|
August 26, 2023 - The RightLine Report
**********************************
NOTES FROM THE EDITOR
**********************************
"Speaking of Money"
***********************************
"QUICK LIST"
***********************************
Stock 08/25 08/25 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
XPOF 20.56 0.44 21.05 19.61 1.44/0.72 2.28
OSTK 24.73 0.67 25.33 23.2 2.13/1.07 4.14
CNX 21.76 0.21 22.11 1.37/0.69 1.42
FLNC 23.77 0.60 24.55 22.53 2.02/1.01 3.42
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/
*****************************
MARKET SUMMARY
*****************************
Stocks closed higher on Friday as investors carefully analyzed Fed Chair Powell's Jackson Hole speech for insights into future interest-rate decisions. Powell's remarks struck a balanced tone, emphasizing data reliance and acknowledging the need to avoid excessive tightening. This led to a positive response in equity markets, with both cyclical and defensive sectors performing well. On a global scale, European equities trended higher while Asian stocks showed weakness. Treasury yields played a role in flattening the yield curve, as short-term rates rose due to the potential for another Fed rate hike. Meanwhile, 10-year rates remained relatively stable, staying below the week's earlier highs. Over the past 18 months, Fed Bank monetary policy has significantly influenced stock and bond markets. In 2022, this resulted in a bear market as the Fed aggressively tightened to combat rising inflation. The landscape shifted in 2023, with markets rallying as the end of the rate-hiking cycle came into view. While positive economic and earnings reports captured attention in recent months, the focus returned to the Fed's influence on Friday as investors dissected Chair Powell's annual Jackson Hole speech. Powell's remarks suggested the possibility of another rate hike in an upcoming meeting, a prudent stance as the Fed navigates uncertainties. The message aimed to strike a balance and highlight data dependence. In essence, while inflation is declining and supports a pause on policy rate changes, it remains too high for comfort. This leaves the door open for an additional rate hike if the downtrend in inflation stalls. This dynamic might contribute to market fluctuations this year as investors recalibrate Fed expectations. However, the broader takeaway is that progress against inflation bodes well for the conclusion of the Fed's tightening efforts, potentially boosting equity performance. The strength of the consumer and spending prospects remain prominent themes. Robust economic growth this year, fueled by solid spending in a tight labor market, has exceeded expectations. Yet, recent earnings results from key retailers indicate shifting spending patterns and some emerging fatigue. This aligns with the latest consumer sentiment survey, released on Friday, which showed a dip in confidence from the previous month. Our view maintains that the economy will soften as the year advances, primarily due to slower household spending growth as savings are utilized and wage growth moderates. This doesn't imply a severe recession, but markets might be slightly too optimistic about the economy's resilience under restrictive Fed policy. Despite this, stocks already accounted for a slowdown in last year's bear-market decline, suggesting that forthcoming economic softness doesn't necessarily equate to a steep decline or a return to the lows seen in October of 2022. Friday On The Week
-------------------- --------------------
Dow 34,346.90 247.48 -153.76 -0.45%
Nasdaq 13,590.65 126.67 +299.87 2.26%
S&P 500 4,405.71 29.40 +36 0.82%
NYSE Volume 3.3B
NYSE Advancers 1,715
NYSE Decliners 1,133
Nasdaq Volume 3.98B
Nasdaq Advancers 2,338
Nasdaq Decliners 1,904
New Highs/Lows
08/18 08/21 08/22 08/23 08/24 08/25
--------------------------------------------
NYSE New Highs 16 31 37 43 32 25
NYSE New Lows 92 87 81 62 75 66
Nasdaq New Highs 32 44 43 57 46 33
Nasdaq New Lows 263 215 242 167 227 212
***********************************
TRADER'S TIP:
***********************************
TRADER'S TIP: "Finding the Daily Trend" Though it sounds simple, the trend can be an elusive rascal that is subject to many definitions. One thing is for certain - determining "the trend" requires an associated reference point, such as time frame or number of bars. To locate short-term trends on a daily chart, consider using the 10-EMA (Exponential Moving Average). If the slope is up, you can safely assume that the daily trend is too. If it's down, a downtrend is likely underway. **************************
THE TECHNICAL ANALYST
**************************
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 - 4405.71 August 25, 2023 52-Week High: 4607.07 52-Week Low: 3491.58 Daily Trend: UP Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 4610.78 Resistance 2: 4508.77 Resistance 1: 4457.24 Pivot: 4406.76 Support 1: 4355.23 Support 2: 4304.75 Support 3: 4202.74 https://www.prorightline.com/rlch/082523SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, August 28, 2023: 28-Aug None scheduled Tuesday, August 29, 2023: 29-Aug 9:00 am S&P Case-Shiller home price index 29-Aug 10:00 am Job openings 29-Aug 10:00 am Consumer confidence Wednesday, August 30, 2023: 30-Aug 8:15 am ADP employment 30-Aug 8:30 am GDP (revision) 30-Aug 8:30 am Advanced U.S. trade balance in goods 30-Aug 8:30 am Advanced retail inventories 30-Aug 8:30 am Advanced wholesale inventories 30-Aug 10:00 am Pending home sales Thursday, August 31, 2023: 31-Aug 8:30 am Initial jobless claims 31-Aug 8:30 am Personal income (nominal) 31-Aug 8:30 am Personal spending (nominal) 31-Aug 8:30 am PCE index 31-Aug 8:30 am Core PCE index 31-Aug 8:30 am PCE (year-over-year) 31-Aug 8:30 am Core PCE (year-over-year) 31-Aug 9:45 am Chicago Business Barometer 31-Aug 10:00 am Friday, September 01, 2023: 01-Sep 8:30 am U.S. nonfarm payroll 01-Sep 8:30 am U.S. unemployment rate 01-Sep 8:30 am U.S. hourly wages 01-Sep 8:30 am Hourly wages year over year 01-Sep 10:00 am ISM manufacturing 01-Sep 10:00 am Construction spending 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/
***********************************
TRADER'S TIP:
***********************************
TRADER'S TIP: "Sweet Emotion" Studies show that most investors buy and sell on emotion instead of logic. For example most people will sell their winning positions to make up for losers, then hold the losers way too long in hopes they will recover. This is the opposite of what should be done, for the winners tend to keep on winning, while losers usually keep losing. The most common management strategy used by successful traders is pretty simple. Get rid of losers quickly, and keep winners profitable with a stop order based exit strategy. ***********************************
STOCKS COVERED IN THIS ISSUE
***********************************
CONSUMER CYCLICAL SECTOR Xponential Fitness, Inc. (XPOF: Consumer Cyclical/Leisure) - SQUEEZE PLAY. Trader indecision has put XPOF 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 21.05 and a SELL short entry at 19.61. Now it's up to XPOF to show us which entry will be filled. Once the trade is underway place a 1.44 trailing stop, which can be tightened to 0.72 after you achieve a 2.28 profit. XPOF closed on Friday at 20.56. Earnings Report Date: Nov 08, 2023. Beta: 1.08. Market-Cap: 1.027B. Optionable. Overstock.com, Inc. (OSTK: Consumer Cyclical/Internet Retail) - 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. OSTK traders reached this state of stand-off on Friday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 25.33 and a SELL short trigger at 23.2. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 2.13 which can be tightened to 1.07 on a 4.14 gain. OSTK closed Friday at 24.73. Earnings Report Date: Oct 25, 2023. Beta: 3.55. Market-Cap: 1.118B. Optionable. ENERGY SECTOR CNX Resources Corporation (CNX: Energy/Oil & Gas E&P) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. CNX's behavior on Friday could very well be a sign that a new bounce is underway. Place a BUY trigger at 22.11. In the event your trigger is met, also place a 1.37 trailing stop which can be trimmed down to 0.69 when you have a 1.42 profit. CNX closed Friday at 21.76. Earnings Report Date: Oct 25, 2023. Beta: 1.37. Market-Cap: 3.513B. Optionable. UTILITIES SECTOR Fluence Energy, Inc. (FLNC: Utilities/Utilities-Renewable) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in FLNC's narrowest trading range of the past seven sessions. With neither group able to take complete control on Friday, the stock's short term destiny is up for grabs. You can capitalize on this unusually tight condition by placing both a BUY order at 24.55 and a SELL order at 22.53. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.02 trailing stop. Tighten the stop to 1.01 once you have a 3.42 gain. FLNC closed Friday at 23.77. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 4.21B. 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
***********************************
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 ---------------- ------- -------- ------- ------ ------- 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. 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
**********************************
"How To Trade Channeling or Range Bound Stocks" (Editor's Note: Though the markets may change over time, some aspects of trading will always stay the same. Such is the nature of human behavior, especially when money is involved. Senior Analyst T.C. Salmon wrote the following Trader's Corner quite a few years ago, and it's still just as relevant to trading stocks today as it was then. Enjoy!) Often a stock will enter a period when it seems to go nowhere. One day's gains are offset by a dip the following session or two, and so on and on. This Bull and Bear tussle can be very profitable if one takes the time to identify the trend - or in these cases, the lack of trend - and trade the boundaries of support and resistance. There are several names for this behavior. Call it what you may: "channeling", "range bound" or "consolidation"; its all the same thing. Buyers seem to come out of the woodwork as shares approach the bottom of their range and sellers are waiting at the top. No pattern lasts forever, so it is important to recognize when the stock you are watching breaks out of its pattern in one direction or the other. This is where risk management through the use of trailing stops comes into play. There are several key factors which need to be addressed if you decide to trade a channeling stock. First find a company which has easily identifiable support and resistance levels. Many times a stock will "bounce" back and forth between key DMAs such as the 22 and 50 DMAs. It is important to note the distance between the DMAs, not so much by dollars and cents, but rather by percentage. Give preference to the stocks with a 5-10% difference between the two extremes. Since most people prefer the bullish side, also give preference to plays where the levels of support or resistance are either running "flat" (vertical) or on a slight incline. This can be easily seen when using DMAs - Daily Moving Averages - or by drawing trend-lines through recent highs and lows on the daily chart. In addition, pay attention to the stocks' Beta. Stocks with a Beta above 1 will be more active than the S&P 500, those under 1 less volatile. A Beta of 1.20 means that a company's stock price will be 20% more volatile than the S&P and a Beta of 0.80, 20% less volatile. Those not able to monitor their investments closely should stay with lower Beta companies. Compare a stock's recent volume with its norm. Average volume can be easily found if you use RightLine Charts, or you can pull up a company's chart on Yahoo Finance. If a stock moves out of its recent range on markedly higher volume, chances are that it will continue the trend at least into the next session. Keep an eye on the overall trend of the markets. Also monitor the news, and be aware of significant upcoming events on each trade that you are in. Earnings report dates are very important. Now let's take a look at one of the companies that I recently traded: TRST began to become range bound on December 23rd. This happened to be a stock that I was long in and was becoming frustrated with. As I began the process of evaluating whether or not I wanted to be in the stock or move on to something else, I recognized what was occurring on the charts. To see the chart go to: https://prorightline.com/rlr/TCtrst012304.gif If you draw a straight line through the December 29th high and another line through the January 6th low, the channel is clear. Buying near the low of the channel and selling near the top would have yielded one or two successful trades per week, on a consistently profitable basis. TRST broke out of its channel to the upside on January 20th, then pulled back into it the following session. Notice how its floor or support level seems to be moving up. From late December to January 13th, support was coming from near 13.20-13.23, it then moved up to the 50 DMA (13.40) and now it appears to be moving into the 22 DMA's (13.53) neighborhood. At the same time intra-day highs have been declining. This has given TRST smaller intra-day spreads in price and thus less room for profits in channel trading. That said, the "coiling" or "squeezing" of the stock's price, on lower volume and firming and rising support looks bullish to me. This should make TRST a good candidate for a long position, but that's another column. If you are interested in channel trading, pick a stable of companies to monitor on a daily basis. Make sure they meet your personal risk tolerance preference and price comfort level. Watch your stocks for "pauses" to develop with clear lines of support and resistance. Make sure on your purchases that you immediately set trailing stops just below support. The amount of the stop should be based on the price of the stock and its intra-day volatility range. Plan an exit strategy before you get into a trade. Remember - it is extremely rare to ever buy at the exact low and sell at the high on these stocks. Good luck to you, and remember to always "plan your trade and trade your plan!" TC Salmon Senior Analyst ======================================================================
Best of luck and have a Great Week!
**********
If you prefer to receive this report in html with color and
graphics, or have any questions, send us an email using our contact
form at:https://prorightline.com/index.php/contact-us/
======================================================================
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 To Unsubscribe, send an email to cs@prorightline.com or call 1-312-248-4241. |