Notes From The Editor

How To Trade Morning Reversals

The daily trend for the Nasdaq, Dow and S&P 500 is now up. Up trending markets often experience early morning moves to the downside, and then reverse to move above the opening price by mid-day. These reversals frequently signal the beginning of powerful price moves in the direction of the original up trend.

The setup & trigger for this type of trade is pretty simple. Here's how to trade Morning Reversals...

1) The Trade Setup - Watch for the market to move down from the open price and then reverse sometime during the first half of the day. To qualify for this trade the range of the down movement should be less than half of the 10-day Average True Range for the stock you're trading.

For example, if the ATR - Average True Range - is 4, the downward movement of the stock from the open price to the point of reversal should be 2 points or less. (points = dollars)

2) Entry Trigger - Once you see that a reversal is probably underway, place a buy-stop order just above the high of the day. Here's the info to determine the exact amount to place your enter price above the high:

For stocks priced up to .  .  .  $10 .  .  .  .  .  .  .  .  Add 0.11

For stocks priced from .  .  .  $10.01 to $20 .  .  .  Add 0.16

For stocks priced from .  .  .  $20.01 to $50 .  .  .  Add 0.26

For stocks priced from .  .  .  $50.01 to $100 .  .  .  Add 0.51

For stocks priced over .  .  .  $100 .  .  .  .  .  .  .  .  Add 1.01

Quick List

    
Stock     04/14     04/14      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

DOOO      20.32      0.46     20.71     18.69        2.02/1.01      6.22
LZB       21.10      0.08     22.15     20.22        1.93/0.96      4.16
LKQ       21.44      0.10     22.33     20.37        1.96/0.98      5.06
PPC       20.08      0.49     20.56     19.05        1.51/0.76      3.10

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 higher on Tuesday as the first quarter earnings season kicked off with Dow Industrial Average member Johnson & Johnson (JNJ $146) beating profit expectations and raising its dividend. In light economic news, import prices declined in March but at a lower-than-expected rate. Oil remained under pressure as the recent record OPEC production cut appears to have failed to boost prices, treasury yields were mostly higher, the USD/dollar dollar declined, while gold finished the session higher.

                        Apr 13, 2020           Apr 14, 2020   
                  --------------------   --------------------
Dow                    23,391  -328.60        23,950  +558.99
Nasdaq               8,192.43   +38.85      8,515.74  +323.32
S&P 500                 2,762   -28.19         2,846   +84.43

NYSE Volume                      5.36B                  5.61B
NYSE Advancers                     751                   2229
NYSE Decliners                    2214                    747

Nasdaq Volume                    3.16B                  3.73B
Nasdaq Advancers                  1238                   2349
Nasdaq Decliners                  1991                    928

                                 New Highs/Lows

                   04/07  04/08  04/09  04/09  04/13  04/14
                 --------------------------------------------
NYSE New Highs         7      7     12      0     11     21
NYSE New Lows         16      6      2      0      9      6
Nasdaq New Highs       9     10     17      0     19     31
Nasdaq New Lows       38     24     16      0     19     19
   

TRADER'S TIP: "The Psychology of Psychology"

In the stock market, psychology obviously plays a huge role in the dynamics of sometimes frenzied, sometimes subdued human beings - especially when substantial sums of cash get thrown in the mix. It's just one of the unique characteristics of social cultures, and we're all affected at some point or another. Remember that trade you planned out so perfectly, entered so carefully, and then so inexplicably abandoned it when your confidence waivered? We've all been there.

To help overcome that recurring possibility, consider the following:

1. Use a trading system that requires you to execute ALL aspects of your plan at the beginning of each trade, not just entry points.

2. Keep a trading log. Even if never revisited for analytical purposes, they provide a written reminder of your ability to stick with your plan. To boot, it's in your own handwriting, which can be pretty persuasive when self-doubt rears its ugly head.

3. Remove actively traded stocks from your trading program's topmost page. That prevents your natural curiosity from lulling you into ticker-tape-fixation, which tends to breed suspicion over each and every tick.

Try these ideas for starters, they have been shown to help traders better manage the potential psychological pitfalls of the markets.

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 - 2846.06 April 14, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 2285.71
Resistance 2: 2041.71
Resistance 1: 1020.85
Pivot: 1797.71
Support 1: 776.85
Support 2: 1553.71
Support 3: 1309.71


NASDAQ Composite - 8515.74 April 14, 2020

52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 6502.14
Resistance 2: 5892.02
Resistance 1: 2946.01
Pivot: 5281.90
Support 1: 2335.89
Support 2: 4671.78
Support 3: 4061.66
        
Dow Industrials - 23949.76 April 14, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 19864.92
Resistance 2: 17549.56
Resistance 1: 8774.78
Pivot: 15234.20
Support 1: 6459.42
Support 2: 12918.84
Support 3: 10603.48
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, April 13, 2020:
13-Apr          None scheduled

Tuesday, April 14, 2020:
14-Apr  8:30 am   Import price index

Wednesday, April 15, 2020:
15-Apr  8:30 am   Retail sales
15-Apr  8:30 am   Retail sales ex-autos
15-Apr  8:30 am   Empire state index
15-Apr  9:15 am   Industrial production
15-Apr  9:15 am   Capacity utilization
15-Apr  10 am   Business inventories
15-Apr  10 am   Homebuilders' index
15-Apr   2 pm   Beige Book

Thursday, April 16, 2020:
16-Apr  8:30 am   Weekly jobless claims
16-Apr  8:30 am   Housing starts
16-Apr  8:30 am   Building permits
16-Apr  8:30 am   Philly Fed manufacturing index

Friday, April 17, 2020:
17-Apr          None scheduled



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

TRADER'S TIP: "Planning Entries"

Typically when our analysts determine entry points, they evaluate setups from more than one perspective. They usually look at a relatively longer-term chart when determining the underlying trend, then use shorter-term analysis to figure out where in that longer trend the stock currently is. For example, if a stock sits mired in a downtrend, but is nearing the lower edge of the trading range, we anticipate a potential long bounce entry yet use a relatively tight stop since the prevailing winds are pressuring prices downward. It's a matter of integrating BOTH perspectives when formulating a plan.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

BRP Inc. (DOOO: Consumer Cyclical/Recreational Vehicles) - SQUEEZE PLAY. The ticker for Tuesday's session shows DOOO is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 20.71 and a SELL short trigger at 18.69. When DOOO starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 2.02 trailing stop. Upon reaching a 6.22 profit, resize the stop to 1.01. Earnings Report Date: N/A. Beta: 2.59. Market-Cap: 1.778B. Not Optionable.

La-Z-Boy Incorporated (LZB: Consumer Cyclical/Furnishings, Fixtures & Appliances) - SQUEEZE PLAY. Tuesday's trading session left LZB in a very narrow price range after buyers and sellers fought to a near stalemate. Both sides are looking for some traction, and a breakout either way could provide a nice gain in the short term. To get aboard, set your BUY trigger at 22.15 and your SELL short trigger at 20.22. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.93 trailing stop. Once you have a 4.16 profit, reduce the stop to 0.96. Earnings Report Date: Jun 15, 2020. Beta: 1.06. Market-Cap: 971.29M. Optionable.

LKQ Corporation (LKQ: Consumer Cyclical/Auto Parts) - SQUEEZE PLAY. LKQ is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 22.33 and a SELL short entry at 20.37. Once your trade is filled, enter a 1.96 trailing stop. Tighten it to 0.98 after a 5.06 gain. LKQ closed on Tuesday at 21.44. Earnings Report Date: Apr 29, 2020. Beta: 1.56. Market-Cap: 6.597B. Optionable.

CONSUMER DEFENSIVE SECTOR

Pilgrim's Pride Corporation (PPC: Consumer Defensive/Packaged Foods) - SQUEEZE PLAY. PPC shareholders know what it feels like to be squeezed. Tuesday's slim price range reveals uncertainty on both sides of the table, a situation which often resolves itself by either Bears or Bulls quickly gaining a clear advantage. The question is "who will win?" Near-term market action tell us whether we should sell short or we should buy shares instead. PPC closed Tuesday at 20.08. The plan is to enter in the right direction by placing a BUY trigger at 20.56 and a SELL short trigger at 19.05. Once PPC establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.51. After you've collected a 3.10 profit, tighten the stop to 0.76. Earnings Report Date: Apr 28, 2020. Beta: 0.93. Market-Cap: 5.004B. 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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