Notes From The Editor

Trading can challenge our instincts. In order to be effective, we have to resist our natural inclinations on a regular basis. This involves more than just planning to use a particular method that brings structure to our intentions. We also have to follow through and take action, which means dealing with powerful emotional forces.

Trading requires us to confront and overcome psychological barriers. Since doubt and fear constantly influence the markets, we have to remember that it's normal for us to sense them. Sensing doubt and fear isn't the same as being afraid. It's just a form of awareness ... the same type of awareness that pilots become accustomed to when they look out of the plane and see how high they are flying.

Okay, let's dig deeper for a minute. Since fear is a constant in the stock market, we can turn it to our advantage. How? By using it to become more capable and confident. Our confidence and ability grows quickly when we're exposed to reasonably stressful challenges on a regular basis. As our skills improve, so do our results. This simply means that being aware of the negative effect fear has on the market enables us to make better choices and take direct action to make more money trading. Remembering this concept lets us deal effectively with any fears in our trading environment.

Excessive hope - which I call "semi-desperate-wishful-thinking" - often intensifies fear. It almost always causes traders to hold onto positions much longer than they should. On the other hand, confidence that your carefully prepared exit strategy can keep a trade open long enough to develop into a winner will keep you on track ... even when fear and doubt are shouting "get out early!"

Confidence is an extremely powerful component of any winning strategy. Though it has a magical effect, it isn't magic. It is a natural byproduct of understanding the principles beneath your trading methods, and routinely putting them into action. Traders who do understand this and believe in what they are doing become unstoppable.

The temptation to quit isn't hard to overcome when we choose the right frame of mind. Giving up insures failure, while persistence does just the opposite. Realizing that each of these conflicting actions result from different attitudes allows us to select our point of view ... for maximum benefit.

When feeling hesitant about making choices, always remember the old saying "Good judgment comes from experience, and experience comes from bad judgment." Life continuously gives us opportunities to learn how to replace the bad with good and then the good with the even better. Change is inevitable, so we might as well choose the best routes to take along the journey. With this in mind, let's do our best to trade our best. And when we don't, let's make the best of it anyway.

Trade Well!

- Thomas Sutton, Editor

Quick List

    
Stock     05/28     05/28      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

DAO       22.07     -0.76     22.77     21.19        1.58/0.79      2.56
TBIO      20.23      0.60     20.83     18.62        2.21/1.10      2.72
IMAB      24.35      0.10     26.11     23.55        2.56/1.28      3.14
SPT       24.24     -0.68     25.17     23.27        1.90/0.95      2.44

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 Thursday following mixed economic news showing weekly initial unemployment claims have continued to decelerate, durable goods orders fell by a smaller amount than expected, and pending home sales declined. In earnings headlines, Dollar Tree (DLTR $98), Toll Brothers (TOL $32) and Dollar General (DG $184) all beat quarterly profit estimates, while HP (HPQ $15) disappointed shareholders and issued weak guidance for the upcoming quarter. Gold and oil gained ground, the USD/dollar was lower and treasury yields finished mixed.

                        May 27, 2020           May 28, 2020   
                  --------------------   --------------------
Dow                    25,548  +553.16        25,401  -147.63
Nasdaq                  9,412   +72.14         9,369   -43.37
S&P 500                 3,036   +44.36         3,030    -6.40

NYSE Volume                      6.43B                  5.46B
NYSE Advancers                    2421                   1230
NYSE Decliners                     550                   1724

Nasdaq Volume                    4.48B                  4.08B
Nasdaq Advancers                  2254                   1097
Nasdaq Decliners                  1009                   2159

                                 New Highs/Lows

                   05/21  05/22  05/25  05/26  05/27  05/28
                 --------------------------------------------
NYSE New Highs        30     26      0     42     21     37
NYSE New Lows          6      7      0      3      7      1
Nasdaq New Highs      58     72      0    125     49     84
Nasdaq New Lows       13     10      0     11     12     11
   

TRADER'S TIP: "Adapting To A Changing Market"

One of the key attributes of a successful trader is the ability to adapt to changing markets. It isn't always easy, for change comes in many forms, and is caused by a wide range of economic, political, social, regulatory, and technical forces. It can occur slowly or abruptly, and sometimes affects a large number of investors, or just a small group. But no matter what the causes market change, and how fast it takes place, eventually everyone who participates in the market either learns to adapt, or pays the price. Even normal "bull to bear and back" market cycles require that we adapt to change, to recognize when the shift between up and down trends is taking place. And though many investors have been conditioned to think that the only defense against a bear market is to wait it out, strategies that take advantage of the inevitable short-term counter-trend rallies, and short stocks in the direction of the negative primary trend can turn a bear market into a bull!

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 - 3029.73 May 28, 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 - 9368.99 May 28, 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 - 25400.64 May 28, 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: "Using The Gap Open Tactic When Selling Short"

The Gap Open Tactic works as well when we sell short as it does when we buy a stock. If the stock gaps down at the open, wait for it to take out its low of the first half-hour then enter 0.25 below that point.

For more on the Gap Open Tactic go to: http://www.rightline.net/education/gapopen.html.

Stocks Covered in This Issue

COMMUNICATION SERVICES SECTOR

Youdao, Inc. (DAO: Communication Services/Internet Content & Information) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in DAO, 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 22.77 and a SELL short entry at 21.19. Let DAO's price action determine your long or short entry. Once the order is filled, place a 1.58 trailing stop, and tighten it to 0.79 upon getting a 2.56 gain. DAO closed Thursday at 22.07. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 2.467B. Not Optionable.

HEALTHCARE SECTOR

Translate Bio, Inc. (TBIO: Healthcare/Biotechnology) - SQUEEZE PLAY. Traders are feeling the pressure as TBIO'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 20.83 and a SELL short entry at 18.62. TBIO's price movement will decide which entry is filled. As soon as you're in the trade, enter a 2.21 trailing stop. Tighten it to 1.10 after you get a 2.72 gain. TBIO closed Thursday at 20.23. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.273B. Optionable.

I-Mab (IMAB: Healthcare/Biotechnology) - SQUEEZE PLAY. Thursday's trading action forced IMAB'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 IMAB 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 26.11 if IMAB moves higher, and place your order to SELL short at 23.55 if price declines to that level. As usual follow your entry with a trailing stop, 2.56 should be sufficient. Reduce your stop to 1.28 on a 3.14 gain. IMAB closed Thursday at 24.35. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.408B. Not Optionable.

TECHNOLOGY SECTOR

Sprout Social, Inc. (SPT: Technology/Software-Application) - SQUEEZE PLAY. A look at SPT'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 25.17 and a SELL short trigger at 23.27. Once SPT shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.90 and tighten to 0.95 on a 2.44 gain. SPT closed Thursday at 24.24. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.221B. 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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