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February 29, 2020 - The RightLine Report
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NOTES FROM THE EDITOR
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Every trader and investor should learn to recognize price trends. Trend identification is a relatively simple yet very valuable skill you can use to enhance your trading profitability.
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"QUICK LIST"
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Stock 02/29 02/29 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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BYD 26.71 0.08 27.54 25.18 2.36/1.18 1.98
COE 24.99 -4.34 27.87 9.92/4.96 3.30
TWST 30.62 0.34 31.48 28.42 3.06/1.53 3.72
SAFE 54.62 -0.17 55.44 5.98/2.99 3.46
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 For a glossary of terms unique to The RightLine Report go to: http://www.rightline.net/education/glossary.html Problems? If you have any difficulty viewing this report, the link below will take you to a page where you will find a list of items that may affect normal viewing within your email client. http://www.rightline.net/home/reportprob.html Questions? Send us an email using our contact form at: http://www.rightline.net/home/contact.html
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MARKET SUMMARY
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Stocks rallied on Friday after a tough week for bulls due to the coronavirus outbreak that shut down the Chinese economy and sent economic shockwaves around the globe. Economic data was positive in a number of categories, including personal income, consumer sentiment and regional manufacturing. In equities, VMware (VMW $121) reported mixed quarterly earnings numbers, Baidu (BIDU $120) warned of the coronavirus outbreak's negative impact, while Workday (WDAY $170) posted favorable quarterly results. Gold and oil finished lower, treasury yields and the USD/dollar closed higher. Friday On The Week
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Dow 25,409 -357.28 -3583 -12.36%
Nasdaq 8,567.37 +0.89 -1009.63 -10.54%
S&P 500 2,954 -24.54 -384 -11.5%
NYSE Volume 8.65B
NYSE Advancers 716
NYSE Decliners 2308
Nasdaq Volume 5.36B
Nasdaq Advancers 1126
Nasdaq Decliners 2187
New Highs/Lows
02/21 02/24 02/25 02/26 02/27 02/28
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NYSE New Highs 176 86 52 28 22 8
NYSE New Lows 87 245 367 352 696 938
Nasdaq New Highs 129 74 64 41 56 57
Nasdaq New Lows 67 185 244 244 568 726
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TRADER'S TIP:
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TRADER'S TIP: "Mistakes" "The greatest mistake you can make in life is to be continually fearing you will make one." ~ Elbert Hubbard **************************
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 - 2954.22 February 28, 2020
52-Week High: 3393.52
52-Week Low: 2722.27
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3831.22
Resistance 2: 3427.25
Resistance 1: 3190.73
Pivot: 3023.28
Support 1: 2786.76
Support 2: 2619.31
Support 3: 2215.35
http://www.rightline.net/rlch/022820SPX.jpg
NASDAQ Composite - 8567.37 February 28, 2020
52-Week High: 9838.37
52-Week Low: 7292.22
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 10835.57
Resistance 2: 9776.85
Resistance 1: 9172.11
Pivot: 8718.13
Support 1: 8113.39
Support 2: 7659.41
Support 3: 6600.69
Dow Industrials - 25409.36 February 28, 2020
52-Week High: 29568.57
52-Week Low: 24680.57
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 33608.27
Resistance 2: 29886.35
Resistance 1: 27647.85
Pivot: 26164.43
Support 1: 23925.93
Support 2: 22442.51
Support 3: 18720.59
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MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern):
Monday, March 02, 2020: 02-Mar 9:45 am Markit manufacturing PMI 02-Mar 10 am ISM manufacturing index 02-Mar 10 am Construction spending Tuesday, March 03, 2020: 03-Mar Varies Motor vehicle sales Wednesday, March 04, 2020: 04-Mar 8:15 am ADP employment report 04-Mar 9:45 am Markit services PMI 04-Mar 10 am ISM nonmanufacturing index 04-Mar 2 pm Beige book Thursday, March 05, 2020: 05-Mar 8:30 am Weekly jobless claims 05-Mar 8:30 am Productivity 05-Mar 8:30 am Unit labor costs 05-Mar 10 am Factory orders Friday, March 06, 2020: 06-Mar 8:30 am Nonfarm payrolls 06-Mar 8:30 am Unemployment rate 06-Mar 8:30 am Average hourly earnings 06-Mar 8:30 am Trade deficit 06-Mar 10 am Wholesale inventories 06-Mar 3 pm Consumer credit 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: "Monthly Stock Options Expirations" US stock options expire at 11:59AM on the third Saturday of each month. Since most retail traders can't trade options on Saturday, this equates to 4:00pm Eastern Time closing bell. This date changes to the third Thursday at 4:00pm whenever Friday is a holiday. ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR Boyd Gaming Corporation (BYD: Consumer Cyclical/Resorts & Casinos) - SQUEEZE PLAY. The ticker for Friday's session shows BYD is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 27.54 and a SELL short trigger at 25.18. When BYD starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 2.36 trailing stop. Upon reaching a 1.98 profit, resize the stop to 1.18. Earnings Report Date: Apr 22, 2020. Beta: 2.24. Market-Cap: 2.969B. Optionable. CONSUMER DEFENSIVE SECTOR China Online Education Group (COE: Consumer Defensive/Education & Training Services) - NEW HIGH DIP. Basking in the light of a recent new 52-week high, COE shares have pulled back a bit as traders enjoy some nice profits. Now it looks like the Bull may be ready to resume the uptrend again. Friday's bounce from a Moving Average support zone provides us with solid setup, so be ready to enter when price reaches our BUY trigger at 27.87. Follow your long entry with a 9.92 stop, then tighten it to 4.96 after gaining 3.30. COE ended the Friday session at 24.99. Earnings Report Date: Mar 12, 2020. Beta: 0.84. Market-Cap: 509.966M. Not Optionable. HEALTHCARE SECTOR Twist Bioscience Corporation (TWST: Healthcare/Diagnostics & Research) - SQUEEZE PLAY. Friday's trading session left TWST in a very narrow price range after buyers and sellers fought to a near stalemate. Both sides are looking for some traction, and a breakout either way could provide a nice gain in the short term. To get aboard, set your BUY trigger at 31.48 and your SELL short trigger at 28.42. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 3.06 trailing stop. Once you have a 3.72 profit, reduce the stop to 1.53. Earnings Report Date: May 05, 2020. Beta: N/A. Market-Cap: 1.085B. Optionable. REAL ESTATE SECTOR Safehold Inc. (SAFE: Real Estate/REIT-Diversified) - NEW HIGH DIP. You know a stock is performing well when it sets a new 52-week high. Such is the case with SAFE, which recently entered new-high territory before dipping lower the past few sessions. A rebound from Moving Average support on Friday indicates SAFE may be ready to resume its upward climb. Now sitting at 54.62, a move to 55.44 will trigger a BUY entry. Place a 5.98 trailing stop after entering and tighten it to 2.99 once you've gained 3.46. Earnings Report Date: N/A. Beta: 0.43. Market-Cap: 2.61B. 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 ***********************************
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 **********************************
TRADER'S CORNER
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"The Profitable Trader" Let's look at the differences between profitable and unprofitable traders. Is it a question of experience, or are some folks just born with the talent to play the markets successfully? How does risk tie in with profitability? Are profitable traders more willing to make riskier trades? Author Mark Douglas talks about three stages in becoming a profitable trader. First you learn how to find promising trade setups. Second, you learn how to enter and exit those positions at the right time. Third, get to a point where you build equity on a consistent basis. The secret to this third step is really no secret at all. You master the discipline required to follow your methodology, plan or system. Traders need to make an important choice early in their careers. They can decide to follow a specific method that forces them out of the market during unfavorable conditions. Or they can master a broad range of skills, and then apply the right one at the right time. Neither approach is right or wrong, but both require paying close attention to the profit-and-loss feedback. Most unprofitable traders rely on a poorly matched execution style, or a good one they haven't mastered yet. Very often they fail to recognize critical errors in their methodology because it was learned in a book, or through inappropriate conditioning, i.e., making money on bad decisions. Realize that profitable traders know all the weak points in their strategies and exercise damage control at all times. You can't understand your methodology until you analyze your profits and losses. Identify its weaknesses quickly, and then decide if it really works at all. You may discover that your whole approach to the market isn't right for your lifestyle, emotional nature or long-term goals. For example, you could be a scalper with the disposition of an investor, or a daytrader who hates risk. Bad things will happen when your system doesn't match your personality. Traders hate to think about discipline. After all, it's not as sexy as just becoming a market gunslinger. But the bottom line is that most of us don't follow our own rules. This is ironic, because the folks who ignore the reasons they lose money are the same ones who spend thousands of dollars attending trading seminars. Personal discipline is the one thing you can't learn sitting in an audience. Discipline and money management go a long way toward becoming a profitable trader. But let's be realistic. However you trade, you must be confident in the positive expectancy of your style or methodology. This poorly understood concept refers to how much profit you can reasonably expect to make vs. each dollar risked on a trade. Gamblers know this equation as the player's edge in a casino. The problem is that most of us don't understand our strategy well enough to determine whether or not it has a positive expectancy. System traders use backtesting to gauge the positive expectancy of their systems. Retail traders choose entry and exit without this methodology, so they need to compensate through extensive record- keeping and analysis of each trade result. Even so, they could be fooling themselves into believing they have an edge in their pursuit of profitability. The sell side of the positive expectancy equation is more important than where you buy. Research suggests that a very profitable system can be built using random trade entry. Yes, you heard that right. It's possible to make money in the same way as a chimp who throws darts at a dartboard. But the hairy primate still has the same problem as the losing trader: He doesn't know when to take money off the table. Positive expectancy requires a robust exit strategy. But you already knew that, didn't you? Volumes have been written about money management techniques, such as cutting your losses, riding your winners and trading adequate reward/risk. But somehow, losing traders continue to outnumber profitable ones by a very wide margin. One aspect of positive expectancy is more difficult to manage than any pure numbers game. All trading styles experience drawdowns, and profitable ones are no exception. Traders routinely abandon profitable methods because they hate to lose money. They stop following perfectly good rules because they aren't getting the instant gratification they want from the markets. If this all sounds like a big loop from the top of our discussion, it's meant to be that way. Losing traders get stuck in a vicious cycle. They want to profit from the market so they come up with a strategy to make money. They trade the strategy until it frustrates them to the point they abandon it and go looking for another strategy. In the process, they never take the time to find out whether or not it had positive expectancy in the first place. In other words, they don't let their methodology mature enough to watch its real potency bear fruit. Which brings us back to discipline. Sure, it's boring to plan the trade and trade the plan. But it's the only way to break this losing cycle and get on the road to consistent profitability. NOTE: This special guest article was written by Alan Farley, author of "The Master Swing Trader." To order a copy of Alan's book, go to http://www.invest-store.com/rightline/. ====================================================================== Best of luck and have a Great Week! ********** If you would prefer to receive this report in html with color and graphics go to https://www.rightline.net/preferences/lookup.html to access your account profile. Once your profile is accessed you can change your report format preference and other items such as your password. ********** To subscribe go to: http://www.rightline.net/subscribe/index.html Questions? Send us an email using our contact form at: http://www.rightline.net/home/contact.html ====================================================================== 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. Stock picks, entry points and exit points should be considered an information resource to assist the trader in developing a trading plan and it is the sole responsibility of the reader to conduct his or her own due diligence before executing a trade. Trading securities should be considered speculative with a high degree of volatility and risk. 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