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.

Support and resistance comes in many flavors. When these come together, they create deep lines in the sand where Bulls and Bears tend to duke it out. Sometimes the battles can be epic and the outcome can dictate price action for days or weeks. With that in mind, let's take a closer look at these key levels.

Moving average: the 13, 22, 50, and 200-day moving averages are closely watched on Wall Street. Shorter-term traders will sometimes use slightly smaller numbers for MA calculations.

Horizontal: These are formed when price action rebounds or bumps its head into the same level more than once.

Historical: Levels dating back several years can come into play if a stock is trading at 52-week lows/highs.

Trendline: These are formed by connecting at least two relative lows or relative highs. Creating trendlines is one of the most basic and straightforward forms of technical analysis.

Psychological: Also sometimes referred to as "round-number" support/resistance, these are numbers like 2500, 10000, 50, and 100.

The most common convergence occurs when two moving averages are crossing paths. This doesn't necessarily mean that one MA is rising while the other is falling; often one will simply be rising or falling at a more rapid pace. For that brief moment when the two MAs touch, they can create a powerful wall that stops price action in its tracks. Sometimes three moving averages will converge, creating an even stronger price wall.

Note that we've coined the term "Moving Average Zone" when referring to any region on a chart where Moving Averages have converged into the same area. This term applies even when MAs haven't necessarily crossed each other but are in close proximity. The combined forces of different MAs within a narrow price range can be very powerful obstacle. This is especially true when it occurs on a major index like the Dow or S&P 500.

Moving average and horizontal support/resistance is another powerful convergence. Imagine, for example, that XYZ is trading at 30.25, and has already rebounded three times from 30.00. The 50 DMA is rising and currently at 29.94. With the underlying moving average reinforcing horizontal support at 30.00, you'd expect Bulls to vigorously defend that level. A solid rebound could offer a buying opportunity, while a breakdown would give traders a short signal.

Every type of support/resistance can be represented as a line on a chart. The more lines you draw in, the more likely it is that you'll spot converging levels. As an interesting experiment, trying "back-testing" some of your favorite stocks or one of the major indexes. Chances are, you'll see just how often convergences make a large impact on price movement.

Here's to profits,

Kent Barton
Senior Analyst

                           "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 In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to

To learn more about controlling risk go to the RightLine Risk Control System at

For a glossary of terms unique to The RightLine Report go to:

Questions? Send us an email using our contact form at:
                           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:
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
NASDAQ Composite - 12657.55 August 5, 2022 52-Week High: 16212.23 52-Week Low: 10565.14 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 13502.82 Resistance 2: 13027.11 Resistance 1: 12842.33 Pivot: 12551.40 Support 1: 12366.62 Support 2: 12075.69 Support 3: 11599.98
Dow Industrials - 32803.47 August 5, 2022 52-Week High: 36952.65 52-Week Low: 29653.27 Daily Trend: DOWN Weekly trend: UP Weekly Pivot Levels Resistance 3: 33890.69 Resistance 2: 33305.78 Resistance 1: 33054.62 Pivot: 32720.87 Support 1: 32469.71 Support 2: 32135.96 Support 3: 31551.05
************************** MARKET CALENDAR **************************
--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:
                              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    


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.


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.


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.


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.

Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels.

                           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:

                           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:

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!
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