April 5, 2022 - The RightLine Report
Notes From The Editor
Trading volume is an often-overlooked aspect of market and equity movement that can give key insights into where prices may be headed. The most important thing to keep in mind is that when volume behind a price movement is higher, it's more likely to be sustained. A low-volume breakout, for example, is more likely to be a "head fake" than one that that isn't accompanied by much buying.
When hearing the media discuss equities, you'll typically hear volume referred to in terms of "most active" for the day - or the stocks that had the highest readings for the session. This list typically includes big-caps such as General Electric (GE) or Exxon Mobil (XOM), or tech behemoths like Intel (INTC) or Microsoft (MSFT).
One way to profit from the "most active" board is to use it as a filter. Does the list show any unusual names? If so, it's probably a company that just experienced a major news event, such as earnings. Make a note of these equities that had unusually strong volume, then watch them during the following session.
"Follow-through" sessions are of the utmost importance when news moves a stock. One-day volume spikes created by a news story look impressive, but often fade away after the initial reaction is absorbed by the market.
What really counts is how the stock behaves the next session. Does price action continue in the same direction? Does volume continue at a higher-than-average rate? If "yes" is the answer to both those questions, there's likely to be a sustained price movement.
Technically-minded traders have thought of all sorts of ways to incorporate volume into their analysis. The list runs from basic set-ups to advanced, complicated indicators. One of my favorite methods is to find volume trends.
Most charting software includes volume information in the form of vertical lines above or below the chart. These lines can often be connected to form trendlines. For instance, an equity whose volume is gradually rising every day will have a rising volume trendline.
These trendlines help to identify periods of rising or falling interest in a stock. It also helps to determine when a price trend might be nearing an end.
Imagine, for example, that stock XYZ has been moving higher for several days - while at the same time, volume has been trending lower. This "volume divergence" is a sign that buyers are becoming less enthusiastic about XYZ as it moves higher, and that a short-term top might be just around the corner.
Remember that volume isn't just some run-of-the-mill indicator - it's an integral part of a stock's movement. Price and volume go hand in hand. Learn more about their relationship, and you've added a valuable resource to your trading toolbox.
Have a great week,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 04/05 04/05 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
WMMVY 39.26 0.02 40.11 2.22/1.11 2.5
RE 298.88 1.58 304.74 18.48/9.24 14.18
TSC 33.06 0.17 33.62 1.86/0.93 1.58
AVTE 16.67 0.51 16.89 1.92/0.96 2.68
CWAN 21.08 -0.25 21.69 20.16 1.53/0.77 2.76
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.
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Stocks Covered Today Stock Splits
Market Summary
The major stock indices were lower on Tuesday following hawkish comments from US Federal Reserve Bank Governor Lael Brainard that the central bank could soon start reducing its balance sheet "at a rapid pace." Apparently inflation pressures remain a primary catalyst for the monetary policy stance. In economic news, the ISM Services Index accelerated less than predicted, the trade deficit widened, and the final March S&P Global Services PMI Index was revised lower. In equities, Twitter announced that Elon Musk has been added to its Board after the Tesla (TSLA $1,091) founder bought almost 10% of Twitter's (TWTR $51) stock for roughly $3-Billion, while Carnival Corporation (CCL $20) reported a record week of bookings. Gold and oil prices declined, the USD/dollar dipped and treasuries dropped, raising yields.
Apr 4, 2022 Apr 5, 2022
-------------------- --------------------
Dow 34,921.88 103.61 34,641.18 -280.70
Nasdaq 14,532.55 271.05 14,204.17 -328.39
S&P 500 4,582.64 36.78 4,525.12 -57.52
NYSE Volume 4.62B 4.81B
NYSE Advancers 1,842 648
NYSE Decliners 1,529 2,716
Nasdaq Volume 4.59B 4.66B
Nasdaq Advancers 3,057 1,204
Nasdaq Decliners 1,757 3,549
New Highs/Lows
03/29 03/30 03/31 04/01 04/04 04/05
--------------------------------------------
NYSE New Highs 117 120 119 111 99 122
NYSE New Lows 74 25 73 76 47 116
Nasdaq New Highs 92 78 91 75 81 74
Nasdaq New Lows 78 83 125 130 80 156
Stocks Covered Today Stock Splits
TRADER'S TIP: "Learning From The Past"
One thing is for certain; the stock market can move up and down faster than most investors ever imagine. The cost of being unprepared for a trip in the wrong direction can be extremely expensive, both financially AND emotionally. Many traders and investors think risk control is boring, and had much rather spend their time chasing some ultra-hot stock tip. Just remember that the main reason most traders and investors lose money is because they don't have a planned risk control strategy to protect them from excessive losses.
It hurts to lose. That's why so many of our friends and relatives stop talking about their investments when things go bad. With no plan to limit losses, their stocks can look like the energizer bunny in reverse - they keep going and going, lower and lower. Even folks who recover some of their losses can be helplessly frozen, not knowing what to do. They still have no plan to prevent it from happening again.
Help stop the madness. If you know someone in this situation, tell them about RightLine, and we'll show them how to control risk. You can be sure they'll sleep better at night!
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 - 4525.12 April 5, 2022
52-Week High: 4818.62
52-Week Low: 4056.88
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4823.03
Resistance 2: 4693.30
Resistance 1: 4619.58
Pivot: 4563.57
Support 1: 4489.85
Support 2: 4433.84
Support 3: 4304.11
NASDAQ Composite - 14204.17 April 5, 2022
52-Week High: 16212.23
52-Week Low: 12555.35
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 15427.70
Resistance 2: 14882.14
Resistance 1: 14571.82
Pivot: 14336.58
Support 1: 14026.26
Support 2: 13791.02
Support 3: 13245.46
Dow Industrials - 34641.18 April 5, 2022
52-Week High: 36952.65
52-Week Low: 32272.64
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 36577.61
Resistance 2: 35743.60
Resistance 1: 35280.93
Pivot: 34909.59
Support 1: 34446.92
Support 2: 34075.58
Support 3: 33241.57
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, April 04, 2022: 04-Apr 10 am Factory orders 04-Apr 10 am Core capital equipment orders Tuesday, April 05, 2022: 05-Apr 8:30 am Foreign trade deficit 05-Apr 9:45 am 05-Apr 10 am ISM services index Wednesday, April 06, 2022: 06-Apr 2 pm FOMC minutes Thursday, April 07, 2022: 07-Apr 8:30 am Initial jobless claims 07-Apr 8:30 am Continuing jobless claims 07-Apr 3 pm Consumer credit Friday, April 08, 2022: 08-Apr 10 am Wholesale inventories 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: "Sometimes You Gotta . . ."
The fear of "missing out" can cloud a trader's judgment, so be sure to base all buy or sell decisions on careful planning instead of emotional reactions. The market is full of opportunities - there's plenty for everyone. Rushing in can lead to problems, so remember the old saying . . . "sometimes you gotta slow down to go fast!"
Stocks Covered in This Issue
CONSUMER DEFENSIVE SECTOR
Wal-Mart de México, S.A.B. de C.V. (WMMVY: Consumer Defensive/Discount Stores) - NEW HIGH DIP. Confident in its ability to continue trending skyward, WMMVY's pullback from a new 52-week high sets the stage for a return to that peak. Price activity on Tuesday provided a setup, with the BUY trigger ready at 40.11 should WMMVY reach that level. Follow up your entry with a 2.22 trailing stop. Tighten it to 1.11 when you have a 2.5-point gain. WMMVY closed Tuesday at 39.26. Earnings Report Date: N/A. Beta: 0.08. Market-Cap: 68.553B. Not Optionable.
FINANCIAL SERVICES SECTOR
Everest Re Group, Ltd. (RE: Financial Services/Insurance-Reinsurance) - NEW HIGH DIP. Another high-flyer, RE just recently set a new 12-month max price. Having dipped since then, RE's bullish response to an encounter with moving average support on Tuesday shows that the stock may be ready for another move skyward. Now at 298.88, an upward push to 304.74 will signal a BUY entry. Once in the trade, place a 18.48 trailing stop which can be tightened to 9.24 once you've gained 14.18. Earnings Report Date: Apr 27, 2022. Beta: 0.62. Market-Cap: 11.738B. Optionable.
TriState Capital Holdings, Inc. (TSC: Financial Services/Banks-Regional) - BULLISH BOUNCE. Up-trending stocks like TSC have a tendency to bounce their way skyward rather than travel higher in a straight line. After touching down to a moving average support level on Tuesday, TSC is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 33.62 if positive price action occurs. As always, follow your entry with a trailing stop. A 1.86 trailer should work well with TSC. Tighten it to 0.93 on a 1.58 gainer. Earnings Report Date: Apr 19, 2022. Beta: 2.01. Market-Cap: 1.11B. Optionable.
HEALTHCARE SECTOR
Aerovate Therapeutics, Inc. (AVTE: Healthcare/Biotechnology) - BULLISH BOUNCE. Here is another example of a stock in an established uptrend that has recently experienced a counter-trend drop. The sliding price action has now found support near a moving average zone, bouncing upward during Tuesday's session to close at 16.67. Anticipate the rebound to continue, and be ready to buy AVTE at 16.89. Follow your entry with a trailing stop of 1.92 which can be tightened to 0.96 on a 2.68 profit. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 406.921M. Not Optionable.
TECHNOLOGY SECTOR
Clearwater Analytics Holdings, Inc. (CWAN: Technology/Software-Application) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in CWAN, 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 21.69 and a SELL short entry at 20.16. Let CWAN's price action determine your long or short entry. Once the order is filled, place a 1.53 trailing stop, and tighten it to 0.77 upon getting a 2.76 gain. CWAN closed Tuesday at 21.08. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 3.761B. 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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