February 27, 2020 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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Trading is a game of probabilities. Every experienced trader knows that when it comes to the market, there are very few things that can be depended on with absolute certainty. However, even though the market's tendencies and traits are not completely reliable in every situation, they do present a powerful framework that we can use to recognize opportunities with a high probability of success.

For example, the market's fondness for bouncing at significant support levels such as the 22, 50, 100, and 200 EXPMA -- Exponential Moving Average -- is well documented. The 50 period monthly and the 200 period weekly moving averages aren't as well known, yet they carry similar support and resistance significance.

Experience reveals the realities that trade set-ups don't always produce the desired results. However there are still two very important lessons to be learned from the story told by the charts -- even when a trade setup doesn't follow through as anticipated.

The first has to do with the relationship between trade Set-ups and Triggers. For example a bounce setup should be specific enough to leave no doubt that a rebound is likely to occur. "Likely" doesn't mean "definitely." That's why the Trigger is so important in any type of trade setup.

The Trigger should always confirm the price direction that is indicated by the Set-up. Price must clearly move in the intended direction before a position is entered -- usually beyond a resistance level such as the high or opening price of the Set-up day. Sometimes price action provides a Set-up based on reversal conditions that signal a potential bounce. However, there are times when the price action does NOT confirm that the bounce is genuine. Instead of continuing higher above the previous session high, prices stall, then drop back, perhaps below the low of the day. Whenever the Trigger does not confirm an entry into a bounce Set-up, the trade should not be entered.

Which brings us to the second lesson. Just as stocks that break out above previous resistance have a very good chance of going even higher, those that fall beneath support have an increased chance of heading even lower.

Bounce trades that fail to materialize will often produce excellent short setups. Once the low of a previous session gives way, the moving average providing support will also often cave in. Once that happens, prices will normally plunge even lower as a significant technical rule comes into play ... "What once was support becomes resistance."

Bottom Line: Regardless of the specifics for each trade Set-up and Trigger, the Trigger should always confirm the price direction that is indicated by the Set-up. When price doesn't reach the trigger, stay out of the trade and be on the lookout for a break-down of support. This is where you will find some of the best shorting opportunities.

Trade well,

Thomas Sutton, Editor 

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                           "QUICK LIST"
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Stock     02/28     02/28      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

GSX       42.00     -1.50     44.10     40.43        3.67/1.83      6.58
BCEL      21.41     -0.66     22.64     20.22        2.42/1.21      3.84
SPCE      21.97     -6.78     25.33                  6.80/3.40      3.30


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 www.rightline.net/education/using-quicklist.html. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to www.RightLine.net and login to the Member's area.

To learn more about controlling risk go to the RightLine Risk Control System at http://www.rightline.net/education/riskcontrol.html

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                           MARKET SUMMARY
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Stocks fell hard on Thursday after coronavirus concerns were heightened by the first case in the USA from an unknown origin. Previous cases had a reasonably direct connection to China, which still remains the country most impacted by the disease. Economic headlines included a report showing durable goods orders above expectations, and an increase in unemployment claims. In equities, Best Buy (BBY $79) beat quarterly earnings forecasts, and Microsoft (MSFT $160) warned it will take longer than originally expected for its supply chain to return to normal. Gilead Sciences (GILD $73) announced that trials for its treatment of the coronavirus are underway. Gold, the USD/dollar, treasury yields and oil prices all finished lower. 


                       Feb 26, 2020           Feb 27, 2020   
                  --------------------   --------------------
Dow                    26,958  -123.77        25,767   -1,191
Nasdaq               8,980.78   +15.16      8,566.48  -414.30
S&P 500                 3,116   -11.82         2,979  -137.63

NYSE Volume                      5.55B                  7.19B
NYSE Advancers                    1014                    313
NYSE Decliners                    1948                   2700

Nasdaq Volume                    3.60B                  4.60B
Nasdaq Advancers                  1179                    482
Nasdaq Decliners                  2063                   2821

                                 New Highs/Lows

                   02/20  02/21  02/24  02/25  02/26  02/27
                 --------------------------------------------
NYSE New Highs       236    176     86     52     28     22
NYSE New Lows         61     87    245    367    352    696
Nasdaq New Highs     216    129     74     64     41     56
Nasdaq New Lows       53     67    185    244    244    568


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                              TRADER'S TIP:  
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TRADER'S TIP: "No One Knows"

The stock market is a world shaped by human behavior, and no one has the slightest idea of what will happen in the future. Successful traders don't base their actions on what they THINK will happen, but instead they respond to what DOES happen. Price can only do three things; go up, go down, or go sideways. Plan ahead for all three, and you can react intelligently to whatever the market decides to do. 
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                         THE TECHNICAL ANALYST
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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: www.rightline.net/education/how_to_use_rlr_technical_analyst.html. 
S&P 500 - 2978.76 February 27, 2020

52-Week High: 3393.52
52-Week Low: 2722.27
Daily Trend: DOWN
Weekly trend: UP

http://www.rightline.net/rlch/022720SPX.jpg

NASDAQ Composite - 8566.48 February 27, 2020

52-Week High: 9838.37
52-Week Low: 7292.22
Daily Trend: DOWN
Weekly trend: UP

Dow Industrials - 25766.64 February 27, 2020

52-Week High: 29568.57
52-Week Low: 24680.57
Daily Trend: DOWN
Weekly trend: UP

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                             MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern): 
Monday, February 24, 2020:
24-Feb  8;30 am   Chicago Fed national activity index

Tuesday, February 25, 2020:
25-Feb   9 am   Case-Shiller home price index
25-Feb   9 am   FHFA home price index
25-Feb  10 am   Consumer confidence index

Wednesday, February 26, 2020:
26-Feb  10 am   New home sales

Thursday, February 27, 2020:
27-Feb  8:30 am   Weekly jobless claims
27-Feb  8:30 am   GDP
27-Feb  8:30 am   Durable goods orders
27-Feb  8:30 am   Core capital goods orders

Friday, February 28, 2020:
28-Feb  8:30 am   Advance trade in goods
28-Feb  8:30 am   Personal income
28-Feb  8:30 am   Consumer spending
28-Feb  8:30 am   Core inflation
28-Feb  9:45 am   Chicago PMI
28-Feb  10 am   Consumer sentiment index

For a chart of typical Up or Down market reactions to specific major US economic reports, go to "Economic Indicator Effects" at this link: http://www.rightline.net/education/economic.html 
 
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                              TRADER'S TIP: 
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TRADER'S TIP: "Earnings Conference Calls"

Since the SEC implemented the Fair Disclosure laws, most companies have begun allowing individual shareholders to listen in on earnings conference calls that were previously limited to analysts only. If you are tracking a stock as it approaches its scheduled earnings announcement, always look for the related conference call and mark it on your calendar.

The behavior of the stock during the call can telegraph early reaction to management's explanation of earnings related events. If you can't find any mention of the call, give the firm's Investor Relations department a ring and ask when or if a call will be held. 

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                      STOCKS COVERED IN THIS ISSUE    
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CONSUMER DEFENSIVE SECTOR

GSX Techedu Inc. (GSX: Consumer Defensive/Education & Training Services) - SQUEEZE PLAY. GSX shareholders know what it feels like to be squeezed. Thursday'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. GSX closed Thursday at 42.00. The plan is to enter in the right direction by placing a BUY trigger at 44.10 and a SELL short trigger at 40.43. Once GSX establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 3.67. After you've collected a 6.58 profit, tighten the stop to 1.83. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 9.9B. Optionable.

HEALTHCARE SECTOR

Atreca, Inc. (BCEL: Healthcare/Biotechnology) - 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. BCEL found itself in this condition on Thursday 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 22.64 and a SELL short trigger at 20.22. When BCEL moves outside of Thursday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 2.42 trailing stop. After you've got a 3.84 profit, tighten the stop to 1.21. BCEL closed at 21.41 on Thursday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 598.641M. Not Optionable.

INDUSTRIALS SECTOR

Virgin Galactic Holdings, Inc. (SPCE: Industrials/Aerospace & Defense) - BULLISH BOUNCE. Here is another example of a stock in an established uptrend that has recently experienced a counter-trend drop. The sliding price action has now found support near a moving average zone, bouncing upward during Thursday's session to close at 21.97. Anticipate the rebound to continue, and be ready to buy SPCE at 25.33. Follow your entry with a trailing stop of 6.80 which can be tightened to 3.40 on a 3.30 profit. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 4.306B. 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: http://www.rightline.net/education/riskcontrol.html

Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels.
Link: http://www.rightline.net/education/gap-adjusted.html 

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                           STOCK SPLIT SUMMARY
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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  
---------------- -------     --------    -------     ------  -------   

Currently there are no upcoming stock splits on the major US exchanges.

For a closer look at the different stages of a Stock Split go to: http://www.rightline.net/splits/index.html/#split-stages 
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