Notes From The Editor

"Sometimes the best trade is the one you don't make."

This concept is something you don't hear very often in the equity world. Brokerages promote constant trading as a way of generating higher commissions. The endless hype and buzz of the media creates a sense of urgency and a fear of missing the next big trade. It's the same sort of fear that motivates consumers to immediately jump on what they perceive to be a good deal before it goes away.

What the brokerages and media lack, in this case, is perspective. In a constantly-changing market environment teeming with a huge variety of stocks, there's never a shortage of potential trade set-ups. As attentive observers on the sidelines, we have the luxury of waiting to jump in the game until just the right moment.

While there's no guarantee that you will emerge victorious, your odds will be improved by only taking the best entry points. And during those times when you're on the sidelines, your trading account is completely protected.

Fear should NEVER be the motivating factor behind a trade. All of us have experienced the frustration that comes with seeing a stock soar after you decided not to snap up some shares. That's a perfectly natural emotion - and perfectly harmless, as long as the frustration doesn't produce a habit of over-trading.

Over-trading guarantees that you'll never miss a big profit because you hesitated at the last minute. The problem is that you'll also be hit with losses from trades taken under less-than-ideal conditions.

When a stock you've watched makes a big move without you on board, remind yourself that there will be another compelling set-up right down the pike. Warren Buffet's words of wisdom, quoted here before, are relevant:

"The stock market is a no-called-strike game. You don't have to swing at everything - you can wait for your pitch."

Have a great weekend!

Kent Barton
Senior Analyst

Quick List

    
Stock     08/04     08/04      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

URGN      20.68      0.82     21.07     19.07              2/1       1.5
NX        27.89      0.40     28.29                  1.74/0.87      1.32
FLYW      33.61      0.31     34.51                  2.86/1.43      2.26
MAXN      22.04     -0.34     22.96     21.24        1.72/0.86         3
MXL       23.75     -0.41     24.43     22.65        1.78/0.89         2

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

On Friday, the major US stock indexes experienced a downward trend as traders processed July's jobs report, which showed a slowing but still resilient pace of job creation, combined with a mix of quarterly earnings reports. Consequently, the S&P 500 Index (SPX), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite (COMP) all ended the week on a downward note.

Initially, stocks seemed poised to recover from an early session dip and displayed upward momentum for a significant portion of the afternoon. However, this positivity faded during the final couple of hours of trading. Despite this late-day decline, 10-year yields retreated, having previously surpassed the psychologically significant 4% mark earlier in the week, much to the dismay of stock market enthusiasts, as rising yields can impact stock demand.

With earnings season nearing its conclusion, there are fewer immediate opportunities for market-boosting positive news. This week marked the worst performance for stocks since the banking turbulence in March.

While unemployment remains low, wage growth continues to surpass the Federal Reserve's preferred range. The Fed's ongoing efforts against inflation involve monitoring indicators of job market looseness. The CME FedWatch Tool indicated that investors were assigning an 86% likelihood of the Fed maintaining rates within their existing range of 5.25% to 5.5% during its rate-setting committee meeting in September.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 35,065.62  -150.27      -393.67    -1.11%
Nasdaq              13,909.24   -50.48      -407.42    -2.85%
S&P 500              4,478.03   -23.86       -104.2    -2.27%

NYSE Volume                      4.19B                       
NYSE Advancers                   1,609                       
NYSE Decliners                   1,319                       

Nasdaq Volume                    5.46B                       
Nasdaq Advancers                 1,986                       
Nasdaq Decliners                 2,360                       

                                 New Highs/Lows

                   07/28  07/31  08/01  08/02  08/03  08/04
                 --------------------------------------------
NYSE New Highs       119    152    107     65     76    111
NYSE New Lows         12      8     17     33     46     38
Nasdaq New Highs     126    149    101     56     60     69
Nasdaq New Lows       85     64     93    123    108    114
   

TRADER'S TIP: "Changing Horses In The Middle Of The Stream"

Here's another good reason to avoid changing rules in the middle of a trade. Waiting to finish the trade before making rule changes emphasizes the importance of having a "formal" set of trading procedures. Including a rule that regulates how and when you change your rules implies that you respect for your own rules. This one rule alone will improve your bottom line and set you apart from casual traders with no consistent methods.

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 - 4478.03 August 4, 2023

52-Week High: 4607.07
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4754.93
Resistance 2: 4635.26
Resistance 1: 4556.64
Pivot: 4515.59
Support 1: 4436.97
Support 2: 4395.92
Support 3: 4276.25

NASDAQ Composite - 13909.24 August 4, 2023

52-Week High: 14446.55
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 15032.95
Resistance 2: 14543.39
Resistance 1: 14226.31
Pivot: 14053.83
Support 1: 13736.75
Support 2: 13564.27
Support 3: 13074.71
        
Dow Industrials - 35065.62 August 4, 2023

52-Week High: 35679.13
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 36550.24
Resistance 2: 35904.87
Resistance 1: 35485.24
Pivot: 35259.50
Support 1: 34839.87
Support 2: 34614.13
Support 3: 33968.76
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, August 07, 2023: 
07-Aug  3:00 pm   Consumer credit
07-Aug  TUESDAY, AUGUST 8   

Tuesday, August 08, 2023:
08-Aug  6:00 am   NFIB optimism index
08-Aug  8:30 am   U.S. trade balance
08-Aug  10:00 am   U.S. wholesale inventories 

Wednesday, August 09, 2023:
09-Aug          None scheduled   

Thursday, August 10, 2023:
10-Aug  8:30 am   Initial jobless claims
10-Aug  8:30 am   Consumer price index
10-Aug  8:30 am   Core CPI
10-Aug  8:30 am   CPI (year-over-year)
10-Aug  8:30 am   Core CPI (year-over-year)
10-Aug  2:00 pm   Treasury budget  

Friday, August 11, 2023:
11-Aug  8:30 am   Producer price index
11-Aug  8:30 am   Core PPI
11-Aug  8:30 am   PPI (year-over-year)
11-Aug  8:30 am   Core PPI (year-over-year)
11-Aug  10:00 am   Consumer sentiment (prelim)


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

TRADER'S TIP: "A Bane or Boon?"

Volatility can be a double-edged sword when trading, but a few reminders can help keep things in perspective. First of all, recall that volatility is what creates trading opportunities, so as long as we focus on the short term, share prices that move dramatically should be welcomed. Secondly, risk management is a must when volatile conditions prevail. Make absolutely certain that exit strategies are pre-planned in order to avoid unwanted losses. And finally, use the Gap Open Strategy to help determine buy and sell points. You'll be glad you did! For more on the Gap Open Strategy go to: http://www.rightline.net/education/gapopen.html

Stocks Covered in This Issue

HEALTHCARE SECTOR

UroGen Pharma Ltd. (URGN: Healthcare/Biotechnology) - SQUEEZE PLAY. Friday's trading action forced URGN'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 URGN 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 21.07 if URGN moves higher, and place your order to SELL short at 19.07 if price declines to that level. As usual follow your entry with a trailing stop, 2 should be sufficient. Reduce your stop to 1 on a 1.5 gain. URGN closed Friday at 20.68. Earnings Report Date: Aug 10, 2023. Beta: 0.91. Market-Cap: 485.023M. Optionable.

INDUSTRIALS SECTOR

Quanex Building Products Corporation (NX: Industrials/Building Products & Equipment) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. NX's reaction to support on Friday created a Bullish Bounce setup with a BUY entry trigger at 28.29. Use a 1.74 trailing stop, which should work well with NX's typical daily range. Tighten it to 0.87 on a 1.32 profit. NX closed at 27.89 on Friday. Earnings Report Date: Aug 30, 2023. Beta: 1.43. Market-Cap: 919.045M. Optionable.

TECHNOLOGY SECTOR

Flywire Corporation (FLYW: Technology/Software-Infrastructure) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 33.61, FLYW is on our radar for a BUY entry at 34.51. If you purchase shares of FLYW, be sure to also place a trailing stop of 2.86. Snug it up to 1.43 on a 2.26 gain. Earnings Report Date: Aug 08, 2023. Beta: 1.13. Market-Cap: 3.723B. Optionable.

Maxeon Solar Technologies, Ltd. (MAXN: Technology/Solar) - SQUEEZE PLAY. MAXN is caught in a dilemma. The stock's compressed price range on Friday 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. MAXN is now at 22.04. We can capture price action either way by placing a BUY trigger at 22.96 and a SELL short trigger at 21.24. Once MAXN 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 1.72. When you acquire a 3 profit, tighten the stop to 0.86. Earnings Report Date: Aug 08, 2023. Beta: 1.40. Market-Cap: 1.125B. Optionable.

MaxLinear, Inc. (MXL: Technology/Semiconductors) - 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 MXL. A move to the upside will trigger our BUY entry at 24.43, while a drop to 22.65 will trigger our SELL short entry. Follow your position with a 1.78 trailing stop. Tighten the stop to 0.89 once you have a 2 gain. MXL closed Friday at 23.75. Earnings Report Date: Oct 23, 2023. Beta: 1.87. Market-Cap: 1.9B. 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

Back in the late 1960s, a young commodity broker was situated at E. F. Hutton and Company. This brokerage office was notably advanced for its era, serving as the "flagship office" for E. F. Hutton. Within this office, around thirty brokers and an equivalent number of clients shared a spacious boardroom, eliminating private offices. Brokers enjoyed luxurious desks, while clients had a cozy seating area at the office's front, allowing them to observe the tapes and monitor the state-of-the-art commodity "clacker board."

Positioned near the front of the boardroom, the broker could peruse the Wall Street Journal and monitor commodity markets without visually checking the board. By merely listening to the rhythmic clicks as prices shifted, discerning significant market occurrences became effortless as the tempo of clicks escalated noticeably.

Several plush sofas stood before the broker's desk, facing a high mahogany-paneled wall adorned with the tapes and the "clacker board." A cluster of traders, predominantly retired "old timers" who engaged in real commodities trading such as grains and pork bellies, comfortably lounged on the sofas. They pored over charts and conversed about market trends and life, creating an informal camaraderie. Typically, they arrived early to secure their favorite seats and spent the day trading while exchanging insights and unsolicited advice. Mostly gregarious, they often took coffee breaks together and addressed each other on a first-name basis. These traders relished the opulent ambiance and treated the well-appointed boardroom as their exclusive men's enclave. It's noteworthy that women were barred from trading commodities in those days; a far cry from today's landscape!

However, one of these "old timers" diverged from the rest. He seemed uninterested in becoming part of the convivial social circle. He occupied a quiet spot, intently observing the price fluctuations on the commodity board, clutching an old glass Coca-Cola bottle near his ear. This vintage Coke bottle had been emptied long ago and now held a 12-inch tube of bent and fragmented radio antennae extending awkwardly from its top.

Recall that in the 1960s, the concept of cell phones hadn't yet emerged, rendering the purpose of this Coke bottle a mystery to all. When this trader sporadically spoke to the bottle, heads would turn, nearby traders attempting to eavesdrop. Yet, the trader's soft-spoken conversation with the bottle eluded their ears.

It transpired that this Coke bottle holder was a client of the broker's, and eventually, a representative from the group approached the broker, seeking an explanation for the Coke bottle mystery. Although unaware of the bottle's purpose, the broker's curiosity matched theirs. The broker promised to uncover the truth. Upon the client's next visit, the broker promptly executed his order and then tactfully inquired about the enigmatic Coke bottle.

With a serious demeanor and no trace of embarrassment, the client divulged that the Coke bottle functioned as an inter-planetary communication device gifted to him by extraterrestrials. He claimed that these aliens took a keen interest in commodity markets on Earth and frequently provided trading advice from their various observation posts on other planets. He asserted that he had recently received a message from Mars, indicating a soybean purchase, which led him to buy soybeans as well. With this revelation of his distinctive trading strategy, he returned to his seat, resuming his hushed exchanges with the Coke bottle.

Once the broker shared the meaning of the Coke bottle with the other traders, all eyes fixated on the Coke bottle trader and the soybean market. Interestingly, the soybean market initially moved in the opposite direction, and the Mars-inspired trade eventually incurred a loss. The other traders displayed no sympathy and were swift to mock the trader, ridiculing his beliefs. Yet, the subsequent trade proved highly lucrative, transforming the Coke bottle trader from a subject of jest to a bearer of bragging rights. The trader proceeded from sofa to sofa, recounting his narrative, gesturing toward the clacker board, waving his Coke bottle, and boasting about his extraterrestrial messages that translated into profits. Given his newfound financial success, his prior critics had to endure his prideful proclamations regarding his accomplishments with his current winning trade.

Over time, through a mixture of winning and losing trades, a discernible pattern emerged. The Coke bottle trader bore the brunt of ridicule during losses but relished his moments of triumph during winning trades. While he may have been a tad eccentric, he wasn't foolish. He swiftly recognized that the key to protecting his pride rested in preserving winning trades and promptly exiting losing ones. While seated on his sofa with a winning trade, he became invulnerable to taunts and teasing from other traders. In fact, when he was winning, he readily circulated throughout the room, scoffing at the methods of traders who weren't matching his profit levels. He exhibited his account's gains as solid evidence of his methodology's validity, even presenting statements as irrefutable proof of his alien-influenced insights. Who could contest the efficacy of advice from interplanetary sources when its efficacy was glaringly evident?

For the young broker, this encounter and firsthand observation of the Coke bottle trader, who had metamorphosed into a profitable trader, delivered a crucial lesson on the significance of exits. The broker realized that entry signals bore no relation to success. The Coke bottle trader's batting average wasn't superior to that of any other trader. Yet, this unique trader seemingly garnered consistent profits, whereas traders with greater "sanity" and more rational entry approaches were facing losses. The broker swiftly recognized that this individual achieved trading success by sidestepping ridicule. He comprehended that vulnerability during losses necessitated swift closures. Conversely, retaining winning trades offered protection against ridicule, allowing him to prolong those trades beyond what his unconventional methods had unveiled.

Over the years following this experience, the broker encountered numerous claims of entry method success that likely held even less validity than the Coke bottle messages. The broker learned to quickly glance at the entries of successful traders and meticulously analyze their exit strategies. The insight gained from observing the Coke bottle trader, who achieved profitability solely through his exit strategies, imparted a vital lesson: in trading, triumph hinges on exits, not entries.

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

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