Notes From The Editor

A multiple-faceted perspective is one of the most important advantages a trader or investor can wield when confronting the challenge of squeezing profits out of a constantly-changing market. This is especially true for short-term traders who rely on price trends in different time-frames as the bread-and-butter of their strategy.

Swing traders tend to use daily charts to gauge entry and exit points. This is highly effective, since the majority of market participants also count on the daily interval to guide their trading. But what about the weekly and monthly charts? How can they improve a swing traders' results?

Considered from a psychological perspective, these intervals serve as a reminder that despite the daily media hype and constant flow of news, there are longer-term forces at work. While a daily chart might not readily reveal underlying economic trends or a company's gradual improvement, these can become visible on a weekly chart.

Viewed from a technical standpoint, the weekly and monthly intervals can also uncover trendlines, moving averages, and other important support and resistance levels. For example, weekly moving averages often serve as major price floors throughout powerful multi-month uptrends.

Monthly charts provide, at a quick glance, a Big Picture perspective of where we've been over the past several years. This interval can be particularly useful when an index or stock is trading at multi-year highs or lows; historical support/resistance might be missed on a weekly chart, but will come into focus on the monthly.

These longer-term intervals don't have to be watched constantly, but it's a good idea to refer to them weekly to see where we might be headed. And when a key level is in play, you'll want to keep tabs on that level each day, until it loses its technical significance.

Here's to profits,

Kent Barton
Senior Analyst

Holiday Note: The market will be closed Monday May 25 for the Memorial Day holiday in honor of military personnel who died while serving in the United States Armed Forces.

All of us at RightLine salute the brave women and men who protect the freedom of every US citizen.

- RightLine Staff

Quick List

    
Stock     05/22     05/22      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

NTLA      20.99      0.42     21.28     19.47        1.81/0.91      1.96
ASMB      21.04      0.36     21.32     19.63        1.69/0.84      2.24
AAN       33.98      0.28     34.62     32.16        2.46/1.23      4.08
SPR       20.95      0.33     21.38     19.45        1.93/0.96      3.58

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 modestly higher on Friday to end a week of solid performance. The upward price action was encouraged by optimism over the reopening of economies around the world, progress from the healthcare sector on possible solutions to the C-19 pandemic, and the huge monetary and fiscal policy incentives in play. In equities, shares of Splunk (SPLK $184) and NVIDIA Corporation (NVDA $361) finished the session higher, while Deere & Company (DE $141) closed lower following the release of their quarterly earnings results. Oil prices and treasury yields declined, gold and the USD/dollar climbed upward. The economic calendar didn't contain any major reports.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                    24,465    -8.96         +780     3.29%
Nasdaq               9,324.59   +39.71      +309.59     3.43%
S&P 500                 2,955    +6.94          +91     3.18%

NYSE Volume                      4.03B                       
NYSE Advancers                    1648                       
NYSE Decliners                    1275                       

Nasdaq Volume                    3.66B                       
Nasdaq Advancers                  1857                       
Nasdaq Decliners                  1369                       

                                 New Highs/Lows

                   05/15  05/18  05/19  05/20  05/21  05/22
                 --------------------------------------------
NYSE New Highs        29     45     28     34     30     26
NYSE New Lows         17      8      9      7      6      7
Nasdaq New Highs      58    107     71     88     58     72
Nasdaq New Lows       22     11     11     15     13     10
   

TRADER'S TIP: "Unbiased Trading"

Unbiased trading is a powerful tool; it allows us to take advantage of price movement that may not make sense from a news or fundamental perspective. Think about it for a second. Instead of missing out on a rally just because we don't agree that it should be taking place, isn't it better set our prejudices aside and let the market tell us what IT wants to do?

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 - 2955.45 May 22, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3082.72
Resistance 2: 3016.29
Resistance 1: 2985.87
Pivot: 2949.86
Support 1: 2919.44
Support 2: 2883.43
Support 3: 2817.00


NASDAQ Composite - 9324.59 May 22, 2020

52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 9796.52
Resistance 2: 9545.62
Resistance 1: 9435.10
Pivot: 9294.73
Support 1: 9184.20
Support 2: 9043.83
Support 3: 8792.93
        
Dow Industrials - 24465.16 May 22, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 25731.49
Resistance 2: 25073.01
Resistance 1: 24769.08
Pivot: 24414.53
Support 1: 24110.60
Support 2: 23756.05
Support 3: 23097.57
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, May 25, 2020:
25-May          None scheduled: Memorial Day holiday

Tuesday, May 26, 2020:
26-May  8:30 am   Chicago Fed national activity index
26-May   9 am   Case-Shiller home price index (year-over-year)
26-May   9 am   FHFA home price index
26-May  10 am   Consumer confidence index
26-May  10 am   New home sales

Wednesday, May 27, 2020:
27-May   2 pm   Beige book

Thursday, May 28, 2020:
28-May  8:30 am   Initial jobless claims
28-May  8:30 am   GDP second estimate (annual rate)
28-May  8:30 am   Durable goods orders
28-May  8:30 am   Core capital goods orders

Friday, May 29, 2020:
29-May  8:30 am   Advance trade in goods
29-May  8:30 am   Personal income
29-May  8:30 am   Consumer spending
29-May  8:30 am am   Core inflation
29-May  9:45 am   Chicago PMI
29-May  10 am   Consumer sentiment index (final)

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

TRADER'S TIP: "Playing The Game To Win"

Knowledge is power in the stock market - a game unlike any other. You are allowed to switch sides at will, and even step inside the opponent's huddle before making the change. Professional investors, market makers, and floor specialists do it all the time - it's a part of their regular routine. Remember that trends can and often do change direction. To take advantage of "the trend" requires that we know how to trade with the trend, no matter which way it goes.

Stocks Covered in This Issue

HEALTHCARE SECTOR

Intellia Therapeutics, Inc. (NTLA: Healthcare/Biotechnology) - SQUEEZE PLAY. NTLA traders on both sides of the fence are now locked in a head-to-head shootout. Friday'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 21.28 and a SELL short trigger at 19.47. When one of the orders is filled, cancel the remaining order and enter a 1.81 trailing stop. When you've reached a 1.96 paper profit, tighten the stop to 0.91. NTLA closed at 20.99 on Friday. Earnings Report Date: N/A. Beta: 1.62. Market-Cap: 1.078B. Optionable.

Assembly Biosciences, Inc. (ASMB: Healthcare/Biotechnology) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. ASMB found itself in this condition on Friday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 21.32 and a SELL short trigger at 19.63. When ASMB moves outside of Friday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.69 trailing stop. After you've got a 2.24 profit, tighten the stop to 0.84. ASMB closed at 21.04 on Friday. Earnings Report Date: N/A. Beta: 1.25. Market-Cap: 688.479M. Optionable.

INDUSTRIALS SECTOR

Aaron's, Inc. (AAN: Industrials/Rental & Leasing Services) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in AAN's narrowest trading range of the past seven sessions. With neither group able to take complete control on Friday, 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 34.62 and a SELL order at 32.16. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.46 trailing stop. Tighten the stop to 1.23 once you have a 4.08 gain. AAN closed Friday at 33.98. Earnings Report Date: Jul 23, 2020. Beta: 1.55. Market-Cap: 2.296B. Optionable.

Spirit AeroSystems Holdings, Inc. (SPR: Industrials/Aerospace & Defense) - 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. SPR traders reached this state of stand-off on Friday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 21.38 and a SELL short trigger at 19.45. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.93 which can be tightened to 0.96 on a 3.58 gain. SPR closed Friday at 20.95. Earnings Report Date: Jul 29, 2020. Beta: 1.50. Market-Cap: 2.211B. 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

"Market Breadth"

Have you ever noticed that just a few stocks can have a huge affect on the overall market? Both the Dow and the NASDAQ are susceptible to making a big move based on just a few moving stocks. The Dow contains only 30 stocks, so a large drop in one of its components can really affect this index. Similarly, since the NASDAQ gives more weight to its largest companies, a big move by just a few heavy hitters can dramatically change the index's end of the day result.

So how can we quickly find out whether a move in the market was driven by just a few stocks or by a majority of stocks? In other words, how can we determine market "breadth?"

The most common measurement of market breadth compares the number of advancing stocks to the number of declining stocks. There are several indicators that present the results in various formats, but they all basically deliver the same data. Each of them is based on how many stocks were up on the day, and how many were down.

The undisputed king of advancing and declining indicators is the Advance/Decline Line, or "A/D Line". When compared to the movement of a market index like the Dow or S&P 500, the A/D Line has proven to be an effective gauge of the stock market's breadth and strength.

When more stocks are advancing than declining, the A/D Line moves up, and when decliners outnumber advancers, the A/D Line moves down. Many traders feel that the A/D Line is a better indication of market strength than more frequently used indices such as the Nasdaq, Dow, or S&P 500 Index. Charting the trend of the A/D Line allows you to determine if the strength of the overall market is rising or falling.

One common way to use the A/D Line is to look for a difference of opinion between an index like the Dow and the A/D Line. Often, an end to a bear market can be anticipated when the A/D Line begins to flatten out and turn upward at the same time the Dow is still making new lows.



In the past, when a divergence develops between the Dow and the A/D Line, the Dow has typically reversed and followed the direction of the A/D Line. Sometimes a military example is used to explain the relationship between the A/D Line and the Dow. The idea is that when the soldiers (the A/D Line) refuse to follow their leaders (new highs in the Dow), then the leaders will follow the direction of the soldiers. Sort of a broad based mutiny!

Although there are AD lines for the Nasdaq and the Amex, the New York Stock Exchange (NYSE) is the most commonly used measure of market breadth. Keep in mind that the specific level of the AD line isn't important, it's the trend of the line that matters. Always check to see if it is trending in the same direction and a similar rate as the underlying market index. If the two lines aren't in sync, consider it a sign that a trend reversal may be in the near future.

The A/D Line also helps to confirm whether the market has already bottomed. If the line stays flat while the market moves higher, the rally may just be a relief rally. In the best scenario, the line will rise too. Like all other indicators the A/D Line isn't fool proof. A market bottom may move in step with the A-D line, or it may not occur for months. The A/D Line certainly has value as a timing tool, but shouldn't be used as a stand-alone decision maker.

It is always wise to consider a broad body of evidence when anticipating future price direction!

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

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