August 27, 2022 - The RightLine Report
Notes From The Editor
Trading the markets successfully is a continuous dance of two steps forward and one step back. It's certainly an enjoyable activity - as long as we don't fall down too often or get our toes stepped on too much. To enhance our results, I suggest following a well rehearsed routine each time we make a trade.
Careful planning and lots of practice will reduce trading errors, though I don't know of anything that will eliminate them completely. Just like professional dancers, even the best traders misstep sometimes. One of the most important skills a trader can learn is consistent trade execution, which is the equivalent of proper technique when dancing. Though it sure takes planning and practice, it is very attainable.
Need some help in the self-discipline area? Again, practice makes perfect. Set up and follow a systematic routine that emphasizes the importance of each action you take. A written plan will help avoid execution errors, other goof-ups and the emotional damage which accompanies most of our "mistakes." Any orders placed over the phone should be written down and repeated just to make sure that your broker clearly understands exactly what you want to do.
In the same way, online traders will benefit from a written routine to help avoid goof-ups and the emotional damage which accompanies most of our "mistakes." While it is important to take responsibility for our actions, overreacting to less-than-perfect attempts only serves to strengthen neurological links between our unintentional "mistakes" and negative emotions.
While patience and positive feedback improve our skills, self-inflicted punishment - like yelling angrily at ourselves - does little to stop us from making the same slip-ups again. In fact this sort of chronic trauma does just the opposite - it makes things worse instead of better. On the other hand, planning positive responses to our inevitable errors does effectively reduce them by minimizing negative emotions when they do occur.
Bottom line? Patience and self-awareness are essential. Investing energy into trade planning and practicing execution skills will elevate your bottom line.
Enjoy the weekend,
Thomas Sutton, Editor
Stocks Covered Today Stock Splits Trader's Corner
Quick List
Stock 08/26 08/26 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
AMCX 27.62 -0.83 26.78 2.38/1.19 2.7
CRT 22.60 0.36 22.9 21.37 1.53/0.77 2.26
RYTM 23.99 0.17 24.64 22.12 2.52/1.26 4.64
GRIN 20.50 0.04 20.96 1.59/0.8 1.68
MAXN 20.54 -0.10 21.24 19.39 1.85/0.93 3.94
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.
Stocks Covered Today Stock Splits Trader's Corner
Market Summary
US stocks were lower on Friday following a speech from Federal Reserve Bank Chairman Jerome Powell suggesting that a more hawkish monetary policy than expected may be ahead. Powell stated that another "unusually large" rate hike could be appropriate at the next Fed meeting in September. In equities news, Dell Technologies (DELL $42) released disappointing fuidance, Ulta Beauty (ULTA $411) beat earnings forecasts and offered an upbeat outlook, while Gap (GPS $10) surprised analysts with a positive quarterly report, but retracted its previous full-year guidance due to the uncertain macro-environment. Economic highlights included upbeat inflation news, along with a favorable revision to August consumer sentiment, while personal income and spending both rose though by a smaller amount than predicted. Gold, treasuries and the USD/dollar finished the session lower, oil prices closed higher.
Friday On The Week
-------------------- --------------------
Dow 32,283.40 -1,008.38 -1423.34 -4.22%
Nasdaq 12,141.71 -497.56 -563.51 -4.44%
S&P 500 4,057.66 -141.46 -170.82 -4.04%
NYSE Volume 3.88B
NYSE Advancers 428
NYSE Decliners 2,751
Nasdaq Volume 4.58B
Nasdaq Advancers 802
Nasdaq Decliners 3,750
New Highs/Lows
08/19 08/22 08/23 08/24 08/25 08/26
--------------------------------------------
NYSE New Highs 26 20 29 38 43 28
NYSE New Lows 57 88 62 75 34 97
Nasdaq New Highs 46 42 65 54 53 37
Nasdaq New Lows 109 195 175 144 99 172
Stocks Covered Today Stock Splits Trader's Corner
TRADER'S TIP: "Reversal Gaps"
Morning gaps can occur in the same direction as a major trend or against it. When a gap moves against the trend, it can signal a significant trend change without any other pattern involved. This type of reversal gap after a strong rally should be taken as a serious event, especially if it occurs near a major high. The same is true of a reversal gap that takes place following a major decline. It pays to take notice of whether a gap near a high or low is in the direction of the trend or against it.
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 - 4057.66 August 26, 2022
52-Week High: 4818.62
52-Week Low: 3636.85
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4396.88
Resistance 2: 4251.50
Resistance 1: 4154.58
Pivot: 4106.12
Support 1: 4009.20
Support 2: 3960.74
Support 3: 3815.35
NASDAQ Composite - 12141.71 August 26, 2022
52-Week High: 16212.23
52-Week Low: 10565.14
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 13341.66
Resistance 2: 12827.34
Resistance 1: 12484.52
Pivot: 12313.02
Support 1: 11970.20
Support 2: 11798.70
Support 3: 11284.38
Dow Industrials - 32283.40 August 26, 2022
52-Week High: 36952.65
52-Week Low: 29653.27
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 35332.80
Resistance 2: 34024.43
Resistance 1: 33153.91
Pivot: 32716.06
Support 1: 31845.54
Support 2: 31407.70
Support 3: 30099.33
Stocks Covered Today Stock Splits Trader's Corner
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, AUG. 29, 2022: NONE TUESDAY, AUG. 30 9 am S&P Case-Shiller U.S. home price index (year-over-year) 10 am Consumer confidence index 10 am Job openings 10 am Quits 11 am New York Fed President John Williams speaks WEDNESDAY, AUG. 31 8 am Cleveland Fed President Loretta Mester speaks 8:15 am ADP employment report 9:45 am Chicago manufacturing PMI 6:30 pm Altanta Fed President Raphael Bostic speaks THURSDAY, SEPT. 1 8:30 am Initial jobless claims 8:30 am Continuing jobless claims 8:30 am Productivity revision (SAAR) 8:30 am Unit labor costs revision (SAAR) 9:45 am S&P U.S. manufacturing PMI (final) 10 am ISM manufacturing index 10 am Construction spending 3:30 pm Altanta Fed President Raphael Bostic speaks Varies Light motor vehicle sales (SAAR) FRIDAY, SEPT. 2 8:30 am Nonfarm payrolls 8:30 am Unemployment rate 8:30 am Average hourly earnings 8:30 am Labor-force participation rate 10 am Factory orders 10 am Core capital equipment orders revision 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 Corner
TRADER'S TIP: "The Perfect Indicator"
Most experienced traders have their favorite indicator, yet they will readily admit that there is no "Holy Grail." Instead of searching for the perfect indicator, choose several that you can become comfortable with, and learn to interpret the conflicting signals.
Stocks Covered in This Issue
COMMUNICATION SERVICES SECTOR
AMC Networks Inc. (AMCX: Communication Services/Entertainment) - BEARISH U-TURN. Shares of AMCX have experienced the pain of selling pressure for a while, yet a recent bounce has given shareholders some welcome yet perhaps temporary relief. On Friday the upward bounce ran into a brick wall at a Moving Average. AMCX now appears ready to head lower again. A continuation of this bearish reversal would signal a retracement of the recent gains, so prepare for SHORT entries at 26.78, using a 2.38 stop. Tighten to 1.19 on a gain of 2.7. Friday's closing tick was 27.62. Earnings Report Date: Nov 03, 2022. Beta: 1.03. Market-Cap: 1.185B. Optionable.
ENERGY SECTOR
Cross Timbers Royalty Trust (CRT: Energy/Oil & Gas E&P) - SQUEEZE PLAY. CRT is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 22.9 and a SELL short entry at 21.37. Once your trade is filled, enter a 1.53 trailing stop. Tighten it to 0.77 after a 2.26 gain. CRT closed on Friday at 22.60. Earnings Report Date: N/A. Beta: 0.74. Market-Cap: 135.6M. Not Optionable.
HEALTHCARE SECTOR
Rhythm Pharmaceuticals, Inc. (RYTM: Healthcare/Biotechnology) - SQUEEZE PLAY. Traders are feeling the pressure as RYTM's intra-day price range on Friday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 24.64 and a SELL short entry at 22.12. RYTM's price movement will decide which entry is filled. As soon as you're in the trade, enter a 2.52 trailing stop. Tighten it to 1.26 after you get a 4.64 gain. RYTM closed Friday at 23.99. Earnings Report Date: Oct 31, 2022. Beta: 2.53. Market-Cap: 1.217B. Optionable.
INDUSTRIALS SECTOR
Grindrod Shipping Holdings Ltd. (GRIN: Industrials/Marine Shipping) - BULLISH BOUNCE. Some people hear of a stock that's performing nicely and then buy it without any regard for timing the entry. This approach usually leaves money on the table, money that could just as well be added to profits. The Bullish Bounce setup provides a well timed entry and reduces exposure to risk by placing both the entry trigger and exit stop near the bottom of the bounce. We have an opportunity to use this approach with GRIN which met our setup criteria on Friday. The BUY trigger for this trade is at 20.96, and the trailing stop is sized at 1.59. Resize the stop to 0.8 upon collecting a 1.68 point gain. GRIN closed Friday at 20.50. Earnings Report Date: Nov 15, 2022. Beta: 0.95. Market-Cap: 389.428M. Optionable.
TECHNOLOGY SECTOR
Maxeon Solar Technologies, Ltd. (MAXN: Technology/Solar) - SQUEEZE PLAY. Friday's trading session left MAXN 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 21.24 and your SELL short trigger at 19.39. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.85 trailing stop. Once you have a 3.94 profit, reduce the stop to 0.93. Earnings Report Date: Nov 15, 2022. Beta: 1.76. Market-Cap: 918.935M. 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 Trader's Corner
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
---------------- ------- -------- ------- ------ -------
Nasdaq Inc NDAQ 7/20/2022 8/29/2022 3-for-1 Yes
Tesla TSLA 8/5/2022 8/25/2022 3-for-1 Yes
Palo Alto Net PANW 8/23/22 9/14/22 3-for-1 Yes
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.
Stocks Covered Today Stock Splits Trader's Corner
Trader's Corner
Recognizing False Breakouts And Whipsaws
Swing traders encounter false breakouts and whipsaws throughout their careers. That shouldn't be surprising, though, because all we're doing is playing an odds game.
Even a perfect setup can fall apart for no reason and with little warning. This reminds us that risk management is mandatory if we want to trade successfully.
Breakouts occur in zones of conflict. Both sides of the market are very passionate at these turning points, but no one knows how much force is required to carry price into a sustainable trend. So any position you take near a breakout level carries considerable risk, no matter how perfect a pattern looks.
Price can respond in different ways to breakouts. First, it may carry through successfully to higher levels. Second, it may generate whipsaws that force losses on both sides of the market. Third, it may trap buyers in a false move and start a trend in the opposite direction. Each of these outcomes requires careful trade management.
A successful breakout occurs in three phases. It begins when price breaks through resistance on increased volume. We'll call this the action phase. Price expands a few points or ticks, and then reverses as soon as buying interest fades.
This starts the reaction phase. The market sells off and spawns the first pullback, where fresh buyers see a chance to get in close to the breakout price. If all systems are go, a second rally kicks in and carries price above the initial breakout high. This marks the resolution phase.
The three phases of a successful breakout depend on certain volume characteristics. Demand must exceed supply during the initial breakout. Volume should "dry up" when it pulls back in the reaction phase. And new buyers need to jump in to ensure a successful resolution phase. Whipsaws and false breakouts result when these supply-demand dynamics fall out of balance.
What exactly are whipsaws? Simply stated, they're choppy price swings back and forth through common support or resistance levels. Natural tug and pull generates most whipsaws.
But hidden hands also manipulate price through common stop levels in order to generate volume, and intentionally wash out one side of the market. Whatever the source, whipsaws are responsible for many of the losses in a swing trader's portfolio.
Whipsaws emerge when a breakout can't generate an efficient reaction phase. This failure may or may not trigger a major reversal. The pullback shakes out weak hands and forces price back into resistance.
But there's usually a healthy supply of buyers throughout the choppy movement. These bulls step in repeatedly to support the market. A successful breakout can begin quickly after a whipsaw fades out. The loss of volatility actually triggers a buying signal on many trading screens. This starts a bounce that generates the momentum needed to carry price up and beyond the last high.
Major reversals occur when price action traps one side of the market. Many traders wait to enter positions at key breakout levels. Once these folks execute their trades, they're at the mercy of the market.
In other words, their profits depend on others seeing the breakout and jumping in behind them. False breakouts occur when this second crowd fails to appear.
An overbought, one-sided market can drop quickly below a breakout level. This throws all the traders who bought the breakout into losing positions. Without the support of fresh buyers, a stock can fall from its own weight. Each incremental low triggers more stops and increases fear within the trapped crowd. Momentum builds to the downside, breaks key support and invites fresh short-sale signals from a whole new batch of traders.
*******************************
This special guest article was written by Alan Farley, author of "The Master Swing Trader."
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
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
Click Here To Unsubscribe