July 13, 2024 - The RightLine Report
Notes From The Editor
Several years ago futures trader Linda Bradford published a long list of classic trading rules that she felt "withstood the test of time." Below are a few of them that I've found to be extremely helpful when trading stocks.
1. The difference between winners and losers isn't so much native ability as it is discipline exercised in avoiding mistakes.
2. Continually strive for patience, perseverance, determination, and rational action.
3. Lose your opinion - not your money.
4. Keep a positive attitude, no matter what happens.
5. Don't take the market home.
6. Assimilate into your very bones a set of trading rules that works for you.
7. Place the stop at the time you make your trade.
8. Never get into the market because you are anxious from waiting.
9. Losses make the trader studious - not profits. Take advantage of every loss to improve your knowledge of market action.
10. The most difficult task in speculation is not prediction but self-control. You are the most important element in the equation for success.
11. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
12. Always discipline yourself by following a pre-determined set of rules.
13. A key to successful trading is knowing yourself and your stress point.
14. You must have a program, you must know your program, and you must follow your program.
15. Split your profits right down the middle and never risk more than 50% of them again in the market.
Trade well!
Thomas Sutton, Editor
Stocks Covered Today Stock Splits Trader's Corner
Quick List
Stock 07/12 07/12 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
MMYT 90.23 3.66 92.71 10.27/5.14 6.22
MODV 25.41 0.03 26.44 24.53 1.91/0.96 2.3
SKYW 83.43 -0.17 85.24 5.38/2.69 4.46
CAMT 129.56 0.24 135.5 11.87/5.94 9.82
ACMR 24.49 0.62 25.18 23.22 1.96/0.98 2.68
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.
Stocks Covered Today Stock Splits Trader's Corner
Market Summary
Major stock indices ended higher on Friday, with small and mid-cap stocks outpacing large-cap counterparts. The market exhibited a broad uptrend, with notable gains in consumer discretionary and technology sectors, reflecting a prevailing risk-on sentiment. Both the S&P 500 and Dow Jones Industrial Average achieved record highs during the session.
In Asia, markets showed mixed results, with China advancing on better-than-expected export figures, while Japan's Nikkei index retreated from earlier highs. European markets closed higher.
Bond yields saw modest declines, with the 10-year Treasury yield hovering around 4.18%. The USD/dollar weakened against major currencies, while WTI oil and gold prices dipped in the commodity markets.
Producer price index (PPI) inflation for June surpassed expectations, while Core PPI, which excludes volatile food and energy prices, rose 3.0% year-over-year, compared to the previous reading of 2.6% and consensus estimates of 2.4%. Much of this uptick was driven by a 1.9% rise in wholesaler margins.
Market sentiment appears to be resilient to broader margins, often sustainable when there is robust end-demand, in our analysis. Despite the higher inflationary reading, bond markets continue to factor in expectations of two Federal Reserve interest-rate cuts in 2024, with the first anticipated at the September meeting.
While we view two rate cuts as plausible, they are not assured. Although the core personal consumption expenditures (PCE) index for May remains above the Fed's 2% target at 2.6%, we anticipate inflation will moderate further, supported by easing shelter inflation and decelerating wage growth. Government metrics tracking shelter inflation, such as CPI and PCE, are expected to align with real-time data showing slower housing cost increases. Labor markets are also rebalancing, evident in declining job openings and rising unemployment rates.
Corporate earnings season is commencing with high expectations as companies begin reporting second-quarter results this week. Year-over-year earnings growth is projected to reach 8.8%, marking the fastest pace since Q1 2022. Earnings expansion is forecasted to broaden, with eight of the 11 sectors expected to report year-over-year growth*. We anticipate this broadening earnings performance will set the stage for sectors currently trailing, to make gains relative to technology and communication services, which have led the market higher.
Friday On The Week
-------------------- --------------------
Dow 40,000.90 247.15 +625.03 1.59%
Nasdaq 18,398.45 115.04 +45.69 0.25%
S&P 500 5,615.35 30.81 +48.16 0.87%
NYSE Volume 3.71B
NYSE Advancers 2,135
NYSE Decliners 682
Nasdaq Volume 5.85B
Nasdaq Advancers 3,023
Nasdaq Decliners 1,210
New Highs/Lows
07/05 07/08 07/09 07/10 07/11 07/12
--------------------------------------------
NYSE New Highs 124 108 91 141 279 305
NYSE New Lows 58 38 83 54 9 6
Nasdaq New Highs 153 183 149 180 275 318
Nasdaq New Lows 165 123 155 139 65 42
Stocks Covered Today Stock Splits Trader's Corner
TRADER'S TIP: "Chutes and Ladders"
All trends are not created equal. Up moves tend to take longer than down moves with similar ranges. In other words, even when the distance in price movement is the same, declines usually occur faster than rallies.
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".
Stocks Covered Today Stock Splits Trader's Corner
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, JULY 15 8:30 am Empire State manufacturing survey 12:00 pm Fed Chairman Powell speaks TUESDAY, JULY 16 8:30 am U.S. retail sales 8:30 am Retail sales minus autos 8:30 am Import price index 8:30 am Import price index minus fuel 10:00 am Business inventories May 10:00 am Home builder confidence index 2:45 pm Fed Gov. Adriana Kugler speaks WEDNESDAY, JULY 17 8:30 am Housing starts 8:30 am Building permits 9:15 am Industrial production 9:15 am Capacity utilization June 2:00 pm Fed Beige Book THURSDAY, JULY 18 8:30 am Initial jobless claims 8:30 am Philadelphia Fed manufacturing survey 10:00 am U.S. leading economic indicators FRIDAY, JULY 19 10:40 am New York Fed President Williams speaks 1:00 pm Atlanta Fed President Raphael Bostic speaks For a chart of typical Up or Down market reactions to specific major US economic reports go to: Economic Indicator Effects
Stocks Covered Today Stock Splits Trader's Corner
TRADER'S TIP: "Is Genius A Requirement?"
You don't have to be "gifted" to trade intelligently. Though the skills needed to trade successfully can certainly take several years to acquire, trading isn't rocket science. While a high IQ isn't required, persistence and discipline are. Fortunately these two qualities are available to anyone who really wants them.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
MakeMyTrip Limited (MMYT: Consumer Cyclical/Travel Services) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. MMYT's current price action near moving average support signals a potential BUY entry at 92.71, followed by a 10.27 trailing stop which can be tightened to 5.14 upon earning 6.22. MMYT closed Friday at 90.23. Earnings Report Date: Jul 30, 2024. Beta: 1.30. Market-Cap: 9.906B. Optionable.
HEALTHCARE SECTOR
ModivCare Inc. (MODV: Healthcare/Medical Care Facilities) - SQUEEZE PLAY. MODV 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. MODV closed Friday at 25.41. The plan is to enter in the right direction by placing a BUY trigger at 26.44 and a SELL short trigger at 24.53. Once MODV establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.91. After you've collected a 2.3 profit, tighten the stop to 0.96. Earnings Report Date: Aug 1, 2024. Beta: 0.51. Market-Cap: 361.099M. Optionable.
INDUSTRIALS SECTOR
SkyWest, Inc. (SKYW: Industrials/Airlines) - NEW HIGH DIP. For a stock, the ladder to the top has rungs made up of 52-week highs. Each step up is followed by profit taking that usually causes a temporary pullback. The New High Dip setup uses these dips for safe entries into strong stocks. SKYW is now showing strength, so plan to BUY shares when this winner reaches our trigger at 85.24. Follow your position with a 5.38 trailing stop, which you can tighten to 2.69 when you have gained 4.46 points. SKYW last closed at 83.43. Earnings Report Date: N/A. Beta: 1.96. Market-Cap: 3.359B. Optionable.
TECHNOLOGY SECTOR
Camtek Ltd. (CAMT: Technology/Semiconductor Equipment & Materials) - NEW HIGH DIP. The price momentum required to set a new high doesn't usually disappear over night. Traders can capitalize on this fact by entering positions when stocks making new highs pull back to a support level, then follow the pullback with signs of bouncing higher. CAMT meets the setup criteria, so get ready to BUY into this outstanding performer at 135.5. Enter a trailing stop of 11.87 when your order is filled, then tighten it to 5.94 on a 9.82 gain. Earnings Report Date: Jul 29, 2024. Beta: 1.43. Market-Cap: 5.849B. Optionable.
ACM Research, Inc. (ACMR: Technology/Semiconductor Equipment & Materials) - 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. ACMR 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 25.18 and a SELL short trigger at 23.22. When ACMR 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 1.96 trailing stop. After you've got a 2.68 profit, tighten the stop to 0.98. ACMR closed at 24.49 on Friday. Earnings Report Date: Aug 2, 2024. Beta: 1.55. Market-Cap: 1.519B. 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.
Stocks Covered Today Stock Splits Trader's Corner
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.
Stocks Covered Today Stock Splits Trader's Corner
Trader's Corner
TIME by Alan Farley
Sophisticated technical indicators evolve from simple data inputs of price and time. While most traders understand how price patterns reveal hidden opportunity, many fail to comprehend how time impacts both tactics and results. Lacking a skilled understanding of opportunity cost, they misinterpret signals and waste valuable resources. Or, trapped in common trend relativity errors, they prepare trades in one time frame but execute them in another.
Opportunity cost defines how the trader manipulates working capital. For example, this important concept reveals why cutting losses efficiently is so important for long term survival. By its nature, taking any stock position dictates that those funds will not be available for another trade. This becomes a critical issue on account draw downs when individual trades can dictate success or failure for the aspirant.
All trends in the markets are time frame specific. For example, the existence of an uptrend in a daily chart says nothing about the trend in the monthly or intra-day chart. This highlights the importance of correct time input in preparing technical indicators or reading chart patterns. When improperly time-tuned, technical analysis loses its effectiveness. Alternatively, resonant time readings will evoke startling accuracy with otherwise mediocre data input.
Time Summation of indicators falls into three general categories:
- Moving averages of elements such as price or volume
- Relationships between the open, close, high and/or low of individual bars
- Repeating cycles of price or volume behavior
Time Period of indicators falls into three general categories:
- Short Term
- Intermediate Term
- Long Term
Individual units of time are best viewed as relative periods, as opposed to daily, weekly or monthly lengths. Since no two technicians trade in exactly the same time frame, patterns and indicators must serve a broad range of uses. Fortunately, technical analysis studies a fractal market. Valid predictions may be made with indicators developed from 5-minute bars or monthly ones in exactly the same manner. But don't be fooled: prediction can only be made in the same time frame as the tools being used to study it.
Trends are dependent on the time frame in which you are viewing them. While IBM shows a promising reversal taking place on the intra-day, the daily and weekly show a major correction in progress. Notice how the weekly reveals an excellent buy point at the top of the multi-year price channel, a support level completely missed on the daily chart.
This guest article was written by Alan Farley, trader and author of "The Master Swing Trader."
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
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