April 28, 2022 - The RightLine Report
Notes From The Editor
How To Use Moving Averages
As veteran RightLine readers know, we favor a technical approach to trading stocks. The reason is simple: the twists and turns of shorter- term trades can be more accurately gauged by technicals. Fundamental expectations, on the other hand, take more time to come to fruition.
There are numerous ways to apply technical analysis. A whole boatload of indicators and oscillators are at our disposal. Some traders even invent new ones based on their observations. While there is certainly nothing wrong with in-depth analysis, too many indicators can obscure the most important aspect of a stock's movement - its price action.
Moving averages can be thought of as dynamic trendlines that follow equity's price. A simple trend, connecting two or more relative highs/lows, is one of the easiest technical concepts to grasp. However, these have a major limitation: they don't adapt to price changes.
The solution is to create a trend that incorporates daily price changes. Moving averages do exactly that. Take the "50 DMA" for example - the 50-day moving average. This indicator averages out the trading price for the previous 50 days. It's also constantly updated during the trading day, creating a constantly moving line on the stock chart.
The most useful aspect of moving averages is the fact that they often provide either support or resistance. This is especially helpful in market climates - much like the one we're seeing right now - when many stocks are moving to long-term or historical highs. With well- established trendlines left in the dust, the moving averages provide a logical rebound target during pullbacks.
Moving average crossovers are another way to apply the indicator. When an MA with a shorter period crosses an MA with a longer period, a directional change could be underway. One of the most useful crossovers is the 50/200. These two key moving averages, with their longer-term timeframes, tend to be reliable. If the 50 DMA rises through the 200 DMA, more upside could be in store. The inverse in true when the 50 DMA descends through the 200 DMA.
While moving averages are typically used on daily intervals, they can also be applied to other timeframes to provide helpful charting roadmaps. Weekly charts often show interesting correlations - for example, a long-term uptrend might feature repeated bounces off the 22- week MA. Daytraders can also use the same techniques, applying MA's to intra-day intervals.
Within the next few days we'll take a closer look at this versatile technical indicator and see how it can be applied in everyday situations.
Here's to Profits,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 04/28 04/28 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
NGVC 20.84 0.00 21.28 19.68 1.6/0.8 1.7
HEINY 49.42 -0.14 50.11 3.23/1.62 1.32
DKL 51.00 1.45 52.34 4.83/2.42 3.02
AAL 19.43 0.46 19.82 1.75/0.88 1.34
HURN 53.22 0.50 54.21 3.86/1.93 3.2
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.
Stocks Covered Today Stock Splits
Market Summary
Stocks were solidly higher on Thursday following a session filled with earnings announcements and mixed economic news. The rally came despite a surprise contraction in first quarter GDP/Gross Domestic Product. In other economic headlines, unemployment claims declined as anticipated, yet the 4-week moving average went up. Equities news included quarterly earnings reports from McDonald's (MCD $254), Meta Platforms (FB $206) formerly known as Facebook, Merck (MRK $89) and Qualcomm (QCOM $148). Shares of all four companies traded higher. However, Ford (F $15) and Caterpillar (CAT $212) dropped after the release of their numbers, as Teladoc Health (TDOC $34) fell by 40% after lowering its full-year guidance. Treasuries were mixed but mostly lower to lift yields, the USD/dollar, oil prices and gold all finished higher.
Apr 27, 2022 Apr 28, 2022
-------------------- --------------------
Dow 33,301.93 61.75 33,916.39 614.46
Nasdaq 12,488.93 -1.81 12,871.53 382.59
S&P 500 4,183.96 8.76 4,287.50 103.54
NYSE Volume 4.75B 4.89B
NYSE Advancers 1,462 2,589
NYSE Decliners 1,853 743
Nasdaq Volume 4.72B 5.03B
Nasdaq Advancers 1,924 3,055
Nasdaq Decliners 2,813 1,727
New Highs/Lows
04/21 04/22 04/25 04/26 04/27 04/28
--------------------------------------------
NYSE New Highs 169 20 13 9 17 22
NYSE New Lows 251 412 440 392 591 523
Nasdaq New Highs 100 43 31 38 32 43
Nasdaq New Lows 485 635 626 781 866 830
Stocks Covered Today Stock Splits
TRADER'S TIP: "Consolidation Means Anticipation"
The longer a stock trades within a specific range, the more likely it is that a breakout - either up OR down - will result. One reason is that as support and resistance build through regular successful tests, more traders note that a move OUTSIDE of the regular range is a significant event. Consequently, volume tends to pick up and generate momentum in the direction of the breakout when it does finally occur. Also, risk is limited since stops can be placed just inside the trading range in case the breakout fails. It pays to learn how to recognize this powerful charting tactic, which can be very effective in both the long and short terms.
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".
S&P 500 - 4287.50 April 28, 2022
52-Week High: 4818.62
52-Week Low: 4056.88
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4841.41
Resistance 2: 4596.09
Resistance 1: 4433.93
Pivot: 4350.78
Support 1: 4188.62
Support 2: 4105.46
Support 3: 3860.14
NASDAQ Composite - 12871.53 April 28, 2022
52-Week High: 16212.23
52-Week Low: 12430.90
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 14891.36
Resistance 2: 14008.68
Resistance 1: 13423.98
Pivot: 13126.00
Support 1: 12541.30
Support 2: 12243.32
Support 3: 11360.64
Dow Industrials - 33916.39 April 28, 2022
52-Week High: 36952.65
52-Week Low: 32272.64
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 37796.66
Resistance 2: 36077.83
Resistance 1: 34944.61
Pivot: 34359.00
Support 1: 33225.78
Support 2: 32640.17
Support 3: 30921.34
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, May 02, 2022: 25-Apr None scheduled Tuesday, April 26, 2022: 26-Apr 8:30 am Durable goods orders 26-Apr 8:30 am Core capital equipment orders 26-Apr 9 am 26-Apr 9 am FHFA U.S. home price index (year-over-year) 26-Apr 10 am Consumer confidence index 26-Apr 10 am New home sales (SAAR) Wednesday, April 27, 2022: 27-Apr 8:30 am Advance report on international trade in goods 27-Apr 10 am Pending home sales index 27-Apr 10 am Home ownership rate (NSA) Thursday, April 28, 2022: 28-Apr 8:30 am Initial jobless claims 28-Apr 8:30 am Continuing jobless claims 28-Apr 8:30 am Real gross domestic product (SAAR) (first estimate) Friday, April 29, 2022: 29-Apr 8:30 am Employment cost index 29-Apr 8:30 am PCE price index 29-Apr 8:30 am Core PCE price index 29-Apr 8:30 am PCE price index (year-over-year) 29-Apr 8:30 am Core PCE price index (year-over-year) 29-Apr 8:30 am Nominal personal income 29-Apr 8:30 am Nominal consumer spending 29-Apr 8:30 am Real disposable incomes 29-Apr 8:30 am Real consumer spending 29-Apr 9:45 am Chicago PMI 29-Apr 10 am UMich consumer sentiment index (final) 29-Apr 10 am UMich 5-year inflation expectations 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: "Position Sizing"
"Position sizing is the most important part of your system in determining how much you are likely to make trading the system."
~ Van K. Tharp, from "Trade Your Way To Financial Freedom"
Stocks Covered in This Issue
CONSUMER DEFENSIVE SECTOR
Natural Grocers by Vitamin Cottage, Inc. (NGVC: Consumer Defensive/Grocery Stores) - SQUEEZE PLAY. Traders are feeling the pressure as NGVC's intra-day price range on Thursday 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 21.28 and a SELL short entry at 19.68. NGVC's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.6 trailing stop. Tighten it to 0.8 after you get a 1.7 gain. NGVC closed Thursday at 20.84. Earnings Report Date: May 05, 2022. Beta: 1.02. Market-Cap: 472.164M. Optionable.
Heineken N.V. (HEINY: Consumer Defensive/Beverages-Brewers) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 49.42, HEINY is on our radar for a BUY entry at 50.11. If you purchase shares of HEINY, be sure to also place a trailing stop of 3.23. Snug it up to 1.62 on a 1.32 gain. Earnings Report Date: N/A. Beta: 0.81. Market-Cap: 56.887B. Not Optionable.
ENERGY SECTOR
Delek Logistics Partners, LP (DKL: Energy/Oil & Gas Midstream) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. DKL's current price action near moving average support signals a potential BUY entry at 52.34, followed by a 4.83 trailing stop which can be tightened to 2.42 upon earning 3.02. DKL closed Thursday at 51.00. Earnings Report Date: May 03, 2022. Beta: 2.73. Market-Cap: 2.217B. Optionable.
INDUSTRIALS SECTOR
American Airlines Group Inc. (AAL: Industrials/Airlines) - BULLISH BOUNCE. AAL has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Thursday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return AAL to the previously established uptrend. The Bullish Bounce set-up is the basis for our BUY entry, so be ready to go long on a rise to our trigger at 19.82. Set a trailing stop of 1.75, tightening to 0.88 on a 1.34 profit. AAL closed at 19.43 on Thursday. Earnings Report Date: Jul 20, 2022. Beta: 1.59. Market-Cap: 12.62B. Optionable.
Huron Consulting Group Inc. (HURN: Industrials/Consulting Services) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. HURN's reaction to support on Thursday created a Bullish Bounce setup with a BUY entry trigger at 54.21. Use a 3.86 trailing stop, which should work well with HURN's typical daily range. Tighten it to 1.93 on a 3.2 profit. HURN closed at 53.22 on Thursday. Earnings Report Date: May 03, 2022. Beta: 0.86. Market-Cap: 1.135B. 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
---------------- ------- -------- ------- ------ -------
ACM Research ACMR 3/4/2022 3/24/2022 3-for-1 Yes
PAM Transport PTSI 3/9/2022 3/30/2022 2-for-1 Yes
Amazon AMZN 3/9/2022 6/6/2022 20-for-1 Yes
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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