April 29, 2023 - The RightLine Report
Notes From The Editor
Trading as a Business - Part II
We recently talked about ways that a business approach to trading could yield better results. With that same premise in mind, I'd like to introduce you to a business planning tool called SWOT. Companies use it to position themselves for higher profits and to mitigate risk. It can do the same for your trading account.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Lets take a look at each element.
Strengths are things that you do well. Do you excel at spotting trends just as they develop? Are you good at profiting from oversold/overbought conditions? Perhaps you're a natural contrarian.
Doing any of these consistently can give you an important advantage in the struggle for profits. Think about ways that you can improve your strengths and leverage them for maximum benefit. Make them the integral part of your trading strategy.
Weaknesses are obstacles to success. They might include poor risk management, an inability to pull the trigger on what looks like a good setup, or a habit of over-trading. Consistently doing these sort of things will ruthlessly drain your account. Once you've got them identified, make it your number-one priority to fix them. You might even need to stop trading altogether until you've addressed these areas.
Opportunities and Threats are forward-looking. Take a look at where you think the market will be headed. Are there any major trend shifts underway that could change the way you trade? Are previously weak sectors becoming stronger, or vice versa? What possible developments could threaten your key advantages down the road? Anticipating changes means that you'll be on a more even footing when the playing field shifts.
The value of SWOT is the way it helps you bring all these concepts together. Profitable businesses thrive by doing a handful of things very well. Your own bottom line will flourish if you can leverage and sustain your advantages, fix your problem areas, and be prepared for whatever the future may bring.
Have a great weekend!
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits Trader's Corner
Quick List
Stock 04/28 04/28 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
LTHM 21.85 -0.16 22.29 20.87 1.42/0.71 1.76
LKNCY 26.50 0.75 26.91 24.82 2.09/1.05 2.96
BTAI 20.62 0.01 21.24 1.83/0.92 2.3
PCVX 42.83 0.61 43.73 3.35/1.68 2.8
RYTM 20.17 0.23 20.67 19.19 1.48/0.74 1.94
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 Trader's Corner
Market Summary
The major stock averages were higher on Friday, ednning the week with a positive gain despite a warning from Amazon (AMZN $105) about dwindling growth in its cloud-computing business. Also, investors are keeping a close watch on First Republic Bank, which was down about 49% on the day and over 95% for the week. The company will likely require support from the government or larger banks for it to remain in business. Inflation data continues to trend lower, though still elevated at near 4% compared to the Fed Bank's 2% target. Given this is the Fed's last update of inflation numbers ahead of their next meeting on May 2-3, it looks like the Federal Reserve is on track for a 0.25% rate hike next week, bringing the fed funds rate to around 5.25%. Oil finished the session higher, the yield on a 10-year bond, gold and Bitcoin were lower.
Friday On The Week
-------------------- --------------------
Dow 34,098.16 272.00 +289.2 0.86%
Nasdaq 12,226.58 84.35 +154.12 1.28%
S&P 500 4,169.48 34.13 +35.96 0.87%
NYSE Volume 4.09B
NYSE Advancers 2,206
NYSE Decliners 798
Nasdaq Volume 5.34B
Nasdaq Advancers 2,898
Nasdaq Decliners 1,526
New Highs/Lows
04/21 04/24 04/25 04/26 04/27 04/28
--------------------------------------------
NYSE New Highs 53 53 43 31 37 72
NYSE New Lows 39 40 103 101 55 37
Nasdaq New Highs 68 79 39 51 53 71
Nasdaq New Lows 201 211 385 408 219 153
Stocks Covered Today Stock Splits Trader's Corner
TRADER'S TIP: "Flexibility"
All traders will experience new problems that they do not know how to deal with and feel uncomfortable dealing with. However, once they have overcome a particular problem, they develop a feeling of certainty that they can overcome it again. Unfortunately, there seems to be a constant supply of problems that enter into the trader's life. As the ability to be flexible increases, the ability to resolve new problems also increases.
Successful traders know that flexibility improves their perception of the marketplace and also improves how fast they can react to a new market environment. Flexibility allows successful traders to fight their fear because it forces them to be less rigid in their thinking. They know that as the ability to be flexible increases, their level of resourcefulness will be increased. The amazing thing about flexible thinking is that it enables you to perceive alternative methods to accomplish your goals.
~ John Hayden, trader since 1976
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 - 4169.48 April 28, 2023
52-Week High: 4325.28
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4371.05
Resistance 2: 4250.34
Resistance 1: 4209.91
Pivot: 4129.63
Support 1: 4089.20
Support 2: 4008.92
Support 3: 3888.21
NASDAQ Composite - 12226.58 April 28, 2023
52-Week High: 13181.09
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 12942.25
Resistance 2: 12513.30
Resistance 1: 12369.94
Pivot: 12084.35
Support 1: 11940.99
Support 2: 11655.40
Support 3: 11226.45
Dow Industrials - 34098.16 April 28, 2023
52-Week High: 34712.28
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 35550.27
Resistance 2: 34681.56
Resistance 1: 34389.86
Pivot: 33812.85
Support 1: 33521.15
Support 2: 32944.14
Support 3: 32075.43
Stocks Covered Today Stock Splits Trader's Corner
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, May 01, 2023: 01-May MONDAY, MAY 1 01-May 10:00 am ISM manufacturing 01-May 10:00 am Construction spending 01-May TUESDAY, MAY 2 Tuesday, May 02, 2023: 02-May 10:00 am U.S. job openings 02-May 10:00 am Factory orders 02-May WEDNESDAY, MAY 3 Wednesday, May 03, 2023: 03-May 8:15 am ADP employment 03-May 10:00 am ISM services 03-May 2:00 pm Federal Reserve interest-rate statement 03-May 2:30 pm Fed Chair Powell press conference 03-May THURSDAY, MAY 4 Thursday, May 04, 2023: 04-May 8:30 am U.S. productivity 04-May 8:30 am U.S. trade deficit 04-May 8:30 am Initial jobless claims 04-May 8:30 am Continuing jobless claims 04-May FRIDAY, MAY 5 Friday, May 05, 2023: 05-May 8:30 am U.S. employment report 05-May 8:30 am U.S. unemployment rate 05-May 8:30 am U.S. hourly wages 05-May 8:30 am Hourly wages year over year 05-May 3:00 pm Consumer credit 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 Corner
TRADER'S TIP: "Profit vs. Pain"
Successful traders obtain consistent profits. Losing traders obtain consistent pain. In order to become the trader you desire, you must change the internal representations of what a loss means. You must diligently apply yourself to mastering your perceptions, believing with certainty that you will transform yourself into an outstanding trader, have the discipline to develop and obey your trading methodology, have the courage to execute your methodology without hesitation, have the wisdom to differentiate between into wishing" and intuition, have the persistence never to quit, have the integrity to stand apart from other traders, and have the mental flexibility to be open-minded.
If you do, I promise you that at some point in time you will represent a loss in such a way that you will become a highly profitable trader."
~ John Hayden, full-time trader for over 20 years, author of "The 21 Irrefutable Truths of Trading"
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
Livent Corporation (LTHM: Basic Materials/Specialty Chemicals) - SQUEEZE PLAY. Friday's trading session left LTHM 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 22.29 and your SELL short trigger at 20.87. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.42 trailing stop. Once you have a 1.76 profit, reduce the stop to 0.71. Earnings Report Date: May 02, 2023. Beta: 1.81. Market-Cap: 3.925B. Optionable.
CONSUMER CYCLICAL SECTOR
Luckin Coffee Inc. (LKNCY: Consumer Cyclical/Restaurants) - SQUEEZE PLAY. LKNCY 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 26.91 and a SELL short entry at 24.82. Once your trade is filled, enter a 2.09 trailing stop. Tighten it to 1.05 after a 2.96 gain. LKNCY closed on Friday at 26.50. Earnings Report Date: May 01, 2023. Beta: -0.72. Market-Cap: 7.312B. Not Optionable.
HEALTHCARE SECTOR
BioXcel Therapeutics, Inc. (BTAI: Healthcare/Biotechnology) - 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 20.62, BTAI is on our radar for a BUY entry at 21.24. If you purchase shares of BTAI, be sure to also place a trailing stop of 1.83. Snug it up to 0.92 on a 2.3 gain. Earnings Report Date: May 08, 2023. Beta: 1.10. Market-Cap: 598.176M. Optionable.
Vaxcyte, Inc. (PCVX: Healthcare/Biotechnology) - 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. PCVX's reaction to support on Friday created a Bullish Bounce setup with a BUY entry trigger at 43.73. Use a 3.35 trailing stop, which should work well with PCVX's typical daily range. Tighten it to 1.68 on a 2.8 profit. PCVX closed at 42.83 on Friday. Earnings Report Date: May 08, 2023. Beta: 0.96. Market-Cap: 3.986B. Optionable.
Rhythm Pharmaceuticals, Inc. (RYTM: Healthcare/Biotechnology) - SQUEEZE PLAY. The ticker for Friday's session shows RYTM 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 20.67 and a SELL short trigger at 19.19. When RYTM 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 1.48 trailing stop. Upon reaching a 1.94 profit, resize the stop to 0.74. Earnings Report Date: May 02, 2023. Beta: 1.73. Market-Cap: 1.145B. 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 Trader's Corner
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.
Stocks Covered Today Stock Splits Trader's Corner
Trader's Corner
"Thoughts On Trading"
Quotes and Quips from RightLine founder Roger Perry
The Art Of Trading ...
"Trading can be as much art as science. Approaching the market with one and not the other may produce less than desirable results. One of the most important assets I have as a trader is my feel for the market and my gut instinct. These aren't necessarily gifts, but skills that were developed through trial and error over time. Repeated analysis of the results we get from our trading tactics and actions in varied sets of circumstances is critical to developing that "gut feeling" that successful traders possess.
Usually this means observing the same event or set of occurrences repeatedly and making conclusions about what works based on the unique elements of that specific environment in that particular slice of time. Those who haven't learned or accepted the fact that trading is art and science, and that the art part is messaged by introspection in retrospect will have a more difficult time becoming a successful trader. It's part of the process."
Support, Resistance, And Trailing Stops ...
"Many traders like to trade stocks that trade in trading ranges, between support and resistance. These can be great plays for short- term traders who go long at support and short on resistance. A stop is set based on the daily range and continually adjusted upward (trailing stop) until it approached resistance where the stop would be tightened. Either then go short if the stock fails to break out, or wait for the next bounce off support. Setting stops based on the previous day's low works well for stocks with low volatility. It is a short-term approach for those that don't like to set large stops.
Once your trade becomes profitable, we like to set our stop at break even. Then when a profitable position rises we increase the stop or lessen the "trail" and work towards an intermediate investment horizon if it's appropriate. The goal is to stay in the profitable trade. The fine line between setting a stop too tight and just right is one that can only be learned with experience and trial and error. Your individual perception of risk, fear and greed are traits that you can't learn out of a book. They belong to you and only you know whey they come into play."
Developing As A Trader ...
"Trading is a process and not an event. We constantly are adding information with each new experience, both good and bad. Planning our trade involves a host of factors. Some critical, others not. However, we must follow some disciplined approach in order to make minor course corrections. If we are constantly jumping from one system to another, we are not ever able to refine our approach.
Refinement is the key to success. We must consider our risk assessment on a trade and on our selves. Then we have to decide the kind of market we are in. Next, we need to make an assessment of how a stock's sector is performing. The trade holding horizon which helps us to decide our position size as well as our stop loss limit. We always employ risk management to refine our position size and risk limits.
It seems like a lot and it is! However, as time progresses the assessment can take seconds but be worth gold. It keeps us from staying with an approach after it ceases to be successful. It helps us to lean into conditions we find favorable. However, the bottom line is it preserves our capital so that our trading education can continue indefinitely."
On Indicators ...
"In the past I've often said that no indicator should be used in isolation. Rather, indicators should be used to substantiate and validate moves, whether it is on an individual stock or the market as a whole. If the market indices are in an upward trend AND the new highs/lows and advance/declines are following the same upward trend - this would indicate that the trend has some validity.
However, if the market is in an upward trend and the new highs/lows and advance/declines are diverging (not following) the same upward trend, is this good or bad? It depends. Remember, indicators tend to substantiate and follow rather then predict movement. They are looking at the past, not the future. In the above case, a divergence in several essential indicators would indicate that a cautionary stance would be prudent lest the diverging indicator (the market index) takes a turn downward."
On Shorting ...
"As I've said before, shorting is not as intuitive as is going long. It has more risk and is harder to do successfully. One of the old arguments is that if you go long on a stock it can only fall to zero, but if you go short the stock price can (hypothetically) rise forever to infinity. This is a stupid argument. We don't trade in a vacuum nor do most folks hold on to a position to zero or infinity. However, to succeed when the market is going down, the key is not fighting the tape (trend) but rather embracing it.
Trying to establish long positions when the market is choppy and whipsawing is a good way to lose money fast. However, when we are working with a definite trend, it becomes easier. Rather than trying to swim upstream, go with the flow. I constantly hear people say that a stock is a screaming short because it has moved so strongly and has been setting new highs. That is a not the best way to select a short. You pick a short the same way you do a long. Instead of finding stocks that are breaking out setting new highs, you look for stocks that have broken support, are in a weak sector or which tend to move in lock step with other stocks that have just reported problems. You can use stops to protect yourself in short positions as well."
On Money Management ...
"Many great traders have sabotaged themselves by poor money management. The bust out list runs long, from heavy hitters like Victor Neiderhoffer to small traders like most of us. All can bust out if one is not disciplined and follows this simple yet critical trading formula:
1. Plan your trades.
2. Trade your plan.
3. Document your results with a Trading Journal and use it to work to eliminate mistakes.
4. Be disciplined. Lean in when times are strong; sit on your hands when they aren't.
5. Strive to understand what emotions influence your decisions and how to manage them.
6. Use and refine your system. Allow it to be evolutionary rather than revolutionary. Tweak and tune it, but avoid jumping from one system to another.
7. Be patient.
8. Enjoy yourself and share your successes!"
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
The RightLine Report is an information service for investors and traders. It is not a solicitation nor a recommendation or offer to buy or sell securities. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. The publishers of The RightLine Report are not brokers or financial advisors, and are not acting in any way to influence the purchase or sale of any security. Stock picks, entry points and exit points should be considered an information resource to assist the trader in developing a trading plan and it is the sole responsibility of the reader to conduct his or her own due diligence before executing a trade. Trading securities should be considered speculative with a high degree of volatility and risk.
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