Notes From The Editor

Do you ever think about the value of your mistakes? Most people don't. I suppose we all have blind spots within our field of vision - things that we just don't see because of our psychological makeup.

Trader behavior is often a paradox. Most newbies have little or no training in the markets, yet still expect to be successful without anyone to guide them. Experienced traders know that rules are important, but we still sometimes set rules and then break them.

The reasons for these types of conflicting behaviors are embedded deep in our brains.

Today's actions are largely the result of early childhood conditioning that established habits and beliefs long before we even knew what they were. As young children we were unaware to how silly we probably looked to our older friends and family when we tried to avoid responsibility for our actions.

Making childish excuses seemed like a good idea at the time, though now we can see that it wasn't. In the same way, our current trading behavior always seems like the right thing to do - at least at the time we do it.

When someone complains that the market has caused them grief, they are actually saying that their actions are the primary reason it happened. Have you ever noticed how most investors are reluctant to admit that they are responsible for their losses, yet they seem proud of their gains?

At first glance it seems natural to be ashamed of our mistakes and proud of our accomplishments. However, our blunders usually teach us much more than our achievements - if we are willing to learn from them.

The only truly bad mistakes are the ones that we deny. It takes courage to own up to them, much less accept them as valuable learning experiences to be embraced.

The good news is that we can start changing our old habits and beliefs by taking responsibility for our actions. A trading mistake can cost quite a bit in terms of cash, so it's always wise to get at least the same amount of value in usable experience.

When reviewed objectively, your experiences are worth far more than you ever imagined.

Trade well,

~ Thomas Sutton, Editor

Quick List

    
Stock     05/15     05/15      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

SAH       20.44      0.68     20.86     18.78        2.08/1.04      3.00
EXEL      25.76      1.01     26.25                  2.39/1.20      2.30
MLHR      20.61      0.38     21.03     19.29        1.74/0.87      2.44
NTNX      20.29      0.66     20.68                  2.03/1.01      2.02

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

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

Market Summary

Stocks finished the Friday session higher after a surprise improvement in consumer sentiment and a slower than predicted contraction in New York manufacturing activity offset reports of dismal retail sales and industrial production in April. In equities, VF Corp (VFC $52) and Applied Materials (AMAT $52) fell short of quarterly expectations, while Nike (NKE $87) reported that it is encouraged by the recovery in China and South Korea, where 100% of Nike owned stores and over 95% of partner stores are open for business. Treasury yields, gold and oil prices rallied, the USD/dollar declined modestly.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                    23,685   +60.08         -646    -2.66%
Nasdaq                  9,015   +70.84      -106.32    -1.17%
S&P 500                 2,864   +11.20          -66    -2.25%

NYSE Volume                      5.59B                       
NYSE Advancers                    1658                       
NYSE Decliners                    1268                       

Nasdaq Volume                    4.24B                       
Nasdaq Advancers                  2019                       
Nasdaq Decliners                  1190                       

                                 New Highs/Lows

                   05/08  05/11  05/12  05/13  05/14  05/15
                 --------------------------------------------
NYSE New Highs        31     34     36     16     15     29
NYSE New Lows          6     14     25     72    104     17
Nasdaq New Highs      87    119    116     42     22     58
Nasdaq New Lows       11     15     43     95    114     22
   

TRADER'S TIP: "Profits Improve With Technical Timing"

Regardless of the reasons you decide to buy a stock, Technical Analysis is always helpful when it comes to timing entries. Support and resistance on the charts may be unfamiliar to most investors, but they have a huge impact on stock price movement.

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 - 2863.70 May 15, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3217.08
Resistance 2: 3037.90
Resistance 1: 2950.80
Pivot: 2858.72
Support 1: 2771.61
Support 2: 2679.53
Support 3: 2500.35


NASDAQ Composite - 9014.56 May 15, 2020

52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 10081.67
Resistance 2: 9535.96
Resistance 1: 9275.26
Pivot: 8990.25
Support 1: 8729.55
Support 2: 8444.54
Support 3: 7898.83
        
Dow Industrials - 23685.42 May 15, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 26803.98
Resistance 2: 25211.51
Resistance 1: 24448.46
Pivot: 23619.04
Support 1: 22855.99
Support 2: 22026.57
Support 3: 20434.10
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, May 18, 2020:
18-May  8:30 am   NAHB home builders index

Tuesday, May 19, 2020:
19-May  8:30 am   Housing starts (annual rate)
19-May  8:30 am   Building permits (annual rate)

Wednesday, May 20, 2020:
20-May  10 am   Advance services

Thursday, May 21, 2020:
21-May  8:30 am   Initial jobless claims
21-May  9:45 am   Markit manufacturing PMI (flash)
21-May  9:45 am   Markit services PMI (flash)
21-May  10 am   Existing home sales (annual rate)
21-May  10 am   Leading economic indicators

Friday, May 22, 2020:
22-May          None scheduled

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 Conference Calls"

Since the SEC implemented the Fair Disclosure laws, most companies have begun allowing individual shareholders to listen in on earnings conference calls that were previously limited to analysts only. If you are tracking a stock as it approaches its scheduled earnings announcement, always look for the related conference call and mark it on your calendar. The behavior of the stock during the call can telegraph early reaction to management's explanation of earnings related events. If you can't find any mention of the call, give the firm's Investor Relations department a ring and ask when or if a call will be held.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Sonic Automotive, Inc. (SAH: Consumer Cyclical/Auto & Truck Dealerships) - SQUEEZE PLAY. Friday's trading action forced SAH's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction SAH will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 20.86 if SAH moves higher, and place your order to SELL short at 18.78 if price declines to that level. As usual follow your entry with a trailing stop, 2.08 should be sufficient. Reduce your stop to 1.04 on a 3.00 gain. SAH closed Friday at 20.44. Earnings Report Date: Jul 23, 2020. Beta: 2.66. Market-Cap: 877.281M. Optionable.

HEALTHCARE SECTOR

Exelixis, Inc. (EXEL: Healthcare/Biotechnology) - NEW HIGH DIP. After setting a recent new 52-week high, EXEL shares have since fallen from that peak as traders put some profits in the bank. Friday's intra-day bounce may very signal that the recent decline is over. Prepare for a continuation of this turnaround and "buy-the-dip" if EXEL reaches our BUY trigger set at 26.25. Follow your entry with a trailing stop of 2.39, and tighten to 1.20 on a 2.30 gain. EXEL closed Friday at 25.76. Earnings Report Date: Jul 29, 2020. Beta: 1.53. Market-Cap: 7.9B. Optionable.

INDUSTRIALS SECTOR

Herman Miller, Inc. (MLHR: Industrials/Business Equipment & Supplies) - SQUEEZE PLAY. MLHR is caught in a dilemma. The stock's compressed price range on Friday has resulted in a condition comparable to a wound up rubber band. We anticipate that this undecided equity will take off soon, but with the direction still in question we'll let upcoming market action tell us whether to buy shares or sell short. MLHR is now at 20.61. We can capture price action either way by placing a BUY trigger at 21.03 and a SELL short trigger at 19.29. Once MLHR reveals its direction, enter your triggered order and disregard the other one. As soon as your position is in place, follow up with a trailing stop of 1.74. When you acquire a 2.44 profit, tighten the stop to 0.87. Earnings Report Date: Jun 24, 2020. Beta: 1.58. Market-Cap: 1.212B. Optionable.

TECHNOLOGY SECTOR

Nutanix, Inc. (NTNX: Technology/Software-Infrastructure) - BULLISH BOUNCE. Up-trending stocks like NTNX have a tendency to bounce their way skyward rather than travel higher in a straight line. After touching down to a moving average support level on Friday, NTNX is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 20.68 if positive price action occurs. As always, follow your entry with a trailing stop. A 2.03 trailer should work well with NTNX. Tighten it to 1.01 on a 2.02 gainer. Earnings Report Date: May 27, 2020. Beta: 1.95. Market-Cap: 3.95B. 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.

Trader's Corner

"How To Draft A Trading Plan"

"Plan Your Trade and Trade Your Plan" is a mantra that we repeat on a regular basis. Why? Because we have found that traders who carefully plan each trade have a much better chance of winning in the stock market than those who don't. In fact, properly planning a trade can literally be the difference between making money and losing money.

A successful Trading Plan doesn't have to be complicated. Many traders draft their trading plans in a notebook or on index cards, while others use word processors and spreadsheets. Regardless of the method you choose, every trading plan must contain certain components to be effective. But before we get into the "essentials," let's take a quick look at a few dynamics behind "Planning Your Trade."

Before drafting a plan of action, traders will want to decide what style of trading they prefer. A broad generalization of "buy and sell stocks" doesn't work - the criteria needs to be specific. Successful traders make money in different ways, but each has a well-defined method. On the other hand, a losing trader's plan is always vague and ambiguous. In trading, it pays to be precise, so decide what you like to do and build your plan around that style.

Don't worry about getting locked in to a certain approach; you can always change it later as you gain experience. You can even draft more than one plan if you enjoy different types of trading. The best plans include a set of solid rules that never get broken, and a few elastic rules that allow for real-time decisions to be made when managing live trades. Our judgment improves as we gain experience, so it's good to allow some flexibility in less critical areas of your plan. At the same time, maintain unyielding rules in the more sensitive parts - such as Risk Control.

Okay, now let's layout the essential ingredients to include in your personal trading plan.

~ Determine Your Time Frame

The type of trading you prefer usually defines the time frame. Short term traders who enjoy a fast paced style won't find much action in weekly or monthly time frames, while less active traders generally find that the extremely short time horizons require too much time at the computer. Decide which style best suits your personality, and then select the corresponding time frame. It's usually a good idea to start by spending a few minutes each day. Begin by managing the trades using daily charts, then see if you want to shorten or lengthen the time frame. The RightLine Report offers a variety of stocks in different time frames. Due to the way these stocks are selected and the type of exit strategy used, most of the picks will work for traders who plan to hold positions anywhere from a few hours to a few weeks.

~ Locate The Best Stocks to Trade

Choose a method to determine which stocks to trade. If you are experienced in the markets you probably already have a number of ideas and sources. To make it easier for our subscribers, the Right Line Report presents a wide variety of good stock choices in every issue. They are based on an assortment of trading strategies and tactics that take advantage of predictable market behaviors.

You may also want to develop your own new methods for locating stocks. The educational section on our website at www.rightline.net presents numerous market concepts to help traders understand the nature of price movement, identify trends in every time frame, and choose the tools needed to capture profits.

~ Determine Entry Points

This can be a challenge, for there are almost as many different ways to determine entries, as there are stocks. Again, in an effort to make it easier for our subscribers, the Right Line Report presents specific entry points for every stock in each issue. The exact level to buy or sell short is based on a wide range of technical factors used by our analysts to reduce risk and optimize the potential gain. If you choose to select your own entry points, we provide a large assortment of articles to assist you in developing your own personal methods.

~ Use An Intelligent Method to Select the Number of Shares to Trade

Very few traders and investors realize the importance of balanced "Position Sizing." Most make the mistake of ignoring the size of their trading account when taking on new positions. As a result, many unknowingly join the ranks of high-risk over-traders, and soon find themselves in big trouble. Don't worry, it's easy to avoid when you have the RightLine Risk Manager to help! This simple tool is free to subscribers, but if you prefer to do the math yourself, here are the basics:

"Never risk more than 2% of your trading capital in a single trade or more than 6% of your capital at a time. For example, if you have $100,000 in your trading account, the most you should be willing to risk is $2,000. Before buying a stock, review the chart to locate the best place to put a stop loss order. If you determine that the stock requires 5-points to keep you in the trade while it is trending up, the maximum number of shares that you can afford is 400. ($2,000 maximum risk divided by 5-points = 400 shares.)"

You can see that although doing the calculation isn't terribly hard, the Risk Manager makes the job a whole lot easier!

~ Manage Risk With Stops

You may already know, but a "stop" is an order to buy at a price above or sell at a price below the current market price. Stops, or stop orders, are used to protect our capital and lock in profits. Placing stops is easy, but locating the best place to put them can be quite challenging. To assist traders with stop placement, every stock entry in the RightLine Report includes a suggested stop level. And of course, we offer plenty of help on our website for anyone who wants to learn more about managing risk with stops.

~ Determine Your Exit Strategy

After you've entered a position in a stock and it starts moving, then what? Traders have a lot of different choices when it comes to exiting trades, and the method used can make a world of difference. Some traders routinely use "trailing" stops as their exit strategy of choice, while others choose to exit when the stock hits a certain price, or breaks through a support level, or approaches a resistance level. Other traders will choose to exit based on intra-day swings or expected news releases. Some traders sell half when their target is met and let the other half ride with a trailing stop. Others sell to recover all invested capital, and only keep the stock earned with profits - essentially called free stock. This one is a wealth builder, but results in a lot of positions to manage.

When making a trading plan, remember to plan not only for the upside, but the downside too. The exit strategy is one of the most important parts of any trading plan, and it is fundamental for traders to select an exit plan before entering a trade.

Trade Planning is one of the most important skills that a trader can learn. Make it your strength and you will be well on your way to trading successfully.

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.

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