Notes From The Editor

You are probably familiar with the "three M's" of trading - Money, Management and Mind. Of the three, the "Mind" part tends to get the least attention when in fact it really deserves the most.

Take a look at the mainstream financial websites and you'll see that articles about Money and Management outnumber articles about our Mind by a hefty margin. Clearly the focus is financial, yet everyone knows that successful trading depends directly on how well we use our minds.

We all want money - that's why we trade stocks. However, when money becomes the primary basis of our decision making process, we miss out on many of the best aspects of life.

Most of us want to be rich and happy. So which comes first, the chicken or the egg? Some people believe that "rich" leads to "happy" yet there's plenty of evidence to the contrary.

Regardless of the route you take, an extremely important member of the Mind department is passion. Some people would really love to trade the stock market on a regular basis, yet they fear failure.

Because they don't know how to change their thinking, they are unable to gain the skills necessary to reach their objectives. These folks would have a hard time sleeping at night while carrying stock positions large enough to meet their goals.

It's great to have security and a reliable income, but the cash alone isn't worth sacrificing a passionate career. Loving what you do is a vital part of a healthy lifestyle. Take the time to decide what is most important and what is less important ... to YOU.

This isn't a selfish act, it's a fundamental step in creating a fulfilled life for yourself and those you care about the most.

Remember, you're often asked to show compassion for other people, but you're rarely asked to show compassion for yourself. At the risk of offending a few skeptics, be sure that you invest in building a genuine and healthy love for yourself. Only then are you able to truly love and help others.

Enjoy the weekend,

- Thomas Sutton, Editor

Quick List

    
Stock     08/11     08/11      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

INBK      22.71     -0.23     23.62     21.92         1.7/0.85      1.92
PMTS      23.17      0.65     23.69     21.59         2.1/1.05      2.08
TWST      22.31     -0.48     23.16     21.27        1.89/0.95      3.52
MIRM      26.52      0.22      27.2     25.52        1.68/0.84      2.14
FSLY      19.60      0.29     20.06                  1.78/0.89      1.76

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.

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.

Market Summary

Stocks exhibited a mixed performance on Friday and over the week as a whole. The combination of consumer and producer prices failed to alleviate concerns among investors that the Federal Reserve might proceed with rate hikes in September. While Thurday's Consumer Price Index (CPI) data aligned with expectations, showing only modest growth for the second consecutive month, Friday's Producer Price Index (PPI) data came in slightly hotter than anticipated, driven by rising services prices. This led to an increase in government bond yields and a decline in growth sectors of the equity market such as technology, consumer discretionary, and communication services. International markets, including China equities, also experienced declines, partly due to pressure on real estate stocks. Meanwhile, oil and the dollar saw gains.

Inflation continues to hold attention, with the morning's PPI release indicating a 0.3% increase last month and a 0.8% rise from a year ago, both slightly surpassing expectations. When excluding food, energy, and trade, prices were up 2.7% year-over-year, counteracting recent trends of easing core inflation. This data follows the Consumer Price Index (CPI) report, which reported the smallest consecutive monthly gains in over two years.

Despite potential upside risks posed by higher commodity prices and a robust labor market, we anticipate inflation will maintain its positive trajectory for the remainder of the year. The next inflation reading before the September Federal Reserve meeting could influence the rate path. A continued decline in core prices could encourage the Fed to maintain its current stance.

Approaching a historically weak seasonal period of the year, August and September have shown reduced favorability for stocks, often accompanied by increased volatility. In light of substantial equity market gains and flat S&P 500 earnings growth so far in 2023, valuations have risen, prompting investors to exercise greater selectivity. However, the interplay between growth and inflation provides a sturdy foundation for stocks to maintain a sustainable upward trend.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 35,281.40   105.25      +215.78     0.62%
Nasdaq              13,644.85   -93.14      -264.39     -1.9%
S&P 500              4,464.05    -4.78       -13.98    -0.31%

NYSE Volume                      3.77B                       
NYSE Advancers                   1,498                       
NYSE Decliners                   1,376                       

Nasdaq Volume                    4.65B                       
Nasdaq Advancers                 1,945                       
Nasdaq Decliners                 2,371                       

                                 New Highs/Lows

                   08/04  08/07  08/08  08/09  08/10  08/11
                 --------------------------------------------
NYSE New Highs       111    102     64     77     72     40
NYSE New Lows         38     36     65     37     31     37
Nasdaq New Highs      69     74     62     78     79     59
Nasdaq New Lows      114    175    204    188    181    177
   

TRADER'S TIP: "Rallies Need Rest Too . . ."

For a rally to continue ahead in a healthy fashion requires some periods of rest. If a rally doesn't take periodic breaks, the inevitable exhaustion will result in a price collapse. Sustainable rallies proceed by taking two steps forward and one step back, pacing themselves so they don't burn out from climbing a sheer vertical ascent.

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 - 4464.05 August 11, 2023

52-Week High: 4607.07
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4645.24
Resistance 2: 4561.85
Resistance 1: 4512.95
Pivot: 4478.46
Support 1: 4429.56
Support 2: 4395.07
Support 3: 4311.68

NASDAQ Composite - 13644.85 August 11, 2023

52-Week High: 14446.55
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 14524.99
Resistance 2: 14137.82
Resistance 1: 13891.33
Pivot: 13750.65
Support 1: 13504.16
Support 2: 13363.48
Support 3: 12976.31
        
Dow Industrials - 35281.40 August 11, 2023

52-Week High: 35679.13
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 36431.47
Resistance 2: 35860.30
Resistance 1: 35570.85
Pivot: 35289.13
Support 1: 34999.68
Support 2: 34717.96
Support 3: 34146.79
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, August 14, 2023:
14-Aug          None scheduled

Tuesday, August 15, 2023:
15-Aug  8:30 am   U.S. retail sales
15-Aug  8:30 am   Retail sales minus autos
15-Aug  8:30 am   Import price index
15-Aug  8:30 am   Import price index minus fuel
15-Aug  8:30 am   Empire State manufacturing survey
15-Aug  10:00 am   Business inventories

Wednesday, August 16, 2023:
16-Aug  8:30 am   Housing starts
16-Aug  9:15 am   Industrial production
16-Aug  9:15 am   Capacity utilization
16-Aug  2:00 pm   FOMC minutes of July meeting

Thursday, August 17, 2023:
17-Aug  8:30 am   Initial jobless claims
17-Aug  8:30 am   Philadelphia Fed manufacturing survey
17-Aug  10:00 am   U.S. leading economic indicators

Friday, August 18, 2023:
18-Aug          None scheduled


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

TRADER'S TIP: "Learning To Fly"

Low-cost access to the markets via the Internet has without a doubt been the biggest single change to ever impact the stock market. In fact, it has literally revolutionized the entire industry. But cheap and fast trading tools don't produce successful traders and investors any more than cheap and fast planes produce good pilots. Just like learning to fly, learning to maneuver through the market profitably takes time, training, and sincere effort.

Stocks Covered in This Issue

FINANCIAL SERVICES SECTOR

First Internet Bancorp (INBK: Financial Services/Banks-Regional) - SQUEEZE PLAY. The ticker for Friday's session shows INBK 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 23.62 and a SELL short trigger at 21.92. When INBK 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 1.7 trailing stop. Upon reaching a 1.92 profit, resize the stop to 0.85. Earnings Report Date: Oct 17, 2023. Beta: 0.61. Market-Cap: 202.243M. Optionable.

CPI Card Group Inc. (PMTS: Financial Services/Credit Services) - SQUEEZE PLAY. Friday's trading session left PMTS 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 23.69 and your SELL short trigger at 21.59. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 2.1 trailing stop. Once you have a 2.08 profit, reduce the stop to 1.05. Earnings Report Date: Nov 01, 2023. Beta: 1.23. Market-Cap: 264.757M. Not Optionable.

HEALTHCARE SECTOR

Twist Bioscience Corporation (TWST: Healthcare/Diagnostics & Research) - SQUEEZE PLAY. TWST shareholders know what it feels like to be squeezed. Friday's slim price range reveals uncertainty on both sides of the table, a situation which often resolves itself by either Bears or Bulls quickly gaining a clear advantage. The question is "who will win?" Near-term market action tell us whether we should sell short or we should buy shares instead. TWST closed Friday at 22.31. The plan is to enter in the right direction by placing a BUY trigger at 23.16 and a SELL short trigger at 21.27. Once TWST establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.89. After you've collected a 3.52 profit, tighten the stop to 0.95. Earnings Report Date: N/A. Beta: 1.25. Market-Cap: 1.275B. Optionable.

Mirum Pharmaceuticals, Inc. (MIRM: Healthcare/Biotechnology) - SQUEEZE PLAY. MIRM 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 27.2 and a SELL short entry at 25.52. Once your trade is filled, enter a 1.68 trailing stop. Tighten it to 0.84 after a 2.14 gain. MIRM closed on Friday at 26.52. Earnings Report Date: Nov 07, 2023. Beta: 1.25. Market-Cap: 1.016B. Optionable.

TECHNOLOGY SECTOR

Fastly, Inc. (FSLY: Technology/Software-Application) - BULLISH BOUNCE. FSLY's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Friday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move FSLY back in step with the bullish weekly trend, so our BUY entry trigger is set at 20.06. Once you hold a position, trail a stop of 1.78. Tighten it to 0.89 on a 1.76 gain. FSLY closed at 19.60 on Friday. Earnings Report Date: Oct 31, 2023. Beta: 1.26. Market-Cap: 2.489B. 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  
---------------- -------     --------    -------     ------  -------   

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.

Trader's Corner

Stops: One Size Doesn't Fit All Trades

Knowing when to get out of a trade is every bit as important as knowing when to get in. Since the majority of our exits come as a result of our stops getting triggered, understanding the concepts and strategies behind setting those stops is critical to success.

Stops are the trader's first line of defense against trades that turn against you. Traders with longer time horizons will typically use much wider stops than short-term traders, so the best stop amount is not the same for everyone. As traders we are looking for stops that will take us out of a position before we incur significant losses, yet keep us in a trade if the stock is just wavering slightly before moving higher.

In this discussion we are assuming that traders are buying long positions rather than going short. However when going short the same concepts still apply, but in reverse.

When buying, it's usually best to set stops just below some type of support. When setting stops we have to identify the most significant support levels near the current price of the stock. At times the DMA (Daily Moving Average) will offer the strongest support, while in other cases a trend line or previous specific price level may provide stronger support.

Sometimes the best stop is the one set just below a specific price level. You may find that when a stock's price falls to a certain price level, demand increases and buyers begin to buy. This creates a "floor" or support level.

In contrast, you will find instances where a stock's price rises to a level where demand decreases and shareholders begin to sell. This is the "ceiling" or resistance level. The more times that the stock has bounced from a specific price level, the stronger the support or resistance.

When you see stocks that seem to have little or no consistent trend for any period of time, look to see if they tend to bounce back and forth between specific support and resistance points. If they do, these stocks can present great plays for short-term traders who buy just as the stock bounces off support.

Set your stop based on the daily trading range and continually move it upward using a trailing stop (see below) until it approaches resistance. Then tighten your stop. Once stopped out, wait for the next bounce off support and then repeat the process. Some traders will try to double the benefit offered by these range-bound stocks by going short as the stock bounces down from resistance and long on the bounce up from support.

If you buy a stock when it is breaking out to new highs, setting your stop at support may mean that you'll be exposed to quite a loss by the time the stock drops back to that level. Be sure to lower your position size so that the actual dollar risk is lessened.

Traders who intend to set their stops at one of these support levels should consider waiting for a pullback, and then buy on a bounce off of support rather than buying the breakout.

Buying breakouts is a momentum player's strategy. Very short term momentum traders often watch the stock as it climbs higher, set a close trailing stop mentally, and stay ready to pull the trigger when the stock slows or reverses its momentum.

As mentioned above, shorter-term traders normally use tighter stops. Using tighter stops translates into smaller losses if the stock turns south, but also increases the probability that you'll get jiggled out on a quick drop before the stock climbs higher. While these "unwanted" exits can sometimes be frustrating, they are just a part of the game for short-term traders.

NOTE: You can safely use larger stops by reducing your position size. The RightLine Risk Calculator makes it easy to select the optimum number of shares for a particular stop size.

We often talk about "Trailing Stops." A trailing stop is a stop that you move upward as the price of a stock appreciates. Here's how it works. You initially set a stop to minimize losses. Then as time goes on the trailing stop is adjusted in the profitable direction of the trade, which protects your gains.

Note that some brokers may not allow you to set an automatic "trailing stop." Depending on your broker, you may have to set a stop, and then when the stock appreciates, you cancel the initial stop and replace it with another higher stop. You then continue to move it up higher to protect your profit as the stock advances.

Some Pointers on Using Stops:

1. Decide where you will set your stop BEFORE YOU BUY.

2. Once you determine where to set your stop, calculate how many shares you can buy (position size) so that you will never risk more than 2% of your trading capital in one trade.

3. Set the stop the instant your buy order gets filled.

4. Move stops up as the stock rises, first to break even, then to protect profits. On a long position, NEVER lower a stop - only raise it.

5. As the stock moves up sharply, and looks like it may be "topping out" or if market conditions become unfavorable, tighten your stop, which will effectively employ an "up or out" strategy.

Different Stop Order Types

Note the difference between a stop-loss order and a stop-limit order. We recommend using "stop loss orders" rather than "stop-limit orders."

- Stop-Loss Orders

A stop-loss order is a sell order that will automatically turn into a market order to sell if the stop price is hit. A stop-loss order turns into a market order to sell when the stock's price reaches the stop price that you've set. This means that the stock will immediately be sold at the best available market price, regardless of what that price is, once your stop price is reached. If what you really want is to sell a stock if it falls to $X, you must use a stop market order.

- Stop-Limit Orders

A stop-limit order is a sell order that turns into a limit order to sell at a predetermined price after the stop price is hit. A limit order says in effect that you will sell only at a certain price or better. If the stock is dropping quickly or is gapped over, you may not be filled at your limit price and the stock could plummet as you continue to hold your shares.

Keep in mind that a stop-limit order may not fill even if the stock reaches the limit price. All limit orders are filled in sequence by the exchanges, so if the price changes due to the number of orders put in before yours, your order may not be filled.

More Pointers on Setting Stops

Another strategy is to set a stop below the previous or current day's low price. This technique is more effective on stocks with low volatility. It is a short-term approach for those who don't like to set wide stops. Once in a profitable position, some intermediate-traders may consider widening the stop loss or loosening the "trailer."

When you look at the chart of a stock, try to see which type of support and resistance has been strongest in the past. Probably the most important question you should ask yourself is "What level would I expect the stock to bounce up from?" The answer usually gives you a price level just above where you should set your stop.

- Average True Range (ATR)

Another good method is to take the Average True Range (ATR) over a number of days, multiply it by a chosen factor, and then place the stop an equal distance from the entry point of the trade. In order to prevent being stopped out by normal price movement, it is usually best to place the stop more than one ATR from the entry price. The main advantage of using an ATR stop is that it adapts very well to the current market environment. The distance from the entry point to the stop increases when market volatility is high, and decreases when volatility drops.

Most problems with the ATR Stop tend to occur when the short term ATR becomes much smaller than normal, and the narrow range stops result in being stopped out of the trade too soon. To prevent this, you can calculate two ATR stops - a shorter term 3 or 4 day ATR and a longer term 15 to 20 day ATR. Set your stops using whichever is the largest. This allows the stops to move away quickly but prevents them from moving in too close after a few unusually quiet days.

For quick bounce and reversal plays, you may not need (or want) the full range of the ATR. RightLine Chart users make a note that the default setting for the ATR indicator is 14 days, but you can change it by going to "Utilities" and "Parameters."

On any stock, there will be an assortment of choices that make reasonable stops. One size does not fit all. Among other factors, the stop to use will depend on your individual time frame and risk tolerance. With experience you can recognize the best levels and improve your chances of setting a successful stop.

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.

The publishers of The RightLine Report recommend that anyone trading securities should do so with caution, exercise prudent trading discipline and have a personal risk management strategy in place before doing so. It is possible at this or some subsequent date, the publishers and staff of The Pro Right Line Corp. may own, buy or sell securities presented. The Pro Right Line Corp. is not a financial advisory service. Its publishers, owners or investors, are not liable for any losses or damages, monetary or otherwise, that result from the content of The RightLine Report. Past RightLine Report performance may not be indicative of future performance.

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