Notes From The Editor

What About the Bear?

Between the various factors that can weigh on the market - things like a slowing economy, rising energy costs, nervous consumers, declining home prices, and similar concerns - it is inevitable that sustained declines are going to occur from time to time. The truth is that no one really knows for certain when "normal" selling will turn into a raging Bear.

Are you mentally prepared for a Bear market scenario?

A trader's subconscious plays a big role in trading decisions. When our brains become accustomed to repeated patterns, we make them part of our decision-making process - often without even realizing it.

Over the years we become accustomed to what we perceive as reliable Bull markets. When the cycle shifts, we have to be ready for it. Remember - savvy traders can make money regardless of the market's direction.

Bear markets create an endless array of short set-ups. Prices tend to fall quickly once key support levels and trendlines are broken. This is especially true of stocks that skyrocketed higher at the tail end of a Bullish period.

Psychology plays such a tremendous role in both the market's overall behavior, and how individual traders react to what the market is doing. Take a moment to visualize breakdowns and sell-offs creating great short-side trading set-ups. Imagine yourself profiting, even while the media drones on with the doom and gloom of a Bear market.

Of course, the caveat to all this is the fact that we never know exactly what the future holds. But by thinking ahead and using a little mental prep-work now, it'll be that much easier to make the transition when it's time to shift gears, whether a new trend is Bear or Bull.

Here's to profits,

Kent Barton
Senior Analyst

Quick List

    
Stock     08/24     08/24      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

IEP       20.02     -0.76      21.1     19.27        1.83/0.92       2.7
BKU       25.76      0.52     26.23     24.32        1.91/0.96      2.48
IDYA      28.07     -0.04     28.77     26.73        2.04/1.02       2.1
ACAD      28.40     -0.24     29.19      27.4         1.79/0.9      1.56

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 ended the day in negative territory on Thursday, reversing their earlier gains. This shift comes after NVIDIA released its strong earnings report Wednesday after the market closed. Despite high pre-quarter expectations, NVIDIA's second-quarter revenue surpassed consensus estimates by 20%, and its earnings per share for the same period were nearly 30% higher than anticipated, largely driven by robust artificial intelligence (AI) data-center performance.

In the global arena, Asian markets closed higher, with Japan's Nikkei seeing a near 1% increase, while European markets experienced mixed outcomes.

After a slight decline in the previous session, Treasury yields climbed, and oil prices finished slightly higher.

All eyes are on the upcoming Fed Jackson Hole meeting, where Fed Chair Jerome Powell will discuss the US economic outlook and share his latest perspectives on the need for additional monetary tightening to control inflation. We anticipate Powell will likely keep the Fed's options open and emphasize the importance of data-driven decisions. However, the recent improvement in inflation might support a case for no further interest-rate hikes.

Initial jobless claims were lower than anticipated, highlighting the ongoing strength of the labor market. Although continuing jobless claims were slightly above expectations, they showed a decline from the previous week. The labor market has remained a strong foundation for the economy, supporting robust consumer activity and driving economic growth in recent months. While still historically tight, the labor market in the USA has exhibited signs of gradual softening, which we expect to continue throughout the rest of the year as the effects of higher interest rates impact the economy.

Second-quarter earnings have outperformed predictions. Almost 95% of the S&P 500 companies have reported and the results have generally surpassed expectations. However, year-over-year earnings growth is on track to decrease for the third consecutive quarter. Current market projections indicate a rebound to modestly positive earnings growth in the third and fourth quarters of this year, with double-digit growth anticipated in 2024. The combination of declining inflation and resilient consumer spending provides a backdrop that we believe could bolster corporate profits in the coming months.

                        Aug 23, 2023           Aug 24, 2023   
                  --------------------   --------------------
Dow                 34,472.98   184.15     34,099.42  -373.56
Nasdaq              13,721.03   215.16     13,463.97  -257.06
S&P 500              4,436.01    48.46      4,376.31   -59.70

NYSE Volume                      3.84B                  3.74B
NYSE Advancers                   2,288                    728
NYSE Decliners                     662                  2,175

Nasdaq Volume                    4.14B                   4.4B
Nasdaq Advancers                 2,885                  1,207
Nasdaq Decliners                 1,423                  3,131

                                 New Highs/Lows

                   08/17  08/18  08/21  08/22  08/23  08/24
                 --------------------------------------------
NYSE New Highs        19     16     31     37     43     32
NYSE New Lows         88     92     87     81     62     75
Nasdaq New Highs      30     32     44     43     57     46
Nasdaq New Lows      291    263    215    242    167    227
   

TRADER'S TIP: "Sunny Days"

Researchers at Ohio State and the University of Michigan found a positive correlation between the weather and the stock markets around the globe between 1982 and 1997. Specifically, the stock markets in 26 countries went up more than average when it was sunny in the cities where the markets were located, and declined more than average when it was cloudy.

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 - 4376.31 August 24, 2023

52-Week High: 4607.07
52-Week Low: 3491.58
Daily Trend: UP
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 - 13463.97 August 24, 2023

52-Week High: 14446.55
52-Week Low: 10088.83
Daily Trend: UP
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 - 34099.42 August 24, 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):    

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: "Setting a Profit Target"

When projecting the potential risk vs. reward for a trade, you will want to establish a profit target. While there are numerous ways to determine a profit objective, or "target," one of the best methods is to use a previous price peak as the general area where you will set your target. This becomes your potential reward, while the initial stop level is your risk. As a rule of thumb you should only enter trades with a minimum 1- to-2 risk/reward ratio - ideally you want trades with a 1-to-3 or higher risk/reward ratio.

Stocks Covered in This Issue

ENERGY SECTOR

Icahn Enterprises L.P. (IEP: Energy/Oil & Gas Refining & Marketing) - SQUEEZE PLAY. Thursday's trading action forced IEP's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction IEP will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 21.1 if IEP moves higher, and place your order to SELL short at 19.27 if price declines to that level. As usual follow your entry with a trailing stop, 1.83 should be sufficient. Reduce your stop to 0.92 on a 2.7 gain. IEP closed Thursday at 20.02. Earnings Report Date: Nov 01, 2023. Beta: 0.83. Market-Cap: 7.877B. Optionable.

FINANCIAL SERVICES SECTOR

BankUnited, Inc. (BKU: Financial Services/Banks-Regional) - SQUEEZE PLAY. BKU is caught in a dilemma. The stock's compressed price range on Thursday 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. BKU is now at 25.76. We can capture price action either way by placing a BUY trigger at 26.23 and a SELL short trigger at 24.32. Once BKU 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 1.91. When you acquire a 2.48 profit, tighten the stop to 0.96. Earnings Report Date: Oct 18, 2023. Beta: 1.24. Market-Cap: 1.917B. Optionable.

HEALTHCARE SECTOR

IDEAYA Biosciences, Inc. (IDYA: Healthcare/Biotechnology) - 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 IDYA. A move to the upside will trigger our BUY entry at 28.77, while a drop to 26.73 will trigger our SELL short entry. Follow your position with a 2.04 trailing stop. Tighten the stop to 1.02 once you have a 2.1 gain. IDYA closed Thursday at 28.07. Earnings Report Date: Nov 06, 2023. Beta: 0.80. Market-Cap: 1.616B. Optionable.

ACADIA Pharmaceuticals Inc. (ACAD: 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 ACAD's case we will enter a BUY should it reach the 29.19 level, or a SELL short trade if it drops to 27.4. As usual a trailing stop is essential, 1.79 which should be tightened to 0.9 on a 1.56 gain. ACAD closed Thursday at 28.40. Earnings Report Date: Oct 31, 2023. Beta: 0.54. Market-Cap: 4.65B. 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.

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