August 6, 2022 - The RightLine Report ********************************** NOTES FROM THE EDITOR **********************************
One of the terms you'll sometimes see in the Rightline Report is "converging." It's root is "converge," which means "to tend toward or approach an intersecting point." From a technical perspective, this is a very powerful word. It's revolves around the simple logic that two (or more) support levels are better than one.
*********************************** "QUICK LIST" *********************************** Stock 08/05 08/05 Buy Short Trailing Stops Gain Symbol Price +/- Entry Entry Initial/Tighten Amount ------ -------- -------- -------- -------- --------------- -------- WFRD 22.00 0.15 22.57 20.67 1.9/0.95 2.34 VERV 26.67 0.56 27.04 24.15 2.89/1.45 6.56 SHYF 25.91 -0.18 26.46 24.57 1.89/0.95 1.9 INFA 23.47 0.12 23.9 22.2 1.7/0.85 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" 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 ***************************** US stocks were mixed on Friday, with the Dow Jones Industrial Average closing higher and the S&P 500 Index and the Nasdaq Composite finishing the session lower. The highly anticipated July nonfarm payroll report was much stronger than predicted, as job growth was well above expectations, and consumer credit for June was significantly higher than expected. In equities, Lyft (LYFT $20) and Expedia (EXPE $103) both announced positive quarterly profit results, yet Warner Bros Discovery (WBD $15) fell short of forecasts. Oil prices and the USD/dollar were higher, gold and treasuries were lower, boosting yields. Friday On The Week -------------------- -------------------- Dow 32,803.47 76.65 -41.66 -0.13% Nasdaq 12,657.55 -63.03 +266.86 2.15% S&P 500 4,145.19 -6.75 +14.9 0.36% NYSE Volume 4.1B NYSE Advancers 1,527 NYSE Decliners 1,686 Nasdaq Volume 4.9B Nasdaq Advancers 2,557 Nasdaq Decliners 2,009 New Highs/Lows 07/29 08/01 08/02 08/03 08/04 08/05 -------------------------------------------- NYSE New Highs 42 41 35 25 29 27 NYSE New Lows 46 48 32 36 37 46 Nasdaq New Highs 91 80 52 54 68 68 Nasdaq New Lows 121 118 95 57 51 66 *********************************** TRADER'S TIP: *********************************** TRADER'S TIP: "Minute-by-Minute" Mature traders realize that there is no connection between the amount of time they watch their stock symbols during a session and the profits they make. Constantly over-monitoring a trade wastes time and is very distracting. Place your positions, set stops, and manage your trades on a regular schedule. Good trading habits allow you to be successful without being glued to your computer screen. ************************** 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 - 4145.19 August 5, 2022 52-Week High: 4818.62 52-Week Low: 3636.85 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 4306.58 Resistance 2: 4218.73 Resistance 1: 4181.96 Pivot: 4130.88 Support 1: 4094.11 Support 2: 4043.03 Support 3: 3955.18 https://www.prorightline.com/rlch/080522SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, August 08, 2022: 08-Aug 11 am NY Fed 3-year inflation expectations Tuesday, August 09, 2022: 09-Aug 6 am NFIB small-business index 09-Aug 8:30 am Productivity 09-Aug 8:30 am Unit labor costs Wednesday, August 10, 2022: 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 10 am Wholesale inventories (revision) 10-Aug 2 pm Federal budget (compared with year earlier) Thursday, August 11, 2022: 11-Aug 8:30 am Initial jobless claims 11-Aug 8:30 am Continuing jobless claims 11-Aug 8:30 am Producer price index Friday, August 12, 2022: 12-Aug 8:30 am Import price index 12-Aug 10 am UMich consumer sentiment index (preliminary) 12-Aug 10 am UMich 5-year inflation expectations (preliminary) 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: "Trading With Uncertainty" Successful traders learn how to be comfortable with uncertainty. It's impossible to be sure that your trade will be profitable before you enter a position. Waiting for all the right "facts" to arrive usually results in missing out on the opportunity. Accept that you can't know in advance whether or not a trade will work. Risk is a constant companion when trading. You can't eliminate it, so learn how to recognize and manage it. New traders want all the facts before they do a trade and by the time all the facts are out the trading opportunity is gone, then they enter the trade and wonder why it didn't work. If you're about to drive to town and you need every traffic light to turn green before you leave, you'll never get out of the driveway. *********************************** STOCKS COVERED IN THIS ISSUE *********************************** ENERGY SECTOR Weatherford International plc (WFRD: Energy/Oil & Gas Equipment & Services) - SQUEEZE PLAY. Traders are feeling the pressure as WFRD'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 22.57 and a SELL short entry at 20.67. WFRD's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.9 trailing stop. Tighten it to 0.95 after you get a 2.34 gain. WFRD closed Friday at 22.00. Earnings Report Date: Oct 31, 2022. Beta: 2.74. Market-Cap: 1.552B. Optionable. HEALTHCARE SECTOR Verve Therapeutics, Inc. (VERV: Healthcare/Biotechnology) - SQUEEZE PLAY. Friday's trading action forced VERV'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 VERV 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 27.04 if VERV moves higher, and place your order to SELL short at 24.15 if price declines to that level. As usual follow your entry with a trailing stop, 2.89 should be sufficient. Reduce your stop to 1.45 on a 6.56 gain. VERV closed Friday at 26.67. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.594B. Optionable. INDUSTRIALS SECTOR The Shyft Group, Inc. (SHYF: Industrials/Farm & Heavy Construction Machinery) - SQUEEZE PLAY. A look at SHYF's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 26.46 and a SELL short trigger at 24.57. Once SHYF shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.89 and tighten to 0.95 on a 1.9 gain. SHYF closed Friday at 25.91. Earnings Report Date: Nov 02, 2022. Beta: 1.86. Market-Cap: 908.651M. Optionable. TECHNOLOGY SECTOR Informatica Inc. (INFA: Technology/Software-Infrastructure) - SQUEEZE PLAY. Friday's narrow price range has created a potentially profitable setup in INFA, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 23.9 and a SELL short entry at 22.2. Let INFA's price action determine your long or short entry. Once the order is filled, place a 1.7 trailing stop, and tighten it to 0.85 upon getting a 2 gain. INFA closed Friday at 23.47. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 6.595B. 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 ---------------- ------- -------- ------- ------ ------- Gamestop GME 7/7/2022 7/22/2022 4-for-1 Yes Alphabet GOOG 2/1/2022 7/18/2022 20-for-1 Yes Nasdaq Inc NDAQ 7/20/2022 8/29/2022 3-for-1 Yes 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 an example: 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. 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