April 16, 2020 - The RightLine Report
Notes From The Editor
One of the best parts about being actively involved in the market is that it gives you a front-row seat to the daily happenings, and puts you in touch with its ever-changing pulse. But the knowledge and insight you gain from observing stocks isn't limited to short-term trades; it can also help you with longer-term trading, or even with investing.
In the course of pursuing daytrading, swing trading, or other short-term set-ups, you'll inevitably run across stocks that also look great from a longer-term perspective. This is powerful stuff! When you find one of those stocks, make it a point to keep an eye on it - not just over the coming days, but for several weeks or months.
For example, let's say a stock has been trading in a large ascending channel for a few months. You first notice the stock when it's in the middle of that channel. Although that's not the best place to jump onboard, you know that a pullback and rebound from the bottom of the channel could afford a great longer-term entry point - especially if the market is in Bull mode. Similarly, a rollover from the top of the channel might offer a bearish entry point.
Using this simple observational technique, you can gradually build an evolving list of potential set-ups. This will add a powerful element to your trading strategy: time. Using longer-term set-ups, you can take advantage of gradually-evolving trends and underlying market tendencies that unfold over weeks and months, rather than days.
And what about stop placement? As a general rule of thumb, it's a good idea to give these trades much more room to breathe; you don't want to get stopped out by intraday "noise." One idea is to take a look at the stock's typical trading range over the course of a week, and then double it. This would be your initial stop. Also be aware of any upcoming earnings reports or other scheduled news announcements that might influence price action.
The market is as flexible as you want it to be. Customize your trading strategy to your own personal goals and preferences. Work with the flow of the market, rather than against it. Your account will thank you!
Here's to profits,
Kent Barton
Senior Analyst
Stocks Covered Today...Stock Splits...
Quick List
Stock 04/16 04/16 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
KBH 20.22 0.22 20.94 19.08 1.86/0.93 5.30
DAR 20.15 0.06 20.63 19.00 1.63/0.81 4.12
ORCC 11.95 0.27 12.36 1.43/0.71 2.86
LSCC 20.07 0.67 20.44 19.04 1.40/0.70 3.04
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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Stocks Covered Today...Stock Splits...
Market Summary
US stocks posted minor gains on Thursday despite another round of uninspiring economic news that included a spike in weekly initial unemployment claims along with a decline in housing construction and regional manufacturing. Equities featured earnings, with Morgan Stanley (MS $38) falling short of forecasts, while Bed Bath & Beyond (BBBY $5) rallied on its anouncement. Costco Wholesale (COST $322) increased its quarterly dividend and Abbott Labs (ABT $96) beat quarterly estimates and announced three recently launched tests for COVID-19. The USD/dollar jumped higher, treasury yields were mostly lower, gold and oil prices finished the session near even.
Apr 15, 2020 Apr 16, 2020
-------------------- --------------------
Dow 23,504 -445.41 23,538 +33.33
Nasdaq 8,393.18 -122.57 8,532.36 +139.19
S&P 500 2,783 -62.70 2,800 +16.19
NYSE Volume 5.26B 5.32B
NYSE Advancers 480 1104
NYSE Decliners 2494 1864
Nasdaq Volume 3.34B 4.08B
Nasdaq Advancers 733 1457
Nasdaq Decliners 2507 1786
New Highs/Lows
04/09 04/09 04/13 04/14 04/15 04/16
--------------------------------------------
NYSE New Highs 12 0 11 21 10 20
NYSE New Lows 2 0 9 6 22 32
Nasdaq New Highs 17 0 19 31 29 50
Nasdaq New Lows 16 0 19 19 29 70
Stocks Covered Today...Stock Splits...
TRADER'S TIP: "No Retro-Trading Allowed"
No one sells at the "top" all of the time, so don't fret over selling a stock that goes up even higher after you get out. Trust your planned exit strategy and never punish yourself for selling "too early." There's always another trade around the corner.
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 - 2799.55 April 16, 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 - 8532.36 April 16, 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 - 23537.68 April 16, 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
Stocks Covered Today...Stock Splits...
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
Stocks Covered Today...Stock Splits...
TRADER'S TIP: "Okay - Where's The Bounce?"
RightLine analysts look at a myriad of charts and technical indicators in order to determine the best stocks and entry points. When our research indicates that a "bounce" play has a high probability and potential for profit, our next job is to determine the level at which the bounce is likely to occur. Be aware that a bounce can be "up" from support (similar to a ball bouncing up from the floor), or "down" from resistance (similar to a ball bouncing down from the ceiling). Frequently, the "floor" or "ceiling" from which a bounce will occur is one of our closely watched DMA (Daily Moving Average) lines.
Remember, however, that DMAs are dynamic, and constantly move based on each new day's pricing data! With that in mind, when we say to "Buy on a bounce up from support near the 22 DMA (30.50)" what must be taken into consideration is that the DMA may be moving higher. Consequently, when shares pull back three or four trading days later, the bounce will still occur at the 22 DMA - but that DMA may now be up to 32.50! Just make sure you do a quick double- check of where the DMA is located before blindly jumping into a trade - or missing a good entry!
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
KB Home (KBH: Consumer Cyclical/Residential Construction) - SQUEEZE PLAY. Thursday's trading action forced KBH'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 KBH 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 20.94 if KBH moves higher, and place your order to SELL short at 19.08 if price declines to that level. As usual follow your entry with a trailing stop, 1.86 should be sufficient. Reduce your stop to 0.93 on a 5.30 gain. KBH closed Thursday at 20.22. Earnings Report Date: Jun 24, 2020. Beta: 1.60. Market-Cap: 1.977B. Optionable.
CONSUMER DEFENSIVE SECTOR
Darling Ingredients Inc. (DAR: Consumer Defensive/Packaged Foods) - SQUEEZE PLAY. A look at DAR'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 20.63 and a SELL short trigger at 19.00. Once DAR shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.63 and tighten to 0.81 on a 4.12 gain. DAR closed Thursday at 20.15. Earnings Report Date: May 06, 2020. Beta: 1.35. Market-Cap: 3.305B. Optionable.
FINANCIAL SERVICES SECTOR
Owl Rock Capital Corporation (ORCC: Financial Services/Credit Services) - BULLISH BOUNCE. ORCC's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Thursday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move ORCC back in step with the bullish weekly trend, so our BUY entry trigger is set at 12.36. Once you hold a position, trail a stop of 1.43. Tighten it to 0.71 on a 2.86 gain. ORCC closed at 11.95 on Thursday. Earnings Report Date: May 05, 2020. Beta: N/A. Market-Cap: 4.72B. Not Optionable.
TECHNOLOGY SECTOR
Lattice Semiconductor Corporation (LSCC: Technology/Semiconductors) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in LSCC, 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 20.44 and a SELL short entry at 19.04. Let LSCC's price action determine your long or short entry. Once the order is filled, place a 1.40 trailing stop, and tighten it to 0.70 upon getting a 3.04 gain. LSCC closed Thursday at 20.07. Earnings Report Date: Apr 28, 2020. Beta: 1.14. Market-Cap: 2.698B. 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.
Stocks Covered Today...Stock Splits...
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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