Notes From The Editor

The Market Goes Up, The Market Goes Down

One of the unique benefits of trading stocks is the opportunity to make money in any market. While traditional investors are limited to up- trends in bull markets, active traders with shorting skills can easily find opportunities in both bullish and bearish environments.

There are a number of reasons that investors normally don't short stocks. Most have never heard of shorting and have no idea what is involved. Those who are fortunate enough to hear about it are usually told that it's too hard or too risky.

In truth, shorting stocks is neither more difficult nor dangerous than buying stocks. Over the years two major fear tactics have been used to keep investors from learning how to short stocks:

1) "It's just too hard to short stocks because of the up-tick rule."

2) "It's too risky to short stocks because a loss can continue to grow indefinitely."

The first objection to shorting is outdated. The old rule that you could only go short on an up-tick was replaced years ago with a limited rule. It applies only to stocks which have fallen by 10% in price during a trading day, and applies only to the remainder of that trading day and the following trading day. During that period of time, a stock can only be sold short when the sale price is higher than the highest bid price maintained by any market maker in the stock. In other words, after a stock has fallen by 10% a short position has to be entered on an uptick. Before that, it can be entered at any time. In most cases you no longer have to wait for a stock's price to be moving up to get a short order filled.

As for the second objection, anyone who would let a loss go on forever would have to be completely incompetent or in a coma. Theoretically a perpetual loss could happen, but it actually never does. Experienced traders use stop losses and other forms of risk control. In addition, brokerages monitor shorting activities very carefully and will pull the plug on a short sale before it gets completely out of hand.

Remember that things never stay the same. To be competitive we all have to embrace change and become more flexible. If you've been thinking about learning how to short, now is a good time to get started.

Trade well!

- Thomas Sutton, Editor

Quick List

    
Stock     08/22     08/22      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

PHR       24.55     -0.30     25.22     23.67        1.55/0.78      2.54
BWMN      24.45     -0.02     24.83     23.28        1.55/0.78      3.78
ZETA      23.67     -0.13     24.37     22.92        1.45/0.73      2.74

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 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 hovered around the flat line for most of Tuesday before closing slightly lower, ending the S&P 500's eight-day winning streak. The index has risen approximately 7% over the past two weeks, recovering sharply from a pullback driven by recession concerns and disruptions in Japanese markets. The market showed little movement beneath the surface, with health care and consumer staples stocks leading the day, hinting at a more defensive tone.

Gold prices finished near all-time highs, while oil prices continued their decline, falling again after a nearly 6% drop in the previous two trading days. Equities might consolidate in anticipation of the Fed's annual symposium later this week, where market attention will be on the central bank's latest commentary and plans for rate cuts.

Interest rates modestly decreased, with the 10-year Treasury yield approaching 3.8% and 2-year yields falling to 4%. Longer-term yields have significantly decreased recently, with a roughly 40-basis-point drop in 10-year rates over the past month and a nearly 90-basis-point decline since their peak in April. This decline has been driven by data showing further moderation in inflation and signs of slowing economic momentum.

Following recent recession fears, which appear to he overblown, yields have stabilized in recent days. We anticipate that yields will remain influenced by upcoming Fed commentary and additional labor-market and inflation data. While immediate further declines are not expected, long-term yields may see additional downside as the Fed progresses with its rate-cutting cycle. However, we do not foresee a drastic economic downturn, which should help prevent 10-year benchmark rates from falling to levels seen between 2019 and 2021.

As the second-quarter earnings season wraps up, attention turned to Lowe's, which reported better-than-expected earnings. However, the company's profit guidance was lowered due to a slowdown in home-project spending and economic pressures. While we remain cautious about extending this softness in home-improvement spending to broader consumer spending concerns, it aligns with our view that consumer spending is likely to cool from its recent high. We believe home-project spending might be impacted by the "pull forward" effect from previous years and sustained high interest rates. Last week's retail-sales report indicated that consumer spending remains robust, and we expect slower but still positive household spending growth to support continued economic expansion this year.

TRADER'S TIP: "Your Trading Journal"

A Trading Journal has no physical specifications - it can be a notebook, pages you put in a binder, a spreadsheet or possibly copies of trade confirmations with notes written on them. Choose whatever is easiest for you to work with, since it's the details inside the journal that are important.

At a minimum, the content of your trading Journal should be broken into three major categories:

1) The Numbers (date, symbol, position size, cost, gain or loss, etc.)

2) The Decision-Making Process (Why did you chose to do what you did?)

3) What Can I Learn From the Trade?

This is where the rubber meets the road! Although a trade may end when you exit a position, this is often when the learning begins. A trading journal or diary will help answer the questions, "Now that I see the past with 20/20 vision, what would I have done differently? What did I do right? Did my emotional state of mind affect my success? Did I follow my trading plan? Did I use Risk Control? Did I set my stop at reasonable level?"

When you review your trades after the fact, it's amazing how easy it is to find important information that will help you with your next trades. We can't force stocks to do what we want them to, but we can obtain valuable insight from each trade we make. Moreover, the difference between progress and stagnation is our ability to learn from our experiences.

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".

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

MONDAY, Aug. 19					
9:15 am	Fed Governor Christopher Waller welcoming remarks				
10:00 am	U.S. leading economic indicators	

TUESDAY, Aug. 20					
1:35 pm	Atlanta Fed President Raphael Bostic speech				
2:45 pm	Fed Vice Chair for Supervision Michael Barr speech
				
WEDNESDAY, Aug. 21					
2:00 pm	Minutes of Fed's July FOMC meeting
				
THURSDAY, Aug. 22					
8:30 am	Initial jobless claims	
9:45 am	S&P flash U.S. services PMI	
9:45 am	S&P flash U.S. manufacturing PMI	
10:00 am	Existing home sales	

FRIDAY, Aug. 23					
10:00 am	Fed Chair Jerome Powell speech at Jackson Hole retreat				
10:00 am	New home sales

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

TRADER'S TIP: "Switching Emotions"

Most of us are motivated by a variety of emotions that can be roughly grouped under two headings - hope and fear. For example, when the average investor is caught in a losing position, they usually do nothing other than hope that each day will be the last that the stock goes down. As a result, they end up losing more than if they had not "hoped" as much. On the other hand, when someone holds a winning position, they usually become fearful that the next session will take away their profits, so they get out the trade too soon. In effect, fear keeps them from making as much as they should.

Successful traders know how to reverse their emotions in these circumstances - to use fear when most people would hope, and use hope when most people would fear. It's much more profitable to fear that our losses will grow bigger, and hope that our profits will grow bigger. Research shows that this lesson can be difficult to accept, because it goes against human nature and is the complete opposite of what most people would do. However uncomfortable it may feel when you first attempt it, this simple reversal of emotions during normal trading situations is a valuable "brain tool" that will help you make wise decisions - sell losing positions and hold on to winners!

Stocks Covered in This Issue

HEALTHCARE SECTOR

Phreesia, Inc. (PHR: Healthcare/Health Information Services) - SQUEEZE PLAY. Thursday's trading session left PHR 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 25.22 and your SELL short trigger at 23.67. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.55 trailing stop. Once you have a 2.54 profit, reduce the stop to 0.78. Earnings Report Date: Sep 4, 2024. Beta: 0.94. Market-Cap: 1.409B. Optionable.

INDUSTRIALS SECTOR

Bowman Consulting Group Ltd. (BWMN: Industrials/Engineering & Construction) - SQUEEZE PLAY. The ticker for Thursday's session shows BWMN 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 24.83 and a SELL short trigger at 23.28. When BWMN 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 1.55 trailing stop. Upon reaching a 3.78 profit, resize the stop to 0.78. Earnings Report Date: N/A. Beta: 1.15. Market-Cap: 445.112M. Optionable.

TECHNOLOGY SECTOR

Zeta Global Holdings Corp. (ZETA: Technology/Software - Infrastructure) - SQUEEZE PLAY. ZETA shareholders know what it feels like to be squeezed. Thursday'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. ZETA closed Thursday at 23.67. The plan is to enter in the right direction by placing a BUY trigger at 24.37 and a SELL short trigger at 22.92. Once ZETA 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 2.74 profit, tighten the stop to 0.73. Earnings Report Date: N/A. Beta: 1.24. Market-Cap: 5.206B. 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.

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

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