Notes From The Editor

Trading volume is an often-overlooked aspect of market and equity movement that can give key insights into where prices may be headed. The most important thing to keep in mind is that when volume behind a price movement is higher, it's more likely to be sustained. A low-volume breakout, for example, is more likely to be a "head fake" than one that that isn't accompanied by much buying.

When hearing the media discuss equities, you'll typically hear volume referred to in terms of "most active" for the day - or the stocks that had the highest readings for the session. This list typically includes big-caps such as General Electric (GE) or Exxon Mobil (XOM), or tech behemoths like Intel (INTC) or Microsoft (MSFT).

One way to profit from the "most active" board is to use it as a filter. Does the list show any unusual names? If so, it's probably a company that just experienced a major news event, such as earnings. Make a note of these equities that had unusually strong volume, then watch them during the following session.

"Follow-through" sessions are of the utmost importance when news moves a stock. One-day volume spikes created by a news story look impressive, but often fade away after the initial reaction is absorbed by the market.

What really counts is how the stock behaves the next session. Does price action continue in the same direction? Does volume continue at a higher-than-average rate? If "yes" is the answer to both those questions, there's likely to be a sustained price movement.

Technically-minded traders have thought of all sorts of ways to incorporate volume into their analysis. The list runs from basic set-ups to advanced, complicated indicators. One of my favorite methods is to find volume trends.

Most charting software includes volume information in the form of vertical lines above or below the chart. These lines can often be connected to form trendlines. For instance, an equity whose volume is gradually rising every day will have a rising volume trendline.

These trendlines help to identify periods of rising or falling interest in a stock. It also helps to determine when a price trend might be nearing an end.

Imagine, for example, that stock XYZ has been moving higher for several days - while at the same time, volume has been trending lower. This "volume divergence" is a sign that buyers are becoming less enthusiastic about XYZ as it moves higher, and that a short-term top might be just around the corner.

Remember that volume isn't just some run-of-the-mill indicator - it's an integral part of a stock's movement. Price and volume go hand in hand. Learn more about their relationship, and you've added a valuable resource to your trading toolbox.

Have a great week,

Kent Barton
Senior Analyst

Quick List

    
Stock     04/18     04/18      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

LOVE      20.35      0.17     20.68     19.17        1.51/0.76      1.68
SG        20.84      0.03     21.67     19.84        1.83/0.92       2.2
JAKK      22.31      0.15     23.12     21.58        1.54/0.77      1.76
MNR       20.18      0.30     20.74                  1.62/0.81      0.96
AEYE      13.01      0.55     13.93                  2.23/1.12      1.56

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

Equity markets ended mostly lower on Thursday, marking the fifth consecutive daily decline for the S&P 500. Meanwhile, the Dow recorded a modest gain of 25 points, while the S&P 500 experienced a decline of approximately 0.2%. In terms of sectors, communication services, utilities, and consumer staples emerged as the top performers within the S&P 500, whereas technology stocks lagged behind. The underperformance of the technology sector followed cautious guidance from Taiwan Semiconductor, which raised concerns about broader semiconductor demand in the coming months.

Despite this, both Asian and European markets closed mostly higher. The rise in Asian markets occurred despite President Joe Biden's recent proposal to increase tariffs on specific Chinese steel and aluminum products to 25% from the current 7.5%. While the proposal drew attention, its direct impact on the market may be limited. According to the US Census Bureau, China represented only 2% of the dollar value of US steel imports in the first two months of 2024.

In bond markets, Treasury yields saw an uptick, with the 10-year yield closing at around 4.63% and the 2-year yield at approximately 5%.

                        Apr 17, 2024           Apr 18, 2024   
                  --------------------   --------------------
Dow                 37,760.26   -38.71     37,772.83    19.52
Nasdaq              15,683.37  -181.88     15,620.29   -63.08
S&P 500              5,025.68   -25.73      5,011.96   -10.25

NYSE Volume                       3.6B                  3.62B
NYSE Advancers                   1,356                  1,363
NYSE Decliners                   1,433                  1,423

Nasdaq Volume                    5.01B                  4.95B
Nasdaq Advancers                 1,632                  1,883
Nasdaq Decliners                 2,580                  2,268

                                 New Highs/Lows

                   04/11  04/12  04/15  04/16  04/17  04/18
                 --------------------------------------------
NYSE New Highs        47     63     20      9     12     12
NYSE New Lows         28     60     89    118     62     58
Nasdaq New Highs      61     49     35     29     25     21
Nasdaq New Lows      141    209    335    361    241    239
   

TRADER'S TIP: "Fading the Gap"

Often, news can dramatically impact the price of a stock after the close or prior to the next session's open. This is often reflected in the opening price being much different than the price at the previous close. The difference between the closing and opening price is commonly referred to as a gap. "Fading the gap" is a trader's tactic that involves trading in the opposite direction of a gap at the market open.

For example, the market has a tendency to pullback after a strong open. This usually happens because of an imbalance between buy and sell orders. Once Market Makers and Specialists work through their overnight and pre-market orders, they will usually either drop their bids or go short. As the price begins to drop, many traders will also sell short, or "fade the gap" in anticipation that the gap will fill. Whenever you see a considerable gap up or down in price at the open, watch for the first major move to be in the opposite direction of the gap.

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".

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

MONDAY, APRIL 15					
2:30 am	Dallas Fed President Lorie Logan speaks in Tokyo				
8:30 am	Empire State manufacturing survey	
8:30 am	U.S. retail sales	
8:30 am	Retail sales minus autos	
8:30 am	New York Fed President John Williams TV appearance				
10:00 am	Business inventories	
10:00 am	Home builder confidence index	
8:00 pm	San Francisco Fed President Mary Daly speaks
				
TUESDAY, APRIL 16					
8:30 am	Housing starts	
8:30 am	Building permits	
9:00 am	Fed Vice Chair Philip Jefferson speaks				
9:15 am	Industrial production	
9:15 am	Capacity utilization	
1:15 pm	Fed Chair Jerome Powell speaks
				
WEDNESDAY, APRIL 17					
2:00 pm	Fed Beige Book				
5:30 pm	Cleveland Fed President Loretta Mester speaks				
7:15 pm	Fed Governor Michelle Bowman speaks
				
THURSDAY, APRIL 18					
8:30 am	Initial jobless claims
8:30 am	Philadelphia Fed manufacturing survey	
9:05 am	Fed Governor Michelle Bowman speaks				
9:15 am	New York Fed President John Williams speaks				
10:00 am	Existing home sales	
10:00 am	U.S. leading economic indicators	
11:00 am	Atlanta Fed President Raphael Bostic speaks				
5:45 pm	Atlanta Fed President Raphael Bostic speaks
				
FRIDAY, APRIL 19					
10:30 am	Chicago Fed President Austan Goolsbee speaks

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

TRADER'S TIP: "100% Guaranteed Winner!"

When it comes to the stock market, everybody wants a sure thing. Some traders will go to any length to be absolutely certain that their next trade is a winner. Unfortunately there's no way to do that. It doesn't matter how great the company is or how many analysts recommend you buy it, there is no way to be certain that your next trade will be a home run. In the world of stocks, certainty is a myth. Instead of struggling toward the impossible goal of certainty, focus your efforts on finding the best trade setups and executing your trading plan.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

The Lovesac Company (LOVE: Consumer Cyclical/Furnishings, Fixtures & Appliances) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in LOVE, 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 20.68 and a SELL short entry at 19.17. Let LOVE's price action determine your long or short entry. Once the order is filled, place a 1.51 trailing stop, and tighten it to 0.76 upon getting a 1.68 gain. LOVE closed Thursday at 20.35. Earnings Report Date: Jun 05, 2024. Beta: 2.82. Market-Cap: 315.215M. Optionable.

Sweetgreen, Inc. (SG: Consumer Cyclical/Restaurants) - SQUEEZE PLAY. A look at SG'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 21.67 and a SELL short trigger at 19.84. Once SG shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.83 and tighten to 0.92 on a 2.2 gain. SG closed Thursday at 20.84. Earnings Report Date: May 09, 2024. Beta: 2.22. Market-Cap: 2.355B. Optionable.

JAKKS Pacific, Inc. (JAKK: Consumer Cyclical/Leisure) - SQUEEZE PLAY. Thursday's trading action forced JAKK'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 JAKK 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 23.12 if JAKK moves higher, and place your order to SELL short at 21.58 if price declines to that level. As usual follow your entry with a trailing stop, 1.54 should be sufficient. Reduce your stop to 0.77 on a 1.76 gain. JAKK closed Thursday at 22.31. Earnings Report Date: Apr 24, 2024. Beta: 2.35. Market-Cap: 240.912M. Optionable.

ENERGY SECTOR

Mach Natural Resources LP (MNR: Energy/Oil & Gas E&P) - BULLISH BOUNCE. Positive price behavior near moving average support on Thursday qualifies MNR for a Bullish Bounce setup. After several sessions of declining prices, MNR should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if MNR moves up to our entry trigger set at 20.74. You can also enter a 1.62 trailing stop, to be replaced with a 0.81 trailing stop when you obtain a 0.96 profit. MNR closed Thursday at 20.18. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.917B. Not Optionable.

TECHNOLOGY SECTOR

AudioEye, Inc. (AEYE: Technology/Software - Application) - BULLISH BOUNCE. AEYE'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 AEYE back in step with the bullish weekly trend, so our BUY entry trigger is set at 13.93. Once you hold a position, trail a stop of 2.23. Tighten it to 1.12 on a 1.56 gain. AEYE closed at 13.01 on Thursday. Earnings Report Date: Apr 23, 2024. Beta: 1.38. Market-Cap: 151.672M. 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.

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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