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April 22, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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Trading as a Business
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"QUICK LIST"
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Stock 04/21 04/21 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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STC 41.40 0.26 42.06 2.65/1.33 2.04
SASR 24.23 0.26 24.57 22.91 1.66/0.83 2.3
CUTR 22.29 0.25 22.95 21.12 1.83/0.92 2.8
VCYT 23.14 0.40 23.68 21.93 1.75/0.88 2.22
DBX 21.73 -0.03 22.12 1.23/0.62 0.82
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" at https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/
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MARKET SUMMARY
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The top US stock averages finished higher on Friday, though not enough to put the entire week into bull territory due to recession and banking sector concerns. Better manufacturing data than expected countered some of the weaker economic numbers reported earlier this week. In equities, consumer products maker Procter & Gamble (PG) topped quarterly profit expectations while noting "a very difficult cost and operating environment." The S&P 500 Index closed slightly up at 4133.52, as did the the Dow Jones industrial average now at 33,808.96, and the Nasdaq Composite edged up to 12,072.46. The 10-year Treasury yield was up about 2 basis points at 3.566%, gold was also higher, Bitcoin and oil were lower. Friday On The Week
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Dow 33,808.96 22.34 -77.51 -0.23%
Nasdaq 12,072.46 12.90 -51.01 -0.42%
S&P 500 4,133.52 3.73 -4.12 -0.1%
NYSE Volume 3.63B
NYSE Advancers 1,351
NYSE Decliners 1,612
Nasdaq Volume 4.89B
Nasdaq Advancers 2,102
Nasdaq Decliners 2,294
New Highs/Lows
04/14 04/17 04/18 04/19 04/20 04/21
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NYSE New Highs 46 56 66 54 70 53
NYSE New Lows 40 39 34 33 34 39
Nasdaq New Highs 71 81 74 65 58 68
Nasdaq New Lows 222 170 152 140 149 201
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TRADER'S TIP:
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TRADER'S TIP: "Changing Your RightLine Subscriber Acct Info" RightLine Subscribers can easily change their account preferences and other information. Simply go to https://www.rightline.net/preferences/lookup.html. There are several items you can change in this section. For example, you can choose whether to receive the RightLine Report in html with color and graphics, or just plain text. You can also choose to turn the Split & Buyback email alerts "on" or "off." You can change your password and other contact information too. **************************
THE TECHNICAL ANALYST
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This section contains important technical data for the three major market averages -- the S&P 500, the Nasdaq Comp Index, and the Dow Industrial Average. For guidance on how to use this information, go to: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ S&P 500 - 4133.52 April 21, 2023 52-Week High: 4385.83 52-Week Low: 3491.58 Daily Trend: DOWN Weekly trend: UP Weekly Pivot Levels Resistance 3: 4250.19 Resistance 2: 4194.57 Resistance 1: 4164.04 Pivot: 4138.95 Support 1: 4108.42 Support 2: 4083.33 Support 3: 4027.71 https://www.prorightline.com/rlch/042023SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, April 24, 2023: 24-Apr MONDAY, APRIL 24 24-Apr None scheduled 24-Apr TUESDAY, APRIL 25 Tuesday, April 25, 2023: 25-Apr 9:00 am 25-Apr 9:00 am FHFA home price index 25-Apr 10:00 am New home sales 25-Apr 10:00 am Consumer confidence 25-Apr WEDNESDAY, APRIL 26 Wednesday, April 26, 2023: 26-Apr 8:30 am Durable-goods orders 26-Apr 8:30 am Durable-goods minus transportation 26-Apr 8:30 am Advanced U.S. trade balance in goods 26-Apr 8:30 am Advanced retail inventories 26-Apr 8:30 am Advanced wholesale inventories 26-Apr THURSDAY, APRIL 27 Thursday, April 27, 2023: 27-Apr 8:30 am GDP 27-Apr 8:30 am Initial jobless claims 27-Apr 8:30 am Continuing jobless claims 27-Apr 10:00 am Pending home sales 27-Apr FRIDAY, APRIL 28 Friday, April 28, 2023: 28-Apr 8:30 am Employment cost index 28-Apr 8:30 am Personal income (nominal) 28-Apr 8:30 am Personal spending (nominal) 28-Apr 8:30 am PCE index 28-Apr 8:30 am Core PCE index 28-Apr 8:30 am PCE (year-over-year) 28-Apr 8:30 am Core PCE (year-over-year) 28-Apr 9:45 am Chicago Business Barometer 28-Apr 10 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" at this link: https://prorightline.com/index.php/economic-indicator-effects/
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TRADER'S TIP:
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TRADER'S TIP: "The Buy and Hold Myth" Most long-term investors like to believe they are unaffected by short- term price fluctuations in the market. However, since most buy-and- hold advocates have no Exit Plan or Risk Control Strategy to protect capital and profits, the emotions of fear and pain eventually come to bear, often forcing unprepared investors to sell under the worst conditions. ***********************************
STOCKS COVERED IN THIS ISSUE
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FINANCIAL SERVICES SECTOR Stewart Information Services Corporation (STC: Financial Services/Insurance-Property & Casualty) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday STC seemed intent on initiating a rebound. With moving average support nearby, STC 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 42.06. Manage risk with a 2.65 stop. Tighten your stop to 1.33 when you have a 2.04 profit. STC ended the day at 41.40. Earnings Report Date: Apr 26, 2023. Beta: 1.13. Market-Cap: 1.134B. Optionable. Sandy Spring Bancorp, Inc. (SASR: Financial Services/Banks-Regional) - 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 SASR. A move to the upside will trigger our BUY entry at 24.57, while a drop to 22.91 will trigger our SELL short entry. Follow your position with a 1.66 trailing stop. Tighten the stop to 0.83 once you have a 2.3 gain. SASR closed Friday at 24.23. Earnings Report Date: Jul 19, 2023. Beta: N/A. Market-Cap: 1.087B. Optionable. HEALTHCARE SECTOR Cutera, Inc. (CUTR: Healthcare/Medical Devices) - SQUEEZE PLAY. Friday's trading action forced CUTR'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 CUTR 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 22.95 if CUTR moves higher, and place your order to SELL short at 21.12 if price declines to that level. As usual follow your entry with a trailing stop, 1.83 should be sufficient. Reduce your stop to 0.92 on a 2.8 gain. CUTR closed Friday at 22.29. Earnings Report Date: May 08, 2023. Beta: 1.56. Market-Cap: 441.083M. Optionable. Veracyte, Inc. (VCYT: Healthcare/Biotechnology) - SQUEEZE PLAY. VCYT 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. VCYT is now at 23.14. We can capture price action either way by placing a BUY trigger at 23.68 and a SELL short trigger at 21.93. Once VCYT 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 1.75. When you acquire a 2.22 profit, tighten the stop to 0.88. Earnings Report Date: May 04, 2023. Beta: 1.40. Market-Cap: 1.67B. Optionable. TECHNOLOGY SECTOR Dropbox, Inc. (DBX: Technology/Software-Infrastructure) - BULLISH BOUNCE. The charts for DBX 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 22.12, and follow your entry with a trailing stop of 1.23. Tighten it to 0.62 when a 0.82 profit is reached. DBX ended the latest session at 21.73. Earnings Report Date: May 04, 2023. Beta: 0.84. Market-Cap: 7.632B. Optionable. IMPORTANT: Before entering any recommended positions, always use the RightLine "Risk Control System" to determine the level of acceptable risk and the maximum number of shares to buy. Link: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/ ***********************************
STOCK SPLIT SUMMARY
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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 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. For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
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"Take Control Of Your Exits" Almost all traders and investors are naturally preoccupied with the subject of entries. We all want to know: What should I buy and when should I buy it? This emphasis on entries is quite logical, as most successful trades need to start with a good stock and a good entry point. However, if you stop and think about it, it is not the entry that ultimately determines the success or failure of any particular trade. When all is said and done, the amount of our profit will depend entirely on the timeliness of our exit. Particularly in today's volatile markets where large winning trades can quickly turn into losses, our exits are more important than ever. Without good exits, all of our hard work on stock selection and market timing is likely to be wasted. The subject of exits has long been neglected and there is little information available to those knowledgeable traders who have eventually learned to appreciate the value of good exits. Even futures and option traders have given the value of good exits only token significance. This is surprising given that they are dealing in instruments where exits must be given a very high priority. For these traders, "buy and hold" is not an alternative. The futures contracts and options they deal in have only a limited holding period before they expire. To illustrate the critical importance of exits, in one of the trading classes that I teach we play a simple little game where everyone does some paper trading. We all enter each trade at exactly the same price and then we report a lengthy sequence of prices designed to simulate actual price action. As the price changes are reported each student must then make their own exit decisions for the ten different paper trades. Although each student enters every trade at exactly the same point, the difference in exits after a series of ten trades causes the individual results to vary more than anyone might imagine. A few students are big winners, most are modestly profitable, and there are always one or two net losers even though the game is biased to help produce a profit. This simple exercise clearly demonstrates to the students the importance of exits on our trading results. Our profits clearly depend on our exits. Assuming that we now have an appreciation for the importance of good exits, how do we find a good exit strategy? Exit strategies are much more difficult than entry strategies. I believe that the issue of control is what makes the exits difficult. When we are getting ready to enter a trade we have complete control of the conditions. We can carefully select a stock based on our criteria and every condition we impose must be satisfied or we do not have to enter. The market must conform to each and every one of our demands or we simply do not implement the trade. We are obviously very much in control of the situation when we enter. However, once we have entered, our control suddenly disappears. Now the market is in control of our position. We are no longer in a situation where we can dictate terms and conditions. The market is going to do whatever it pleases and that is often not what we desire or expect. Once we are in the trade we are in a situation where we must be prepared for anything. Our flexibility and ability to adapt to changing market conditions will now determine how much money we make or lose on our well-planned entry. There is an old trader's adage that will serve as a guide in helping us to develop sound exit strategies. We want to cut our losses short and let our profits run. I'm sure that this isn't news to anyone. However it is much easier said than done. Here are a few helpful guidelines. 1. Set a precise predetermined loss point before you enter any trade. You are most objective and clear headed before you have actually entered the market. Once you are in the trade you tend to lose your objectivity and become obsessed by a harmful desire to make every trade a winner. Set your maximum loss point before you enter. Good traders accept occasional losses as a cost of doing business. If you are afraid of losses you shouldn't be trading. Remember: if you don't cut those losses you are eventually destined to wind up with a whole portfolio of losers. That's not what we want. 2. Don't get too carried away with the advice about keeping the losses small. Your initial loss point should allow for a reasonable fluctuation in prices. The losses should be small, relative to your potential gains, but not small in terms of the day to day price changes. If you try to keep the losses too small you will lower your winning percentage and you will be taking losses needlessly. You must always make a priority of protecting your trading capital but don't over do it. Give the market some room and give your new trade a chance to succeed. [Editor's note: If you choose to use wider stops you can compensate by taking a smaller position size.] 3. Assume now that your loss point has been properly established and your entry point was a good one. Pretty soon you should be sitting back and watching your profits grow. Don't get too pleased with your temporary success and assume that your profits will run forever. But don't just jump in and take the profit for fear of losing it. Devise a plan that allows the open trade to continue to work in your favor but that will get you out if the market changes directions. 4. The bigger the profit becomes the closer you should protect it. But you should never attempt to guess where the top is. No one is that smart. You have to be willing to get out a little bit after the top if you want to consistently maximize the profit potential on each trade. Don't be too demanding and feel that you have failed if you get out a little bit too late. A little bit late is a fine exit. However don't err on the other side and fall asleep and allow your hard-earned profits to disappear. Remember that if you do sell a stock too soon you can always buy it back. Just treat the re-entry as you would any new trade. Although exits are difficult, with some thought and a little effort they can easily be improved and nothing will add to your profits faster than improving your exits. Helpful information about exits is hard to find. Its not a popular topic even though we know it should be. For those who are interested in learning more about technical trading strategies and exits in particular we have a great deal of useful information on our web site. Visit us at Traderclub.com and learn some specific exit strategies that will make you a better trader. ********************* Chuck LeBeau is the co-author of Computer Analysis of the Futures Market (McGraw-Hill 1992). ======================================================================
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