Notes From The Editor

While you might have your definition of what constitutes day trading, the SEC has its own regulatory definition. And that can make a big difference when it comes to the rules that dictate your trading strategy.

First off, the SEC defines a pattern day trader as someone who executes four or more round-trip (in-and-out) day trades within five consecutive business days. Day trades, for this purpose, refer to a stock you buy and sell during the same day.

If you don't remotely come close to this frequency of trading, pattern day trading rules have no direct impact on you and your account. However, if you like to frequently move in and out of the market, buying and selling stocks several times a day, here's what you need to know:

- To engage in pattern day trading, you need to maintain an account balance of at least $25,000. This must be a margin account. To make this happen, you'll obviously need to have necessary funds, but also need your brokerage to authorize you for a margin account.

- The brokerage can determine, on their own, whether or not you're likely to be a pattern day trader. This can be a result of the initial questions you answer when you apply for an account, or a result of your trading history with the brokerage.

- Remember that margin requirement? By being labeled a pattern day trader, you have access to a lot more leverage. As a pattern day trader, you have buying power up to four times your margin excess. For example, let's say you have $30,000 worth of equities in your account. That's $30,000 above your minimum margin. Based on the 4:1 rule, you'd be able to buy $120,000 worth of securities.

Note that this leverage isn't always a good thing. Without proper risk management, you can be slaughtered. Exercise extreme caution when trading on margin. We can't stress this enough!

The vast majority of RightLine set-ups are geared toward swing traders, who don't typically enter and exit the same equity during the same trading session. If you fall in this category too, it's still good to at least have an awareness of pattern day trading rules.

While pattern day traders don't make up the majority of the market's total volume, their margin buying and fast paced in-and-out trading can lead to heightened volatility. Their impact can be particularly strong in volatile stocks that tend to trade relatively large intraday ranges.

Here's to profits,

Kent Barton
Senior Analyst

Quick List

    
Stock     05/07     05/07      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

WHG       20.37      0.12     21.08     19.26        1.82/0.91      2.10
AX        20.48      0.36     21.48     19.72        1.76/0.88      2.62
IRMD      20.33      0.60     20.77     19.40        1.37/0.69      2.14
NSS       20.27      0.35     20.72     19.55        1.17/0.58      2.20

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

US stocks closed solidly higher on Thursday after earnings reports from a number of key firms were rewarded by traders, suggesting that the negative economic impact of the C-19 pandemic could be showing signs of stabilizing. Shares of Lyft (LYFT $32), Square (SQ $75), Peloton (PTON $44) and Paypal (PYPL $146) all surged higher after the companies released their quarterly earnings reports. In addition, progress against the virus is underway, with Moderna (MRNA $53) getting FDA approval for later-stage trials of its new vaccine candidate. Investors seemed to ignore the latest unpleasant employment data, as initial jobless filings were upwards of 3,000,000 last week. Oil prices, treasury yields and the USD/dollar all finished lower, while gold moved higher.

                        May 6, 2020            May 7, 2020    
                  --------------------   --------------------
Dow                    23,665  -218.45        23,876  +211.25
Nasdaq               8,854.39   +45.27         8,980  +125.27
S&P 500                 2,848   -20.02         2,881   +32.77

NYSE Volume                      4.98B                  5.35B
NYSE Advancers                     900                   2145
NYSE Decliners                    2030                    771

Nasdaq Volume                    3.67B                  3.92B
Nasdaq Advancers                  1324                   2255
Nasdaq Decliners                  1893                    959

                                 New Highs/Lows

                   04/30  05/01  05/04  05/05  05/06  05/07
                 --------------------------------------------
NYSE New Highs        17      5      5     23     24     27
NYSE New Lows          2      5     10      7     19     15
Nasdaq New Highs      28     20     19     47     61     66
Nasdaq New Lows        7     20     16     15     32     14
   

TRADER'S TIP: "When Your Indicators Contradict The Trend"

Due to their overly sensitive nature, some technical indicators will turn in one direction while the price trend remains in the other. A rule of thumb - whenever a price trend and indicators are in conflict, always go with price until the trend is broken.

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 - 2881.19 May 7, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 3135.56
Resistance 2: 3002.31
Resistance 1: 2916.51
Pivot: 2869.06
Support 1: 2783.26
Support 2: 2735.81
Support 3: 2602.56


NASDAQ Composite - 8979.66 May 7, 2020

52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 9490.52
Resistance 2: 9100.10
Resistance 1: 8852.52
Pivot: 8709.68
Support 1: 8462.10
Support 2: 8319.26
Support 3: 7928.84
        
Dow Industrials - 23875.89 May 7, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 26283.52
Resistance 2: 25164.05
Resistance 1: 24443.87
Pivot: 24044.58
Support 1: 23324.40
Support 2: 22925.11
Support 3: 21805.64
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, May 04, 2020:
04-May  10 am   Factory orders

Tuesday, May 05, 2020:
05-May  8:30 am   Trade deficit
05-May  9:45 am   Markit services PMI
05-May  10 am   ISM nonmanufacturing index

Wednesday, May 06, 2020:
06-May  8:15 am   ADP employment report

Thursday, May 07, 2020:
07-May  8:30 am   Initial jobless claims
07-May  8:30 am   Productivity
07-May  8:30 am   Unit labor costs

Friday, May 08, 2020:
08-May  8:30 am   Nonfarm payrolls
08-May  8:30 am   Unemployment rate
08-May  8:30 am   Average hourly earnings
08-May  10 am   Wholesale 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: "Stock Too Expensive?"

Sometimes traders are hesitant to buy a stock in the $75 to $150 range because it is priced "too high." Actually that price range holds no greater risk than a lower priced stock - if you just enter smaller positions. To do this properly, be sure to use the RightLine Risk Control Calculator 100% of the time. It converts every position to a "low risk" trade, and allows you to take advantage of the more rapid price movement that more expensive stocks often enjoy. You can access it at http://www.rightline.net/rcc/index.html using your email address and password.

Stocks Covered in This Issue

FINANCIAL SERVICES SECTOR

Westwood Holdings Group, Inc. (WHG: Financial Services/Capital Markets) - SQUEEZE PLAY. WHG traders on both sides of the fence are now locked in a head-to-head shootout. Thursday'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 21.08 and a SELL short trigger at 19.26. When one of the orders is filled, cancel the remaining order and enter a 1.82 trailing stop. When you've reached a 2.10 paper profit, tighten the stop to 0.91. WHG closed at 20.37 on Thursday. Earnings Report Date: Jul 29, 2020. Beta: 1.57. Market-Cap: 170.545M. Optionable.

Axos Financial, Inc. (AX: Financial Services/Banks-Regional) - 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. AX found itself in this condition on Thursday 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 21.48 and a SELL short trigger at 19.72. When AX moves outside of Thursday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.76 trailing stop. After you've got a 2.62 profit, tighten the stop to 0.88. AX closed at 20.48 on Thursday. Earnings Report Date: Jul 28, 2020. Beta: 1.43. Market-Cap: 1.222B. Optionable.

HEALTHCARE SECTOR

IRadimed Corporation (IRMD: Healthcare/Medical Devices) - 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. IRMD traders reached this state of stand-off on Thursday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 20.77 and a SELL short trigger at 19.40. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.37 which can be tightened to 0.69 on a 2.14 gain. IRMD closed Thursday at 20.33. Earnings Report Date: N/A. Beta: 1.31. Market-Cap: 244.184M. Not Optionable.

N/A SECTOR

NuStar Logistics, L.P. SB NT FX/FL 43 (NSS: N/A/N/A) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in NSS's narrowest trading range of the past seven sessions. With neither group able to take complete control on Thursday, 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 20.72 and a SELL order at 19.55. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.17 trailing stop. Tighten the stop to 0.58 once you have a 2.20 gain. NSS closed Thursday at 20.27. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.579B. 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.

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