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April 1, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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Thoughts On Trading ...
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"QUICK LIST"
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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" at https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/
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MARKET SUMMARY
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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
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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
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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
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TRADER'S TIP:
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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
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This section contains important technical data for the three major market averages -- the S&P 500, the Nasdaq Comp Index, and the Dow Industrial Average. For guidance on how to use this information, go to: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ 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 https://www.prorightline.com/rlch/033123SPX.jpg--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" at this link: https://prorightline.com/index.php/economic-indicator-effects/
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TRADER'S TIP:
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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
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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 recommended positions, always use the RightLine "Risk Control System" to determine the level of acceptable risk and the maximum number of shares to buy. Link: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/ ***********************************
STOCK SPLIT SUMMARY
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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 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. For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
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"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 the book "Computer Analysis of the Futures Market". He has also published an instructional DVD set entitled "Precise Exits and Entries." ======================================================================
Best of luck and have a Great Week!
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