Notes From The Editor

Many traders love Bull markets because entry points appear more frequently. Breakouts are particularly common. However, Bull markets also require discipline. All breakouts are not created equal.

When equities are rising sharply, it's often tempting to "chase" a stock higher, even if it has rallied dramatically during the past few sessions. The reasoning is that with no overhead resistance, there's nothing to stop the upward momentum. The trouble with this strategy is that it's difficult to gauge risk. Once profit-taking hits a high-flying stock, the rapid gains are often retraced just as quickly as they accumulated.

"Chase" plays can still be effectively employed in certain situations, but they typically demand tight stops. If a soaring stock starts to falter, it's time to head for the exits. Also watch for a decline in volume. This is an indication of fading momentum.

"Fresh" breakouts - stocks that have just moved past an important relative high or a major resistance level - tend to offer more favorable set-ups. This is because former resistance often turns into support once a breakout occurs. With a probable bounce point, it's easier to calculate downside risk.

Pullbacks are the best set-ups in Bull markets, but also require the most amount of patience. Pullback entries are hard to find when the broader market is shooting higher every day. In fact, stocks that are showing too much weakness should be viewed with suspicion; underperformance often heralds more selling.

The 13-day moving average is a traders' best friend in these situations. The 13 DMA closely follows price action, so it doesn't take much selling pressure to test that level. Once a rebound is confirmed with some renewed buying, entries can be taken with relatively little risk.

Here's to profits!

Kent Barton
Senior Analyst

Quick List

    
Stock     04/19     04/19      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

KSS       23.24      0.34     23.35     22.55        1.70/0.90      2.22
MPTI      23.90      0.11     24.45     22.70        1.50/0.65      2.65
VNO       26.09      0.26     26.30     25.80        1.55/0.70      2.10
GHM       28.02      0.04     28.93     27.23        1.80/0.95      2.15

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

Stocks ended broadly lower on Friday, with the S&P 500 experiencing a loss of 0.9% and the Nasdaq falling by 2%. However, the Dow managed to close in positive territory, boosted by a strong performance from American Express shares. The news of an Israeli retaliatory strike on Iran heightened geopolitical tensions as investors maintained a "risk-off" stance, influenced by ongoing conflict in the Middle East and the likelihood of delayed Fed rate cuts due to persistent inflation trends.

Oil prices remained relatively unchanged for the day and notably lower for the week, indicating that oil markets have already factored in uncertainty and the potential increase in supply if Iranian production is affected. Treasury bond yields decreased, while gold prices rose, reflecting the defensive stance across financial markets.

Earnings season kicked off with announcements from Netflix, Procter & Gamble, and American Express, offering insights into broader market trends. Netflix surpassed consensus expectations on both revenue and earnings, but its forward guidance fell short, reflecting high expectations in the technology and communication services sectors. P&G's and Amex's results shed light on consumer sentiment, with P&G raising its earnings growth outlook amid solid demand, while also noting the impact of higher prices on consumer purchasing behavior.

Overall, market performance in 2024 is expected to be driven by earnings growth, with consensus projections suggesting approximately 10% profit growth for the S&P 500.The recent pullback in the stock market, marking the third consecutive weekly loss for the S&P 500, is viewed as a normal correction following a period of significant gains. Despite the discomfort of volatility, the market remains only 5% below its all-time high. Considering historical trends, such periodic declines are not unusual, and after the substantial rally witnessed in recent months, a temporary pause is considered both expected and beneficial.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 37,986.40   211.02          +66     0.17%
Nasdaq              15,282.01  -319.49      -893.08    -5.52%
S&P 500              4,967.23   -43.89      -146.05    -2.86%

NYSE Volume                      3.97B                       
NYSE Advancers                   1,908                       
NYSE Decliners                     892                       

Nasdaq Volume                    5.39B                       
Nasdaq Advancers                 2,199                       
Nasdaq Decliners                 2,028                       

                                 New Highs/Lows

                   04/12  04/15  04/16  04/17  04/18  04/19
                 --------------------------------------------
NYSE New Highs        63     20      9     12     12     13
NYSE New Lows         60     89    118     62     58     38
Nasdaq New Highs      49     35     29     25     21     34
Nasdaq New Lows      209    335    361    241    239    209
   

TRADER'S TIP: "Try a Few Diamonds and Spiders!"

If you are new to shorting, a good place to start is with index "stocks" like QQQ (NASDAQ 100 Trust), DIA (Dow Diamonds), or SPY (Spiders). While they aren't actually "stocks," these popular instruments are widely traded in virtually the same fashion.

However, there is one distinct advantage. Unlike individual stocks, each index "stock" represents a broad list of securities. The DIA includes 30 stocks, the QQQ contains 100, and the SPY consists of 500. As a result, trading this type of index security lowers the risk associated with holding positions in specific companies.

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 22					
None scheduled
				
TUESDAY, APRIL 23					
9:45 am	S&P flash U.S. services PMI	
9:45 am	S&P flash U.S. manufacturing PMI	
10:00 am	New home sales
	
WEDNESDAY, APRIL 24					
8:30 am	Durable-goods orders	March	
8:30 am	Durable-goods minus transportation	

THURSDAY, APRIL 25					
8:30 am	GDP	
8:30 am	Initial jobless claims				
8:30 am	Advanced U.S. trade balance in goods	
8:30 am	Advanced retail inventories	%
8:30 am	Advanced wholesale inventories	
10:00 am	Pending home sales	

FRIDAY, APRIL 26					
8:30 am	Personal income 		
8:30 am	Personal spending 
8:30 am	PCE index]			
8:30 am	Core PCE index			
8:30 am	PCE (year-over-year)			
8:30 am	Core PCE (year-over-year)			
10:00 am	Consumer sentiment (final)


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

TRADER'S TIP: "Using The Gap Open Tactic When Selling Short"

The Gap Open Tactic works as well when we sell short as it does when we buy a stock. If the stock gaps down at the open, wait for it to take out its low of the first half-hour then enter 0.25 below that point. For more on the Gap Open Tactic go to:http://www.rightline.net/education/gapopen.html

Stocks Covered in This Issue

Kohl's Corporation (KSS): SQUEEZE PLAY. KSS 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 23.35 and a SELL short entry at 22.55. Once your trade is filled, enter a 1/70 trailing stop. Tighten it to 0.90 after a 2.22 gain. KSS closed on Friday at 23.24. Earnings Report Date: May 22, 2024 - May 27, 2024. Beta: 2.01. Market-Cap: 2.572B. Optionable.

M-tron Industries, Inc. (MPTI) - SQUEEZE PLAY. Traders are feeling the pressure as MPTI's intra-day price range on Friday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 24.45 and a SELL short entry at 22.70. MPTI's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.50 trailing stop. Tighten it to 0.85 after you get a 2.65 gain. MPTI closed Friday at 23.90. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 66.825M. Not Optionable.

Vornado Realty Trust (VNO) - SQUEEZE PLAY. Friday's trading session left VNO 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 26.30 and your SELL short trigger at 25.80. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.55 trailing stop. Once you have a 2.10 profit, reduce the stop to 0.70. Earnings Report Date: May 06, 2024. Beta: 1.55. Market-Cap: 5.411B. Optionable.

Graham Corporation (GHM) - SQUEEZE PLAY. The ticker for Friday's session shows GHM 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 24.19 and a SELL short trigger at 27.23. When GHM 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 1.80 trailing stop. Upon reaching a 2.15 profit, resize the stop to 0.95. Earnings Report Date: Jun 06, 2024 - Jun 10, 2024. Beta: 0.58. Market-Cap: 303.409M. 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.

Trader's Corner

"Program Trading"

The financial news media often refers to "program trading" or "High Frequency Trading." CNBC even goes so far as to report program trading buy and sell levels for every session. The Aite Group, LLC claims that high-frequency trading (HFT) accounts for 73 percent of U.S. equity trading, despite making up just two percent of trading firms. The TABB Group has a slightly lower number. TABB claims that high-speed trades account for 53 percent of U.S. equity trades.

But you get the point. Despite which numbers are correct, HFT is making up the majority of stock market transactions in the United States. So exactly what are they talking about?


Let's take a brief look at "program trading." This is a general term that refers to trades that are automatically executed by computers, usually in large volume "baskets" of stocks. There are different types of program trading, but the most common, and the one referred to on CNBC, is a type of securities trading intended to profit from temporary differences between an index like the S&P 500, and the actual value of the stocks that make up the index.

This sort of program trading is called "index arbitrage," and is based purely on the price relationship between the two - not on any fundamental reason. The individual company's earnings, dividends, and growth prospects are not factors, and neither is any economic reason, like inflation, changes in interest rates, or government actions.

Other frequently used program trading terms are "Fair Value" and "the premium," or "spread."

- Fair Value is the total value of the stocks underlying an index security plus the cost of any expenses incurred while a position is being held, such as interest and trading commissions.

- The "premium" (commonly referred to as the "PREM" or "spread") is the difference between the most active S&P 500 Index Futures Contract minus the actual cash value of the S&P 500 Stock Index. That difference makes up the profit that program trading is based on.

When the PREM, or spread, rises to a certain level, computer-driven "buy" programs are automatically activated by large institutional clients, who buy the individual stocks in the S&P 500 Stock Index and sell the S&P 500 Stock Index Futures Contract against those positions.

When the "spread" drops to a certain level, "sell" programs activate and the exact opposite takes place. These extremely low-risk transactions allow institutional traders to capture a few points of profit before the PREM returns to normal, or Fair Value.

There you have a quick look at program trading and how it works. In the days ahead we will review some companies that offer fee-based information services for individual active traders and investors, and also examine the circuit breakers and curbs used by major stock exchanges to minimize the sometimes negative effects of program trading.

In the meanwhile, always use Risk Control and strategically placed exit stops to insure that the tidal waves produced by these events give you profits and prevent any erosion to your trading account!

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.

Disclaimer

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The publishers of The RightLine Report recommend that anyone trading securities should do so with caution, exercise prudent trading discipline and have a personal risk management strategy in place before doing so. It is possible at this or some subsequent date, the publishers and staff of The Pro Right Line Corp. may own, buy or sell securities presented. The Pro Right Line Corp. is not a financial advisory service. Its publishers, owners or investors, are not liable for any losses or damages, monetary or otherwise, that result from the content of The RightLine Report. Past RightLine Report performance may not be indicative of future performance.

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