April 4, 2024 - The RightLine Report
Notes From The Editor
The Ups and Downs of Making The Market
Market makers and specialists use technical analysis to locate potential reversal zones whenever they feel the need to "sweep" the street in search of profits, commissions and brokerage fees. They stimulate orders by offering large amounts of stock for sale (shorting), which in turn motivates other traders to sell shares they own or to short shares that they borrow. This creates downward price momentum, which forces prices even lower. Once there is enough profit on the table to cover their shorts, they buy back the stock and lock in their gains.
In my experience, the reversal points are usually predetermined. Some of these reversal levels are easy for traders to anticipate. They usually line up with previous highs and lows, or pivot points like the 13, 22, and 50 Exponential Daily Moving Averages. Others are less obvious. Trend lines, Bollinger Bands, Fibonacci overlays, and other technical tools are used to locate "hot spots." Keep in mind that wherever two or more of these hot spots converge, support or resistance is even stronger.
In the case of "down-then-up" sweeps, the reversal point is often the closest logical support that doesn't create too much panic. After all, market makers and specialists don't usually intend to push the market to it's knees, they just want to create enough action to make a handsome profit from their shorts, plus get their share of the commissions and brokerage fees resulting from all the commotion.
Every day is business as usual for the hundreds of member firms that perform as Nasdaq Market Makers. Name any major brokerage. The odds are almost 100 percent that the firm is a Nasdaq market maker. Yes, even YOUR broker is a market maker.
On the New York Stock Exchange you'll find hundreds of "Designated Market Makers" (DMMs) formerly known as "specialists." Though a slightly different breed of market maker, they too are allowed to trade on their own behalf - both long and short.
Over the years I've learned that it doesn't pay to be stubborn in the face of determined market makers and DDMs. This group wields an immense amount of power. As traders we can assume they are behind - or at the very least involved in - most price moves of any significance. Fortunately, we can anticipate the support and resistance points. This allows us to prepare for likely reversals or breakouts at the familiar junctions.
One measure of a trader's strength is the ability to quickly adapt and go with the current price flow. To a large degree, this is what is meant by the saying, "let the market tell you what to do" - a statement that holds true for ALL traders and investors!
Good trading,
Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 04/05 04/05 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
MED 33.88 -0.18 35.23 32.78 2.45/1.23 3.44
MODV 23.42 -0.14 24.88 22.64 2.24/1.12 3.9
CRBP 38.97 0.47 41.2 37.59 3.61/1.81 10.56
FOUR 65.80 -3.29 63.65 7.27/3.64 6.62
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
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Stocks Covered Today Stock Splits
Market Summary
After spending most of the day in positive territory, the equity markets experienced a late-day drop, resulting in a 1% loss and continuing the shaky start to the second quarter. Thursday's weakness can be attributed to escalating tensions in the Middle East, rising oil prices, and comments from Fed officials emphasizing their intention to await further confirmation of falling inflation before considering rate cuts.
Bonds reflected a "risk-off" mood, with the 10-year Treasury yield falling to 4.3%. Caution was also evident in sector performance, with utilities, energy, and consumer staples outperforming.
Overall, we interpret this as not a dramatic shift in the prevailing market narrative, but rather a normal, if not healthy, pause following the sharp rally since last October, driven by profit-taking and rebalancing as the calendar turned to the second quarter.
The recent strong rally in stocks has overshadowed a notable upswing in commodity markets. Crude oil has surged more than 18% in the last two months, while gold has gained 15% since mid-February. This trend may be tied to rising oil prices, now at their highest since last October, posing a threat to falling inflation and potentially stoking higher gold prices as an inflation hedge. However, we believe it's premature to assume a renewed inflation scare sparked by oil prices. While higher oil prices may pressure headline CPI due to consumer fuel and energy spending, the more influential measure, core CPI, which excludes food and energy prices, may not see a structural or prolonged upturn in consumer prices. Rising commodity prices inject some uncertainty in the near term, but we don't anticipate them derailing the outlook for lower inflation and Fed rate cuts.
Apr 3, 2024 Apr 4, 2024
-------------------- --------------------
Dow 39,127.14 -43.10 38,596.98 -530.16
Nasdaq 16,277.46 37.01 16,049.08 -228.38
S&P 500 5,211.49 5.68 5,147.21 -64.28
NYSE Volume 3.71B 4.08B
NYSE Advancers 1,668 975
NYSE Decliners 1,143 1,836
Nasdaq Volume 5.18B 5.38B
Nasdaq Advancers 2,332 1,586
Nasdaq Decliners 1,879 2,666
New Highs/Lows
03/28 03/28 04/01 04/02 04/03 04/04
--------------------------------------------
NYSE New Highs 370 369 186 101 169 224
NYSE New Lows 12 12 23 38 36 16
Nasdaq New Highs 269 277 170 70 115 170
Nasdaq New Lows 50 49 81 134 127 100
Stocks Covered Today Stock Splits
TRADER'S TIP: "Get A Groove Going"
Most companies will announce stock splits concurrent with a "major" event, such as an earnings release or during an annual shareholder's meeting. When a corporation breaks from this pattern and announces a split just before one of these events, it many times is a good "tip off" that further good news is just around the corner.
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".
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, APRIL 1 9:45 am S&P U.S. manufacturing PMI (final) 10:00 am Construction spending 10:00 am ISM manufacturing TUESDAY, APRIL 2 10:00 am Factory orders 10:00 am Job openings 9:05 am Chicago Fed President Austan Goolsbee speaks 12:05 pm Cleveland Fed President Loretta Mester speaks 1:30 pm San Francisco Fed President Mary Daly speaks TBA U.S. auto sales WEDNESDAY, APRIL 3 8:15 am ADP employment 9:45 am S&P U.S. services PMI (final) 10:00 am ISM services 12:00 pm New York Fed President John Williams moderates discussion THURSDAY, APRIL 4 8:30 am Initial jobless claims 8:30 am U.S. trade balance 10:00 am Philadelphia Fed President Patrick Harker speaks 12:15 pm Richmond Fed President Tom Barkin speaks 12:45 pm Chicago Fed President Austan Goolsbee speaks 2:00 pm Cleveland Fed President Loretta Mester speaks FRIDAY, APRIL 5 8:30 am U.S. nonfarm payrolls 8:30 am U.S. unemployment rate 8:30 am U.S. hourly wages 8:30 am Hourly wages year over year 9:15 am Richmond Fed President Tom Barkin speaks 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 TIP: "Turn Off The Tube"
It's wise to limit the amount of information that does not help your trading. You may want to avoid stock chat rooms entirely, and though it may be hard, consider keeping financial news TV to a minimum.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Medifast, Inc. (MED: Consumer Cyclical/Personal Services) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in MED, 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 35.23 and a SELL short entry at 32.78. Let MED's price action determine your long or short entry. Once the order is filled, place a 2.45 trailing stop, and tighten it to 1.23 upon getting a 3.44 gain. MED closed Thursday at 33.88. Earnings Report Date: Apr 29, 2024. Beta: 1.17. Market-Cap: 369.143M. Optionable.
HEALTHCARE SECTOR
ModivCare Inc. (MODV: Healthcare/Medical Care Facilities) - SQUEEZE PLAY. Traders are feeling the pressure as MODV'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 24.88 and a SELL short entry at 22.64. MODV's price movement will decide which entry is filled. As soon as you're in the trade, enter a 2.24 trailing stop. Tighten it to 1.12 after you get a 3.9 gain. MODV closed Thursday at 23.42. Earnings Report Date: May 02, 2024. Beta: 0.46. Market-Cap: 332.519M. Optionable.
Corbus Pharmaceuticals Holdings, Inc. (CRBP: Healthcare/Biotechnology) - SQUEEZE PLAY. A look at CRBP'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 41.2 and a SELL short trigger at 37.59. Once CRBP shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 3.61 and tighten to 1.81 on a 10.56 gain. CRBP closed Thursday at 38.97. Earnings Report Date: May 07, 2024. Beta: 2.43. Market-Cap: 408.916M. Optionable.
TECHNOLOGY SECTOR
Shift4 Payments, Inc. (FOUR: Technology/Software - Infrastructure) - BEARISH U-TURN. Shares of FOUR have experienced the pain of selling pressure for a while, yet a recent bounce has given shareholders some welcome yet perhaps temporary relief. On Thursday the upward bounce ran into a brick wall at a Moving Average. FOUR now appears ready to head lower again. A continuation of this bearish reversal would signal a retracement of the recent gains, so prepare for SHORT entries at 63.65, using a 7.27 stop. Tighten to 3.64 on a gain of 6.62. Thursday's closing tick was 65.80. Earnings Report Date: May 02, 2024. Beta: 1.60. Market-Cap: 5.671B. 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
---------------- ------- -------- ------- ------ -------
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.
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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