Notes From The Editor

Tradeaholic? Twelve Steps to Recovery

We recently jumped into a discussion about trading addiction - a nasty affliction that can have a negative impact on both your profitability and your general happiness. Again, we'd like to stress that there's nothing wrong with a healthy market obsession. But if you've developed the type of symptoms outlined last week, it may be time for some intervention.

1) Admit you have a problem. Are you over-trading, constantly focusing on the market, stressed out, and not scoring consistent profits? If so, it's time to take the next step and...

2) Stop Trading! While this is always a good idea in cases when your account has been hit by several consecutive losing positions, it's even more important for tradeaholics. Breaking the cycle of overtrading and preventing further losses are the main goals here.

3) Take a few days off, or even a week. It's amazing what a few days without the market can do. Trading is only as stressful as you make it. Recharge your batteries with a more relaxing pursuit.

4) Avoid the media. The constant hype spewed out by news outlets encourages the "must trade now!" Mentality that all tradeaholics share. Every day brings fresh opportunities. Calmly waiting for the best ones will vastly increase your odds of success.

5) Analyze your strategy. Go over your previous positions from an unbiased, non-stressed viewpoint. What type of trades tended to be more successful? Did you practice solid risk management and stop-loss techniques on the losing positions?

6) Eliminate what didn't work. If necessary, consider a major overhaul to your approach - a longer timeframe, for instance, or a different sector focus.

7) Take a keep-it-simple approach towards charting. Technical analysis is a very good thing, but too many indicators and oscillators can add too much clutter, creating a "can't see the forest through the trees" situation.

8) Set a new limit on your trading. Excess is the hallmark of any addiction, and this is no exception. Place a limit based on your timeframe for when you return to the market - perhaps three trades per week for a swing trader, or two per day for a daytrader.

9) Step away from your desk after the closing bell. Give your brain a well-deserved breather after a busy day.

10) Talk to friends who know nothing about the market. It's hard to keep thinking about stocks when your buddy doesn't know the difference between moving averages and batting averages.

11) Spend some time paper trading. After reformulating your strategy, it's essential to test it without "live" ammo. If the paper trading results are successful, feel free to move back into the market.

12) Stay on guard. Trading addictions can creep up slowly. Watch for the warning signs, and be ready to act quickly if addictive behavior begins to take over.

Here's to profits!

Kent Barton
Senior Analyst

Quick List

    
Stock     07/19     07/19      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

CRTO      40.55      0.70     41.12                  2.48/1.24      2.18
ICLR     329.70      1.90    335.43                20.22/10.11     13.16
NRIX      20.78     -0.37     21.74     20.06        1.68/0.84      3.44
PHR       22.92      0.27     23.47     21.87          1.6/0.8      1.48
LII      555.76      5.36    567.07                35.86/17.93     27.74

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

A widespread tech outage on Friday caused significant disruptions, impacting flights, banking services, and numerous businesses globally, with the travel sector being the hardest hit. Shares of cybersecurity firm CrowdStrike fell 11% after it was revealed that its software was responsible for the system crashes. Microsoft initially lagged but saw a partial recovery after cloud services were restored later in the day.

Overall, the tech-heavy Nasdaq experienced its worst weekly loss since late April, as investors took profits following a strong first half of the year for the sector.

On a brighter note, the recent tech weakness has been accompanied by gains in the Dow, cyclical sectors, and small-cap stocks. WTI oil prices dropped by 3%, while Treasury bond yields and the dollar saw slight increases.

Next week, earnings season ramps up, and the Fed's preferred inflation measure will be crucial for determining if the rotation continues. Mega-cap tech companies have so far outpaced other sectors in earnings growth, but this gap is expected to narrow starting this quarter. About 30% of S&P 500 companies, including Tesla, Visa, and Alphabet, are set to report earnings.

Investors will also closely monitor the core personal consumption expenditures (PCE) price index, which is projected to decline to 2.5% in June from the previous year, marking the lowest reading since March 2021. The recent cooling in inflation and labor market conditions suggest that the Fed may implement its first rate cut in September, though the bank will remain attentive to forthcoming economic data.

A forthcoming multiyear rate-cutting cycle, coupled with positive but moderating economic growth and rising corporate profits, should continue to support the bull market. With the onset of the seasonally weaker months of September and October and increased election-related headlines, volatility is expected to rise. However, we view potential pullbacks as buying opportunities given the current market environment.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 40,287.53  -377.49      +286.63     0.72%
Nasdaq              17,726.94  -144.28      -671.51    -3.65%
S&P 500              5,505.00   -39.59      -110.35    -1.97%

NYSE Volume                      3.77B                       
NYSE Advancers                   1,004                       
NYSE Decliners                   1,768                       

Nasdaq Volume                    5.03B                       
Nasdaq Advancers                 1,409                       
Nasdaq Decliners                 2,722                       

                                 New Highs/Lows

                   07/12  07/15  07/16  07/17  07/18  07/19
                 --------------------------------------------
NYSE New Highs       305    304    419    314    244     48
NYSE New Lows          6      8      4      4     11     18
Nasdaq New Highs     318    349    499    362    228     56
Nasdaq New Lows       42     42     34     38     65    104
   

TRADER'S TIP: "More on Trading Frequency"

"If we flip a coin only ten times our odds of having 50% heads and 50% tails are not very good. However if we flip the coin one thousand times we are likely to come much closer to obtaining 50% heads and 50% tails. The same logic applies to our real-time trading. If we have a large sample of real trades then our results should come closer to our expectations than if we only have one or two trades. The active system will approach our expectations much quicker than the system that trades infrequently. If we have 50 or more trades per month with a good system we might reasonably expect to be profitable every month. However if we have a system that is only producing two or three trades per month then our monthly results will less predictable and inconsistent. The infrequent trading system might be expected to produce a profit every year but it would not be realistic to expect it to show a profit every month because the sample size in a month will be very small."

~Chuck LeBeau, Trader and author

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".

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

MONDAY, JULY 22					
None scheduled
				
TUESDAY, JULY 23					
10:00 am	Existing home sales	June		
9:45 am	S&P flash U.S. services PMI	
9:45 am	S&P flash U.S. manufacturing PMI	

WEDNESDAY, JULY 24					
10:00 am	New home sales
	
THURSDAY, JULY 25					
8:30 am	GDP	
8:30 am	Initial jobless claims	
8:30 am	Durable-goods orders	
8:30 am	Durable-goods minus transportation	
8:30 am	Advanced U.S. trade balance in goods	
8:30 am	Advanced retail inventories	
8:30 am	Advanced wholesale inventories
	
FRIDAY, JULY 26					
8:30 am	Personal income (nominal)	
8:30 am	Personal spending (nominal)	
8:30 am	PCE index]	
8:30 am	PCE (year-over-year)		
8:30 am	Core PCE index	
8:30 am	Core PCE (year-over-year)		
10:00 am	Consumer sentiment (final)

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

TRADER'S TIP: "Four Cornerstones of Successful Trading"

The four primary objectives of a Trader are to:

1. Clearly define how you see the market.

2. Know under what circumstances you will enter it.

3. Determine in advance what has to happen for you to accept that your trade is or isn't working.

4. Know when to exit your position.

Stocks Covered in This Issue

COMMUNICATION SERVICES SECTOR

Criteo S.A. (CRTO: Communication Services/Advertising Agencies) - BULLISH BOUNCE. Some people hear of a stock that's performing nicely and then buy it without any regard for timing the entry. This approach usually leaves money on the table, money that could just as well be added to profits. The Bullish Bounce setup provides a well timed entry and reduces exposure to risk by placing both the entry trigger and exit stop near the bottom of the bounce. We have an opportunity to use this approach with CRTO which met our setup criteria on Friday. The BUY trigger for this trade is at 41.12, and the trailing stop is sized at 2.48. Resize the stop to 1.24 upon collecting a 2.18 point gain. CRTO closed Friday at 40.55. Earnings Report Date: Jul 31, 2024. Beta: 0.99. Market-Cap: 2.299B. Optionable.

HEALTHCARE SECTOR

ICON Public Limited Company (ICLR: Healthcare/Diagnostics & Research) - NEW HIGH DIP. "Buy the dip" is usually good advice when applied to an up-trending stock. This is expecially true when a new 52-week high has recently made its mark on the charts. ICLR meets the setup requirements, so get ready to BUY if shares reach our trigger price of 335.43. Once you've confirmed that your order is filled, follow it with a 20.22 trailing stop which can be changed to 10.11 when you have a 13.16-point gain. ICLR closed Friday at 329.70. Earnings Report Date: Jul 24, 2024. Beta: 1.23. Market-Cap: 27.292B. Optionable.

Nurix Therapeutics, Inc. (NRIX: Healthcare/Biotechnology) - SQUEEZE PLAY. NRIX 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 21.74 and a SELL short entry at 20.06. Once your trade is filled, enter a 1.68 trailing stop. Tighten it to 0.84 after a 3.44 gain. NRIX closed on Friday at 20.78. Earnings Report Date: Oct 10, 2024. Beta: 2.22. Market-Cap: 1.338B. Optionable.

Phreesia, Inc. (PHR: Healthcare/Health Information Services) - SQUEEZE PLAY. Traders are feeling the pressure as PHR's intra-day price range on Friday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 23.47 and a SELL short entry at 21.87. PHR's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.6 trailing stop. Tighten it to 0.8 after you get a 1.48 gain. PHR closed Friday at 22.92. Earnings Report Date: Sep 4, 2024. Beta: 0.94. Market-Cap: 1.316B. Optionable.

INDUSTRIALS SECTOR

Lennox International Inc. (LII: Industrials/Building Products & Equipment) - NEW HIGH DIP. Confident in its ability to continue trending skyward, LII's pullback from a new 52-week high sets the stage for a return to that peak. Price activity on Friday provided a setup, with the BUY trigger ready at 567.07 should LII reach that level. Follow up your entry with a 35.86 trailing stop. Tighten it to 17.93 when you have a 27.74-point gain. LII closed Friday at 555.76. Earnings Report Date: Jul 24, 2024. Beta: 1.08. Market-Cap: 19.799B. 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

Profiting From Psychological Support and Resistance

Sometimes the stock market seems to take on a life of its own. Rather than perceiving price movement as a reflection of human emotions, traders often come to view the whole process as mechanistic and impersonal. Actually, this viewpoint isn't entirely without merit. After all, a healthy chunk of stock trading volume each day is based on the cold calculations of computerized programs.

But someone has to tell those computers what to do - artificial intelligence hasn't evolved to the point where machines can make all of their own decisions. Ultimately, every buy and sell order that enters the market comes from somebody's expectation that a stock or market will move higher or lower. The participation of thousands of traders anticipating a certain price movement often creates a "herd mentality" where clear levels of support and resistance can be identified.

"Psychological" levels are one of the most common - and intuitive - forms of support and resistance. Their existence stems from the simple fact that humans give special significance to round numbers. Specifically, stocks tend to find support/resistance at increments of 10. This tendency is even stronger at major "milestones" such as 50 and 100.

Higher-valued indexes also find areas of psychological significance. The most striking example is Dow 10,000. Take a look at the price action in 2005, and you'll see that a 30-month rally started after bouncing from that level in April of the same year.

When it comes to stocks, look for price action to level out on decreasing volume as the equity approaches a round number. Like most forms of support and resistance, these zones of congestion aren't set in stone - they might be pierced several times before a breakout or breakdown occurs. Increased volume and confirmation from technical indicators such as MACD and stochastics help to differentiate "head fakes" from the more meaningful moves.

In addition to increments of 10 (40, 50, 60, etc), "minor" psychological support and resistance sometimes develops at the mid-point between those levels (45, 55, 65, and so on). For stocks trading in the single digits, 5.00 and 10.00 can be formidable resistance levels.

Daily Chart - Best Buy (BBY):

This chart of Best Buy should help to illustrate these tendencies. Let's break down the various points of interest:

1.) BBY developed support near 50 in late-January/early-February 2004.

2.) 55 emerged as a stubborn resistance level.

3.) BBY plummeted through the support at 50. This breakdown was accompanied by higher-than-average volume; a good sign that the move was not a head-fake.

4.) The sell-off continued until shares found support at 45.

5.) A breakout attempt was made in late-April 2004 as BBY moved through resistance at 55. However, without an uptick in volume the move had little conviction. The stock was quickly pushed back below resistance.

Psychological levels are especially helpful when it comes to gauging where a stock might go once it hits the clear air space of all-time highs. An equity trading in "blue-sky territory" has no technical resistance, but does face potential obstacles at increments of 10, and to a lesser extent 5.

Daily Chart - eBay Inc. (EBAY):

Something else to keep in mind is the strong magnetic pull of the 100-dollar price level. A good rule of thumb is that once a stock hits 90, odds favor a continued move up to 100. It's a sort of self-fulfilling prophecy; potential sellers expect more upside, so they stay on the sidelines. Meanwhile, shareholders refrain from taking profits until that logical upside target is reached.

Once you get the hang of it, it's easy to incorporate psychological levels into your chart analysis. Here are some things to look for:

- Is the stock trading at or near all-time highs? If so, has it already shown a tendency to find resistance at 5-dollar and 10-dollar increments?

- How has price action reacted as psychological levels were approached? Does the stock have a tendency to hesitate and gyrate near the round number, or does it tend to easily slice through those levels?

- Note how volume accompanies price action as shares approach psychological support/resistance. Certain patterns often repeat themselves. Once recognized, they can be used to help anticipate future movement.

- Check to see if other technical indicators such as stochastics, MACD, and RSI have tended to provide confirmation for moves above and below psychological levels.

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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