October 20, 2022 - The RightLine Report
Notes From The Editor
Stock trading opportunities come in all shapes and sizes. The very best of these trades share one important characteristic - rapid price movement.
In any market it is essential to find stocks that are moving. Short sellers like stocks that are trending down, while buyers want stocks that are going up. While the definition of a "moving" stock is somewhat subjective, there are several things to consider when looking for good stocks to trade.
The first place to look is at stocks that are making new highs and new lows. Stocks that have just set new highs make ideal buy-side candidates. The ability to rise to new heights reflects investor interest, and indicates the demand for shares is in excess of available supply.
On the flip side, stocks making new lows are exhibiting extreme weakness. This usually results in even more weakness as wave after wave of investors that are tired of losing money give up and bail out. The list of New Lows often contains stocks that are begging to be shorted.
As a rule, new-highs lead to more strength, while new-lows point to more trouble ahead. To get into trends early, look for stocks that have just made new four-week highs or lows. Also check the slope of the 22-day moving average. If it's leaning decidedly in one direction or the other, you can assume that the trend is relatively stable.
Keep in mind that although the purpose of trading is to be profitable, we don't have to catch 100% of every move. Find stocks that are active within your chosen time frame, and take a reasonable amount out of the anticipated movement. As for timing entries, start with the basic reversal strategies like the Bullish Bounce and Bearish U-Turn.
Bottom Line: Market volatility swings from one extreme to the other. The RightLine Report delivers plenty of new high and low setups during periods of rapid price movement, as well as during the slower periods. Trading these setups is relatively simple. Just make sure that you size all positions intelligently before entering, and stick with the planned exit strategy for each one.
Trade well!
~ Thomas Sutton, Editor
Note: Click on the following link for more information about the Bullish Bounce and Bearish U-Turn trading strategies: https://prorightline.com/index.php/2019/07/10/1506/
Stocks Covered Today Stock Splits
Quick List
Stock 10/20 10/20 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
GSUN 21.25 -0.69 23 20.53 2.47/1.24 21.2
VET 22.06 0.04 23.05 21.17 1.88/0.94 2.36
VIR 20.37 -0.13 21.26 19.69 1.57/0.79 1.76
WOLF 101.86 -1.94 98.31 9.91/4.96 12.86
PCG 14.03 0.07 14.29 0.82/0.41 1.2
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
Stocks were lower on Thursday following a heavy economic calendar that included a slight improvement in manufacturing activity in the Philadelphia region, moderate unemployment claims, a drop in existing home sales for the eighth month in a row, and another decline in the Leading Economic Index, which has slipped lower for six of the past seven months. In equities, Tesla (TSLA $208) and IBM (IBM $128) topped quarterly earnings estimates and raised guidance, and American Airlines (AAL $14) outperformed forecasts on record revenue. Gold, oil prices, treasuries and the USD/dollar all finished the session lower.
Oct 19, 2022 Oct 20, 2022
-------------------- --------------------
Dow 30,423.81 -99.99 30,333.59 -90.22
Nasdaq 10,680.51 -91.89 10,614.84 -65.66
S&P 500 3,695.16 -24.82 3,665.78 -29.38
NYSE Volume 4.26B 4.54B
NYSE Advancers 776 979
NYSE Decliners 2,455 2,194
Nasdaq Volume 4.99B 4.65B
Nasdaq Advancers 1,263 1,943
Nasdaq Decliners 3,354 2,617
New Highs/Lows
10/13 10/14 10/17 10/18 10/19 10/20
--------------------------------------------
NYSE New Highs 29 29 43 40 33 37
NYSE New Lows 934 218 120 115 310 412
Nasdaq New Highs 71 61 70 76 53 72
Nasdaq New Lows 958 336 208 157 326 372
Stocks Covered Today Stock Splits
TRADER'S TIP: "Before You Enter"
Before entering a trade, carefully plan "what you will do" and "when you will do it" once you have entered the position. Actually, this aspect of trading is much more important than finding the "perfect" entry. Always include an exit plan for three possible scenarios: the trade moves favorably, unfavorably, or doesn't move at all. Pay attention to details, and be sure to include the specific exit price when planning stop-losses. When using the trailing stop method to lock in gains, make certain that you decide in advance at what point the trailing stop will be adjusted.
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 - 3665.78 October 20, 2022
52-Week High: 4818.62
52-Week Low: 3491.58
Daily Trend: UP
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
NASDAQ Composite - 10614.84 October 20, 2022
52-Week High: 16212.23
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 11748.02
Resistance 2: 11070.16
Resistance 1: 10695.77
Pivot: 10392.30
Support 1: 10017.91
Support 2: 9714.44
Support 3: 9036.58
Dow Industrials - 30333.59 October 20, 2022
52-Week High: 36952.65
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 33110.62
Resistance 2: 31342.74
Resistance 1: 30488.78
Pivot: 29574.86
Support 1: 28720.90
Support 2: 27806.98
Support 3: 26039.10
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, October 24, 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
Stocks Covered Today Stock Splits
TRADER'S TIP: "Three Possibilities"
As traders and investors we've learned not to spend too much time speculating on market direction, but to focus on careful planning and trade management. It's far better to prepare and have a specific plan ready for any possible price action than to become so devoted to our expectations that we fail to plan for the opposite of what we expect to happen.
The market, and our chosen stocks can really only do three simple things that affect price; (1) move up, (2) move down, or (3) stay the same. Unless our trading plan includes specific instructions on what we will do in the event any one of these three scenarios occur, the plan is incomplete.
Stocks Covered in This Issue
CONSUMER DEFENSIVE SECTOR
Golden Sun Education Group Limited (GSUN: Consumer Defensive/Education & Training Services) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in GSUN, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 23 and a SELL short entry at 20.53. Let GSUN's price action determine your long or short entry. Once the order is filled, place a 2.47 trailing stop, and tighten it to 1.24 upon getting a 21.2 gain. GSUN closed Thursday at 21.25. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 390.054M. Not Optionable.
ENERGY SECTOR
Vermilion Energy Inc. (VET: Energy/Oil & Gas E&P) - SQUEEZE PLAY. A look at VET's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 23.05 and a SELL short trigger at 21.17. Once VET shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.88 and tighten to 0.94 on a 2.36 gain. VET closed Thursday at 22.06. Earnings Report Date: Nov 07, 2022. Beta: 3.32. Market-Cap: 3.632B. Optionable.
HEALTHCARE SECTOR
Vir Biotechnology, Inc. (VIR: Healthcare/Biotechnology) - SQUEEZE PLAY. Traders are feeling the pressure as VIR's intra-day price range on Thursday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 21.26 and a SELL short entry at 19.69. VIR's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.57 trailing stop. Tighten it to 0.79 after you get a 1.76 gain. VIR closed Thursday at 20.37. Earnings Report Date: Nov 02, 2022. Beta: -0.06. Market-Cap: 2.702B. Optionable.
TECHNOLOGY SECTOR
Wolfspeed, Inc. (WOLF: Technology/Semiconductors) - BEARISH U-TURN. This short setup turns common stock behavior into profits. Grounded in the tendency for down-trending stocks to bounce briefly and then return to the familiar down-trend, the Bearish U-Turn points traders to weak stocks when conditions are calling for more downward price action. WOLF's behavior on Thursday near moving average support signals a potential SELL short entry at 98.31, followed by a 9.91 trailing stop which can be tightened to 4.96 upon earning 12.86. WOLF closed Thursday at 101.86. Earnings Report Date: Oct 26, 2022. Beta: 1.53. Market-Cap: 12.651B. Optionable.
UTILITIES SECTOR
PG&E Corporation (PCG: Utilities/Utilities-Regulated Electric) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 14.03, PCG is on our radar for a BUY entry at 14.29. If you purchase shares of PCG, be sure to also place a trailing stop of 0.82. Snug it up to 0.41 on a 1.2 gain. Earnings Report Date: Oct 27, 2022. Beta: 1.08. Market-Cap: 34.602B. 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
---------------- ------- -------- ------- ------ -------
Copart CPRT 11/4/2022 11/4/2022 2-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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