Notes From The Editor

The Trader's Mind

When you think about it, trading can be a very un-instinctive activity. In order to be effective, we have to resist our natural "hard wired" inclinations on a regular basis. This involves more than just planning to use a particular method that brings structure to our intentions. We also have to follow through and take action. This means dealing with the powerful emotional forces that can sometimes get in the way.

Trading requires us to confront and overcome psychological barriers. Since doubt and fear constantly influence the markets, we have to remember that it's normal for us to sense them. Sensing doubt and fear isn't the same as being afraid. It's just a form of awareness, the same type of awareness that pilots become accustomed to when they look out of the plane and see how high they are flying.

Okay, let's dig deeper for a minute. Since fear is a constant in the stock market, we can turn it to our advantage. How? By using it to become more capable and confident. Our confidence and ability grows quickly when we're exposed to reasonably stressful challenges on a regular basis. As our skills improve, so do our results. This simply means that being aware of the negative effect fear has on the market enables us to make better choices and take direct action to make more money trading. Remembering this concept lets us deal effectively with any fears in our trading environment.

Excessive hope - which is sometimes called "semi-desperate-wishful-thinking" - can intensify fear. It almost always causes traders to hold onto positions much longer than they should. On the other hand, confidence that your planned exit strategy offers protection that can potentially keep a trade open long enough to become a winner will encourage you to stay on track ... even when fear and doubt are shouting "get out early!"

Confidence is an extremely powerful component of any winning strategy. Though it has an almost magical effect, it isn't magic. It is a natural byproduct of understanding the principles beneath your trading methods, and routinely putting them into action. Traders who do understand this and believe in what they are doing become unstoppable.

The temptation to quit isn't hard to overcome when we choose the right frame of mind. Giving up insures failure, while persistence does just the opposite. Realizing that each of these conflicting actions result from different attitudes allows us to select our point of view ... for maximum benefit.

When feeling hesitant about making choices, always remember the old saying "Good judgment comes from experience, and experience comes from bad judgment." Life continuously gives us opportunities to learn how to replace the bad with good and then the good with the even better.

Change is inevitable, so we might as well choose the best routes to take along the journey. With this in mind, let's do our best to trade our best. And when we don't, let's make the best of it anyway.

Trade Well!

- Thomas Sutton, Editor

Quick List

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

BOOT      97.58     -0.51     99.06                  7.82/3.91      5.04
JWN       22.38      0.26     22.68                  1.82/0.91       1.5
XP        26.25      0.07      26.6                  2.21/1.11      1.86
EH        21.30      1.11     21.73                  2.94/1.47      2.94
ASAN      21.55     -0.52     21.88     20.41        1.47/0.74      2.24

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 Tuesday the S&P 500 (SPX) and Nasdaq Composite (COMP) briefly reached their lowest points in four weeks. This drop was triggered by Moody's, a company that rates financial stability, lowering the credit ratings of several US regional banks. Moody's mentioned that these banks were struggling with "growing profitability pressures" due to interest rates and their involvement in commercial real estate. This raised concerns about smaller and medium-sized banks, especially because there have been bank closures in the sector recently.

This downgrade came just a week after Fitch Ratings unexpectedly lowered its rating on US Treasuries. This surprise move had a negative impact on the stock market. Although the downgrade initially caused stocks to fall, the declines were limited by strong earnings reports from other industries.

Health care stocks were the leaders in the market throughout the day. Financial and technology sectors were weaker, with the KBW Regional Banking Index (KRX) dropping by around 1.5%. In contrast, energy stocks performed well as crude oil futures increased by more than 1%. The VIX, which measures market volatility, spiked to its highest level since late May before decreasing later in the session. The USD/Dollar Index (DXY) gained strength due to expectations that domestic interest rates would remain higher than those in other countries.

                        Aug 7, 2023            Aug 8, 2023    
                  --------------------   --------------------
Dow                 35,473.13   407.51     35,314.49  -158.64
Nasdaq              13,994.40    85.16     13,884.32  -110.07
S&P 500              4,518.44    40.41      4,499.38   -19.06

NYSE Volume                       3.5B                  3.89B
NYSE Advancers                   1,851                  1,089
NYSE Decliners                   1,074                  1,814

Nasdaq Volume                    4.91B                   5.3B
Nasdaq Advancers                 2,046                  1,674
Nasdaq Decliners                 2,272                  2,599

                                 New Highs/Lows

                   08/01  08/02  08/03  08/04  08/07  08/08
                 --------------------------------------------
NYSE New Highs       107     65     76    111    102     64
NYSE New Lows         17     33     46     38     36     65
Nasdaq New Highs     101     56     60     69     74     62
Nasdaq New Lows       93    123    108    114    175    204
   

TRADER'S TIP: "Position Size: Finding The Right Fit"

"Many people believe that in order to make healthy profits in the market that they need to own a large position (a thousand shares or whatever your big block is for you) or more. I have found repeatedly that this is not the case. In fact, it may even work against you. Trading is tremendously psychological. When you have a position that is large enough that normal fluctuations, a point or two movement in the wrong direction causes you to start to mentally calculate how much money you have lost, you begin to make decisions out of fear. Big block positions also are a leading cause of ulcers (don't worry - I made that up).

When you make your trading decisions from a basis of fear and greed - you betcha, they are lousy decisions. Think in these terms. A 200-share position, that moves 20 points made you a $4,000 profit. You were able to keep a 3 or 4 point trailing stop loss on the stock meaning you were only at risk $600 to $800 at any time. An aura of tranquility pervades. When you have this feeling of tranquility is when you make your better decisions. I guarantee it.

The rule of thumb is this. If your stock goes down a couple of points and your mind becomes a mental calculator, constantly calculating that you are now down two grand, then your block size is probably bigger than necessary. If you think about the trade calmly and in terms of the boundaries of your trading plan, then you are likely on track."

~ Roger Perry

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 - 4499.38 August 8, 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 - 13884.32 August 8, 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 - 35314.49 August 8, 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: "Looking for a Good Fortune Teller?"

You don't really need a psychic if you plan each position with a "what if" approach. Before entering any trade always ask - "What will I do if price moves in my favor, and what will I do if it moves against me?" Since most traders and investors never consider these questions at all, simply writing down specific answers will put you WAY ahead of the game. Remember to set any bias aside, and play the hand that's dealt.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Boot Barn Holdings, Inc. (BOOT: Consumer Cyclical/Apparel Retail) - NEW HIGH DIP. BOOT is still showing the bullish strength that gave this stock a new 12-month high just a few days ago. Tuesday's intra-day price action near moving average support tells us that another run to the high-mark may be in the works. Get ready to BUY shares if BOOT reaches our trigger price of 99.06, and enter a 7.82 trailing stop. The stop can be resized to 3.91 once you have a 5.04 profit. BOOT closed Tuesday at 97.58. Earnings Report Date: Oct 24, 2023. Beta: 2.36. Market-Cap: 2.924B. Optionable.

Nordstrom, Inc. (JWN: Consumer Cyclical/Department Stores) - BULLISH BOUNCE. Another bullish bouncer, JWN appears ready to resume trading in an uptrend after recent selling forced the stock lower for several days. Tuesday's positive price action near Moving Average support says it's time to BUY shares if JWN reaches our entry trigger set at 22.68. Also place a 1.82 trailing stop which can be narrowed to 0.91 when you reach a 1.5 profit. JWN closed Tuesday at 22.38. Earnings Report Date: Aug 24, 2023. Beta: 2.32. Market-Cap: 3.614B. Optionable.

FINANCIAL SERVICES SECTOR

XP Inc. (XP: Financial Services/Capital Markets) - BULLISH BOUNCE. Positive price behavior near moving average support on Tuesday qualifies XP for a Bullish Bounce setup. After several sessions of declining prices, XP should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if XP moves up to our entry trigger set at 26.6. You can also enter a 2.21 trailing stop, to be replaced with a 1.11 trailing stop when you obtain a 1.86 profit. XP closed Tuesday at 26.25. Earnings Report Date: Aug 14, 2023. Beta: 1.65. Market-Cap: 14.357B. Optionable.

INDUSTRIALS SECTOR

EHang Holdings Limited (EH: Industrials/Aerospace & Defense) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. EH's behavior on Tuesday could very well be a sign that a new bounce is underway. Place a BUY trigger at 21.73. In the event your trigger is met, also place a 2.94 trailing stop which can be trimmed down to 1.47 when you have a 2.94 profit. EH closed Tuesday at 21.30. Earnings Report Date: Aug 16, 2023. Beta: 0.79. Market-Cap: 1.286B. Optionable.

TECHNOLOGY SECTOR

Asana, Inc. (ASAN: Technology/Software-Application) - SQUEEZE PLAY. One interesting trait of price volatility is that it cycles back and forth through periods of expansion and contraction. Stocks that have recently seen their daily price range shift from an average or wide range to an extremely contracted state are ideal candidates for expansive price moves. In many cases the next move is relatively fast and covers a sizable amount of territory. To take advantage of these trades we use both a BUY and a SELL entry. This allows us to enter in whichever direction the breakout takes. In ASAN's case we will enter a BUY should it reach the 21.88 level, or a SELL short trade if it drops to 20.41. As usual a trailing stop is essential, 1.47 which should be tightened to 0.74 on a 2.24 gain. ASAN closed Tuesday at 21.55. Earnings Report Date: Sep 05, 2023. Beta: 1.21. Market-Cap: 4.673B. 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.

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.

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