July 18, 2023 - The RightLine Report
Notes From The Editor
In my early days as a trader, I made my fair share of mistakes, and one of the most frustrating ones was missing out on great opportunities because I lacked confidence in pulling the trigger. It's a common experience for traders, but it shouldn't happen too often.
A valuable solution for hesitant traders is a pre-entry checklist, similar to a pilot's safety checklist before takeoff. This checklist tackles two fears: the fear of losing money and the fear of missing out on potential gains.
Effective risk management is crucial to prevent significant losses in case the trade goes against you. Knowing your position size and setting a stop-loss beforehand provides a clear worst-case scenario for the trade.
For small-cap equities traders, it's essential to check that the average daily volume (ADV) is at least 30,000 shares to avoid liquidity issues and unpredictable price movements.
The fear of missing a better opportunity can be strong, especially when most of your trading capital is already tied up. It's easy to justify not taking action, believing that there are better places for your money.
With countless potential setups available, it's vital to focus on the ones that align with your trading goals and style. Ensure the equity has sufficient volatility for your timeframe by checking its Beta (volatility compared to the S&P 500) and recent trading range.
Here's a quick example of a trader's checklist before entering a trade. If all conditions are met, it's time to execute the order and see how things unfold. No more hesitation!
Beta is more than 1.50
Average Daily Volume is greater than 30,000 shares
Average Trading Range over the past week has been more than 3% per day
The risk/reward ratio is at least 1:2.5
The proper number of shares have been calculated
Stop-loss placement has been determined
Always remember, your thoughtful planning and preparedness lay the groundwork for successful trades. Here's to more profitable opportunities!
Best wishes,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 07/18 07/18 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
XPOF 20.71 0.38 21.09 19.7 1.39/0.7 3.08
GSL 20.38 0.47 20.7 1.37/0.69 0.78
ASAN 23.68 0.00 24.64 22.84 1.8/0.9 2.34
SMTC 29.62 0.19 30.36 28.47 1.89/0.95 1.64
QTWO 33.29 -0.41 34.24 32.21 2.03/1.02 1.86
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
Market Summary
On Tuesday, the stock markets showed strength, and the S&P 500 recorded its sixth day of gains out of the last seven days. This positive momentum was fueled by a gradual increase in US retail sales for June and strong earnings from large banks. In response to these developments, the 10-year US Treasury yields softened slightly, and the U.S. dollar remained relatively flat, possibly due to market expectations of a pause in the Fed's rate-hiking campaign after the upcoming FOMC meeting on July 25-26.
Retail sales for June came in below expectations, while May's figures were revised higher. Despite the lower-than-expected figure, several retail categories showed increased spending, particularly in nonstore retailers, electronics, and furniture outlets. The softer retail sales might be a reflection of shifting consumer preferences, with a greater focus on spending in services like leisure, hospitality, and travel. The upcoming GDP growth reading for the second quarter will provide more insights into consumption patterns across services and goods, but so far, the consumer has remained resilient, with above-trend growth.
In the earnings department, large banks such as Morgan Stanley and Bank of America reported strong second-quarter results, with Morgan Stanley benefiting from its wealth-management business and Bank of America from its fixed-income and equity-trading business. Both banks are optimistic about more activity in deal-making and IPOs in the coming quarters. While it's still early in earnings season, the trends have been positive, with a majority of companies reporting positive surprises and beating earnings expectations on average by 8.2%, which is slightly higher than historical averages.
Overall, market sentiment remains upbeat, driven by favorable economic indicators and strong corporate earnings.
Jul 17, 2023 Jul 18, 2023
-------------------- --------------------
Dow 34,585.35 76.32 34,951.93 366.58
Nasdaq 14,244.95 131.25 14,353.64 108.69
S&P 500 4,522.79 17.37 4,554.98 32.19
NYSE Volume 3.54B 4.09B
NYSE Advancers 1,664 2,103
NYSE Decliners 1,292 844
Nasdaq Volume 4.6B 4.83B
Nasdaq Advancers 2,773 2,695
Nasdaq Decliners 1,596 1,683
New Highs/Lows
07/11 07/12 07/13 07/14 07/17 07/18
--------------------------------------------
NYSE New Highs 148 216 174 112 138 202
NYSE New Lows 9 10 12 24 21 16
Nasdaq New Highs 145 227 275 185 222 275
Nasdaq New Lows 49 52 47 77 88 100
Stocks Covered Today Stock Splits
TRADER'S TIP: "Sometimes You Gotta ..."
The fear of "missing out" can cloud a trader's judgment, so be sure to base all buy or sell decisions on careful planning instead of emotional reactions. The market is full of opportunities - there's plenty for everyone. Rushing in can lead to problems, so remember the old saying "sometimes you gotta slow down to go fast!"
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 - 4554.98 July 18, 2023
52-Week High: 4562.30
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4750.04
Resistance 2: 4612.20
Resistance 1: 4558.81
Pivot: 4474.36
Support 1: 4420.97
Support 2: 4336.52
Support 3: 4198.68
NASDAQ Composite - 14353.64 July 18, 2023
52-Week High: 14396.69
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 15271.37
Resistance 2: 14624.13
Resistance 1: 14368.91
Pivot: 13976.89
Support 1: 13721.67
Support 2: 13329.65
Support 3: 12682.41
Dow Industrials - 34951.93 July 18, 2023
52-Week High: 34986.36
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 36042.15
Resistance 2: 35155.57
Resistance 1: 34832.29
Pivot: 34268.99
Support 1: 33945.71
Support 2: 33382.40
Support 3: 32495.82
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Tuesday, July 18, 2023: 18-Jul 8:30 am U.S. retail sales 18-Jul 8:30 am Retail sales minus autos 18-Jul 9:15 am Industrial production 18-Jul 9:15 am Capacity utilization 18-Jul 10:00 am Business inventories 18-Jul 10:00 am Home builder confidence index 18-Jul WEDNESDAY, JULY 19 Wednesday, July 19, 2023: 19-Jul 8:30 am Housing starts 19-Jul THURSDAY, JULY 20 Thursday, July 20, 2023: 20-Jul 8:30 am Initial jobless claims 20-Jul 8:30 am Philadelphia Fed manufacturing survey 20-Jul 10:00 am Existing home sales 20-Jul 10:00 am U.S. leading economic indicators 20-Jul FRIDAY, JULY 21 Friday, July 21, 2023: 21-Jul None scheduled 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 TIP: "100% Guaranteed Winner!"
When it comes to the stock market, everybody wants a sure thing. Some traders will go to any length to be absolutely certain that their next trade is a winner. Unfortunately there's no way to do that. It doesn't matter how great the company is or how many analysts recommend you buy it, there is no way to be certain that your next trade will be a home run. In the world of stocks, certainty is a myth. Instead of struggling toward the impossible goal of certainty, focus your efforts on finding the best trade setups and executing your trading plan.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Xponential Fitness, Inc. (XPOF: Consumer Cyclical/Leisure) - SQUEEZE PLAY. A look at XPOF's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 21.09 and a SELL short trigger at 19.7. Once XPOF shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.39 and tighten to 0.7 on a 3.08 gain. XPOF closed Tuesday at 20.71. Earnings Report Date: Aug 09, 2023. Beta: N/A. Market-Cap: 1.045B. Optionable.
INDUSTRIALS SECTOR
Global Ship Lease, Inc. (GSL: Industrials/Marine Shipping) - 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. GSL's behavior on Tuesday could very well be a sign that a new bounce is underway. Place a BUY trigger at 20.7. In the event your trigger is met, also place a 1.37 trailing stop which can be trimmed down to 0.69 when you have a 0.78 profit. GSL closed Tuesday at 20.38. Earnings Report Date: Aug 02, 2023. Beta: 1.68. Market-Cap: 723.51M. Optionable.
TECHNOLOGY SECTOR
Asana, Inc. (ASAN: Technology/Software-Application) - SQUEEZE PLAY. Tuesday's trading action forced ASAN's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction ASAN will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 24.64 if ASAN moves higher, and place your order to SELL short at 22.84 if price declines to that level. As usual follow your entry with a trailing stop, 1.8 should be sufficient. Reduce your stop to 0.9 on a 2.34 gain. ASAN closed Tuesday at 23.68. Earnings Report Date: Sep 18, 2023. Beta: 1.20. Market-Cap: 5.135B. Optionable.
Semtech Corporation (SMTC: Technology/Semiconductors) - SQUEEZE PLAY. SMTC is caught in a dilemma. The stock's compressed price range on Tuesday has resulted in a condition comparable to a wound up rubber band. We anticipate that this undecided equity will take off soon, but with the direction still in question we'll let upcoming market action tell us whether to buy shares or sell short. SMTC is now at 29.62. We can capture price action either way by placing a BUY trigger at 30.36 and a SELL short trigger at 28.47. Once SMTC reveals its direction, enter your triggered order and disregard the other one. As soon as your position is in place, follow up with a trailing stop of 1.89. When you acquire a 1.64 profit, tighten the stop to 0.95. Earnings Report Date: Aug 29, 2023. Beta: 1.70. Market-Cap: 1.894B. Optionable.
Q2 Holdings, Inc. (QTWO: Technology/Software-Application) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into QTWO. A move to the upside will trigger our BUY entry at 34.24, while a drop to 32.21 will trigger our SELL short entry. Follow your position with a 2.03 trailing stop. Tighten the stop to 1.02 once you have a 1.86 gain. QTWO closed Tuesday at 33.29. Earnings Report Date: Aug 01, 2023. Beta: 1.42. Market-Cap: 1.937B. 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
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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