October 21, 2023 - The RightLine Report
Notes From The Editor
Here are a few thoughts that should help you along the path of becoming a better trader ...
1) Although most investors simply follow the crowd, successful traders make up their own minds. Seek good counsel - yet always remember that YOU make the final decisions. Focus on opportunity - there's plenty of it. Don't let the crowd determine your perspective.
2) Avoid overtrading. There are two ways to over trade - trading too often, or taking on positions that are too large. To prevent the latter, always calculate the appropriate number of shares for your personal account size. And for the former, remember there's no reason to trade too much. Instead of grabbing every stock that comes along, make sure that each setup meets the criteria of your trading plan.
3) Cut your losses and let your winners run. This means setting reasonable stops and executing them as planned. Don't dwell on the losers, just learn from each experience and go on. Manage your winners intelligently - give them enough room to grow, but don't neglect them and let profits disappear.
4) Even though trading is serious business, the best traders know how to laugh - especially at themselves! Relax, and give yourself regular breaks to clear your head. Have fun as you earn - you deserve it!
5) Thinking like a winner makes you a winner. The sum of our thoughts has an interesting way of showing up in our lives.
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits Trader's Corner
Quick List
Stock 10/20 10/20 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
LQDT 19.37 -0.16 19.85 18.76 1.09/0.55 1
ARCT 20.18 -0.42 21.33 19.57 1.76/0.88 2.66
SDGR 21.98 -0.57 22.85 21.24 1.61/0.81 2.24
CERE 22.75 -0.02 23.49 21.82 1.67/0.84 1.64
DMRC 27.16 0.06 27.67 25.79 1.88/0.94 3.58
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 Trader's Corner
Market Summary
US stocks had a rough day, with the S&P 500 index dropping for the third consecutive day. By the end of the week, the S&P 500 had fallen below its crucial 200-day moving average and closed at its lowest level. Selling was widespread, affecting major sectors like technology, consumer discretionary, materials, energy, and financials. The Smallcap Russell 2000 index also took a hit, dipping below 1,700 points. It's down 3.4% for the year, while the S&P 500 is still up 11% year-to-date. The Russell 2000's October performance has been particularly weak, down over 5.5% so far, as rising interest rates and yields are putting pressure on smaller companies and impacting borrowing.
Looking ahead to Monday, it's interesting to note that the S&P 500 has had 15 consecutive positive Mondays, which is the longest streak in the index's history.
Earnings season has started with some disappointments, especially in regional banks, airlines, solar, and electric vehicles, although there were a few bright spots, like Netflix reporting better subscriber numbers and positive earnings results from Union Pacific and Knight-Swift Transportation in the transportation sector. Next week, we'll see earnings reports from mega-cap companies like Microsoft, Amazon, Google, Meta, Boeing, General Motors, Verizon, Visa, Merck, Comcast, Intel, ExxonMobil, and more. Sentiment is undoubtedly leaning towards the negative side as fears of escalating tensions in Gaza loom.
Friday On The Week
-------------------- --------------------
Dow 33,127.28 -286.89 -543.01 -1.61%
Nasdaq 12,983.81 -202.37 -423.42 -3.16%
S&P 500 4,224.16 -53.84 -103.62 -2.39%
NYSE Volume 4.01B
NYSE Advancers 788
NYSE Decliners 2,069
Nasdaq Volume 4.63B
Nasdaq Advancers 1,297
Nasdaq Decliners 2,923
New Highs/Lows
10/13 10/16 10/17 10/18 10/19 10/20
--------------------------------------------
NYSE New Highs 27 38 53 26 16 4
NYSE New Lows 162 100 140 257 355 401
Nasdaq New Highs 30 38 43 28 17 9
Nasdaq New Lows 347 233 190 303 471 533
Stocks Covered Today Stock Splits Trader's Corner
TRADER'S TIP: "Volume . . . High or Low?"
"High" and "low" volume are relative terms. "High" volume for one stock is often considered "low" for another. Generally, "high" volume for any given stocks is at least 25% above the 10-day average, and "low" volume is at least 25% below the average.
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 - 4224.16 October 20, 2023
52-Week High: 4607.07
52-Week Low: 3647.42
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4621.33
Resistance 2: 4450.79
Resistance 1: 4337.47
Pivot: 4280.25
Support 1: 4166.93
Support 2: 4109.71
Support 3: 3939.17
NASDAQ Composite - 12983.81 October 20, 2023
52-Week High: 14446.55
52-Week Low: 10207.47
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 14437.47
Resistance 2: 13812.65
Resistance 1: 13398.23
Pivot: 13187.83
Support 1: 12773.41
Support 2: 12563.01
Support 3: 11938.19
Dow Industrials - 33127.28 October 20, 2023
52-Week High: 35679.13
52-Week Low: 30206.28
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 35523.36
Resistance 2: 34493.85
Resistance 1: 33810.56
Pivot: 33464.34
Support 1: 32781.05
Support 2: 32434.83
Support 3: 31405.32
Stocks Covered Today Stock Splits Trader's Corner
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, OCT. 23 None scheduled TUESDAY, OCT. 24 9:00 am S&P Case-Shiller home price index (20 cities) 9:45 am S&P flash U.S. services PMI 9:45 am S&P flash U.S. manufacturing PMI WEDNESDAY, OCT. 25 10:00 am New home sales THURSDAY, OCT. 26 8:30 am GDP Q3 8:30 am Initial jobless claims 8:30 am Durable-goods orders 8:30 am Durable-goods minus transportation 8:30 am Advanced U.S. trade balance in goods 8:30 am Advanced retail inventories 8:30 am Advanced wholesale inventories 10:00 am Pending home sales FRIDAY, OCT. 27 8:30 am Personal income (nominal) 8:30 am Personal spending (nominal) 8:30 am PCE index] 8:30 am Core PCE index 8:30 am PCE (year-over-year) 8:30 am Core PCE (year-over-year) 10:00 am Consumer sentiment (final) 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 Corner
TRADER'S TIP: "For Dessert? Profit Pie"
Entering "long" positions just above support, and "short" positions just below resistance delivers a larger slice of the potential profit "pie" when the trade is favorable, and quick, small losses when it isn't.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Liquidity Services, Inc. (LQDT: Consumer Cyclical/Internet Retail) - SQUEEZE PLAY. The ticker for Friday's session shows LQDT 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 19.85 and a SELL short trigger at 18.76. When LQDT 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 1.09 trailing stop. Upon reaching a 1 profit, resize the stop to 0.55. Earnings Report Date: Dec 06, 2023. Beta: 1.51. Market-Cap: 594.487M. Optionable.
HEALTHCARE SECTOR
Arcturus Therapeutics Holdings Inc. (ARCT: Healthcare/Biotechnology) - 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. ARCT 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 21.33 and a SELL short trigger at 19.57. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.76 which can be tightened to 0.88 on a 2.66 gain. ARCT closed Friday at 20.18. Earnings Report Date: Nov 07, 2023. Beta: 2.55. Market-Cap: 536.758M. Optionable.
Schrodinger, Inc. (SDGR: Healthcare/Health Information Services) - SQUEEZE PLAY. SDGR 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 22.85 and a SELL short trigger at 21.24. When one of the orders is filled, cancel the remaining order and enter a 1.61 trailing stop. When you've reached a 2.24 paper profit, tighten the stop to 0.81. SDGR closed at 21.98 on Friday. Earnings Report Date: Nov 01, 2023. Beta: 1.36. Market-Cap: 1.58B. Optionable.
Cerevel Therapeutics Holdings, Inc. (CERE: Healthcare/Biotechnology) - 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. CERE 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 23.49 and a SELL short trigger at 21.82. When CERE 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 1.67 trailing stop. After you've got a 1.64 profit, tighten the stop to 0.84. CERE closed at 22.75 on Friday. Earnings Report Date: Nov 01, 2023. Beta: 1.45. Market-Cap: 4.032B. Optionable.
TECHNOLOGY SECTOR
Digimarc Corporation (DMRC: Technology/Information Technology Services) - SQUEEZE PLAY. DMRC 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. DMRC closed Friday at 27.16. The plan is to enter in the right direction by placing a BUY trigger at 27.67 and a SELL short trigger at 25.79. Once DMRC establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.88. After you've collected a 3.58 profit, tighten the stop to 0.94. Earnings Report Date: Nov 06, 2023. Beta: 1.29. Market-Cap: 552.331M. 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 Trader's Corner
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.
Stocks Covered Today Stock Splits Trader's Corner
Trader's Corner
"Index and Sector Stocks"
Want to trade the entire Nasdaq, Dow, or S&P 500 in one stock? Index stocks and sector stocks (formally known as ETFs, or Exchange Traded Funds) provide a convenient way to invest in ALL of the leading companies in a top index or industry. Similar to mutual funds, sector and index stocks provide access to a "basket" of stocks in an entire index or industry sector through a single transaction.
Sector and index stocks trade just like any other stock and can be used for short-term or longer-term strategies. Short-term traders love them because they are very liquid, can easily be traded both long or short on margin, and tend to move closely with their related indices. For long-term investors, these stocks provide unique tax advantages, and unlike mutual funds there are no management fees.
Just as "normal" stocks represent ownership in a publicly traded company, sector and index stocks signify ownership in a Unit Investment Trust, or UIT - a collection of securities (stocks for our purposes) bundled together in a trust. Due to the number of stocks in each group, sector and index stocks provide an element of safety through diversification, and are usually less volatile than the individual stocks they represent. They generally provide a lower-stress way to trade highly volatile markets.
Sector stocks are represented by individual stock symbols - here are several examples:
SPY - Formally named Standard & Poor's Depositary Receipts, SPDRs are commonly called "Spiders" and represent the basket of stocks in the S&P 500 (SPX). This was the first index stock and was created by the American Stock Exchange in January 1993.
DIA - The Dow Industrial Average Model of New Depository Shares (DIAMONDS) represent the basket of 30 stocks in the DOW (DJX or INDU).
QQQQ - Represents the stocks in the Nasdaq 100 (NDX).
HOLDRS - HOLding Company Depositary ReceiptS represent the common stock of companies from a specific industry segment. Merrill Lynch launched HOLDRS for trading on the Amex stock exchange, which is now the NYSE MKT LLC Equities exchange. For more information on Merrill Lynch's current HOLDRS and the stocks represented by each one, go to the following webpage:
https://www.holdrs.com/holdrs/main/index.asp?Action=Outstanding
FFX - Fortune 500 index represents the companies in the Fortune 500.
FEX - Fortune e-50 index represents the top 50 Internet economy companies.
IShares Sector Funds provide investment vehicles similar to HOLDRS and are modeled after specific index funds based on the Russell 2000, Morgan Stanley Capital International (MSCI) Index Fund Series, S&P 500, and the DOW indices. Ishares are the world's most extensive family of Exchange Traded Funds (ETFs).
You can trade index and sector stocks exactly the same way you trade regular stocks through any brokerage. HOLDRS require a minimum purchase of 100 shares, but you can buy a single share of the other sector stocks. The lower volatility of sector stocks makes them relatively easy on the nerves to trade, but as with any trade, risk management is critical and stops must be used to protect against the market moving against a position.
Good luck!
Note: For more on Index and Sector Funds (ETFs) go to the following webpage: https://prorightline.com/education/etfs.html
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
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