Notes From The Editor

Do you have a big brokerage account or a small account? When you look at the range of possible trading account sizes that could fit betweeen a $10-Billion account versus a $1,000 account, it becomes obvious that "Big" and "Small" are relative terms. Regardless of your account size, I'm convinced that the maximum amount a trader should put at risk on a single trade, including commissions, is 2% of their total account value.

While this may seem way too conservative to traders with small accounts, my research indicates otherwise. Since the internet based brokers came on the scene, lower commissions have helped make trading an affordable venture for smaller players. However, due to the minimum transaction fees imposed by most brokers, smaller accounts have a more difficult time staying within the recommended maximum risk level of 2% (which includes commission costs).

Traders with smaller accounts should probably use a low-cost brokerage. Also keep in mind that while it is important to hold the cost of commissions down, good service and reliability should be among the top considerations.

It's always wise to resist the temptation to ignore the 2% risk cap. The principals underlying risk management are designed to minimize losses and give as many chances as possible for winning trades to develop. Following these guidelines will even keep a string of five or six losers from inflicting seriously damage to your trading account.

No matter what size account you have, it's important to acquire intelligent trading habits that insure a steady progression of profits over the long haul. Substituting high-risk short cuts for reliable risk management methods usually results in quick and expensive lessons that can easily be avoided.

Trade well!

- Thomas Sutton, Editor

Quick List

    
Stock     04/17     04/17      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

XENE      12.61      0.06     13.15                  1.30/0.65      2.70
PETQ      23.36      1.23     24.26     22.20        2.06/1.03      5.34
CRS       20.11      1.74     20.60     18.79        1.81/0.91      4.64
TRMB      32.46      1.12     33.21                  2.69/1.34      5.40

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 Friday to record the second consecutive week of gains as traders see progress in the ongoing battle against COVID-19. Adding to the positive developments, President Trump released guidelines on reopening the US economy, the world's most powerful. The optimistic sentiment offset dismal economic news that included a record monthly drop in Leading Indicators. In equities, Boeing Company (BA $154) announced plans to resume commercial plane production at its Puget Sound regional facilities next week, after shutting down operations last month in response to the COVID-19 pandemic. Shares of BA finished the session higher. Gold, oil prices and the USD/dollar a closed lower, while treasury yields were higher.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                    24,242  +704.81       +24242        0%
Nasdaq               8,650.14  +117.78     +8650.14        0%
S&P 500                 2,875   +75.01        +2875        0%

NYSE Volume                      5.84B                       
NYSE Advancers                    2537                       
NYSE Decliners                     440                       

Nasdaq Volume                    4.35B                       
Nasdaq Advancers                  2596                       
Nasdaq Decliners                   669                       

                                 New Highs/Lows

                   04/09  04/13  04/14  04/15  04/16  04/17
                 --------------------------------------------
NYSE New Highs         0     11     21     10     20     19
NYSE New Lows          0      9      6     22     32     10
Nasdaq New Highs       0     19     31     29     50     41
Nasdaq New Lows        0     19     19     29     70     13
   

TRADER'S TIP: "CAUTION: Options Expiration Just Ahead"

The third Friday of every month is often a turbulent session due to index and stock options expirations. The actual expiration date is Saturday, but all trading has to be finished by Friday's close. So what does it actually mean?

For traders, it means increased volatility as those options and futures become subject to exercise or roll-over, two processes that require trading transactions. While you don't have to trade options to take advantage of the movement in stocks resulting from these "Witching" days, it is wise to at least be aware of when these abnormal market sessions are about to occur.

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 - 2874.56 April 17, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 3141.08
Resistance 2: 2983.03
Resistance 1: 2928.79
Pivot: 2824.98
Support 1: 2770.74
Support 2: 2666.93
Support 3: 2508.88


NASDAQ Composite - 8650.14 April 17, 2020

52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 9720.82
Resistance 2: 9086.47
Resistance 1: 8868.30
Pivot: 8452.12
Support 1: 8233.95
Support 2: 7817.78
Support 3: 7183.43
        
Dow Industrials - 24242.49 April 17, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 26205.07
Resistance 2: 25036.21
Resistance 1: 24639.35
Pivot: 23867.35
Support 1: 23470.49
Support 2: 22698.49
Support 3: 21529.63
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, April 20, 2020:
20-Apr  8:30 am   Chicago Fed national activity index

Tuesday, April 21, 2020:
21-Apr  10 am   Existing home sales

Wednesday, April 22, 2020:
22-Apr          None scheduled

Thursday, April 23, 2020:
23-Apr  8:30 am   Weekly jobless claims
23-Apr  9:45 am   Markit manufacturing PMI (flash)
23-Apr  9:45 am   Markit services PMI (flash)
23-Apr  10 am   New home sales

Friday, April 24, 2020:
24-Apr  8:30 am   Durable goods orders
24-Apr  8:30 am   Core capital goods orders
24-Apr  10 am   Consumer sentiment index

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

TRADER'S TIP: "Too Flexible?"

As traders we need to be flexible, yet that doesn't mean we should attempt too many methods at the same time. The best approach is to use a relatively simple strategy that contains enough tactical setups to take advantage of price movement in any market environment. For example, a good place to start is with a combination of Bullish Bounces for uptrends, Bearish U-Turns for downtrends, and Squeeze Plays for sideways or choppy market periods. While you can always add additional types of setups as your trading skills improve, it's always wise to start with the basics. And repetition is the key, so remember to practice, practice, practice!

Stocks Covered in This Issue

HEALTHCARE SECTOR

Xenon Pharmaceuticals Inc. (XENE: Healthcare/Biotechnology) - BULLISH BOUNCE. The charts for XENE show that despite the downward pressure from sellers recently, the weekly uptrend is still going strong. Buyers showed up again on Friday, resulting in the early stages of a rebound that started near moving average support. The resulting Bullish Bounce set-up offers a potential entry point for a long play. Set your trigger to BUY shares at 13.15, and follow your entry with a trailing stop of 1.30. Tighten it to 0.65 when a 2.70 profit is reached. XENE ended the latest session at 12.61. Earnings Report Date: N/A. Beta: 1.40. Market-Cap: 440.799M. Optionable.

PetIQ, Inc. (PETQ: Healthcare/Drug Manufacturers-Specialty & Generic) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into PETQ. A move to the upside will trigger our BUY entry at 24.26, while a drop to 22.20 will trigger our SELL short entry. Follow your position with a 2.06 trailing stop. Tighten the stop to 1.03 once you have a 5.34 gain. PETQ closed Friday at 23.36. Earnings Report Date: N/A. Beta: 1.67. Market-Cap: 662.314M. Optionable.

INDUSTRIALS SECTOR

Carpenter Technology Corporation (CRS: Industrials/Metal Fabrication) - SQUEEZE PLAY. CRS is caught in a dilemma. The stock's compressed price range on Friday has resulted in a condition comparable to a wound up rubber band. We anticipate that this undecided equity will take off soon, but with the direction still in question we'll let upcoming market action tell us whether to buy shares or sell short. CRS is now at 20.11. We can capture price action either way by placing a BUY trigger at 20.60 and a SELL short trigger at 18.79. Once CRS reveals its direction, enter your triggered order and disregard the other one. As soon as your position is in place, follow up with a trailing stop of 1.81. When you acquire a 4.64 profit, tighten the stop to 0.91. Earnings Report Date: Apr 23, 2020. Beta: 2.37. Market-Cap: 961.236M. Optionable.

TECHNOLOGY SECTOR

Trimble Inc. (TRMB: Technology/Scientific & Technical Instruments) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday TRMB seemed intent on initiating a rebound. With moving average support nearby, TRMB 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 33.21. Manage risk with a 2.69 stop. Tighten your stop to 1.34 when you have a 5.40 profit. TRMB ended the day at 32.46. Earnings Report Date: Apr 29, 2020. Beta: 1.80. Market-Cap: 8.341B. 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.

Trader's Corner

"15 Ways To Trade Moving Averages"

Reading a chart without moving averages is like baking a cake without butter or eggs. Those simple lines above or below current price tell many tales, and their uses in market interpretation are unparalleled. Simply stated, they're the most valuable indicators in technical analysis.

You can trade without moving averages, but you do so at your own risk. After all, these lines represent median levels where your competition will make important buying or selling decisions. So it makes sense to predict what they're going to do before the fact, rather than afterward.

Here are 15 ways you can manage opportunity through moving averages:

1. The 20-day moving average commonly marks the short-term trend, the 50-day moving average the intermediate trend, and the 200-day moving average the long-term trend of the market.

2. These three settings represent natural boundaries for price pullbacks. Two forces empower those averages: First, they define levels where profit- and loss-taking should ebb following strong price movement. Second, their common recognition draws a crowd that perpetrates a self-fulfilling event whenever price approaches.

3. Moving averages generate false signals during range-bound markets because they're trend-following indicators that measure upward or downward momentum. They lose their power in any environment that shows a slow rate of price change.

4. The characteristic of moving averages changes as they flatten and roll over. The turn of an average toward horizontal signifies a loss of momentum for that time frame. This increases the odds that price will cross the average with relative ease. When a set of averages flatline and draw close to one another, price often swivels back and forth across the axis in a noisy pattern.

5. Moving averages emit continuous signals because they're plotted right on top of price. Their relative correlation with price development changes with each bar. They also exhibit active convergence-divergence relationships with all other forms of support and resistance.

6. Use exponential moving averages, or EMAs, for longer time frames but shift down to simple moving averages, or SMAs, for shorter ones. EMAs apply more weight to recent price change, while SMAs view each data point equally.

7. Short-term SMAs let traders spy on other market participants. The public uses simple moving average settings because they don't understand EMAs. Good intraday signals rely more on how the competition thinks than the technicals of the moment.

8. Place five-, eight- and 13-bar SMAs on intraday charts to measure short-term trend strength. In strong moves, the averages will line up and point in the same direction. But they flip over one at a time at highs and lows, until price finally surges through in the other direction.

9. Price location in relation to the 200-day moving average determines Long-term investor psychology. Bulls live above the 200-day moving average, while bears live below it. Sellers eat up rallies below this line in the sand, while buyers come to the rescue above it.

10. When the 50-day moving average pierces the 200-day moving average in either direction, it predicts a substantial shift in buying and selling behavior. The 50-day moving average rising above the 200-day moving average is called a Golden Cross, while the bearish piercing is called a Death Cross.

11. It's harder for price to break above a declining moving average than a rising moving average. Conversely, it's harder for price to drop through a rising moving average than a declining moving average.

12. Moving averages set to different time frames reveal trend velocity through their relationships with each other. Measure this with a classic Moving Average-Convergence-Divergence (MACD) indicator, or apply multiple averages to your charts and watch how they spread or contract over different time.

13. Place a 60-day volume moving average across green and red volume histograms in the lower chart pane to identify when specific sessions draw unexpected interest. The slope of the average also identifies hidden buying and selling pressure.

14. Don't use long-term moving averages to make short-term predictions because they force important data to lag current events. A trend may already be mature and nearing its end by the time a specific moving average issues a buy or sell signal.

15. Support and resistance mechanics develop between moving averages as they flip and roll. Look for one average to bounce on the other average, rather than break through it immediately. After a crossover finally takes place, that level becomes support or resistance for future price movement.

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

This special guest article was written by Alan Farley, author of "The Master Swing Trader." To order a copy of Alan's book, go to http://www.invest-store.com/rightline/.

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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