April 30, 2022 - The RightLine Report
Notes From The Editor
Do you ever think about the value of your mistakes? Most people don't. I suppose we all have blind spots within our field of vision - things that we just don't see because of our psychological makeup.
Trader behavior is often a paradox. Most newbies have little or no training in the markets, yet still expect to be successful without anyone to guide them. Experienced traders know that rules are important, but we still sometimes set rules and then break them.
The reasons for these types of conflicting behaviors are embedded deep in our brains.
Today's actions are largely the result of early childhood conditioning that established habits and beliefs long before we even knew what they were. As young children we were unaware to how silly we probably looked to our older friends and family when we tried to avoid responsibility for our actions.
Making childish excuses seemed like a good idea at the time, though now we can see that it wasn't. In the same way, our current trading behavior always seems like the right thing to do - at least at the time we do it.
When someone complains that the market has caused them grief, they are actually saying that their actions are the primary reason it happened. Have you ever noticed how most investors are reluctant to admit that they are responsible for their losses, yet they seem proud of their gains?
At first glance it seems natural to be ashamed of our mistakes and proud of our accomplishments. However, our blunders usually teach us much more than our achievements - if we are willing to learn from them.
The only truly bad mistakes are the ones that we deny. It takes courage to own up to them, much less accept them as valuable learning experiences to be embraced.
The good news is that we can start changing our old habits and beliefs by taking responsibility for our actions. A trading mistake can cost quite a bit in terms of cash, so it's always wise to get at least the same amount of value in usable experience.
When reviewed objectively, your experiences are worth far more than you ever imagined.
Trade well,
~ Thomas Sutton, Editor
Stocks Covered Today Stock Splits Trader's Corner
Quick List
Stock 04/29 04/29 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
FEAM 25.54 -0.18 26.81 24.5 2.31/1.16 3.18
AVD 21.40 -0.18 22.19 20.63 1.56/0.78 1.54
ADNT 34.14 -0.83 32.9 2.75/1.38 3.44
STNG 24.73 0.04 25.66 23.63 2.03/1.02 1.88
OPRX 28.11 -1.08 30.93 27.11 3.82/1.91 4.7
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 US stock indices moved lower on Friday, closing out the final week of April with a loss. Catalysts for the downturn included expectations of an aggressive Fed Bank tightening cycle, concerns over persistent inflation concerns and rising interest rates. In economic news, manufacturing growth in the Chicago region decelerated more than predicted, and consumer sentiment was revised downward. Other data showed personal income and spending were up than expected, while inflation remained elevated. In equities, Amazon (AMZN $2,486) announced a stark quarterly loss, Apple (AAPL $158) released cautious guidance, and Intel (INTC $44) issued a weak outlook. Oil prices, the USD/dollar and treasuries declined, gold advanced higher.
Friday On The Week
-------------------- --------------------
Dow 32,977.21 -939.18 -834.19 -2.47%
Nasdaq 12,334.64 -536.89 -504.65 -3.93%
S&P 500 4,131.93 -155.57 -139.85 -3.27%
NYSE Volume 5.19B
NYSE Advancers 685
NYSE Decliners 2,666
Nasdaq Volume 4.79B
Nasdaq Advancers 1,257
Nasdaq Decliners 3,534
New Highs/Lows
04/22 04/25 04/26 04/27 04/28 04/29
--------------------------------------------
NYSE New Highs 20 13 9 17 22 24
NYSE New Lows 412 440 392 591 523 332
Nasdaq New Highs 43 31 38 32 43 35
Nasdaq New Lows 635 626 781 866 830 538
Stocks Covered Today Stock Splits Trader's Corner
TRADER'S TIP: "The Market Trend: A Friend That's Too Big To Push Around"
"The manipulation of the primary trend is not possible. When large amounts of money are at stake, the temptation to manipulate is bound to be present. Speculators, specialists or anyone else involved in the markets could manipulate the prices, but it is not possible to manipulate the primary trend. Intraday, day-to-day and possibly even secondary movements could be prone to manipulation. These short movements, from a few hours to a few weeks, could be subject to manipulation by large institutions, speculators, breaking news or rumors. Individual shares could be manipulated, but manipulations usually end the same way: the security continues the primary trend. But it would be virtually impossible to manipulate the market as a whole. The market is simply too big for this to occur."
~ William Hamilton, the Dow theory
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 - 4131.93 April 29, 2022
52-Week High: 4818.62
52-Week Low: 4056.88
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4492.19
Resistance 2: 4346.64
Resistance 1: 4239.28
Pivot: 4201.09
Support 1: 4093.73
Support 2: 4055.54
Support 3: 3909.99
NASDAQ Composite - 12334.64 April 29, 2022
52-Week High: 16212.23
52-Week Low: 12315.74
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 13945.36
Resistance 2: 13249.65
Resistance 1: 12792.14
Pivot: 12553.94
Support 1: 12096.43
Support 2: 11858.23
Support 3: 11162.52
Dow Industrials - 32977.21 April 29, 2022
52-Week High: 36952.65
52-Week Low: 32272.64
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 35717.84
Resistance 2: 34524.98
Resistance 1: 33751.09
Pivot: 33332.12
Support 1: 32558.23
Support 2: 32139.26
Support 3: 30946.40
Stocks Covered Today Stock Splits Trader's Corner
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, May 02, 2022: 02-May 9:45 am 02-May 10 am ISM manufacturing index 02-May 10 am Construction spending Tuesday, May 03, 2022: 03-May 10 am Job openings 03-May 10 am Quits 03-May 10 am Factory orders 03-May Varies Motor vehicle sales (SAAR) Wednesday, May 04, 2022: 04-May 8:15 am ADP employment report 04-May 8:30 am International trade balance 04-May 9:45 am 04-May 10 am ISM services index 04-May 2 pm FOMC statement 04-May 2:30 pm Fed Chair Jerome Powell news conference Thursday, May 05, 2022: 05-May 8:30 am Initial jobless claims 05-May 8:30 am Continuing jobless claims 05-May 8:30 am Productivity (SAAR) 05-May 8:30 am Unit labor costs (SAAR) Friday, May 06, 2022: 06-May 8:30 am Nonfarm payrolls 06-May 8:30 am Unemployment rates 06-May 8:30 am Average hourly earnings 06-May 8:30 am Labor force participation rate, 25-54 06-May 3 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: "Trading for Instant Wealth"
Looking for a short cut to riches? Join the crowd. Many novice traders catch the "get rich quick" bug, and more than a few resort to questionable tactics in a futile attempt to fulfill their fantasies. One such tactic is known as "St. Pete's Paradox," an old gambling scheme that utilizes a distorted version of a common Black Jack strategy - "doubling down." Here's a simple example of how St. Pete's Paradox works;
You bet $1000 on a coin flip, and if you win you quit with a $1000 gain. If you lose you double your last bet and put $2000 on the result of another flip of the coin. If you win, you quit - but if you lose, you double your bet again - this time to $4000. If you win on the third attempt, you quit with $1000 profit. If you lose, you continue to double the bet until you do win.
The good news is that if you have an unlimited amount of money you will ultimately win. The bad news is that it's unlikely that you have access to an infinite supply of cash, which means you will eventually go bankrupt if you try this extremely risky method. As for the paradox...it may sound strange, but the results don't depend on having a fair coin toss.
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
5E Advanced Materials Inc. (FEAM: Basic Materials/Specialty Chemicals) - SQUEEZE PLAY. Friday's narrow price range has created a potentially profitable setup in FEAM, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 26.81 and a SELL short entry at 24.5. Let FEAM's price action determine your long or short entry. Once the order is filled, place a 2.31 trailing stop, and tighten it to 1.16 upon getting a 3.18 gain. FEAM closed Friday at 25.54. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 10.844B. Not Optionable.
American Vanguard Corporation (AVD: Basic Materials/Agricultural Inputs) - SQUEEZE PLAY. AVD 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. AVD is now at 21.40. We can capture price action either way by placing a BUY trigger at 22.19 and a SELL short trigger at 20.63. Once AVD 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 1.56. When you acquire a 1.54 profit, tighten the stop to 0.78. Earnings Report Date: May 04, 2022. Beta: 0.94. Market-Cap: 662.219M. Optionable.
CONSUMER CYCLICAL SECTOR
Adient plc (ADNT: Consumer Cyclical/Auto Parts) - BEARISH U-TURN. ADNT's reaction after running into moving average resistance on Friday sets up this stock for a Bearish U-Turn trade. Having spent the past few days of moving higher, ADNT is now likely to revert back to its dominant weekly downtrend. Get ready to SELL short shares if ADNT drops to our entry at 32.9. Once in the trade, place a 2.75 trailing stop, which should be tightened to 1.38 after a 3.44 profit. ADNT closed Friday at 34.14. Earnings Report Date: May 05, 2022. Beta: 2.92. Market-Cap: 3.235B. Optionable.
ENERGY SECTOR
Scorpio Tankers Inc. (STNG: Energy/Oil & Gas Midstream) - SQUEEZE PLAY. A look at STNG's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 25.66 and a SELL short trigger at 23.63. Once STNG shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 2.03 and tighten to 1.02 on a 1.88 gain. STNG closed Friday at 24.73. Earnings Report Date: N/A. Beta: 0.71. Market-Cap: 1.443B. Optionable.
HEALTHCARE SECTOR
OptimizeRx Corporation (OPRX: Healthcare/Health Information Services) - SQUEEZE PLAY. Friday's trading action forced OPRX'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 OPRX 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 30.93 if OPRX moves higher, and place your order to SELL short at 27.11 if price declines to that level. As usual follow your entry with a trailing stop, 3.82 should be sufficient. Reduce your stop to 1.91 on a 4.7 gain. OPRX closed Friday at 28.11. Earnings Report Date: May 04, 2022. Beta: 0.72. Market-Cap: 510.261M. 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
---------------- ------- -------- ------- ------ -------
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.
Stocks Covered Today Stock Splits Trader's Corner
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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