Notes From The Editor

Thoughts On Trading ...

Trading stocks for a living is not your average job. For example, if you trade from home you probably have a commute to work of less than one-minute. Yep, one minute. While everyone else gets up early to fight traffic and wait for their coffee in the Starbucks drive-thru, you slip on your most comfortable clothes then casually stop by your kitchen for a breakfast snack. While others are running from the parking lot to the time clock, you've already sat down in front of your computer and planned out your trading day. Talk about low stress ...

Trading for a living gives you exactly what every human being craves .. freedom! There's also the potential to make plenty of money. You can forget about all of the crazy job drama you once endured on a daily basis. It disappears. Plus there's no boss telling you what to do and how to do it. No more boring meetings with fellow corporate captives or lengthy interrogations by egotistical supervisors. You have plenty of time to do whatever you choose. It's all up to you.

I remember reading a note from a college student who had never bought or sold a stock in her life. She said she was going to trade stocks during the summer instead of getting a regular job. Apparently someone had told her just how easy it is to make a lot of money trading, so she decided to dive right in.

Time for a reality check!

Just because trading is a wonderful job doesn't mean a beginner with no experience can easily make a living doing it. That would be like thinking you could get a summer job as a doctor even though you've never been to med school.

Anyone who trades for a living knows it takes a few years to learn the skills needed to be successful. Though RightLine methods and resources help steamline the process, even the most talented traders spend a lot of time and money getting a good trading education.

The sooner you get started, the faster things improve ...

Fortunately, the Internet has opened up a whole new world for anyone who is interested in learning how to trade stocks online. In addition, the huge volume of online brokerage transactions over the past decade has dramatically lowered the cost of trading commissions.

This powerful mixture of information and economy has resulted in lower risk for new traders and higher profits for experienced traders. When you add in the convenience, the amount of money saved on transportation, and the tax benefits of working from home, you can easily see why so many people are waking up to the remarkable benefits of trading stocks.

Here's to the weekend!

- Thomas Sutton, Editor

Quick List

    
Stock     03/31     03/31      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

AVD       21.88      0.14      22.2                  1.32/0.66      1.36
IPI       27.60      0.72     27.97     26.04        1.93/0.97      3.24
JBSS      96.92      0.72     98.51     93.45        5.06/2.53      4.88
SM        28.16      0.13     28.88     27.16        1.72/0.86      3.06
LNC       22.47      0.63     22.78     21.24        1.54/0.77      2.72

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 more on controlling risk go to the RightLine Risk Control System

For a glossary of terms unique to The RightLine Report go to: Glossary

Questions? Send us an email using our Contact Form.

Market Summary

US stocks were higher on Friday, the final session of the first quarter for 2023, following news that the Federal Reserve Bank's preferred inflation gauge declined compared to the prior month. Though the annual increases are still higher than the Fed's 2% inflation target, the market typically welcomes any evidence that confirms the central bank's interest rate hikes during the past year are slowing inflation. The hope is that the Fed Open Market Committee will become less aggressive after having raised its benchmark lending rate near five percentage points in a short span. In other economic headlines, the University of Michigan's consumer sentiment index dipped in March, its first decline in four months. Gold and the 10-year treasury yield were lower, oil prices were higher.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 33,274.15   415.12     +1036.62     3.22%
Nasdaq              12,221.91   208.44      +397.95     3.37%
S&P 500              4,109.31    58.48      +138.32     3.48%

NYSE Volume                      4.55B                       
NYSE Advancers                   2,506                       
NYSE Decliners                     506                       

Nasdaq Volume                    5.55B                       
Nasdaq Advancers                 3,159                       
Nasdaq Decliners                 1,293                       

                                 New Highs/Lows

                   03/24  03/27  03/28  03/29  03/30  03/31
                 --------------------------------------------
NYSE New Highs        23     34     27     41     44     65
NYSE New Lows        260     34     50     20     16     19
Nasdaq New Highs      42     63     43     68     75     95
Nasdaq New Lows      333    147    147    143    153    142
   

TRADER'S TIP: "Stubborn?"

Is it really wise to fight the market? The tendency for new traders to stubbornly hold onto losing positions usually results in deep regret. Cut losses quick, and get on to the next trade. Remember, only the market is ALWAYS right. No one else.

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Improve Your Trading With Moving Averages".

S&P 500 - 4109.31 March 31, 2023

52-Week High: 4593.45
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4375.63
Resistance 2: 4216.41
Resistance 1: 4162.86
Pivot: 4057.19
Support 1: 4003.64
Support 2: 3897.97
Support 3: 3738.75

NASDAQ Composite - 12221.91 March 31, 2023

52-Week High: 14534.38
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 13214.08
Resistance 2: 12621.18
Resistance 1: 12421.54
Pivot: 12028.29
Support 1: 11828.64
Support 2: 11435.39
Support 3: 10842.49
        
Dow Industrials - 33274.15 March 31, 2023

52-Week High: 35492.22
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 34975.85
Resistance 2: 33961.57
Resistance 1: 33617.86
Pivot: 32947.29
Support 1: 32603.58
Support 2: 31933.01
Support 3: 30918.73
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

MONDAY, April 3					
8:30 am	St. Louis Fed President Bullard speaks				
9:45 am	S&P final U.S. manufacturing PMI
10:00 am	ISM manufacturing	
10:00 am	Construction spending
4:15 pm	Fed Gov. Cook speaks	
			
TUESDAY, April 4					
10.00 am	Factory orders	
10:00 am	Job openings	
6:00 pm	Cleveland Fed President Mester speaks
				
WEDNESDAY, April 5					
8:15 am	ADP employment	
8:30 am	U.S. trade balance	
9:45 am	S&P final U.S. services PMI	
10:00 am	ISM services	

THURSDAY, April 6					
8:30 am	Initial jobless claims
8:30 am	Continuing jobless claims	
10:00 am	St. Louis Fed President Bullard speaks
				
FRIDAY, April 7					
8:30 am	U.S. employment report	
8:30 am	U.S. unemployment rate	
8:30 am	Average hourly wages	
8:30 am	Average hourly wages (year over year)	
3:00 pm	Consumer credit

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

TRADER'S TIP: "Over Extended"

Here is a quick and easy way to determine if a stock that is trending higher is "over extended." Compare the current distance between the price and the 22-DMA to previous weeks or months. If the current price is well beyond the average distance, the stock is probably overextended. This often occurs after a stock has risen sharply for several days in a row. The same comparison can be used on stocks that are trending lower and are about to reach the end of their recent drop.

Stocks Covered in This Issue

BASIC MATERIALS SECTOR

American Vanguard Corporation (AVD: Basic Materials/Agricultural Inputs) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday AVD seemed intent on initiating a rebound. With moving average support nearby, AVD is at a logical place for Bulls to regroup and extend the familiar uptrend that shareholders have become accustomed to. On continued buying, plan on taking long entries with a BUY at 22.2. Manage risk with a 1.32 stop. Tighten your stop to 0.66 when you have a 1.36 profit. AVD ended the day at 21.88. Earnings Report Date: May 02, 2023. Beta: 0.92. Market-Cap: 644.937M. Optionable.

Intrepid Potash, Inc. (IPI: Basic Materials/Agricultural Inputs) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in IPI'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 27.97 and a SELL order at 26.04. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.93 trailing stop. Tighten the stop to 0.97 once you have a 3.24 gain. IPI closed Friday at 27.60. Earnings Report Date: May 01, 2023. Beta: 2.02. Market-Cap: 365.885M. Optionable.

CONSUMER DEFENSIVE SECTOR

John B. Sanfilippo & Son, Inc. (JBSS: Consumer Defensive/Packaged Foods) - 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 JBSS's case we will enter a BUY should it reach the 98.51 level, or a SELL short trade if it drops to 93.45. As usual a trailing stop is essential, 5.06 which should be tightened to 2.53 on a 4.88 gain. JBSS closed Friday at 96.92. Earnings Report Date: Apr 25, 2023. Beta: 0.30. Market-Cap: 1.103B. Optionable.

ENERGY SECTOR

SM Energy Company (SM: Energy/Oil & Gas E&P) - 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. SM 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 28.88 and a SELL short trigger at 27.16. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.72 which can be tightened to 0.86 on a 3.06 gain. SM closed Friday at 28.16. Earnings Report Date: Apr 26, 2023. Beta: 4.42. Market-Cap: 3.46B. Optionable.

FINANCIAL SERVICES SECTOR

Lincoln National Corporation (LNC: Financial Services/Insurance-Life) - SQUEEZE PLAY. Trader indecision has put LNC squarely in the center of a Bull versus Bear standoff. This tight spot should soon give way to a clear winner in the short-term, and we want to be in position for the move. To do that we've set a BUY entry at 22.78 and a SELL short entry at 21.24. Now it's up to LNC to show us which entry will be filled. Once the trade is underway place a 1.54 trailing stop, which can be tightened to 0.77 after you achieve a 2.72 profit. LNC closed on Friday at 22.47. Earnings Report Date: May 02, 2023. Beta: 1.79. Market-Cap: 3.984B. 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  
---------------- -------     --------    -------     ------  -------   

NOTE: The number of stock split announcments goes up during Bull markets, 
and goes down during Bear market cycles. There are currently no upcoming 
stock splits that meet RightLine's proprietary criteria for split ratio, 
trading volume and price action.      

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

"Moving Average Crossovers May Not Be The Best Entry Signals"

There are many ways of using moving averages to trade but by far the most common method is to trade when a short-term moving average crosses over a longer term moving average. For example, if the 10-day MA crosses above the 30-day MA we typically assume that we have a new buy signal.

Let's stop for a minute and think about what exactly is occurring at the point of a crossover. When the 10-day MA and the 30-day MA are at the same price, the trend is not nearly as clear as it should be. What we are really observing at the crossover point is that the average of the last 30 prices is exactly the same as the average of the last 10 prices.

If we are looking for trends to trade, this equal relationship of the two moving averages is not a reliable or logical indication of a trend. In an upward trending market the average prices over the last 10 days should be much higher than the average of the last 30 days. By implementing new trades at crossover points we are limiting our trading to points that may not clearly reflect what we should be doing.

For best results in a trend-following system we want to be trading when the trend is clear and reliable; not when the trend is confused and questionable.

Instead of trading at crossovers we should be implementing our trades when the moving averages are parallel or when the short-term moving average is moving farther away from the longer-term moving average. Perhaps the short term MA should remain a minimum of some units of Average True Range above the longer term MA for several days.

I believe that this procedure would give us more reliable and more frequent entry signals in the direction of the prevailing trend, which is exactly what we want. To identify the most reliable trends we want to see the slopes of various moving averages all moving steadily in the same direction and not crossing back and forth.

Take a look at a chart of any market with a strong trend. You will see that the moving averages are not crossing back and forth repeatedly. They will be moving in the same general direction in a more or less parallel fashion. Now look at a chart of a non-trending market. As this market moves sideways the moving averages will be crossing back and forth very frequently.

Look at the implications of this simple examination of the charts. If we are trading the crossovers we will be trading most frequently in non-trending markets and trading most infrequently in strongly trending markets. Is that what we want? No, it's obviously not what we want. We want just the opposite. We want frequent entry opportunities in trending markets and we want to avoid as many trades as possible in non-trending markets.

~ Chuck Lebeau

*********************

Chuck LeBeau is the co-author of "Computer Analysis of the Futures Market" and has also published an instructional DVD set entitled "Precise Exits and Entries."

A simple yet powerful tool, the Risk Control Calculator helps you manage risk by recommending a maximum number of shares to purchase. Available in the RightLine Member's Area.

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