Notes From The Editor

Common Trading Mistakes...And How to Avoid Them (Part II)

Recently we covered three common pitfalls that can trap traders, making it more difficult to succeed over the long-run. Let's look at two more of these mistakes. What are their causes, and how can they be avoided?

Mistake #4: Failing to control your emotions.

Unless you happen to be a robot with an unfeeling CPU brain, your trading successes and failures will produce an emotional reaction. For example, imagine that you're on a nice winning streak. You've had three winning trades in a row, each producing a larger profit than the last. You feel excited and even a bit elated. Your trading strategy is paying off! However, the problem emerges when your start to become careless. You feel a bit invincible, as if you suddenly have this all figured out. You start to let greed influence your decisions, jumping into less-than-promising trades and failing to use solid risk management. The resulting carelessness quickly leads to a string of losing trades - and before you know it, your winnings have been erased.

Dangers also arise when fear enters the equation; it clouds your decision-making and leads to trading that is based on your emotions, rather than the price action. Thinking less rationally, you might bail out of profitable positions before they've realized their full potential, or sell a position for a loss even though it hasn't triggered your stop. Not a good state of affairs.

The solution is to have a trading system that's emotion-proof. There's tremendous value in setting rules for yourself. Always use risk management strategies, regardless of how you're feeling at the time. And always, always honor your stops.

Also make it a point to become more self-aware; it's okay to feel those fundamental emotions (hey, that's what makes us human!), as long as you remember to insulate them from your trading.

Mistake #5: Holding on to losing positions.

One of the most frustrating aspects of trading is when you sell out of a position for a loss, only to see it snap back and move in the direction you originally thought it would. "Arrgh," you think, "if I just would've held on a bit longer, I would've been fine!"

This line of thinking can get you into a heap of trouble.

While some trades will bounce back after you're stopped out, there are also cases where a stock will keep moving against you. As you continue to hold out for a rebound and recovery, your losses mount. What was a manageable loss may turn into a sizeable hit to your account.

The cure to this malady is simple: don't hold on to losers! Start each and every trade with a clearly-defined stop. If that level is violated, you're out of the position with your skin intact, ready to move on. Also consider placing that stop-loss with your brokerage - what's known as a "hard stop" - to remove all guesswork from the equation.

Next week we'll explore more of these common trading traps. While the market landscape is littered with obstacles, the good news is that you can spot them on the horizon, steer clear, and continue your journey to lasting success.

Here's to profits,

Kent Barton
Senior Analyst

Quick List

    
Stock     05/14     05/14      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

CARG      21.82      0.03     22.13     20.01        2.12/1.06      2.26
ZYXI      19.57      1.15     19.94                  2.96/1.48      2.42
PAR       20.66     -0.50     21.26     19.07        2.19/1.09      2.16
SSTI      20.70     -0.80     22.00     19.69        2.31/1.16      4.52

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 access to the Risk Calculator, go to http://www.rightline.net and login to the Member's area.

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

Problems? If you have any difficulty viewing this report in your email go to this page where you will find a list of items that may affect normal viewing within your email client.

Questions? Send us an email using our contact form at: http://www.rightline.net/home/contact.html

Market Summary

Stocks closed higher Thursday despite cautionary comments from US Federal Bank Chairman Powell and Congress disputing over a proposed additional $3 trillion in fiscal relief. Economic news included a drop in import prices along with continuing elevated unemployment claims. In earnings, shares of Mastercard Incorporated (MA $277) and Cisco Systems (CSCO $44) both advanced in price after MA reported relatively positive guidance, while Cisco released upbeat profit results. The USD/dollar, gold and oil prices climbed higher, treasury yields were lower.

                        May 13, 2020           May 14, 2020   
                  --------------------   --------------------
Dow                    23,248  -516.81        23,625  +377.37
Nasdaq                  8,863  -139.38         8,944   +80.55
S&P 500                 2,820   -50.12         2,853   +32.50

NYSE Volume                      6.17B                  5.69B
NYSE Advancers                     326                   1615
NYSE Decliners                    2648                   1352

Nasdaq Volume                    4.25B                  3.95B
Nasdaq Advancers                   620                   1636
Nasdaq Decliners                  2643                   1625

                                 New Highs/Lows

                   05/07  05/08  05/11  05/12  05/13  05/14
                 --------------------------------------------
NYSE New Highs        27     31     34     36     16     15
NYSE New Lows         15      6     14     25     72    104
Nasdaq New Highs      66     87    119    116     42     22
Nasdaq New Lows       14     11     15     43     95    114
   

TRADER'S TIP: "What If I Had A Crystal Ball?"

You don't need a crystal ball if you prepare for each trade with the "what if" approach. Always remember to ask these questions before entering any position - "What will I do if price moves in my favor?" And "What will I do if price moves against me?" Most traders and investors never consider these questions at all, so simply writing down specific answers will put you way ahead of the game.

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Boost Your Profits With Moving Averages".

S&P 500 - 2852.50 May 14, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3155.22
Resistance 2: 3020.91
Resistance 1: 2975.35
Pivot: 2886.60
Support 1: 2841.04
Support 2: 2752.29
Support 3: 2617.98


NASDAQ Composite - 8943.72 May 14, 2020

52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 10104.67
Resistance 2: 9516.52
Resistance 1: 9318.92
Pivot: 8928.37
Support 1: 8730.77
Support 2: 8340.22
Support 3: 7752.07
        
Dow Industrials - 23625.34 May 14, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 25991.60
Resistance 2: 25002.86
Resistance 1: 24667.09
Pivot: 24014.12
Support 1: 23678.35
Support 2: 23025.38
Support 3: 22036.64
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, May 11, 2020:
11-May          None scheduled

Tuesday, May 12, 2020:
12-May   6 am   NFIB small-business index
12-May  8:30 am   Consumer price index
12-May  8:30 am   Core CPI
12-May   2 pm   Federal budget

Wednesday, May 13, 2020:
13-May  8:30 am   Producer price index

Thursday, May 14, 2020:
14-May  8:30 am   Initial jobless claims
14-May  8:30 am   Import price index

Friday, May 15, 2020:
15-May  8:30 am   Retail sales
15-May  8:30 am   Retail sales ex-autos
15-May  8:30 am   Empire state index
15-May  9:15 am   Industrial production
15-May  9:15 am   Capacity utilization
15-May  10 am   Job openings
15-May  10 am   Consumer sentiment index
15-May  10 am   Business inventories



For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Earnings: Holding Through or Getting Back In"

It's no secret that we believe in avoiding undue risk. Because earnings reports often end up surprising traders, we often suggest closing out positions before the company announces earnings. However, if a stock is moving in a solid trend (long or short) and earnings estimates support that trend, experienced traders will often elect to drastically reduce the number of shares in their position and hold them through the earnings announcement. In some cases traders jump back into the trade after the company reports better than expected earnings. This can be profitable at times, but don't chase the stock. If it has jumped more than 5% beyond your exit point, you're probably better off waiting for price to pull back to a moving average support level.

Stocks Covered in This Issue

COMMUNICATION SERVICES SECTOR

CarGurus, Inc. (CARG: Communication Services/Internet Content & Information) - SQUEEZE PLAY. A look at CARG'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 22.13 and a SELL short trigger at 20.01. Once CARG shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 2.12 and tighten to 1.06 on a 2.26 gain. CARG closed Thursday at 21.82. Earnings Report Date: Aug 03, 2020. Beta: 2.00. Market-Cap: 2.458B. Optionable.

HEALTHCARE SECTOR

Zynex, Inc. (ZYXI: Healthcare/Medical Devices) - NEW HIGH DIP. ZYXI's upward price momentum produced a brand new 52-week high just a few sessions ago. Shares have been sliding downhill since reaching that point, but the bounce that took place during Thursday's trading could be telling us the short-term decline is over. We need to confirm that sellers are exiting, so we'll wait for ZYXI to move a bit higher before buying this stock. Set your BUY trigger at 19.94, and then enter a trailing stop of 2.96. Tighten the stop to 1.48 when you accumulate a 2.42-point gain. ZYXI finished the Thursday session at 19.57. Earnings Report Date: N/A. Beta: 1.14. Market-Cap: 649.577M. Optionable.

TECHNOLOGY SECTOR

PAR Technology Corporation (PAR: Technology/Software-Application) - SQUEEZE PLAY. Traders are feeling the pressure as PAR'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 19.07. PAR's price movement will decide which entry is filled. As soon as you're in the trade, enter a 2.19 trailing stop. Tighten it to 1.09 after you get a 2.16 gain. PAR closed Thursday at 20.66. Earnings Report Date: N/A. Beta: 1.31. Market-Cap: 376.915M. Optionable.

ShotSpotter, Inc. (SSTI: Technology/Software-Application) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in SSTI, 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 22.00 and a SELL short entry at 19.69. Let SSTI's price action determine your long or short entry. Once the order is filled, place a 2.31 trailing stop, and tighten it to 1.16 upon getting a 4.52 gain. SSTI closed Thursday at 20.70. Earnings Report Date: N/A. Beta: 1.79. Market-Cap: 235.966M. 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.

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  
---------------- -------     --------    -------     ------  -------   

Currently there are no upcoming stock splits on the major US exchanges.
    

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 to all RightLine subscribers. For access, go to http://www.rightline.net and login to the Member's area.

Disclaimer

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

Click Here To Unsubscribe