August 15, 2023 - The RightLine Report
Notes From The Editor
When it comes to shopping, everybody wants a good deal. It's no surprise that the same thing is true with stocks. Even the common investment advice to "buy low and sell high" is frequently interpreted as "buy cheap." Many investors seem to forget that more often than not there is a good reason why cheap stocks are so cheap!
Some folks are so inclined to buy cheap stocks they ignore signs that the stock could easily get even cheaper. Obvious downtrends repeatedly point to underlying reasons for a stock's demise, yet many individuals decide to buy anyway because the stock is "down" from a higher price.
Think about this for a second. People will say a stock is a bargain at $20 simply because it has dropped from a high of $60. The concept seems simple enough. The stock used to cost three times the current price, so it MUST be a good deal. Unfortunately the problem with this type of relative reasoning doesn't become clear until the stock drops to $5.
The desire for a bargain often causes normally intelligent people to make bad investment decisions. They forget that cheap stocks in downtrends usually continue to make lower highs and lower lows for much longer than expected. As investors lose money in a declining stock they will eventually leave it in search of a more attractive opportunity.
Some cheap stocks are former high-fliers that have split several times. This has resulted in their having a huge number of shares in their "float." This inflated condition requires massive trading volume for even minor price increases, and keeps the stock from making any significant moves.
These heavy-float stocks currently trade in a lower price range because professional traders lost interest years ago. They are too sluggish and don't move quickly enough to qualify as good trading candidates.
Bottom Line: When you're thinking about buying a stock, you want it to show positive signs that it will go up a reasonable amount. Look for recent bullish activity in the context of a longer period of positive momentum. The same way that declining stocks tend to continue going lower, stocks moving higher in price tend to continue moving higher.
Whenever you come across a "bargain" stock, make sure you have good reasons to buy it other than just the fact "it's cheap!"
Trade well,
Thomas Sutton
Stocks Covered Today Stock Splits
Quick List
Stock 08/15 08/15 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
IEP 23.74 -0.42 24.62 22.93 1.69/0.85 2.3
VIST 25.25 -0.24 25.84 24.31 1.53/0.77 2.26
BLTE 22.17 -0.93 22.86 20.91 1.95/0.98 3.76
ARVN 24.62 -0.48 25.26 23.56 1.7/0.85 1.98
EH 20.48 -0.68 21.43 19.4 2.03/1.02 2.82
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
Stocks wrapped up Tuesday on a downward note, as investor confidence took a hit from news that Fitch Ratings is considering potential credit downgrades for US banks, and that economic activity in China is below par. This cast a shadow over an otherwise positive retail-sales report, contributing to the slight decline in equities during August. Meanwhile, the 10-year Treasury yield experienced another uptick, surpassing 4.2% and reaching a new peak for 2023, coming close to the previous high observed last October. Additionally, concerns about Chinese economic growth prompted oil prices to drop by over 1.5%.
Following the steady stock market rally from March through July, the resurgence of uneasiness isn't unexpected as economic data fails to consistently exceed expectations. However, there doesn't appear to be a drastic shift in the fundamental backdrop.
A closer look at retail sales reveals that consumer spending remains robust, even amidst the headwinds of the Federal Reserve Bank's tightening policy. Overall, retail sales experienced a 0.7% boost in July compared to June, surpassing consensus forecasts. When considering less volatile categories, control-group sales demonstrated an even stronger 1.0% month-over-month increase, indicating an acceleration from the pace seen in June. Upon further examination, we notice that sales of automobiles, furniture, electronics, and appliances dipped, which suggests consumers are reallocating spending from larger purchases to services and leisure activities. Notably, there was a substantial rise in spending at bars and restaurants. Overall, this confirms that consumers aren't on the brink of scaling back spending, but underlying trends suggest that household consumption might soften as we move forward, particularly if wage growth continues to moderate.
Aug 14, 2023 Aug 15, 2023
-------------------- --------------------
Dow 35,307.63 26.23 34,946.39 -361.24
Nasdaq 13,788.33 143.48 13,631.05 -157.28
S&P 500 4,489.72 25.67 4,437.86 -51.86
NYSE Volume 3.9B 3.84B
NYSE Advancers 1,207 477
NYSE Decliners 1,706 2,453
Nasdaq Volume 4.28B 4.48B
Nasdaq Advancers 1,830 1,233
Nasdaq Decliners 2,517 3,128
New Highs/Lows
08/08 08/09 08/10 08/11 08/14 08/15
--------------------------------------------
NYSE New Highs 64 77 72 40 47 34
NYSE New Lows 65 37 31 37 55 80
Nasdaq New Highs 62 78 79 59 56 66
Nasdaq New Lows 204 188 181 177 205 224
Stocks Covered Today Stock Splits
TRADER'S TIP: "Oh Well"
Taking a planned loss is a calculated part of doing business. Don't let it bother you - just shrug it off and go forward. Not taking a loss as planned can cause damage to both your trading account and your morale. Remember that many traders are incredibly successful with less than a 50% winning trade ratio. It's not that you have a loser; it's how you manage the trade that is important. Another good reason to plan your trade and stick with it!
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 - 4437.86 August 15, 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 - 13631.05 August 15, 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 - 34946.39 August 15, 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
Stocks Covered Today Stock Splits
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
Stocks Covered Today Stock Splits
TRADER'S TIP: "Using The Market Map"
While Charting and Technical Analysis gives us a map of the market by revealing the price levels where trading decisions need to be made, it doesn't make those decisions for us. It's our job as traders to begin the journey by entering positions and taking the right exits along the way!
Stocks Covered in This Issue
ENERGY SECTOR
Icahn Enterprises L.P. (IEP: Energy/Oil & Gas Refining & Marketing) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into IEP. A move to the upside will trigger our BUY entry at 24.62, while a drop to 22.93 will trigger our SELL short entry. Follow your position with a 1.69 trailing stop. Tighten the stop to 0.85 once you have a 2.3 gain. IEP closed Tuesday at 23.74. Earnings Report Date: Nov 01, 2023. Beta: 0.83. Market-Cap: 8.765B. Optionable.
Vista Energy, S.A.B. de C.V. (VIST: Energy/Oil & Gas E&P) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in VIST's narrowest trading range of the past seven sessions. With neither group able to take complete control on Tuesday, 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 25.84 and a SELL order at 24.31. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.53 trailing stop. Tighten the stop to 0.77 once you have a 2.26 gain. VIST closed Tuesday at 25.25. Earnings Report Date: N/A. Beta: 0.22. Market-Cap: 2.4B. Optionable.
HEALTHCARE SECTOR
Belite Bio, Inc (BLTE: Healthcare/Biotechnology) - SQUEEZE PLAY. One interesting trait of price volatility is that it cycles back and forth through periods of expansion and contraction. Stocks that have recently seen their daily price range shift from an average or wide range to an extremely contracted state are ideal candidates for expansive price moves. In many cases the next move is relatively fast and covers a sizable amount of territory. To take advantage of these trades we use both a BUY and a SELL entry. This allows us to enter in whichever direction the breakout takes. In BLTE's case we will enter a BUY should it reach the 22.86 level, or a SELL short trade if it drops to 20.91. As usual a trailing stop is essential, 1.95 which should be tightened to 0.98 on a 3.76 gain. BLTE closed Tuesday at 22.17. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 603.607M. Not Optionable.
Arvinas, Inc. (ARVN: Healthcare/Biotechnology) - SQUEEZE PLAY. Trader indecision has put ARVN squarely in the center of a Bull versus Bear standoff. This tight spot should soon give way to a clear winner in the short-term, and we want to be in position for the move. To do that we've set a BUY entry at 25.26 and a SELL short entry at 23.56. Now it's up to ARVN to show us which entry will be filled. Once the trade is underway place a 1.7 trailing stop, which can be tightened to 0.85 after you achieve a 1.98 profit. ARVN closed on Tuesday at 24.62. Earnings Report Date: Nov 06, 2023. Beta: 1.74. Market-Cap: 1.315B. Optionable.
INDUSTRIALS SECTOR
EHang Holdings Limited (EH: Industrials/Aerospace & Defense) - SQUEEZE PLAY. EH is caught in a dilemma. The stock's compressed price range on Tuesday 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. EH is now at 20.48. We can capture price action either way by placing a BUY trigger at 21.43 and a SELL short trigger at 19.4. Once EH 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 2.03. When you acquire a 2.82 profit, tighten the stop to 1.02. Earnings Report Date: Aug 17, 2023. Beta: 0.79. Market-Cap: 1.237B. 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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