September 27, 2022 - The RightLine Report
Notes From The Editor
Common Trading Mistakes...And How to Avoid Them (Part I)
One of the basic building blocks of successful trading is the stuff you don't do. While best practices such as stop-loss placement and effective risk management sharply improve your ability to grow your trading account, there are also several potential pitfalls to watch out for.
Over the coming weeks we'll take a closer look at several of these trading traps. Let's start by looking at three mistakes that are especially prevalent in the modern age of non-stop, on-demand information.
Mistake #1: Trading stocks that are hyped on message boards and spam emails.
The promise can see be so alluring. A gang of excited traders pumps up a stock on a message board or email, calling for a large move within the near future. Then, over the next few sessions the ticker actually starts to do what they said it would. You jump on the following day, only to have the position dramatically reverse course.
This "pump and dump" is a classic scheme that has continued unabated in the Information Age. However, you can easily avoid this trap by simply ignoring those hype-filled message boards, and by sending those spam emails straight to the delete folder. Also be weary of stocks that trade on very light volume; scheming traders find it much easier to push around low-volume equities.
Mistake #2: Falling in love with a "story."
The stock media loves to shape conventional wisdom. However, this doesn't always match what's really happening in the market. Imagine, for instance, that you turn on the TV and see a report on how stock prices will head lower over the next week. Your favorite mainstream Wall Street websites say the same thing.
Could those reports be right? Absolutely. But before you commit yourself to the story that's being written by the media, verify it with your own knowledge and tools. Do the technicals support the outlook for more weakness? Or are they deeply oversold and ready for a bounce? Trade based on what you see - not on what the media tells you.
Mistake #3: Overloading your screen with too many indicators.
Another classic mistake: analysis paralysis! Technical indicators are a wonderful thing, and a well-groomed daily chart can provide an excellent roadmap to likely price movements. The problem occurs when the chart starts to look more like an overgrown garden, with moving averages, indicators, and numbers creating confusion and contradictions.
The remedy for this mistake is to keep it simple and focused. Use only the technical indicators that you feel most comfortable with. If you're thinking about adding a new indicator to your line-up, give it a trial period first to see if it fits into your current strategy.
Additionally, remember that basic analyses of price action - moving averages and trendlines, for example - tend to be more effective than more obscure indicators. The reason is simple: more market participants watch the price action, and act accordingly.
Here's to profits,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 09/27 09/27 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
AMLX 28.96 0.77 29.83 2.73/1.37 5.6
PLRX 20.19 0.01 21.08 19.48 1.6/0.8 2.9
FATE 21.88 0.83 22.57 20.69 1.88/0.94 3.82
TMCI 22.39 0.21 23.19 21.35 1.84/0.92 2.52
ESEA 21.25 1.04 21.58 20.28 1.3/0.65 2.04
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
The major US indices were mixed on Tuesday as the Dow and S&P 500 finished lower, while the Nasdaq gained ground. In economic news, home prices unexpectedly declined, yet new home sales were up. Consumer confidence increased more than projected, durable goods orders were down less than predicted, and manufacturing activity in the Richmond region was just about even. In light corporate news, Cracker Barrel (CBRL $97) topped quarterly earnings estimates and upped its full-year guidance. Oil prices, gold and the USD/dollar were higher, treasuries were mixed.
Sep 26, 2022 Sep 27, 2022
-------------------- --------------------
Dow 29,260.81 -329.60 29,134.99 -125.82
Nasdaq 10,802.92 -65.00 10,829.50 26.58
S&P 500 3,655.04 -38.19 3,647.29 -7.75
NYSE Volume 4.92B 4.6B
NYSE Advancers 572 1,579
NYSE Decliners 2,715 1,687
Nasdaq Volume 4.74B 4.47B
Nasdaq Advancers 1,433 2,372
Nasdaq Decliners 3,315 2,317
New Highs/Lows
09/20 09/21 09/22 09/23 09/26 09/27
--------------------------------------------
NYSE New Highs 13 22 10 8 11 15
NYSE New Lows 395 374 726 1,106 1,083 893
Nasdaq New Highs 29 36 25 23 24 31
Nasdaq New Lows 558 630 932 1,227 990 898
Stocks Covered Today Stock Splits
TRADER'S TIP: "Selling Short"
"It takes real knowledge and market know-how as well as lots of courage to sell, and particularly to sell short, because you will make many mistakes. However, I don't see how anyone could really do well in the market and protect assets if they don't learn how, when, and why stocks should be sold."
~ William J. O'Neil, author and trader
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 - 3647.29 September 27, 2022
52-Week High: 4818.62
52-Week Low: 3623.29
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4268.45
Resistance 2: 4008.85
Resistance 1: 3851.04
Pivot: 3749.25
Support 1: 3591.44
Support 2: 3489.65
Support 3: 3230.05
NASDAQ Composite - 10829.50 September 27, 2022
52-Week High: 16212.23
52-Week Low: 10565.14
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 12833.10
Resistance 2: 11952.25
Resistance 1: 11410.09
Pivot: 11071.40
Support 1: 10529.24
Support 2: 10190.55
Support 3: 9309.70
Dow Industrials - 29134.99 September 27, 2022
52-Week High: 36952.65
52-Week Low: 28958.22
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 33508.76
Resistance 2: 31732.34
Resistance 1: 30661.37
Pivot: 29955.92
Support 1: 28884.95
Support 2: 28179.50
Support 3: 26403.08
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): WEDNESDAY, SEPT. 28 8:30 am Trade in goods, advance report 8:35 am Atlanta Fed President Raphael Bostic speaks 10 am Pending home sales index 10:15 am Fed Chair Jerome Powell delivers opening remarks 11 am Fed Gov. Michelle Bowman speaks on bank competition 11:30 am Richmond Fed President Tom Barkin speaks 2 pm Chicago Fed President Charles Evans speaks THURSDAY, SEPT. 29 8:30 am Initial jobless claims 8:30 am Continuing jobless claims 8:30 am Real gross domestic product revision (SAAR) 8:30 am Real gross domestic income revision (SAAR) 8:30 am Real final sales to domestic purchasers (SAAR) 9:30 am St. Louis Fed President James Bullard speaks 4:45 pm San Francisco Fed President Mary Daly speaks FRIDAY, SEPT. 30 8:30 am PCE price index 8:30 am Core PCE price index Aug. 8:30 am PCE price index (year-on-year) 8:30 am Core PCE price index (year-on-year) 8:30 am Real consumer spending 8:30 am Real disposable incomes 8:30 am Richmond Fed President Tom Barkin speaks 9 am Fed Vice Chair Lael Brainard speaks 9:45 am Chicago PMI 10 am UMich consumer sentiment index 10 am UMich 5-year expected inflation 11 am Fed Gov. Michelle Bowman speaks on bank supervision 12:30 pm Richmond Fed President Tom Barkin speaks on what's driving inflation 4:15 pm New York Fed President John Williams speaks on financial stability 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: "Short-term Trading = Long Term Results"
Occasionally we hear from traders who are frustrated and can't seem to do anything right. They usually haven't made money for a while and are starting to feel as if they never will.
The problem could be thinking short-term -- not about their trades but about their results. Even if your trades last only minutes or hours, you have to think about your results over the long term.
The laws of probabilities allow for losing streaks which can sometimes run longer than you think is possible. Realize that when you have a run of losers, it doesn't necessarily reflect your skill as a trader.
Every trader - no matter how good - has some periods of time when they do poorly. The most important thing you can do is to keep working at it day after day. When combined with Risk Management, persistence and hard work lead to good results.
Stocks Covered in This Issue
HEALTHCARE SECTOR
Amylyx Pharmaceuticals, Inc. (AMLX: Healthcare/Biotechnology) - BULLISH BOUNCE. AMLX's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Tuesday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move AMLX back in step with the bullish weekly trend, so our BUY entry trigger is set at 29.83. Once you hold a position, trail a stop of 2.73. Tighten it to 1.37 on a 5.6 gain. AMLX closed at 28.96 on Tuesday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.695B. Optionable.
Pliant Therapeutics, Inc. (PLRX: Healthcare/Biotechnology) - SQUEEZE PLAY. The ticker for Tuesday's session shows PLRX 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 21.08 and a SELL short trigger at 19.48. When PLRX 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 1.6 trailing stop. Upon reaching a 2.9 profit, resize the stop to 0.8. Earnings Report Date: Nov 07, 2022. Beta: 1.47. Market-Cap: 982.89M. Optionable.
Fate Therapeutics, Inc. (FATE: Healthcare/Biotechnology) - SQUEEZE PLAY. Tuesday's trading session left FATE 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 22.57 and your SELL short trigger at 20.69. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.88 trailing stop. Once you have a 3.82 profit, reduce the stop to 0.94. Earnings Report Date: Nov 02, 2022. Beta: 1.67. Market-Cap: 2.122B. Optionable.
Treace Medical Concepts, Inc. (TMCI: Healthcare/Medical Devices) - SQUEEZE PLAY. Traders are feeling the pressure as TMCI's intra-day price range on Tuesday 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 23.19 and a SELL short entry at 21.35. TMCI's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.84 trailing stop. Tighten it to 0.92 after you get a 2.52 gain. TMCI closed Tuesday at 22.39. Earnings Report Date: Nov 02, 2022. Beta: N/A. Market-Cap: 1.24B. Optionable.
INDUSTRIALS SECTOR
Euroseas Ltd. (ESEA: Industrials/Marine Shipping) - SQUEEZE PLAY. ESEA 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 21.58 and a SELL short entry at 20.28. Once your trade is filled, enter a 1.3 trailing stop. Tighten it to 0.65 after a 2.04 gain. ESEA closed on Tuesday at 21.25. Earnings Report Date: Nov 14, 2022. Beta: 0.71. Market-Cap: 154.699M. Not 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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