Notes From The Editor

The stock market is a lot like the weather. It always does what it wants to do regardless of what anyone thinks about it. Stocks sometimes race higher for no apparent reason, thrilling investors with the unexpected gains. At other times the bottom drops out unexpectedly, or stocks hardly move at all.

Here are a few things to consider when the market weather doesn't quite meet your expectations ...

~ The market is much bigger than any of us. There is nothing we can do to control or change it. However, we can certainly make wise trading choices and take intelligent action.

~ The market isn't aware of our desires. It doesn't care about what we want. We don't have to take it personally, that's just the way it is.

~ The market doesn't "make" us feel any particular way. Our feelings about the market only exist in our minds. These feelings are the result of our individual thoughts and beliefs.

~ We can decide what to believe. As we shape our beliefs to reflect the "real" market, our feelings about the market change too.

~ The market offers us opportunity for both profit and pain. We choose between the two.

~ Reacting emotionally to price movement disrupts our ability to make smart decisions.

~ The market can't hurt us unless we let it. Risk Control provides a simple way to stay safe and dry during stormy weather - even when others are getting soaked!

Trade well,

- Thomas Sutton, Editor

Quick List

    
Stock     05/19     05/19      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

OSTK      17.87      2.69     18.50                  3.75/1.88      3.48
REAL      12.44      0.27     12.77                  1.36/0.68      2.18
ZUMZ      20.02     -0.72     21.12     19.30        1.82/0.91      2.68
KBR       20.07     -0.29     21.00     19.46        1.54/0.77      1.74

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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Market Summary

Stocks closed lower on Tuesday as optimism from progress of a potential COVID-19 vaccine and the reopening of global economies faced off with mixed earnings and downbeat data for the market to consider. The single report on Tuesday's economic calendar showed housing starts declining more than predicted. Equities news was highlighted by the retail sector as Walmart (WMT $125) beat expectations for the quarter and withdrew its guidance, while Home Depot (HD $238) reported mixed results and also witheld its outlook. Kohl's Corporation (KSS $17) announced a bigger loss than expected, yet Southwest Airlines (LUV $28) offered upbeat bookings results so far in May. The USD/dollar and treasury yields finished the session lower, gold and oil prices were higher.

                        May 18, 2020           May 19, 2020   
                  --------------------   --------------------
Dow                    24,597  +911.95        24,207  -390.51
Nasdaq               9,234.83  +220.27      9,185.10   -49.72
S&P 500                 2,954   +90.21         2,923   -30.97

NYSE Volume                      6.53B                  5.22B
NYSE Advancers                    2647                   1141
NYSE Decliners                     331                   1801

Nasdaq Volume                    4.37B                  4.16B
Nasdaq Advancers                  2684                   1234
Nasdaq Decliners                   603                   2043

                                 New Highs/Lows

                   05/12  05/13  05/14  05/15  05/18  05/19
                 --------------------------------------------
NYSE New Highs        36     16     15     29     45     28
NYSE New Lows         25     72    104     17      8      9
Nasdaq New Highs     116     42     22     58    107     71
Nasdaq New Lows       43     95    114     22     11     11
   

TRADER'S TIP: "Charles Dow's Three Trends"

Charles Dow - who developed the Dow Jones Averages - taught that there are always three "trends" occurring in the stock market at the same time.

~ The first trend is the Primary Trend, which can be either bullish or bearish. These trends tend to last anywhere from a year up to several years, and can sometimes run for much longer.

~ The next trend is the Secondary Trend. These "counter trends" move in the opposite direction to the Primary Trend, and usually last anywhere from a week to a few months. They present themselves as rallies in Bear markets and pullbacks, or corrections in Bull markets. Secondary trends will often retrace between one-third to two-thirds of the most recent prior secondary trend.

~ The third trend is the Minor Trend. These are the very short-term intra and inter day trends that Dow referred to as "Tertiary Movements." Though it may seem like a paradox at first, it's easy to see these three separate trends at work simultaneously when looking at stock charts in monthly, weekly, daily, and intra-day time frames.

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 - 2922.94 May 19, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: UP
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 - 9185.10 May 19, 2020

52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: UP
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 - 24206.86 May 19, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: UP
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: "Paid Two Ways"

"When it comes to trading the stock market, everyone is paid two ways - in money and experiences. Learn from the experiences first, and the money will follow."

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Overstock.com, Inc. (OSTK: Consumer Cyclical/Internet Retail) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, OSTK fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 17.87, plan to buy shares at 18.50 and use a 3.75 trailing stop. Tighten the stop to 1.88 on a 3.48 gain. Earnings Report Date: Aug 06, 2020. Beta: 3.62. Market-Cap: 720.622M. Optionable.

The RealReal, Inc. (REAL: Consumer Cyclical/Specialty Retail) - BULLISH BOUNCE. REAL has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Tuesday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return REAL to the previously established uptrend. The Bullish Bounce set-up is the basis for our BUY entry, so be ready to go long on a rise to our trigger at 12.77. Set a trailing stop of 1.36, tightening to 0.68 on a 2.18 profit. REAL closed at 12.44 on Tuesday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.081B. Optionable.

Zumiez Inc. (ZUMZ: Consumer Cyclical/Apparel Retail) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into ZUMZ. A move to the upside will trigger our BUY entry at 21.12, while a drop to 19.30 will trigger our SELL short entry. Follow your position with a 1.82 trailing stop. Tighten the stop to 0.91 once you have a 2.68 gain. ZUMZ closed Tuesday at 20.02. Earnings Report Date: Jun 04, 2020. Beta: 1.80. Market-Cap: 508.71M. Optionable.

INDUSTRIALS SECTOR

KBR, Inc. (KBR: Industrials/Engineering & Construction) - 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 KBR's case we will enter a BUY should it reach the 21.00 level, or a SELL short trade if it drops to 19.46. As usual a trailing stop is essential, 1.54 which should be tightened to 0.77 on a 1.74 gain. KBR closed Tuesday at 20.07. Earnings Report Date: Jul 29, 2020. Beta: 1.21. Market-Cap: 2.856B. 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.

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