Notes From The Editor

Tapping Into the Power of Relative Strength Analysis

The broader market's direction tends to have the largest impact on the movement of any given stock. However, it's difficult to design a trading strategy solely around this tendency. The reason is simple: individual equities don't usually march in lock-step with the overall market. They sometimes underperform or outperform, or "fade" the major indices by moving entirely in the opposite direction.

A common-sense tool called relative strength analysis can help us draw useful conclusions when stocks diverge from the broader market. The idea is simple: when you're looking at a stock, compare it to a chart of the S&P 500 (the best gauge of overall market performance). How does it look - especially over the past month or so? Has the stock roughly mirrored the S&P's price action? Has it moved in the same direction, but at a faster or slower pace? Or has it faded the index with a move in the opposite direction?

Just by eyeballing the two charts - the index and the stock - you can reach some interesting conclusions about the stock's strength (or lack thereof). If shares are outperforming the S&P 500 during a bullish period, that's a good sign that more buying might be in store over the near-term. Similarly, an underperforming uptrend in a rising market (also called relative weakness) would be a bearish sign.

But wait...you don't have to stop with just looking at the S&P 500. Relative strength analysis can also be used with sector indices. This is a good idea, as it accounts for sector-specific strength or weakness. For example, you could compare Intel (INTC) to not only the S&P 500, but also the semiconductor index (SOX). This would give you a deeper understanding of how INTC is performing versus the overall chip sector.

You can even perform this analysis with two stocks. This comes in handy when you're torn between two similar trade set-ups in the same sector. To take the INTC example one step further, you might compare it to, say, Advanced Micro Devices (AMD) to see which one has been stronger. The one showing relative strength would probably be a better candidate for a long trade.

Some charting programs offer a simple way of charting relative strength; a rising line shows that the stock in question is outperforming, while a falling line shows relative weakness. But oftentimes, the best tool is your eyeballs! Compare, contrast, and drill down to find your best trade.

Here's to profits,

Kent Barton
Senior Analyst

Note: The markets will be closed for the Good Friday holiday on April 10, 2020. RightLine will also be closed for the Easter / Resurrection weekend, so the next Report will be published on Tuesday April 14th.

Quick List

    
Stock     04/09     04/09      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

GWB       20.28      1.10     21.07     19.16        1.91/0.95      5.20
FHI       21.34      1.44     22.01     19.97        2.04/1.02      5.08
SNDR      20.25      0.42     20.75     19.25        1.50/0.75      2.62
AIMC      21.32      1.27     21.96     19.97        1.99/0.99      4.74

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 access to the Risk Calculator, go to http://www.rightline.net and login to the Member's area.

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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Market Summary

US stocks added more gains to the recent rally on Thursday as traders were optimistic going into the long Easter holiday weekend. The Federal Reserve Bank announced another deluge of monetary policy stimulus, this time a whopping $2.3 trillion in benefits. The Fed's actions are aimed at providing further relief and stability to the markets during the ongoing worldwide COVID-19 event. Oil prices, the USD/dollar ad treasury yields dropped, while gold was solidly stronger.

                        Apr 8, 2020            Apr 9, 2020    
                  --------------------   --------------------
Dow                    23,434  +779.71        23,719  +285.80
Nasdaq               8,090.90  +203.64      8,153.58   +62.67
S&P 500                 2,750   +90.57         2,790   +39.84

NYSE Volume                      5.95B                  8.00B
NYSE Advancers                    2675                   2584
NYSE Decliners                     325                    422

Nasdaq Volume                    3.50B                  4.19B
Nasdaq Advancers                  2725                   2549
Nasdaq Decliners                   550                    719

                                 New Highs/Lows

                   04/02  04/03  04/06  04/07  04/08  04/09
                 --------------------------------------------
NYSE New Highs         2      2      6      7      7     12
NYSE New Lows        117    180     20     16      6      2
Nasdaq New Highs       4      5     12      9     10     17
Nasdaq New Lows      138    193     50     38     24     16
   

TRADER'S TIP: "Nay-Sayers and Hay-Makers"

It seems that practically every market turn comes draped in commentary and analysis from all angles of pundits and prophets. For every pullback there's the requisite reasoning for a "golden buying opportunity," which comes equally weighted with the seemingly sound logic of numerous warning signs signaling impending doom. Enough already! Once in a while try turning down the volume and simply observing the charts and figures that come across without the rhetoric. It can be so much more informative.

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Boost Your Profits With Moving Averages".

S&P 500 - 2789.82 April 9, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 2913.64
Resistance 2: 2719.74
Resistance 1: 2604.19
Pivot: 2525.84
Support 1: 2410.29
Support 2: 2331.94
Support 3: 2138.04


NASDAQ Composite - 8153.58 April 9, 2020

52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 8698.23
Resistance 2: 8106.03
Resistance 1: 7739.55
Pivot: 7513.83
Support 1: 7147.35
Support 2: 6921.63
Support 3: 6329.43
        
Dow Industrials - 23719.37 April 9, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 24913.33
Resistance 2: 23167.99
Resistance 1: 22110.26
Pivot: 21422.64
Support 1: 20364.91
Support 2: 19677.29
Support 3: 17931.94
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, April 06, 2020:
06-Apr          None scheduled

Tuesday, April 07, 2020:
07-Apr  10 am   Job openings
07-Apr   3 pm   Consumer credit

Wednesday, April 08, 2020:
08-Apr   2 pm   FOMC minutes

Thursday, April 09, 2020:
09-Apr  8:30 am   Weekly jobless claims
09-Apr  8:30 am   Producer price index
09-Apr  10 am   Consumer sentiment index
09-Apr  10 am   Wholesale inventories

Friday, April 10, 2020:
10-Apr  8:30 am   Consumer price index
10-Apr  8:30 am   Core CPI



For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "A Trader's Mind: Beliefs"

"You experience what you believe, unless you believe you won't, in which case you don't, which means you did."

- Harry Palmer

Stocks Covered in This Issue

FINANCIAL SERVICES SECTOR

Great Western Bancorp, Inc. (GWB: Financial Services/Banks-Regional) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. GWB traders reached this state of stand-off on Thursday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 21.07 and a SELL short trigger at 19.16. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.91 which can be tightened to 0.95 on a 5.20 gain. GWB closed Thursday at 20.28. Earnings Report Date: Apr 27, 2020. Beta: 1.58. Market-Cap: 1.14B. Optionable.

Federated Hermes, Inc. (FHI: Financial Services/Asset Management) - SQUEEZE PLAY. FHI traders on both sides of the fence are now locked in a head-to-head shootout. Thursday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 22.01 and a SELL short trigger at 19.97. When one of the orders is filled, cancel the remaining order and enter a 2.04 trailing stop. When you've reached a 5.08 paper profit, tighten the stop to 1.02. FHI closed at 21.34 on Thursday. Earnings Report Date: N/A. Beta: 1.21. Market-Cap: 2.155B. Optionable.

INDUSTRIALS SECTOR

Schneider National, Inc. (SNDR: Industrials/Trucking) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in SNDR's narrowest trading range of the past seven sessions. With neither group able to take complete control on Thursday, the stock's short term destiny is up for grabs. You can capitalize on this unusually tight condition by placing both a BUY order at 20.75 and a SELL order at 19.25. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.50 trailing stop. Tighten the stop to 0.75 once you have a 2.62 gain. SNDR closed Thursday at 20.25. Earnings Report Date: Apr 29, 2020. Beta: 1.09. Market-Cap: 3.587B. Optionable.

Altra Industrial Motion Corp. (AIMC: Industrials/Specialty Industrial Machinery) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. AIMC found itself in this condition on Thursday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 21.96 and a SELL short trigger at 19.97. When AIMC moves outside of Thursday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.99 trailing stop. After you've got a 4.74 profit, tighten the stop to 0.99. AIMC closed at 21.32 on Thursday. Earnings Report Date: Apr 29, 2020. Beta: 2.16. Market-Cap: 1.379B. 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.

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  
---------------- -------     --------    -------     ------  -------   

Currently there are no upcoming stock splits on the major US exchanges.
    

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 to all RightLine subscribers. For access, go to http://www.rightline.net and login to the Member's area.

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