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July 22, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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We recently talked about how to overcome some common obstacles that keep most investors from successfully using "the trend." One of the most common roadblocks is the belief that "the only time the trend is worthwhile is when it is going up." However since the market spends a great deal of time going down as well as up, this widely held opinion often prevents traders from seeing other types of profit opportunities that are easily available.
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"QUICK LIST"
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Stock 07/21 07/21 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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VIST 26.18 0.11 27.05 25.3 1.75/0.88 1.76
EGBN 25.20 -0.42 26.06 24.32 1.74/0.87 1.66
RCUS 20.04 0.40 20.36 18.92 1.44/0.72 1.8
VCYT 28.58 0.55 29.36 27.34 2.02/1.01 1.78
TYGO 24.17 1.37 24.76 2.64/1.32 2.28
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 https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/
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MARKET SUMMARY
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US equities showed a mixed performance on Friday, with the S&P 500 advancing while the Nasdaq lagged due to tech stocks' pullback after recent earnings reports. On the other hand, the Dow continued its winning streak for the 10th consecutive day, the longest run since 2017. While there were no major economic releases, next week promises to be eventful with the release of second-quarter GDP, PCE inflation data, and the Fed's rate announcement, along with key earnings reports from major tech companies. In other markets, bond yields saw a slight decline, while the USD/dollar strengthened. Oil recorded its fourth consecutive weekly gain, benefiting from China's stimulus efforts to boost auto and electronics sales. All eyes are now focused on the upcoming Fed rate decision, where a quarter-point rate hike is widely anticipated. Chair Powell is likely to strike a balance in his message, acknowledging positive inflation data while emphasizing the need for sustained improvement in core CPI. The Fed remains open to another rate hike, but the case for further tightening appears to be weakening, as inflation shows signs of slowing in various sectors and downside risks to economic growth persist. If inflation continues to improve in the coming months, the Fed is expected to conclude its tightening campaign, with policy rates peaking at 5.25% - 5.50%, the highest since 2001. Earnings season is also in full swing, with one-third of S&P 500 companies set to report next week. Investors are eagerly awaiting reports from major players like Alphabet, Microsoft, Exxon, and Meta. Early indications from earnings reports have been relatively positive, with banks and airlines noting a resilient consumer and healthy household finances, supported by a strong labor market. While the S&P 500 has seen a significant rally driven by valuation expansion, earnings will likely play a crucial role in driving gains in the second half of the year. Though the second quarter is expected to mark the worst earnings decline for this cycle, it also signals the end of the earnings downturn, with projections showing a return to positive growth in the third quarter and further rebound in 2024. Friday On The Week
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Dow 35,227.69 2.51 +718.66 2.08%
Nasdaq 14,032.81 -30.50 -80.89 -0.57%
S&P 500 4,536.34 1.47 +30.92 0.69%
NYSE Volume 3.59B
NYSE Advancers 1,466
NYSE Decliners 1,462
Nasdaq Volume 5.36B
Nasdaq Advancers 2,009
Nasdaq Decliners 2,316
New Highs/Lows
07/14 07/17 07/18 07/19 07/20 07/21
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NYSE New Highs 112 138 202 162 101 94
NYSE New Lows 24 21 16 8 10 7
Nasdaq New Highs 185 222 275 275 87 106
Nasdaq New Lows 77 88 100 70 75 68
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TRADER'S TIP:
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TRADER'S TIP: "Before You Enter" Before entering a trade, carefully plan "what you will do" and "when you will do it" once you have entered the position. Actually, this aspect of trading is much more important than finding the "perfect" entry. Always include an exit plan for three possible scenarios: the trade moves favorably, unfavorably, or doesn't move at all. Pay attention to details, and be sure to include the specific exit price when planning stop-losses. When using the trailing stop method to lock in gains, make certain that you decide in advance at what point the trailing stop will be adjusted. **************************
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: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ S&P 500 - 4536.34 July 21, 2023 52-Week High: 4578.43 52-Week Low: 3491.58 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 4686.95 Resistance 2: 4613.42 Resistance 1: 4574.88 Pivot: 4539.89 Support 1: 4501.35 Support 2: 4466.35 Support 3: 4392.82 https://www.prorightline.com/rlch/072123SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, July 24, 2023: 24-Jul 9:45 am S&P "flash" U.S. manufacturing PMI 24-Jul 9:45 am S&P "flash" U.S. services PMI Tuesday, July 25, 2023: 25-Jul 9:00 am S&P Case-Shiller home price index (20 cities) 25-Jul 10:00 am Consumer confidence Wednesday, July 26, 2023: 26-Jul 2:00 am FOMC decision on interest-rate policy 26-Jul 2:30 pm Fed Chairman Powell press conference Thursday, July 27, 2023: 27-Jul 8:30 am Initial jobless claims 27-Jul 8:30 am Durable-goods orders 27-Jul 8:30 am Durable-goods minus transportation 27-Jul 8:30 am GDP (advanced report) 27-Jul 8:30 am Advanced U.S. trade balance in goods 27-Jul 8:30 am Advanced retail inventories 27-Jul 8:30 am Advanced wholesale inventories 27-Jul 10:00 am Pending home sales Friday, July 28, 2023: 28-Jul 8:30 am Personal income (nominal) 28-Jul 8:30 am Personal spending (nominal) 28-Jul 8:30 am PCE index 28-Jul 8:30 am Core PCE index 28-Jul 8:30 am PCE (year-over-year) 28-Jul 8:30 am Core PCE (year-over-year) 28-Jul 8:30 am Employment cost index 28-Jul 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" at this link: https://prorightline.com/index.php/economic-indicator-effects/
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TRADER'S TIP:
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TRADER'S TIP: "Three Possibilities" As traders and investors we've learned not to spend too much time speculating on market direction, but to focus on careful planning and trade management. It's far better to prepare and have a specific plan ready for any possible price action than to become so devoted to our expectations that we fail to plan for the opposite of what we expect to happen. The market, and our chosen stocks can really only do three simple things that affect price; (1) move up, (2) move down, or (3) stay the same. Unless our trading plan includes specific instructions on what we will do in the event any one of these three scenarios occur, the plan is incomplete. ***********************************
STOCKS COVERED IN THIS ISSUE
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ENERGY SECTOR Vista Energy, S.A.B. de C.V. (VIST: Energy/Oil & Gas E&P) - SQUEEZE PLAY. The ticker for Friday's session shows VIST 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 27.05 and a SELL short trigger at 25.3. When VIST 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 1.75 trailing stop. Upon reaching a 1.76 profit, resize the stop to 0.88. Earnings Report Date: N/A. Beta: 0.23. Market-Cap: 2.537B. Optionable. FINANCIAL SERVICES SECTOR Eagle Bancorp, Inc. (EGBN: Financial Services/Banks-Regional) - SQUEEZE PLAY. EGBN 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. EGBN closed Friday at 25.20. The plan is to enter in the right direction by placing a BUY trigger at 26.06 and a SELL short trigger at 24.32. Once EGBN establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.74. After you've collected a 1.66 profit, tighten the stop to 0.87. Earnings Report Date: Jul 26, 2023. Beta: 0.89. Market-Cap: 774.053M. Optionable. HEALTHCARE SECTOR Arcus Biosciences, Inc. (RCUS: 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. RCUS 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 20.36 and a SELL short trigger at 18.92. When RCUS 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 1.44 trailing stop. After you've got a 1.8 profit, tighten the stop to 0.72. RCUS closed at 20.04 on Friday. Earnings Report Date: Aug 01, 2023. Beta: 0.85. Market-Cap: 1.465B. Optionable. Veracyte, Inc. (VCYT: Healthcare/Biotechnology) - SQUEEZE PLAY. Friday's trading session left VCYT 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 29.36 and your SELL short trigger at 27.34. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 2.02 trailing stop. Once you have a 1.78 profit, reduce the stop to 1.01. Earnings Report Date: Aug 08, 2023. Beta: 1.33. Market-Cap: 2.07B. Optionable. TECHNOLOGY SECTOR Tigo Energy, Inc. (TYGO: Technology/Solar) - BULLISH BOUNCE. Positive price behavior near moving average support on Friday qualifies TYGO for a Bullish Bounce setup. After several sessions of declining prices, TYGO should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if TYGO moves up to our entry trigger set at 24.76. You can also enter a 2.64 trailing stop, to be replaced with a 1.32 trailing stop when you obtain a 2.28 profit. TYGO closed Friday at 24.17. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.542B. Not 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: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/ ***********************************
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 ---------------- ------- -------- ------- ------ ------- 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. For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
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"Market Liquidity and Fund Flows" You may remember from high school economics that business operates on the basic principle of "supply and demand." If there is a lot of demand for a limited amount of supply, prices will go higher, if there is more supply than demand, than prices will go lower. In the stock market, the principle works the same way. If there are more people who want to buy (demand) than there are people who want to sell (supply) prices will head higher, and visa versa. Successfully forecasting short-term supply/demand for stocks can improve our odds as traders, but is it possible to do it? To find out, let's take a look at the providers of mutual fund flows and liquidity numbers to see how they can be helpful to traders. - Who Provides the Mutual Fund Flow Data? There are three premier companies that specialize in tracking flows in and out of mutual funds: Trim Tabs, AMG Data (Lipper), and the Investment Company Institute. Even though each company provides its own specific interpretation of the data, they all understand how important these flows are to the market. At RightLine, we primarily use the TrimTabs reports. Trim Tabs Fund Flows report attempts to reliably forecast the Investment Company Institute's results by taking a sampling of approximately 850 statistically significant funds. The ICI numbers are more comprehensive, but are not always released as quickly as Trim Tabs. - Trim Tabs Trim Tabs is the only independent research service that publishes daily and weekly in-depth coverage of stock market liquidity going back to 1990. Charles Biderman, a former Barron's Financial Weekly editor, is the originator of the "Liquidity Theory". This view is based on the premise that the total market capitalization - price - is a function of liquidity, and has nothing to do with value. The Mutual Fund Flows provided by TrimTabs is very popular with the media, but the Liquidity Report really gives a much broader picture of how money is shifting in and out of the market. TrimTabs considers liquidity a "coincident indicator" to stock prices. In other words, if we know where liquidity is heading, then we'll know where stock prices are heading at the same time. The "Mutual Fund Flows" are the net amount of money either going in or out of mutual funds. Trim Tabs surveys over 850 equity and bond funds daily to calculate this figure. The flows are categorized as follows: ~ Total Equity Funds are made up of US Equity funds and International funds. ~ The US Equity funds include "Aggressive Growth", "Growth", and "Growth and Income" funds. ~ The Total Bond funds include Hybrid (stock and bond) funds, Government and GNMA bonds, Municipal Bonds, Corporate/Income/Global bond funds, and High Yield funds. If US Equity funds show a significant inflow, the individual fund managers scramble to put the money to work in the market by buying stock. On the other hand, if there are major outflows from mutual funds, the fund managers liquidate stock to fulfill redemption requests from fund shareholders. - Trim Tabs Liquidity Calculation Liquidity is the difference between inflows and outflows of cash in the stock market over a given period of time. Trim Tabs calculates liquidity by adding US Equity Fund Inflows, two-thirds of newly announced cash takeovers, one-third of completed cash takeovers and subtracting new offerings. Cash takeovers of publicly traded companies are considered a new inflow of cash into the market. On the other hand, new offerings (IPOs) are considered a drain on liquidity because they "use" money that would have been available for investing in the "previously-existing" stocks. Liquidity tends to run higher during tax refund season and year-end bonus time, and lower near dates when people and companies have to pay their taxes. The Trim Tabs website can be seen at https://www.trimtabs.com/. - Investment Company Institute The Investment Company Institute gets its data from ICI members, which represent 95 percent of the total investment company industry's assets. The ICI web site shows similar information as the Trim Tabs Fund Flows, but as mentioned above, it covers a wider number of sources and isn't released as quickly. ICI reports the assets of money market funds to the Federal Reserve Board each week and makes this data available to the public on a weekly basis. The Institute also reports monthly on three broad categories of funds. They are: (1) Short-term funds which include tax-exempt money market funds; (2) Taxable retail and institutional money market funds; and (3) All funds other than money market funds - such as stock, income, corporate bond and municipal bond funds. For more information you can visit ICI's website at: https://www.ici.org/new/index.html. - AMG Data (Lipper) AMG Data (Lipper) is another respected company that provides mutual fund flow information. They offer weekly aggregate and fund specific Money Flow reports on just about any sector. They maintain an archive of historical fund flow reports and year-end statistical data dating back to 1992 on all AMG sectors. AMG collects and reports the numbers for all fund groups as soon as each company releases data. Vanguard, Fidelity, and American Funds report month-end numbers early the following month. Information on weekly reporting funds is for each week ended Wednesday. Monthly flows are calculated by combining weekly reported flows and monthly reported flows for each month. AMG's "Cash Track" describes the rate at which money is coming into or going out of a sector. Most funds report weekly, and some report monthly, so AMG uses a 4-week moving average across the entire set of funds, even those that report less often. Weekly reporting funds include 93% of the share classes, which represent 75% of the total fund assets. The AMG Data (Lipper) Services website is at https://www.lipperusfundflows.com. Bottom Line: In conclusion, market liquidity and fund flow reports have historically been a timely indicator of investor sentiment and current demand. While liquidity and fund flows aren't something you would necessarily consider before each trade, this information can give you valuable insight into the market's current supply and demand situation. ======================================================================
Best of luck and have a Great Week!
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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. All subscriptions and/or use of the RightLine.net website are subject to RightLine's "Terms of Use" and "Subscriber Terms & Conditions" which are posted at www.rightline.net. Any REDISTRIBUTION of the above information, without The RightLine's written consent, is STRICTLY PROHIBITED. Copyright / The Pro Right Line Corporation - All Rights Reserved To Unsubscribe, send an email to cs@prorightline.com or call 1-312-248-4241. |