Notes From The Editor

A Traders Mind - Using Charts To Boost Your Trading Skills

A respected stock trader and successful author of books on trading once told me, "Everything you need to know is in the charts." While I'm certain that I'll never fully grasp the illusive behavior of buyers and sellers, it's easy to understand the wisdom beneath his statement.

When you think about it, the most important aspect of the stock market is the price action that takes place every session. This constant ebb and flow of money leaves a trail of patterns on the screen. When reviewed in the light of similar historical data, these communicative images can be predictive - at least to an extent that gives us a significant edge over those who don't follow the "art of the charts".

Major stock exchanges record every transaction that takes place between buyers and sellers. As you know, these records are updated instantly and made available to traders. The price and number of shares traded are divided into time intervals. The charts that we use are simply graphic representations of these simple data bits.

Whether we choose to view the records in minutes, days, months or years, previous price action takes on meaning when we see consistent patterns appear in all of these time frames. As skilled traders go through their daily routine of taking money away from the unskilled, the price movement etches readable configurations on the charts.

This repetitive routine gives anyone who is willing to spend some time in front of a computer screen plenty of opportunity to learn how the smart money operates. Even more, your educational effort provides a relatively low- cost way to gain valuable trading experience while learning to transform stock market risk into bankable reward.

On the flip side, many investors spend years in the quietly deceptive bliss of ignorance, never taking the time to learn how the stock market really operates. This is no surprise, for studies show that crowds often behave primitively as if each person in the group is in a cultural trance.

This group phenomenon explains why the majority of investors don't see the significance of technical trading. It rarely shows up in their field of vision, and when it does they usually don't understand what a great tool it is. Unfortunately this lack of insight comes at a very high price.

Bottom Line: Trading with charts gives us an objective way to break the hypnotic spell that immobilizes most of the crowd. Remember that more than 80% of all investors lose money in stocks. To be among the 20% who consistently win requires us to use methods that may not be common among most investors.

As the patterns presented on the charts become more familiar to us over time, we gain a deeper sense of awareness. We begin to see the stock market more clearly, and the forces that move it. We become more conscious of how to make money in this emotionally charged atmosphere.

We realize that a chart is simply a lens we can use to focus on and select specific trading opportunities to yield profits. We become better traders, and hopefully better people. We then use what we learn to build a better life, and a better world.

Sound like a plan?

Trade well!

- Thomas Sutton, Editor

Note: The markets will close for the USA Independance 4th of July Holiday at 1:00 pm ET on Monday, July 3rd and all day Tuesday July 4th. The markets will reopen on Wednesday July 5th at 9:30 AM ET. Our office will also be closed for the same dates/hours. The next RightLine Report will be published on Thursday July 6th. Our staff wishes you the very best as we celebrate the freedom that we enjoy in this great nation!

Quick List

    
Stock     06/30     06/30      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

BLBD      22.48      0.42     22.88     21.42        1.46/0.73      3.06
DFH       24.59      0.46     25.16     23.39        1.77/0.89      1.98
BMEA      21.95      0.29     22.94     20.88        2.06/1.03       4.7
XMTR      21.18     -0.18     22.26     20.36         1.9/0.95         3
ASAN      22.04      0.00     22.72     21.16        1.56/0.78      3.02

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

Equity markets were sharply higher on Friday across the board, with the S&P 500 rising by over 1.0%. As the first half of the year officially comes to an end, the index tracking the top 500 US public companies has gained about 15%, the technology-heavy Nasdaq is up an impressive 31%, while the more value and cyclically tilted Dow Jones is up over 3.5% in the first half of the year. Bond markets experienced more modest performance, as Treasury bond yields climbed higher over the past quarter. As we look out into the second half of the year, we would expect markets to continue to move higher, although bouts of volatility remain likely along this path, particularly if the economy shows signs of cooling.

The personal consumption expenditure (PCE) inflation metrics for the month of May came in in-line or slightly below expectations on Friday. Headline PCE inflation was up 3.8% year-over-year, below last month's 4.4% reading and in-line with forecasts. While inflation has moved lower, these levels remain above the Fed's 2.0% target. We continue to believe that the Federal Reserve will likely raise rates one more time and remain very data-dependent thereafter, likely leaning towards a pause in rate hikes through year-end.

We see indications that the US economy is still resilient. GDP growth data for the first quarter was revised upwards on Thursday with economic growth coming in at 2.0% annualized versus the prior reading of 1.3%. This was driven by a robust consumption figure. For the second quarter, the Fed's GDP-Now tracker is pointing to a healthy growth rate of 1.8%, still above trend levels and not indicating an economic downturn.

Leading indicators continue to point to a softening in the economy ahead, including metrics like the inverted yield curve and soft ISM manufacturing and services indexes, but we do not see a deep or prolonged contraction ahead. We would expect the economy to soften sometime in the second half of the year, but markets tend to be forward-looking and could look past this softness towards a more sustainable period of recovery.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 34,407.60   285.18      +680.17     2.02%
Nasdaq              13,787.92   196.59       +295.4     2.19%
S&P 500              4,450.38    53.94      +102.05     2.35%

NYSE Volume                      3.96B                       
NYSE Advancers                   2,100                       
NYSE Decliners                     855                       

Nasdaq Volume                    4.68B                       
Nasdaq Advancers                 2,590                       
Nasdaq Decliners                 1,746                       

                                 New Highs/Lows

                   06/23  06/26  06/27  06/28  06/29  06/30
                 --------------------------------------------
NYSE New Highs        52     58    107    115    149    225
NYSE New Lows         47     31     32     34     19     16
Nasdaq New Highs      49     58     87     86    111    169
Nasdaq New Lows      153    171    168    126    120     76
   

TRADER'S TIP: "Get A Groove Going"

Most companies will announce stock splits concurrent with a "major" event, such as an earnings release or during an annual shareholder's meeting. When a corporation breaks from this pattern and announces a split just before one of these events, it many times is a good "tip off" that further good news is just around the corner.

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 - 4450.38 June 30, 2023

52-Week High: 4458.48
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4673.11
Resistance 2: 4542.71
Resistance 1: 4496.54
Pivot: 4412.31
Support 1: 4366.14
Support 2: 4281.91
Support 3: 4151.51

NASDAQ Composite - 13787.92 June 30, 2023

52-Week High: 13864.06
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 14610.85
Resistance 2: 14128.59
Resistance 1: 13958.25
Pivot: 13646.33
Support 1: 13475.99
Support 2: 13164.07
Support 3: 12681.81
        
Dow Industrials - 34407.60 June 30, 2023

52-Week High: 34712.28
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 35875.81
Resistance 2: 35018.78
Resistance 1: 34713.19
Pivot: 34161.75
Support 1: 33856.16
Support 2: 33304.72
Support 3: 32447.69
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, July 03, 2023:
03-Jul  10:00 am   ISM manufacturing
03-Jul  10:00 am   Construction spending
03-Jul          All markets close early

Tuesday, July 04, 2023:
04-Jul          July 4 holiday, all markets closed

Wednesday, July 05, 2023:
05-Jul  8:15 am   ADP employment
05-Jul  10:00 am   Factory orders
05-Jul  2:00 pm   Minutes of Fed's June FOMC meeting

Thursday, July 06, 2023:
06-Jul  8:30 am   Initial jobless claims
06-Jul  8:30 am   U.S. trade deficit
06-Jul  10:00 am   Job openings
06-Jul  10:00 am   ISM services

Friday, July 07, 2023:
07-Jul  8:30 am   U.S. employment report
07-Jul  8:30 am   U.S. unemployment rate
07-Jul  8:30 am   U.S. hourly wages
07-Jul  8:30 am   Hourly wages year over year


For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Slippage"

"Price slippage" is the difference in the price of the stock that appears on the ticker at the time you place a trade, and the price at which your order is actually filled. "Transaction slippage" is the difference between estimated and actual transaction costs. To control slippage, always trade liquid stocks, avoid low volume issues, and use limit orders whenever possible.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Blue Bird Corporation (BLBD: Consumer Cyclical/Auto Manufacturers) - SQUEEZE PLAY. Friday's trading session left BLBD 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 22.88 and your SELL short trigger at 21.42. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.46 trailing stop. Once you have a 3.06 profit, reduce the stop to 0.73. Earnings Report Date: Aug 08, 2023. Beta: 1.36. Market-Cap: 721.446M. Optionable.

Dream Finders Homes, Inc. (DFH: Consumer Cyclical/Residential Construction) - SQUEEZE PLAY. DFH is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 25.16 and a SELL short entry at 23.39. Once your trade is filled, enter a 1.77 trailing stop. Tighten it to 0.89 after a 1.98 gain. DFH closed on Friday at 24.59. Earnings Report Date: Aug 02, 2023. Beta: 1.47. Market-Cap: 2.29B. Optionable.

HEALTHCARE SECTOR

Biomea Fusion, Inc. (BMEA: 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. BMEA found itself in this condition on Friday 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 22.94 and a SELL short trigger at 20.88. When BMEA moves outside of Friday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 2.06 trailing stop. After you've got a 4.7 profit, tighten the stop to 1.03. BMEA closed at 21.95 on Friday. Earnings Report Date: N/A. Beta: -1.06. Market-Cap: 777.054M. Optionable.

INDUSTRIALS SECTOR

Xometry, Inc. (XMTR: Industrials/Specialty Industrial Machinery) - SQUEEZE PLAY. XMTR shareholders know what it feels like to be squeezed. Friday'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. XMTR closed Friday at 21.18. The plan is to enter in the right direction by placing a BUY trigger at 22.26 and a SELL short trigger at 20.36. Once XMTR establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.9. After you've collected a 3 profit, tighten the stop to 0.95. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.013B. Optionable.

TECHNOLOGY SECTOR

Asana, Inc. (ASAN: Technology/Software-Application) - SQUEEZE PLAY. The ticker for Friday's session shows ASAN 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 22.72 and a SELL short trigger at 21.16. When ASAN 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 1.56 trailing stop. Upon reaching a 3.02 profit, resize the stop to 0.78. Earnings Report Date: Sep 18, 2023. Beta: 1.30. Market-Cap: 4.779B. 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.

Trader's Corner

"How To Draft A Trading Plan"

"Plan Your Trade and Trade Your Plan" is a mantra that we repeat on a regular basis. Why? Because we have found that traders who carefully plan each trade have a much better chance of winning in the stock market than those who don't. In fact, properly planning a trade can literally be the difference between making money and losing money.

A successful Trading Plan doesn't have to be complicated. Many traders draft their trading plans in a notebook or on index cards, while others use word processors and spreadsheets. Regardless of the method you choose, every trading plan must contain certain components to be effective. But before we get into the "essentials," let's take a quick look at a few dynamics behind "Planning Your Trade."

Before drafting a plan of action, traders will want to decide what style of trading they prefer. A broad generalization of "buy and sell stocks" doesn't work - the criteria needs to be specific. Successful traders make money in different ways, but each has a well-defined method. On the other hand, a losing trader's plan is always vague and ambiguous. In trading, it pays to be precise, so decide what you like to do and build your plan around that style.

Don't worry about getting locked in to a certain approach; you can always change it later as you gain experience. You can even draft more than one plan if you enjoy different types of trading. The best plans include a set of solid rules that never get broken, and a few elastic rules that allow for real-time decisions to be made when managing live trades. Our judgment improves as we gain experience, so it's good to allow some flexibility in less critical areas of your plan. At the same time, maintain unyielding rules in the more sensitive parts - such as Risk Control.

Okay, now let's layout the essential ingredients to include in your personal trading plan.

~ Determine Your Time Frame

The type of trading you prefer usually defines the time frame. Short term traders who enjoy a fast paced style won't find much action in weekly or monthly time frames, while less active traders generally find that the extremely short time horizons require too much time at the computer. Decide which style best suits your personality, and then select the corresponding time frame. It's usually a good idea to start by spending a few minutes each day. Begin by managing the trades using daily charts, then see if you want to shorten or lengthen the time frame. The RightLine Report offers a variety of stocks in different time frames. Due to the way these stocks are selected and the type of exit strategy used, most of the picks will work for traders who plan to hold positions anywhere from a few hours to a few weeks.

~ Locate The Best Stocks to Trade

Choose a method to determine which stocks to trade. If you are experienced in the markets you probably already have a number of ideas and sources. To make it easier for our subscribers, the Right Line Report presents a wide variety of good stock choices in every issue. They are based on an assortment of trading strategies and tactics that take advantage of predictable market behaviors.

You may also want to develop your own new methods for locating stocks. The educational section on our website at www.rightline.net presents numerous market concepts to help traders understand the nature of price movement, identify trends in every time frame, and choose the tools needed to capture profits.

~ Determine Entry Points

This can be a challenge, for there are almost as many different ways to determine entries, as there are stocks. Again, in an effort to make it easier for our subscribers, the Right Line Report presents specific entry points for every stock in each issue. The exact level to buy or sell short is based on a wide range of technical factors used by our analysts to reduce risk and optimize the potential gain. If you choose to select your own entry points, we provide a large assortment of articles to assist you in developing your own personal methods.

~ Use An Intelligent Method to Select the Number of Shares to Trade

Very few traders and investors realize the importance of balanced "Position Sizing." Most make the mistake of ignoring the size of their trading account when taking on new positions. As a result, many unknowingly join the ranks of high-risk over-traders, and soon find themselves in big trouble. Don't worry, it's easy to avoid when you have the RightLine Risk Manager to help! This simple tool is free to subscribers, but if you prefer to do the math yourself, here are the basics:

"Never risk more than 2% of your trading capital in a single trade or more than 6% of your capital at a time. For example, if you have $100,000 in your trading account, the most you should be willing to risk is $2,000. Before buying a stock, review the chart to locate the best place to put a stop loss order. If you determine that the stock requires 5-points to keep you in the trade while it is trending up, the maximum number of shares that you can afford is 400. ($2,000 maximum risk divided by 5-points = 400 shares.)"

You can see that although doing the calculation isn't terribly hard, the Risk Manager makes the job a whole lot easier!

~ Manage Risk With Stops

You may already know, but a "stop" is an order to buy at a price above or sell at a price below the current market price. Stops, or stop orders, are used to protect our capital and lock in profits. Placing stops is easy, but locating the best place to put them can be quite challenging. To assist traders with stop placement, every stock entry in the RightLine Report includes a suggested stop level. And of course, we offer plenty of help on our website for anyone who wants to learn more about managing risk with stops.

~ Determine Your Exit Strategy

After you've entered a position in a stock and it starts moving, then what? Traders have a lot of different choices when it comes to exiting trades, and the method used can make a world of difference. Some traders routinely use "trailing" stops as their exit strategy of choice, while others choose to exit when the stock hits a certain price, or breaks through a support level, or approaches a resistance level. Other traders will choose to exit based on intra-day swings or expected news releases. Some traders sell half when their target is met and let the other half ride with a trailing stop. Others sell to recover all invested capital, and only keep the stock earned with profits - essentially called free stock. This one is a wealth builder, but results in a lot of positions to manage.

When making a trading plan, remember to plan not only for the upside, but the downside too. The exit strategy is one of the most important parts of any trading plan, and it is fundamental for traders to select an exit plan before entering a trade.

Trade Planning is one of the most important skills that a trader can learn. Make it your strength and you will be well on your way to trading successfully.

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.

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.

The publishers of The RightLine Report recommend that anyone trading securities should do so with caution, exercise prudent trading discipline and have a personal risk management strategy in place before doing so. It is possible at this or some subsequent date, the publishers and staff of The Pro Right Line Corp. may own, buy or sell securities presented. The Pro Right Line Corp. is not a financial advisory service. Its publishers, owners or investors, are not liable for any losses or damages, monetary or otherwise, that result from the content of The RightLine Report. Past RightLine Report performance may not be indicative of future performance.

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