAWN closed on Friday at 20.88. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.534B. Optionable. Merus N.V. (MRUS: Healthcare/Biotechnology) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in MRUS'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 22.73 and a SELL order at 21.01. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.72 trailing stop. Tighten the stop to 0.86 once you have a 2.78 gain. MRUS closed Friday at 22.00. Earnings Report Date: Oct 31, 2022. Beta: 0.94. Market-Cap: 1.009B. Optionable. IMPORTANT: Before entering any recommended positions, always use the RightLine "Risk Control System" to determine the level of acceptable risk and the maximum number of shares to buy. Link: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/ ***********************************
STOCK SPLIT SUMMARY
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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 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 For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
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"Take Control Of Your Exits" Almost all traders and investors are naturally preoccupied with the subject of entries. We all want to know: What should I buy and when should I buy it? This emphasis on entries is quite logical, as most successful trades need to start with a good stock and a good entry point. However, if you stop and think about it, it is not the entry that ultimately determines the success or failure of any particular trade. When all is said and done, the amount of our profit will depend entirely on the timeliness of our exit. Particularly in today's volatile markets where large winning trades can quickly turn into losses, our exits are more important than ever. Without good exits, all of our hard work on stock selection and market timing is likely to be wasted. The subject of exits has long been neglected and there is little information available to those knowledgeable traders who have eventually learned to appreciate the value of good exits. Even futures and option traders have given the value of good exits only token significance. This is surprising given that they are dealing in instruments where exits must be given a very high priority. For these traders, "buy and hold" is not an alternative. The futures contracts and options they deal in have only a limited holding period before they expire. To illustrate the critical importance of exits, in one of the trading classes that I teach we play a simple little game where everyone does some paper trading. We all enter each trade at exactly the same price and then we report a lengthy sequence of prices designed to simulate actual price action. As the price changes are reported each student must then make their own exit decisions for the ten different paper trades. Although each student enters every trade at exactly the same point, the difference in exits after a series of ten trades causes the individual results to vary more than anyone might imagine. A few students are big winners, most are modestly profitable, and there are always one or two net losers even though the game is biased to help produce a profit. This simple exercise clearly demonstrates to the students the importance of exits on our trading results. Our profits clearly depend on our exits. Assuming that we now have an appreciation for the importance of good exits, how do we find a good exit strategy? Exit strategies are much more difficult than entry strategies. I believe that the issue of control is what makes the exits difficult. When we are getting ready to enter a trade we have complete control of the conditions. We can carefully select a stock based on our criteria and every condition we impose must be satisfied or we do not have to enter. The market must conform to each and every one of our demands or we simply do not implement the trade. We are obviously very much in control of the situation when we enter. However, once we have entered, our control suddenly disappears. Now the market is in control of our position. We are no longer in a situation where we can dictate terms and conditions. The market is going to do whatever it pleases and that is often not what we desire or expect. Once we are in the trade we are in a situation where we must be prepared for anything. Our flexibility and ability to adapt to changing market conditions will now determine how much money we make or lose on our well-planned entry. There is an old trader's adage that will serve as a guide in helping us to develop sound exit strategies. We want to cut our losses short and let our profits run. I'm sure that this isn't news to anyone. However it is much easier said than done. Here are a few helpful guidelines. 1. Set a precise predetermined loss point before you enter any trade. You are most objective and clear headed before you have actually entered the market. Once you are in the trade you tend to lose your objectivity and become obsessed by a harmful desire to make every trade a winner. Set your maximum loss point before you enter. Good traders accept occasional losses as a cost of doing business. If you are afraid of losses you shouldn't be trading. Remember: if you don't cut those losses you are eventually destined to wind up with a whole portfolio of losers. That's not what we want. 2. Don't get too carried away with the advice about keeping the losses small. Your initial loss point should allow for a reasonable fluctuation in prices. The losses should be small, relative to your potential gains, but not small in terms of the day to day price changes. If you try to keep the losses too small you will lower your winning percentage and you will be taking losses needlessly. You must always make a priority of protecting your trading capital but don't over do it. Give the market some room and give your new trade a chance to succeed. [Editor's note: If you choose to use wider stops you can compensate by taking a smaller position size.] 3. Assume now that your loss point has been properly established and your entry point was a good one. Pretty soon you should be sitting back and watching your profits grow. Don't get too pleased with your temporary success and assume that your profits will run forever. But don't just jump in and take the profit for fear of losing it. Devise a plan that allows the open trade to continue to work in your favor but that will get you out if the market changes directions. 4. The bigger the profit becomes the closer you should protect it. But you should never attempt to guess where the top is. No one is that smart. You have to be willing to get out a little bit after the top if you want to consistently maximize the profit potential on each trade. Don't be too demanding and feel that you have failed if you get out a little bit too late. A little bit late is a fine exit. However don't err on the other side and fall asleep and allow your hard-earned profits to disappear. Remember that if you do sell a stock too soon you can always buy it back. Just treat the re-entry as you would any new trade. Although exits are difficult, with some thought and a little effort they can easily be improved and nothing will add to your profits faster than improving your exits. Helpful information about exits is hard to find. Its not a popular topic even though we know it should be. For those who are interested in learning more about technical trading strategies and exits in particular we have a great deal of useful information on our web site. Visit us at Traderclub.com and learn some specific exit strategies that will make you a better trader. ********************* Chuck LeBeau is the co-author of Computer Analysis of the Futures Market (McGraw-Hill 1992). ======================================================================
Best of luck and have a Great Week!
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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 To Unsubscribe, send an email to cs@prorightline.com or call 1-312-248-4241. |