August 20, 2024 - The RightLine Report
Notes From The Editor
Myopia - A vision condition, commonly known as "nearsightedness," that causes distant objects to be blurred while closer objects are clearly seen.
Is your trading myopic? If so, you're not alone. Most active traders suffer from this problem from time to time. While our investor brethren are satisfied with a long-term, "buy-and-hold" stance, we use a more engaged approach. What happens in the here and now has a much greater bearing on us than it does on investors.
The result is that we often find ourselves approaching the short-term with an intense focus that clouds what's in the distance. What trends are emerging that could impact the market? What's likely to change down the road? Unless we step back to look at the big picture once in awhile, these questions might go unanswered.
Weekly charts are a good way to keep myopia at bay. Even painful multi-day downtrends take on a different characteristic on the weekly interval. What seems like a precipitous freefall might actually be a great buying opportunity if long-term trends or support levels come into play. Weekly technical indicators also give fewer buy or sell signals - but when they do, they tend to be reliable.
There's a psychological component too. Myopic trading is hard to avoid when there's major news driving the market up or down. Rallies make traders feel invincible, while sell-offs make it seem as though the sky is falling. Obviously both require a bit of perspective.
Forward-thinking helps us plan ahead and be ready for whatever the market throws at us. If Bears are correct, what sectors will lead the way lower? What will outperform? And if the current geo-political and economic worries subside, which equities will outperform? Think about the different scenarios that might play out, and how to take advantage of them. By keeping an eye on the future, we can be prepared and ready to profit.
Cheers,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 08/20 08/20 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
RVLV 24.00 -0.36 24.7 23.11 1.59/0.8 1.86
PPC 43.54 -0.20 44.31 2.55/1.28 3.06
ARCT 21.27 -0.15 21.97 20.52 1.45/0.73 3.16
TXG 22.54 0.13 23.39 21.54 1.85/0.93 2.52
IDCC 134.82 -0.21 138.16 7.67/3.84 6.74
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
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Stocks Covered Today Stock Splits
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.
Aug 19, 2024 Aug 20, 2024
-------------------- --------------------
Dow 40,896.53 236.77 40,834.97 -61.56
Nasdaq 17,876.77 245.05 17,816.94 -59.83
S&P 500 5,608.25 54.00 5,597.12 -11.13
NYSE Volume 3.23B 3B
NYSE Advancers 2,135 948
NYSE Decliners 681 1,821
Nasdaq Volume 5.59B 5.32B
Nasdaq Advancers 3,129 1,476
Nasdaq Decliners 1,132 2,721
New Highs/Lows
08/13 08/14 08/15 08/16 08/19 08/20
--------------------------------------------
NYSE New Highs 85 113 146 128 154 151
NYSE New Lows 35 36 15 18 11 25
Nasdaq New Highs 78 104 103 118 190 138
Nasdaq New Lows 143 155 105 91 67 73
Stocks Covered Today Stock Splits
TRADER'S TIP: "Adapting To A Changing Market"
One of the key attributes of a successful trader is the ability to adapt to changing markets. It isn't always easy, for change comes in many forms, and is caused by a wide range of economic, political, social, regulatory, and technical forces. It can occur slowly or abruptly, and sometimes affects a large number of investors, or just a small group. But no matter what the causes market change, and how fast it takes place, eventually everyone who participates in the market either learns to adapt, or pays the price. Even normal "bull to bear and back" market cycles require that we adapt to change, to recognize when the shift between up and down trends is taking place. And though many investors have been conditioned to think that the only defense against a bear market is to wait it out, strategies that take advantage of the inevitable short-term counter-trend rallies, and short stocks in the direction of the negative primary trend can turn a bear market into a bull!
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".
Stocks Covered Today Stock Splits
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
Stocks Covered Today Stock Splits
TRADER'S TIP: "Time, Risk, and Reward"
Profit is the reward traders get for doing the right things at the right time. The objective is to be in a trade for the least amount of time possible in order to minimize risk, yet long enough to realize the existing profit potential. While risk tends to increase over time, profit potential doesn't. As a result, holding onto a slightly profitable trade for too long raises risk enough to offset any profit potential.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Revolve Group, Inc. (RVLV: Consumer Cyclical/Internet Retail) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. RVLV found itself in this condition on Tuesday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 24.7 and a SELL short trigger at 23.11. When RVLV moves outside of Tuesday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.59 trailing stop. After you've got a 1.86 profit, tighten the stop to 0.8. RVLV closed at 24.00 on Tuesday. Earnings Report Date: Oct 30, 2024. Beta: 2.10. Market-Cap: 1.695B. Optionable.
CONSUMER DEFENSIVE SECTOR
Pilgrim's Pride Corporation (PPC: Consumer Defensive/Packaged Foods) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Tuesday PPC seemed intent on initiating a rebound. With moving average support nearby, PPC 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 44.31. Manage risk with a 2.55 stop. Tighten your stop to 1.28 when you have a 3.06 profit. PPC ended the day at 43.54. Earnings Report Date: Oct 23, 2024. Beta: 0.78. Market-Cap: 10.324B. Optionable.
HEALTHCARE SECTOR
Arcturus Therapeutics Holdings Inc. (ARCT: Healthcare/Biotechnology) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. ARCT traders reached this state of stand-off on Tuesday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 21.97 and a SELL short trigger at 20.52. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.45 which can be tightened to 0.73 on a 3.16 gain. ARCT closed Tuesday at 21.27. Earnings Report Date: Nov 12, 2024. Beta: 2.64. Market-Cap: 575.188M. Optionable.
10x Genomics, Inc. (TXG: Healthcare/Health Information Services) - SQUEEZE PLAY. TXG traders on both sides of the fence are now locked in a head-to-head shootout. Tuesday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 23.39 and a SELL short trigger at 21.54. When one of the orders is filled, cancel the remaining order and enter a 1.85 trailing stop. When you've reached a 2.52 paper profit, tighten the stop to 0.93. TXG closed at 22.54 on Tuesday. Earnings Report Date: Oct 31, 2024. Beta: 1.84. Market-Cap: 2.716B. Optionable.
TECHNOLOGY SECTOR
InterDigital, Inc. (IDCC: Technology/Software - Application) - 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 Tuesday's session to close at 134.82. Anticipate the rebound to continue, and be ready to buy IDCC at 138.16. Follow your entry with a trailing stop of 7.67 which can be tightened to 3.84 on a 6.74 profit. Earnings Report Date: Oct 31, 2024. Beta: 1.41. Market-Cap: 3.388B. 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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