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August 20, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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Almost twenty years ago Dr. Alex Elder wrote a popular book that became the "official" trader's manual, "Trading For A Living." Since then he's written several more books for traders, including one aptly titled "Sell & Sell Short." Below I've included brief excerpts from chapters three and seven. When you read them you'll get a valuable glimpse into a veteran trader's mind.
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"QUICK LIST"
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Stock 08/19 08/19 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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SD 20.51 -0.46 21.38 19.81 1.57/0.79 2.48
CRNX 21.34 0.13 21.77 1.58/0.79 2.78
RNA 20.94 -0.47 21.59 19.88 1.71/0.86 2.24
GDYN 20.47 -0.01 20.91 1.84/0.92 1.86
CRNC 20.50 -0.91 21.14 19.62 1.52/0.76 2.34
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" at https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/
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MARKET SUMMARY
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US stocks were lower on Friday as the markets contemplate the minutes released earlier this week from the July Federal Reserve Bank FOMC meeting indicating rate hikes may continue in the short term. The economic calendar didn't have any major reports, but releases will resume next week. In equities, Deere & Co. (DE $370) fell short of quarterly earnings estimates, while Foot Locker (FL $38) handily beat profit projections and announced a new CEO. Oil prices and the USD/dollar moved higher, treasuries and gold prices were lower. Friday On The Week
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Dow 33,706.74 -292.30 -54.31 -0.16%
Nasdaq 12,705.22 -260.13 -341.97 -2.62%
S&P 500 4,228.48 -55.26 -51.67 -1.21%
NYSE Volume 3.79B
NYSE Advancers 467
NYSE Decliners 2,714
Nasdaq Volume 4.62B
Nasdaq Advancers 987
Nasdaq Decliners 3,541
New Highs/Lows
08/12 08/15 08/16 08/17 08/18 08/19
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NYSE New Highs 56 61 64 35 55 26
NYSE New Lows 24 19 21 34 30 57
Nasdaq New Highs 96 90 91 50 79 46
Nasdaq New Lows 61 52 61 76 73 109
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TRADER'S TIP:
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TRADER'S TIP: "Holding Their Ground" Buying stocks isn't the first thing that comes to mind on days when the market is slammed with a big sell-off. However, these sessions can be very helpful for bullish traders. Stocks that show relative strength for the day - either posting a gain or only suffering a small decline - are often strong performers after the market stabilizes. This is especially true of equities that hold firm without any specific news story keeping them afloat; the relative strength reveals underlying technical strength and a solid commitment by investors. **************************
THE TECHNICAL ANALYST
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This section contains important technical data for the three major market averages -- the S&P 500, the Nasdaq Comp Index, and the Dow Industrial Average. For guidance on how to use this information, go to: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ S&P 500 - 4228.48 August 19, 2022 52-Week High: 4818.62 52-Week Low: 3636.85 Daily Trend: DOWN Weekly trend: UP Weekly Pivot Levels Resistance 3: 4470.64 Resistance 2: 4364.06 Resistance 1: 4296.27 Pivot: 4257.48 Support 1: 4189.69 Support 2: 4150.90 Support 3: 4044.32 https://www.prorightline.com/rlch/081922SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, August 22, 2022: 22-Aug 8:30 am Chicago Fed national activity index Tuesday, August 23, 2022: 23-Aug 9:45 am 23-Aug 9:45 am 23-Aug 10 am New home sales (SAAR) Wednesday, August 24, 2022: 24-Aug 8:30 am Durable goods orders 24-Aug 8:30 am Core capital equipment orders 24-Aug 10 am Pending home sales index Thursday, August 25, 2022: 25-Aug 8:30 am Initial jobless claims 25-Aug 8:30 am Continuing jobless claims 25-Aug 8:30 am Real gross domestic product. revision (SAAR) 25-Aug 8:30 am Real gross domestic income (SAAR) 25-Aug 8:30 am Real final sales to domestic purchasers, revision (SAAR) Friday, August 26, 2022: 26-Aug 8:30 am PCE price index monthly 26-Aug 8:30 am Core PCE price index monthly 26-Aug 8:30 am PCE price index year-over-year 26-Aug 8:30 am Core PCE price index year-over-year 26-Aug 8:30 am Real disposable incomes 26-Aug 8:30 am Real consumer spending 26-Aug 8:30 am Nominal personal incomes 26-Aug 8:30 am Nominal consumer spending 26-Aug 8:30 am Trade in goods, advance 26-Aug 10 am UMich consumer sentiment index (final) 26-Aug 10 am UMich 5-year inflation expectations (final) For a chart of typical Up or Down market reactions to specific major US economic reports, go to "Economic Indicator Effects" at this link: https://prorightline.com/index.php/economic-indicator-effects/
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TRADER'S TIP:
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TRADER'S TIP: "Tax Deduction Reminder" Your subscription to the RightLine Report may be tax deductible as an investment expense under IRS Sections 67 and 212, to the extent that miscellaneous itemized deductions exceed 2% of your adjusted gross income. It is also fully tax deductible as a business expense by most corporations under Section 162 of the IRS Code. ***********************************
STOCKS COVERED IN THIS ISSUE
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ENERGY SECTOR SandRidge Energy, Inc. (SD: Energy/Oil & Gas E&P) - 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 SD's case we will enter a BUY should it reach the 21.38 level, or a SELL short trade if it drops to 19.81. As usual a trailing stop is essential, 1.57 which should be tightened to 0.79 on a 2.48 gain. SD closed Friday at 20.51. Earnings Report Date: Nov 07, 2022. Beta: 2.45. Market-Cap: 753.574M. Optionable. HEALTHCARE SECTOR Crinetics Pharmaceuticals, Inc. (CRNX: 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 Friday's session to close at 21.34. Anticipate the rebound to continue, and be ready to buy CRNX at 21.77. Follow your entry with a trailing stop of 1.58 which can be tightened to 0.79 on a 2.78 profit. Earnings Report Date: Nov 03, 2022. Beta: 1.21. Market-Cap: 1.147B. Optionable. Avidity Biosciences, Inc. (RNA: Healthcare/Biotechnology) - SQUEEZE PLAY. Trader indecision has put RNA 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 21.59 and a SELL short entry at 19.88. Now it's up to RNA to show us which entry will be filled. Once the trade is underway place a 1.71 trailing stop, which can be tightened to 0.86 after you achieve a 2.24 profit. RNA closed on Friday at 20.94. Earnings Report Date: Nov 07, 2022. Beta: 1.10. Market-Cap: 1.092B. Optionable. TECHNOLOGY SECTOR Grid Dynamics Holdings, Inc. (GDYN: Technology/Information Technology Services) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday GDYN seemed intent on initiating a rebound. With moving average support nearby, GDYN is at a logical place for Bulls to regroup and extend the familiar uptrend that shareholders have become accustomed to. On continued buying, plan on taking long entries with a BUY at 20.91. Manage risk with a 1.84 stop. Tighten your stop to 0.92 when you have a 1.86 profit. GDYN ended the day at 20.47. Earnings Report Date: Nov 02, 2022. Beta: 1.13. Market-Cap: 1.378B. Optionable. Cerence Inc. (CRNC: Technology/Software-Application) - 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 CRNC. A move to the upside will trigger our BUY entry at 21.14, while a drop to 19.62 will trigger our SELL short entry. Follow your position with a 1.52 trailing stop. Tighten the stop to 0.76 once you have a 2.34 gain. CRNC closed Friday at 20.50. Earnings Report Date: N/A. Beta: 2.64. Market-Cap: 807.358M. Optionable. IMPORTANT: Before entering any recommended positions, always use the RightLine "Risk Control System" to determine the level of acceptable risk and the maximum number of shares to buy. Link: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/ ***********************************
STOCK SPLIT SUMMARY
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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 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 ---------------- ------- -------- ------- ------ ------- Gamestop GME 7/7/2022 7/22/2022 4-for-1 Yes Alphabet GOOG 2/1/2022 7/18/2022 20-for-1 Yes Nasdaq Inc NDAQ 7/20/2022 8/29/2022 3-for-1 Yes For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
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Overbought/Oversold Overload Analysts love to show off by proclaiming that the markets have become overbought or oversold. Unfortunately, few of us seem to understand what these terms really mean or what we should do when these moments of truth arise. Should we run for the hills because a market is overbought, or perhaps load up the boat because it's oversold? And how do we know when one of our trades might fall prey to one of these extreme conditions? The best way to understand overbought or oversold markets is to study the nature of supply and demand. At any given moment, a finite pool of buyers and sellers is available to take action on a particular stock. The trading activity of this crowd usually stays within fairly narrow boundaries. But imbalances develop over time and force one side to pull the trigger, sometimes prematurely. This "uses up" that side of the market and awakens price mechanics that favor the other side. Bollinger Bands offer an effective tool for measuring overbought/oversold conditions. Notice how Nvidia (NVDA) triggers a short-term reversal each time price bars thrust outside the extremes of the 20-day Bollinger Bands. These outer bands tell swing traders to expect a reversal before real evidence appears on the price chart. This allows them to take high-profit exits while the rest of the crowd is caught in the moment. See chart: https://prorightline.com/rlr/TCnvda032203.gif It's important to note that overbought/oversold markets are relative to a trader's time frame. In the NVDA chart, some reversals were simple pullbacks in the underlying trend, while others represented major market turns. It is vitally important for traders to define their holding period before reacting to short-term price swings. Major profits will be lost by planning the trade in one time frame but executing it in another. Stochastics represents the classic overbought/oversold oscillator. Unfortunately, most traders don't understand how to interpret the information it provides. The worst thing you can do is jump ship just because stochastics hits a high or low extreme. Most swing-trading profits are booked in the early stages of overbought or oversold markets. Of course, that's where most of the risk is as well. See chart: https://prorightline.com/rlr/TCnq02h032203.gif Use simple double-top or double-bottom patterns to pinpoint reversals driven by overbought or oversold conditions. The best signals come when stochastics makes a lower high (or higher low) and expands in the opposite direction. This type of pattern will often complete ahead of price change, and should be acted upon without waiting for further confirmation. A single price bar can change everything. Stocks trade with an average high-low range through most market conditions. When this range expands sharply after an extended trend, it issues a loud overbought-oversold signal. See chart: https://prorightline.com/rlr/TCover032203.gif What exactly does this mean? First off, when a price bar expands in a new breakout, it's the beginning of something and not a reversal signal. But when a stock ramps from one price level to another, and then pops an expansion bar, get ready to close up shop in a hurry. Traders must deal with the relativity of overbought/oversold markets. A longer-term Wilder's relative strength index (RSI) really drives home this vital point. It captures broad cycles of market movement, and it can stay at overbought or oversold levels for extended time periods. See chart: https://prorightline.com/rlr/TCqcom032203.gif As with the stochastics indicator, hold your ground until RSI shows definite signs of moving in the other direction. This usually comes when it drops below (lifts above) the extension line. Even then, compare RSI with the price pattern to determine whether a major turn, or simple pullback, is under way. *********************************** This special guest article was written by Alan Farley, author of "The Master Swing Trader." ======================================================================
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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 To Unsubscribe, send an email to cs@prorightline.com or call 1-312-248-4241. |