Notes From The Editor

In the world of Wall Street, there's a saying that goes, "Amateurs control the open, but pros control the close." This statement refers to the role of retail orders placed by brokerage firms on behalf of the public when the market opens each morning.

While these initial orders reflect the sentiment of the average investor about the market's potential, it's usually the professionals who steer the market's direction by the end of the trading day.

The significance of what occurs "at the close" cannot be underestimated, as it often offers insights into the likely course of the next trading session. More often than not, the prevailing trend at the close tends to carry over into the following day.

For the Bulls, a market close around or near the session's high is favorable, while Bears prefer to see a downward trend leading up to the closing bell. If you have a short-term position that you intend to exit in the early part of the next session, it's advisable to observe price action as the market approaches its close - especially if this coincides with a period of high trading volume.

You may have also come across advice suggesting that it's prudent to steer clear of trading during the initial part of each session, right after the market opens. This is because many traders find themselves affected by the heightened volatility that tends to characterize the first 30 minutes to an hour after the opening bell.

However, when employing RightLine setups and triggers, the timing of your trades becomes less relevant. Whenever a suggested entry price aligns with your strategy, it's best to execute your order. Naturally, it's always wise to use the risk calculator before entering any position.

Wishing you successful trading ahead!

- Thomas Sutton, Editor

Quick List

    
Stock     08/18     08/18      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

WW        10.27      0.27     10.64                  1.45/0.73      2.02
AROC      12.68      0.03     12.93                  0.86/0.43      0.72
INBK      20.14     -0.32     20.67     19.22        1.45/0.73      2.42
ATSG      21.75      0.39     22.22                  1.75/0.88      1.12
SSTI      20.36      0.07        21     19.42        1.58/0.79      1.84

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

US stocks experienced minimal fluctuations Friday, but concerns related to China's economic situation and the prospect of higher interest rates contributed to a decline in the S&P 500 for the third consecutive week. Despite a decrease in bond yields during the session, the 10-year Treasury yield remains near an 11-year peak, exerting downward pressure on the tech-centric Nasdaq. International markets also saw declines, largely due to renewed apprehensions concerning China's property sector.

Historically, the months of August and September have displayed less favorable trends for equities, often characterized by more pronounced pullbacks and increased volatility. Nevertheless, we hold the view that the interplay between growth and inflation provides a sturdy foundation for equities to maintain a sustainable upward trajectory, though with heightened short-term volatility.

US economic indicators have consistently outperformed expectations in the last three months, propelling the Citi Economic Surprise Index to its highest point since early 2021. While previous estimates had anticipated an economic contraction in the latter part of the year, economists have now revised their forecasts upwards, anticipating continued positive growth. This resilience lends support to the possibility of a soft landing, but it also reinforces the belief that the Federal Reserve will maintain elevated interest rates for an extended period. As a result, yields across the yield curve have approached their peak levels in the current cycle, thereby pressuring equity valuations.

We anticipate that core inflation will exhibit further moderation in the upcoming months, potentially leading to the Fed either implementing a final rate hike next month or adopting a wait-and-see stance, effectively capping any upward momentum in yields.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 34,500.66    25.83      -780.74    -2.21%
Nasdaq              13,290.78   -26.16      -354.07    -2.59%
S&P 500              4,369.71    -0.65       -94.34    -2.11%

NYSE Volume                      3.94B                       
NYSE Advancers                   1,618                       
NYSE Decliners                   1,243                       

Nasdaq Volume                    4.81B                       
Nasdaq Advancers                 2,304                       
Nasdaq Decliners                 1,947                       

                                 New Highs/Lows

                   08/11  08/14  08/15  08/16  08/17  08/18
                 --------------------------------------------
NYSE New Highs        40     47     34     42     19     16
NYSE New Lows         37     55     80     95     88     92
Nasdaq New Highs      59     56     66     45     30     32
Nasdaq New Lows      177    205    224    284    291    263
   

TRADER'S TIP: "Is Shorting Risky?"

Though some folks believe that shorting is riskier than going long, it is far more dangerous to be on the wrong side of an established downtrend. And of course you always have the option to stand aside. If you aren't comfortable trading in a declining trend, then by all means head for the sidelines - there will be plenty of buy-side opportunities once the trend reverses.

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 - 4369.71 August 18, 2023

52-Week High: 4607.07
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4708.48
Resistance 2: 4553.46
Resistance 1: 4461.58
Pivot: 4398.45
Support 1: 4306.57
Support 2: 4243.43
Support 3: 4088.41

NASDAQ Composite - 13290.78 August 18, 2023

52-Week High: 14446.55
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 14668.70
Resistance 2: 14041.30
Resistance 1: 13666.04
Pivot: 13413.90
Support 1: 13038.64
Support 2: 12786.50
Support 3: 12159.10
        
Dow Industrials - 34500.66 August 18, 2023

52-Week High: 35679.13
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 36844.28
Resistance 2: 35772.02
Resistance 1: 35136.34
Pivot: 34699.76
Support 1: 34064.08
Support 2: 33627.50
Support 3: 32555.24
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, August 21, 2023:
21-Aug          None scheduled

Tuesday, August 22, 2023:
22-Aug  10:00 am   Existing home sales

Wednesday, August 23, 2023:
23-Aug  9:45 am   S&P flash U.S. services PMI
23-Aug  9:45 am   S&P flash U.S. manufacturing PMI
23-Aug  10:00 am   New home sales

Thursday, August 24, 2023:
24-Aug  8:30 am   Initial jobless claims
24-Aug  8:30 am   Durable-goods orders
24-Aug  8:30 am   Durable-goods minus transportation

Friday, August 25, 2023:
25-Aug  10:00 am   U Mich consumer sentiment, final


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

TRADER'S TIP: "Always Plan For Three Possibilities"

As traders and investors we've learned not to spend too much time speculating on market direction, but to focus on careful planning and trade management. It's far better to prepare and have a specific plan ready for any possible price action than to become so devoted to our expectations that we fail to plan for the opposite of what we expect to happen.

The market, and our chosen stocks can really only do three simple things that affect price: (1) move up, (2) move down, or (3) stay the same. Unless our trading plan includes specific instructions on what we will do in the event any one of these three scenarios occur, the plan is incomplete.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

WW International, Inc. (WW: Consumer Cyclical/Personal Services) - BULLISH BOUNCE. WW has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Friday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return WW to the previously established uptrend. The Bullish Bounce set-up is the basis for our BUY entry, so be ready to go long on a rise to our trigger at 10.64. Set a trailing stop of 1.45, tightening to 0.73 on a 2.02 profit. WW closed at 10.27 on Friday. Earnings Report Date: Nov 01, 2023. Beta: 1.80. Market-Cap: 807.85M. Optionable.

ENERGY SECTOR

Archrock, Inc. (AROC: Energy/Oil & Gas Equipment & Services) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 12.68, AROC is on our radar for a BUY entry at 12.93. If you purchase shares of AROC, be sure to also place a trailing stop of 0.86. Snug it up to 0.43 on a 0.72 gain. Earnings Report Date: Oct 31, 2023. Beta: 1.75. Market-Cap: 1.987B. Optionable.

FINANCIAL SERVICES SECTOR

First Internet Bancorp (INBK: Financial Services/Banks-Regional) - SQUEEZE PLAY. INBK 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. INBK closed Friday at 20.14. The plan is to enter in the right direction by placing a BUY trigger at 20.67 and a SELL short trigger at 19.22. Once INBK establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.45. After you've collected a 2.42 profit, tighten the stop to 0.73. Earnings Report Date: Oct 17, 2023. Beta: 0.61. Market-Cap: 179.356M. Optionable.

INDUSTRIALS SECTOR

Air Transport Services Group, Inc. (ATSG: Industrials/Airlines) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. ATSG's current price action near moving average support signals a potential BUY entry at 22.22, followed by a 1.75 trailing stop which can be tightened to 0.88 upon earning 1.12. ATSG closed Friday at 21.75. Earnings Report Date: Nov 01, 2023. Beta: 0.81. Market-Cap: 1.557B. Optionable.

TECHNOLOGY SECTOR

SoundThinking, Inc. (SSTI: Technology/Software-Application) - SQUEEZE PLAY. The ticker for Friday's session shows SSTI 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 21 and a SELL short trigger at 19.42. When SSTI 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 1.58 trailing stop. Upon reaching a 1.84 profit, resize the stop to 0.79. Earnings Report Date: Nov 06, 2023. Beta: 1.40. Market-Cap: 249.314M. 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

Lower-Risk, Higher-Return Trades

There are many ways to reduce the risk of a trade, but it all comes down to when you decide to enter and when you exit. Using trend lines to help enter and exit trades is one of the valuable ways to reduce risk. Today we'll talk about using trend lines and give some tips on other ways to find low risk trades.

Tips on Reading Trend Lines

Most charting programs allow traders to draw in their own trend lines. For those who aren't familiar with trend lines, they are straight lines drawn across the highs or lows in order to clearly see the general direction, or trend, of the stock's movement. A support trend line is drawn across two or more low points on a chart and a resistance trend line is drawn across two or more high points.

In the chart below, we see a "channel" formation, which is characterized by two parallel trend lines. Channels can either rise or fall, depending on the price action. Traders can also take advantage of directionless (flat) channels, which are formed when a stock repeatedly bounces back and forth between support and resistance - just like a ping-pong ball.



A stock's trend line over the past year can look very different than its trend line over the past month. The longer that a stock holds its trend and the more times it bounces on its trend line, the stronger the support becomes and the harder it is for the stock to fallout from the trend.

Watch for indications that a stock will continue to trend. It is less risky to buy a stock when it bounces off support than when there is no clear support. The same is true for short positions entered on a bounce down from resistance.

In the popular book "Trading for a Living," Dr. Alex Elder points out some important tips on drawing and reading trend lines:

"First, note that the long tails on intra-day lows are important, but not for drawing trend lines. These long tails usually don't show the point where the majority of traders intend to sell; rather the long tails indicate panic selling. When drawing trend lines, the best approach is usually to simply connect the closing prices. Trends formed by the tails often come into play when that "primary" trend fails. One more caveat: Many charting programs have "regression channel" formations that use automatic best-fit methods to connect highs and lows. These use mathematically determined "best-fit" formulas to form the trends, rather than simply connecting prices."

Secondly Dr. Elder points out that the angle of a trend line (up or down) shows the "emotional intensity of the dominant market crowd." When you see the angle of the trend line beginning to move more vertically off of the stocks previous trend line, it is normally a sign that the trend line is unsustainable and that shorter-term traders should be trailing their stops a little tighter.

Third, Volume is key. Increasing volume at different points can indicate different things. Watch for the volume to confirm a move or to warn of upcoming change. If price is moving in the direction of the trend line, it confirms the trend line. If volume decreases as the stock approaches the trend line that also confirms the trend line. However, "if volume expands when prices return to a trend line, it warns of a potential break; if volume shrinks when prices pull away from a trend line; it warns that the trend line is in danger."

Fourth, don't try to jump the gun in anticipating that a stock will move through support or resistance. The difference between actually breaking out and coming within pennies of breaking out is like the difference between night and day.

Searching for Lower Risk Trades

Studying charts can help us recognize and take advantage of lower risk trades, avoid higher-risk trades, and help us to find higher-than- normal potential returns. We are always on the lookout for reduced risk trades, especially during a choppy trading environment. Here are some ideas to consider.

Double Tops and Double Bottoms

Many times the strongest support or resistance doesn't come from a trend line, but from a specific price level. One common trading strategy used by traders trying to decrease risk and increase returns is to look for double bottoms or double tops. Let's start by looking at double tops. The basis for a double top is that if stock found significant resistance at a specific level once, then chances are that the strong resistance will hold again the next time the stock rises to that level.

Here's how it works. When we see a chart that has a "sharp" intra-day decline, we look to see what the high point was just prior to the collapse. That high point will become a resistance level in the future. Over the following days or weeks, the stock will often hit a short-term bottom and then turn higher as the stock climbs back toward that previous resistance level. We'll watch closely for the "double top" and consider going short if the stock starts bouncing down from resistance.

On the other hand, consider going long after a stock begins to bounce up from a strong support level. The key to playing double tops or bottoms is to WAIT until you actually see the bounce begin before taking a position. The larger the initial reaction from hitting support or resistance, the better the chance that it will happen again the next time around. Set your stops fairly tight to avoid big losses if the stock doesn't follow through with the bounce the way you expected.



There are times when a stock will have a short-term support trend line created by higher lows, while at the same time the highs are holding steady. Eventually the two trend lines start to converge and it can present a nice trading opportunity because the stock will break out one way or the other. If the stock breaks above the resistance, it often will surge higher; but if it the support fails, it can quickly fall sharply lower. This pattern is often referred to as a "wedge."

When trading using "trend lines," "double bottoms," "double tops," or "ascending support with horizontal resistance," it's a good idea to use tight stops. We know the support and resistance levels, so if we are long, for example, any failure to hold the support level is grounds for exiting the position.

Doji Formation

A doji price bar is formed when a stock opens the day at a certain price and then dips or climbs before closing back near the opening price. It is a sign that bulls and bears are undecided about which way to go, and often indicates that the current short-term direction of the stock is about to reverse. When you are in a trade and a doji appears, tighten stops on existing positions, and be ready to take profits.

Summary

Again, no single indicator should be used in isolation, but when used in conjunction with other tools and strategies, the ideas mentioned above can help to reduce risk and increase returns. There are many other chart formations that can help provide lower-risk, higher-return trades.

Chart reading can be challenging at times because we all have a tendency to see what we want to see. Before making a trade, look for reasons why the chart is indicating a move higher, lower or sideways. Don't be overly biased when viewing a chart, and remember to set your stop immediately after entering the position.

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.

All subscriptions and/or use of the RightLine.net website are subject to RightLine's "Terms of Use" and "Subscriber Terms & Conditions" which are posted at www.rightline.net.

Any REDISTRIBUTION of the above information, without The RightLine's written consent, is STRICTLY PROHIBITED.

Copyright / The Pro Right Line Corporation - All Rights Reserved

Click Here To Unsubscribe