Notes From The Editor

"Natural Born Traders"

Is there a trading gene? Some people make trading look so easy you would think they arrived in the delivery room with special market skills. However, while most successful traders share common traits, as far as I can tell it isn't something inherited genetically. Though aptitude varies, winners don't just inherently know how to make money in the market. They become successful at trading stocks the same way as everyone else - by learning from their experiences.

It's been said, "good judgment comes from experience, and experience comes from bad judgment." Sounds strange at first, yet it's true in many instances. Of course there is more than one way to benefit from experience. All of us have learned a few things "the hard way." Hopefully we try to appreciate the value of our experiences despite how painful they may feel at the time.

The most common method of learning is to make a mistake, and then pay for it. These lessons usually cost much more than we expected. Afterwards we often still aren't sure what we were supposed to learn from them.

Fortunately there is a better way. We can choose to develop good judgment from the experiences of others. Though perhaps not as common, learning from the experiences and mistakes of other traders is far superior to investing in over-priced experiences of our own.

Up-close work with many traders over the years reveals that planning and execution are two extremely important elements of consistent winning. Planning is the simple process of deciding exactly when to enter a trade, and precisely what to do if the stock goes up, goes down, or sideways. This is always done in advance of entering a position. Once you are in the market, the focus shifts from planning the trade, to managing the trade.

It may come as a surprise that trade management makes up a big part of what is usually referred to as "executing" the trade. While most traders assume that execution simply means placing a buy or sell order, winners know that there is much more to execution than that. The actual procedures for entering or exiting a trade can be learned quickly. Knowing when to enter, and more importantly when to exit, takes much longer to learn.

If you are new to the markets, commit to spending enough time to acquire the basic skills needed to keep your capital healthy. How much money you ultimately make is up to you. As you learn the ropes, prepare carefully for each trade and then stick with your prepared plan. Also take comfort in the fact that profits are born naturally from this process ... regardless of your genetic makeup!

Trade well,

Thomas Sutton, Editor

Quick List

    
Stock     08/03     08/03      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

ORRF      33.25     -0.73     33.99                  2.35/1.18      1.82
SBSI      32.96     -0.35     33.48                    2.4/1.2      1.42
ARCT      20.55     -1.03     21.09     19.44        1.65/0.83      3.26
VRNS      51.80     -1.37     52.77                  4.41/2.21      2.92
CCSI      20.09     -0.87     20.88     19.39        1.49/0.75      1.94

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.

Market Summary

Equity markets ended sharply lower on Friday, driven by a weaker-than-expected jobs report that pushed the unemployment rate to its highest level since 2021. Nonfarm payrolls increased by just 114,000 in July, falling short of the anticipated 175,000. The report triggered a risk-off sentiment in the markets, with consumer staples emerging as the top-performing sector within the S&P 500.

In contrast, growth and cyclical sectors, such as consumer discretionary, technology, and financials, suffered significant declines. Small-cap stocks also faced pressure, with the Russell 2000 dropping over 3% for the day and more than 6% for the week. Globally, Asian markets fell sharply overnight, with Japan's Nikkei losing nearly 6%, while European markets also declined amid U.S. growth concerns. Bond markets saw a rally, with the 10-year Treasury yield falling nearly 20 basis points to around 3.8%, and the 2-year yield dropping by nearly 30 basis points to 3.88%.

July's nonfarm payrolls increased by only 114,000, significantly below the consensus expectation of 175,000, while the unemployment rate edged up to 4.3%, its highest level since 2021. The number of people working part-time due to economic reasons rose to 4.6 million, aligning with pre-pandemic levels. Average hourly earnings increased by 3.6% year-over-year, falling short of the expected 3.7%. This disappointing jobs report, combined with recent upticks in initial jobless claims and a soft ISM manufacturing report, has heightened concerns about US economic growth. Futures markets are now pricing in a roughly 70% chance of a 50-basis-point rate cut at the Fed's September meeting, with a total of 125 basis points of cuts anticipated before year-end.

Earnings reports continue to capture market attention. After the bell on Thursday, both Apple and Amazon reported results that exceeded earnings expectations. However, Amazon's cautious forward guidance weighed on its shares, while Apple ended the day higher. Semiconductor company Intel also reported after the market close, revealing earnings below expectations and announcing a suspension of its dividend. Intel's stock fell over 25% in response.

Despite recent market volatility, earnings for the second quarter have been robust. About 75% of S&P 500 companies have reported second-quarter results so far, with approximately 78% exceeding expectations. Earnings growth for the quarter is projected at around 10%, up from the 8% expected at the end of June. For the full year, earnings are anticipated to grow by approximately 11%, which would mark the strongest growth rate since 2021.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 39,737.26  -610.71      -852.08     -2.1%
Nasdaq              16,776.16  -417.98      -581.72    -3.35%
S&P 500              5,346.56  -100.12      -112.54    -2.06%

NYSE Volume                      5.18B                       
NYSE Advancers                     702                       
NYSE Decliners                   2,128                       

Nasdaq Volume                    6.34B                       
Nasdaq Advancers                   778                       
Nasdaq Decliners                 3,528                       

                                 New Highs/Lows

                   07/26  07/29  07/30  07/31  08/01  08/02
                 --------------------------------------------
NYSE New Highs       214    179    218    369    208    158
NYSE New Lows         17     14     25     21     53    116
Nasdaq New Highs     243    162    176    284    107    111
Nasdaq New Lows       69     91    140     98    178    330
   

TRADER'S TIP: "When Your Indicators Contradict The Trend"

Due to their overly sensitive nature, some technical indicators will turn in one direction while the price trend remains in the other. A rule of thumb - whenever a price trend and indicators are in conflict, always go with price until the trend is broken.

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. 5					
9:45 am	S&P final U.S. services PMI	
10:00 am	ISM services	July
			
TUESDAY, Aug. 6					
8:30 am	U.S. trade deficit	

WEDNESDAY, Aug. 7					
3:00 pm	Consumer credit	

THURSDAY, Aug. 8					
8:30 am	Initial jobless claims			
10:00 am	Wholesale inventories	
3:00 pm	Richmond Fed President Tom Barkin speaks
				
FRIDAY, Aug. 9					
None scheduled

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

TRADER'S TIP: "Extended Hours and Erroneous Fills"

You'll sometimes find offers in extended hours trading that seem to good to be true. Don't celebrate too quickly when you buy a $20 stock for $15 bucks. Just remember that the person on the other side of your trade can contest the transaction (after the fact) whenever the sale price is too far away from the closing price. Stock buys and sells outside of the market range are considered "erroneous fills" and can be broken by the brokerage or Electronic Communication Network. For example, the ECN "Island" looks at a trade 20% outside the market price as an "erroneous fill."

Stocks Covered in This Issue

FINANCIAL SERVICES SECTOR

Orrstown Financial Services, Inc. (ORRF: Financial Services/Banks - Regional) - NEW HIGH DIP. It's no secret that strong stocks tend to get even stronger. ORRF's recent 52-week high is a clear indication that the ongoing uptrend is still healthy, though traders have taken some profits off the table during the past few sessions. Friday's bounce from support confirms the stock's intention to move even higher. This New High Dip setup takes advantage of the tendency for strong stocks to bounce skyward after pulling back from new highs. Prepare to BUY shares in ORRF should price reach the 33.99 level. Enter a trailing stop of 2.35 as soon as your order is filled, then tighten the stop to 1.18 on a 1.82 gain. Earnings Report Date: Oct 22, 2024. Beta: 0.91. Market-Cap: 640.149M. Optionable.

Southside Bancshares, Inc. (SBSI: Financial Services/Banks - Regional) - NEW HIGH DIP. SBSI's recent new 52-week high proves just how well this stock is performing. Sellers have pushed prices down the past few sessions, but Friday's rebound near support has given us an excellent BUY setup. A continuation of this latest bounce has the potential to push above the recent 52-week high and set a new one. Be ready to get on board if SBSI moves up to the 33.48 level, and set a 2.4 trailing stop to control risk. Tighten the stop to 1.2 when you have banked a 1.42-point gain. Earnings Report Date: Oct 24, 2024. Beta: 0.54. Market-Cap: 997.577M. Optionable.

HEALTHCARE SECTOR

Arcturus Therapeutics Holdings Inc. (ARCT: Healthcare/Biotechnology) - SQUEEZE PLAY. ARCT shareholders know what it feels like to be squeezed. Friday'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. ARCT closed Friday at 20.55. The plan is to enter in the right direction by placing a BUY trigger at 21.09 and a SELL short trigger at 19.44. Once ARCT establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.65. After you've collected a 3.26 profit, tighten the stop to 0.83. Earnings Report Date: Aug 5, 2024. Beta: 2.64. Market-Cap: 553.448M. Optionable.

TECHNOLOGY SECTOR

Varonis Systems, Inc. (VRNS: Technology/Software - Infrastructure) - NEW HIGH DIP. VRNS's strong performance produced a new 52-week high several days ago. Since then we've been waiting for a pullback from that high in order to get on board with a low-risk entry. Friday's reversal near Moving Average support provides us with a New High Dip setup. Set your BUY trigger at 52.77, and follow your purchase with a 4.41 trailing stop which can be tightened to 2.21 when you have a 2.92-point gain. VRNS closed Friday at 51.80. Earnings Report Date: Oct 28, 2024. Beta: 0.82. Market-Cap: 5.811B. Optionable.

Consensus Cloud Solutions, Inc. (CCSI: Technology/Software - Infrastructure) - 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. CCSI found itself in this condition on Friday 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 20.88 and a SELL short trigger at 19.39. When CCSI moves outside of Friday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.49 trailing stop. After you've got a 1.94 profit, tighten the stop to 0.75. CCSI closed at 20.09 on Friday. Earnings Report Date: Aug 8, 2024. Beta: 1.84. Market-Cap: 386.134M. 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.

Trader's Corner

The Squeeze Play

So are you Bullish or Bearish? When it comes to choosing trade setups, it doesn't always have to be one way or the other. Actually, in many cases you are much better off letting the market tell you whether to go long, or to go short, or just stand aside. This is what the Squeeze Play is all about.

Not to be confused with a "short squeeze," the Squeeze Play gets its name from one of the trade setup conditions - an extremely narrow price range which indicates a dramatic drop in volatility. Due to the cyclical nature of volatility, powerful price moves often occur soon after these low-volatility situations.

To begin, let's look at this type of trade setup in a different light than most traders would. Instead of trying to pre-determine which way price will move, we will assume that it could go either direction and plan for both. This means setting aside any expectations we may have for near-term price direction, and letting the upcoming price action determine which way we will enter the trade.

Here is how it works. The Squeeze Play contains both a support and a resistance level which are used to set potential triggers for trade execution. For example, a buy entry is triggered if price moves up and breaks through resistance, while a short sale is triggered if price moves down and breaks below support.

By selecting setups where there is a clearly defined narrow range between the support and resistance levels, we can enter in either direction with very little risk. The low risk comes from the fact that should the initial move fail - price doesn't have to go very far back to confirm that it's time to get out.

Here is an example of a Squeeze Play setup:



Price volatility tends to go through repeating cycles of contraction and expansion. Once price has contracted and "squeezed" into a very narrow range, it invariably begins to expand. This expansion causes price to quickly "break out" of the narrow support & resistance boundaries, and often causes a short-term trend to develop in one direction or the other.

Below is the same chart shown as above - only this one includes the short-term price action after breaking out of the range of the setup bar:



When you first look at a Squeeze Play setup you probably see it as either a long or a short. The only problem is that we don't know which way price will go, so the solution is to let the price action tell us. The narrow range setup bar gives a perfect opportunity to place a low risk stop.

Although the example used in this article is a BUY, the concept works the same way for short sales. If price breaks down through support, then you would enter a SHORT and place an exit stop just above the top of the resistance level.

Squeeze Plays make a trader's job easier because each pattern offers two potential trades. Though this method is very powerful, isn't complicated. The key is to locate low volatility price patterns with clear support & resistance levels that offer reasonable risk and reward potential in either direction. Then you set your entry triggers and stops a calculated distance beyond the S&R levels - simple as that!

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