October 4, 2022 - The RightLine Report
Notes From The Editor
Volatile markets are typically a wild ride. During such times the average daily range of the S&P 500 can quickly shift up to multiples of the normal amount. This type of trading action requires a double-barrel strategy:
#1 - Control Risk. It's the single most important aspect of trading. In fact, Risk Control can't be overstated. Most folks have no clue that a simple tool like the RightLine Risk Control System offers an extremely powerful way to protect against losses and increase profits.
Though intelligent risk management won't turn a really bad trading system into a winner, it will help keep losses under control until a trader develops the skills needed to maneuver the markets successfully.
#2 - Trade Both Sides of The Market. Attention all traders and investors ... it's as easy to go short as it is to go long. Any downtrend in the major indices offers short traders lower risk opportunities than would typically exist during clearly defined uptrends.
Shorting lets you make money from investor fears about credit markets, Fed rates, a bad economy and every other type of media driven chaos.
Note: Volatility is predictable in the sense that it tends to expand until it reaches a highly excited and agitated state, then contract until things become very calm. These repetitive cycles exist in every time frame from just a few hours to weeks and months, or even longer.
Trade well,
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 10/04 10/04 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
MGY 22.31 0.77 22.87 21.09 1.78/0.89 1.76
LMND 23.56 1.38 24.15 22.06 2.09/1.05 2.68
MYGN 20.61 1.03 20.93 19.31 1.62/0.81 1.76
BE 21.90 1.15 22.36 20.68 1.68/0.84 2.56
SHLS 24.00 1.03 24.61 22.54 2.07/1.04 3.34
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
Market Summary
US stocks were significantly higher on Tuesday following the bullish session that opened a new week/month and may reflect the yet to be announced reason for the Fed Bank emergency session on Monday. Whether the content of the meeting was leaked to traders, or if the secret meeting is simply a routine banker gathering will likely be revealed at some point soon. In the meantime, stocks are rallying again after weeks of drought. In economic news, durable goods orders matched expectations, capital spending data was adjusted upwards, and the Job Opening and Labor Turnover Survey was down more than predicted. On the equities front, electric vehicle company Rivian (RIVN $36) reported a sizable increase in third quarter production, South Korean internet mega-company Naver Corporation announced that it will buy Poshmark (POSH $18) for $1.2 billion, and Elon Musk said he will move forward with his original proposal to purchase Twitter (TWTR $52). The USD/dollar and treasury yields were lower, oil prices and gold were both higher.
Oct 3, 2022 Oct 4, 2022
-------------------- --------------------
Dow 29,490.89 765.38 30,316.32 825.43
Nasdaq 10,815.43 239.82 11,176.41 360.97
S&P 500 3,678.43 92.81 3,790.93 112.50
NYSE Volume 4.83B 5.19B
NYSE Advancers 2,761 2,838
NYSE Decliners 572 453
Nasdaq Volume 4.44B 5.05B
Nasdaq Advancers 3,450 3,790
Nasdaq Decliners 1,271 1,021
New Highs/Lows
09/27 09/28 09/29 09/30 10/03 10/04
--------------------------------------------
NYSE New Highs 15 12 8 4 17 30
NYSE New Lows 893 294 820 485 237 78
Nasdaq New Highs 31 31 19 38 56 67
Nasdaq New Lows 898 365 761 572 378 161
Stocks Covered Today Stock Splits
TRADER'S TIP: "The Importance of Convergence"
When charting a stock or index, always be on the lookout for technical convergence. Consider it very important anytime two or more trend lines, moving averages, pivotal highs or lows, and other support or resistance levels show up in the same price zone.
Convergence multiplies the supportive or resistive strength of the combined elements, and increases the likelihood of a price reversal at that junction. Whenever a convergence zone isn't able to deflect price, the breakthrough indicates the trend in place is gaining momentum.
Use this insight to your advantage - from the moment you begin evaluating the strength of a potential setup, all the way to the point you exit the trade. Each new convergence along the way provides you with extremely valuable information!
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 - 3790.93 October 4, 2022
52-Week High: 4818.62
52-Week Low: 3584.13
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 3940.71
Resistance 2: 3788.10
Resistance 1: 3686.86
Pivot: 3635.49
Support 1: 3534.25
Support 2: 3482.88
Support 3: 3330.27
NASDAQ Composite - 11176.41 October 4, 2022
52-Week High: 16212.23
52-Week Low: 10565.14
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 11808.15
Resistance 2: 11278.98
Resistance 1: 10927.30
Pivot: 10749.81
Support 1: 10398.13
Support 2: 10220.64
Support 3: 9691.47
Dow Industrials - 30316.32 October 4, 2022
52-Week High: 36952.65
52-Week Low: 28715.85
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 31276.24
Resistance 2: 30180.31
Resistance 1: 29452.91
Pivot: 29084.38
Support 1: 28356.98
Support 2: 27988.45
Support 3: 26892.52
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, October 03, 2022: 03-Oct 9:45 am 03-Oct 10 am ISM manufacturing index 03-Oct 10 am Construction spending 03-Oct Varies Motor vehicle sales (SAAR) Tuesday, October 04, 2022: 04-Oct 10 am Job openings 04-Oct 10 am Quits 04-Oct 10 am Factory orders 04-Oct 10 am Core capital goods orders revision Wednesday, October 05, 2022: 05-Oct 8:15 am ADP employment report 05-Oct 8:30 am International trade balance 05-Oct 9:45 am 05-Oct 10 am ISM services index Thursday, October 06, 2022: 06-Oct 8:30 am Initial jobless claims 06-Oct 8:30 am Continuing jobless claims Friday, October 07, 2022: 07-Oct 8:30 am Nonfarm payrolls 07-Oct 8:30 am Unemployment rate 07-Oct 8:30 am Average hourly earnings 07-Oct 8:30 am Labor force participation rate, ages 25-54 07-Oct 10 am Wholesale inventories revision 07-Oct 3 pm Consumer credit 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: "Mistakes"
"The greatest mistake you can make in life is to be continually fearing you will make one."
~ Elbert Hubbard
Stocks Covered in This Issue
ENERGY SECTOR
Magnolia Oil & Gas Corporation (MGY: Energy/Oil & Gas E&P) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in MGY's narrowest trading range of the past seven sessions. With neither group able to take complete control on Tuesday, 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 22.87 and a SELL order at 21.09. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.78 trailing stop. Tighten the stop to 0.89 once you have a 1.76 gain. MGY closed Tuesday at 22.31. Earnings Report Date: Oct 31, 2022. Beta: 2.11. Market-Cap: 5.935B. Optionable.
FINANCIAL SERVICES SECTOR
Lemonade, Inc. (LMND: Financial Services/Insurance-Property & Casualty) - 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. LMND traders reached this state of stand-off on Tuesday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 24.15 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 2.09 which can be tightened to 1.05 on a 2.68 gain. LMND closed Tuesday at 23.56. Earnings Report Date: Nov 07, 2022. Beta: 1.60. Market-Cap: 1.552B. Optionable.
HEALTHCARE SECTOR
Myriad Genetics, Inc. (MYGN: Healthcare/Diagnostics & Research) - SQUEEZE PLAY. One interesting trait of price volatility is that it cycles back and forth through periods of expansion and contraction. Stocks that have recently seen their daily price range shift from an average or wide range to an extremely contracted state are ideal candidates for expansive price moves. In many cases the next move is relatively fast and covers a sizable amount of territory. To take advantage of these trades we use both a BUY and a SELL entry. This allows us to enter in whichever direction the breakout takes. In MYGN's case we will enter a BUY should it reach the 20.93 level, or a SELL short trade if it drops to 19.31. As usual a trailing stop is essential, 1.62 which should be tightened to 0.81 on a 1.76 gain. MYGN closed Tuesday at 20.61. Earnings Report Date: Oct 27, 2022. Beta: 1.75. Market-Cap: 1.619B. Optionable.
INDUSTRIALS SECTOR
Bloom Energy Corporation (BE: Industrials/Electrical Equipment & Parts) - SQUEEZE PLAY. Trader indecision has put BE 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 22.36 and a SELL short entry at 20.68. Now it's up to BE to show us which entry will be filled. Once the trade is underway place a 1.68 trailing stop, which can be tightened to 0.84 after you achieve a 2.56 profit. BE closed on Tuesday at 21.90. Earnings Report Date: Nov 02, 2022. Beta: 3.05. Market-Cap: 4.25B. Optionable.
TECHNOLOGY SECTOR
Shoals Technologies Group, Inc. (SHLS: Technology/Solar) - SQUEEZE PLAY. SHLS traders on both sides of the fence are now locked in a head-to-head shootout. Tuesday'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 24.61 and a SELL short trigger at 22.54. When one of the orders is filled, cancel the remaining order and enter a 2.07 trailing stop. When you've reached a 3.34 paper profit, tighten the stop to 1.04. SHLS closed at 24.00 on Tuesday. Earnings Report Date: Nov 07, 2022. Beta: N/A. Market-Cap: 2.704B. 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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