July 23, 2022 - The RightLine Report
Notes From The Editor
Most investors overlook opportunities in the market during volatile times. The media's negative slant on volatility has convinced many people that there's little money to be made during choppy market periods.
In contrast, traders and active investors are more inclined to see the profit potential hidden by the smokescreen of volatility. When price action moves up-and-down faster than usual, active traders know how to stay in touch with the market pulse. We routinely evaluate our positions through the eyes of a structured plan. This increased awareness can maximize profits and limit losses - even in "tough" markets!
The built in-strengths of RightLine's trading approach will help you through good weather and bad. Our system is reliable and adaptable, ready to change with the trend whenever needed.
The strategy is simple - trade in harmony with the trends by shorting the declines and buying the bounces. We prepare for price movement by setting specific triggers for trades in both directions. The market then tells us which way to go when it triggers some of those trades.
Volatile markets aren't necessarily the most pleasant to trade due to their hyper-activity. However they still yield nice profits when you trade intelligently and avoid being swept up by the highly emotional atmosphere that can dominate frisky conditions.
Here's to a good weekend!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits Trader's Corner
Quick List
Stock 07/22 07/22 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
FCX 27.79 -1.12 26.85 3.48/1.74 2.48
CWH 26.79 0.27 27.59 25.66 1.93/0.97 2.36
DK 22.88 -0.04 23.77 22.03 1.74/0.87 3.56
SYM 19.87 1.41 20.26 3.14/1.57 5.96
LSPD 20.29 -1.11 19.42 2.89/1.45 3.24
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
The major US stock indices chalked up a weekly gain despite closing lower on Friday in response to an array of preliminary July manufacturing and services sector reports that indicated slowing business activity. On the equities front, American Express rallied after beating quarterly earnings expectations, while shares of Verizon (VZ $44) came under pressure after the communications firm posted mixed results. Mattel's (MAT $22) stock price also dropped after the toy company issued soft guidance. Gold and treasuries advanced upward, the USD/dollar and oil prices declined.
Friday On The Week
-------------------- --------------------
Dow 31,899.29 -137.61 +611.03 1.95%
Nasdaq 11,834.11 -225.50 +381.69 3.33%
S&P 500 3,961.63 -37.32 +98.47 2.55%
NYSE Volume 4.02B
NYSE Advancers 1,309
NYSE Decliners 1,911
Nasdaq Volume 4.73B
Nasdaq Advancers 1,314
Nasdaq Decliners 3,248
New Highs/Lows
07/15 07/18 07/19 07/20 07/21 07/22
--------------------------------------------
NYSE New Highs 9 17 14 13 12 16
NYSE New Lows 90 60 48 31 42 45
Nasdaq New Highs 38 30 37 44 34 43
Nasdaq New Lows 166 108 94 61 78 97
Stocks Covered Today Stock Splits Trader's Corner
TRADER'S TIP: "Flexibility"
All traders will experience new problems that they do not know how to deal with and feel uncomfortable dealing with. However, once they have overcome a particular problem, they develop a feeling of certainty that they can overcome it again. Unfortunately, there seems to be a constant supply of problems that enter into the trader's life. As the ability to be flexible increases, the ability to resolve new problems also increases.
Successful traders know that flexibility improves their perception of the marketplace and also improves how fast they can react to a new market environment. Flexibility allows successful traders to fight their fear because it forces them to be less rigid in their thinking. They know that as the ability to be flexible increases, their level of resourcefulness will be increased. The amazing thing about flexible thinking is that it enables you to perceive alternative methods to accomplish your goals.
~ John Hayden, trader since 1976
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 - 3961.63 July 22, 2022
52-Week High: 4818.62
52-Week Low: 3636.85
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4318.52
Resistance 2: 4124.71
Resistance 1: 4043.17
Pivot: 3930.90
Support 1: 3849.36
Support 2: 3737.09
Support 3: 3543.28
NASDAQ Composite - 11834.11 July 22, 2022
52-Week High: 16212.23
52-Week Low: 10565.14
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 13290.35
Resistance 2: 12520.17
Resistance 1: 12177.14
Pivot: 11749.99
Support 1: 11406.96
Support 2: 10979.81
Support 3: 10209.62
Dow Industrials - 31899.29 July 22, 2022
52-Week High: 36952.65
52-Week Low: 29653.27
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 34173.06
Resistance 2: 32936.78
Resistance 1: 32418.03
Pivot: 31700.50
Support 1: 31181.75
Support 2: 30464.22
Support 3: 29227.94
Stocks Covered Today Stock Splits Trader's Corner
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, July 25, 2022: 25-Jul 8:30 am Chicago Fed national activity index Tuesday, July 26, 2022: 26-Jul 9 am 26-Jul 10 am Consumer confidence index 26-Jul 10 am New home sales (SAAR) Wednesday, July 27, 2022: 27-Jul 8:30 am Durable goods orders 27-Jul 8:30 am Core capital equipment orders 27-Jul 8:30 am Advance report on trade in goods 27-Jul 10 am Pending home sales index 27-Jul 2 pm Fed funds target rate 27-Jul 2:30 pm Fed Chair Jerome Powell press conference Thursday, July 28, 2022: 28-Jul 8:30 am Gross domestic product, first release (SAAR) 28-Jul 8:30 am Final sales to domestic purchasers (SAAR) 28-Jul 8:30 am Initial jobless claims 28-Jul 8:30 am Continuing jobless claims Friday, July 29, 2022: 29-Jul 8:30 am PCE inflation index 29-Jul 8:30 am Core PCE price index 29-Jul 8:30 am PCE price index (year-over-year) 29-Jul 8:30 am Core PCE price index (year-over-year) 29-Jul 8:30 am Real disposable income 29-Jul 8:30 am Real consumer spending 29-Jul 8:30 am Nominal personal income 29-Jul 8:30 am Nominal consumer spending 29-Jul 8:30 am Employment cost index 29-Jul 9:45 am Chicago PMI 29-Jul 10 am UMich consumer sentiment index (final) 29-Jul 10 am UMich 5-year inflation expectations (final) 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: "Profit vs. Pain"
Successful traders obtain consistent profits. Losing traders obtain consistent pain. In order to become the trader you desire, you must change the internal representations of what a loss means. You must diligently apply yourself to mastering your perceptions, believing with certainty that you will transform yourself into an outstanding trader, have the discipline to develop and obey your trading methodology, have the courage to execute your methodology without hesitation, have the wisdom to differentiate between into wishing" and intuition, have the persistence never to quit, have the integrity to stand apart from other traders, and have the mental flexibility to be open-minded.
If you do, I promise you that at some point in time you will represent a loss in such a way that you will become a highly profitable trader."
~ John Hayden, full-time trader for over 20 years, author of "The 21 Irrefutable Truths of Trading"
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
Freeport-McMoRan Inc. (FCX: Basic Materials/Copper) - BEARISH U-TURN. FCX's chronic decline over the past weeks was relieved by a recent upward bounce that has boosted hope for weary shareholders. Unfortunately for them, Friday's price action near moving average support indicates the bullish rebound may be over. If this turns out to be the case, short-sellers can enter a SELL position at 26.85. Control risk with a 3.48 stop that can be resized to 1.74 on a gain of 2.48. FCX closed at 27.79 on Friday. Earnings Report Date: Oct 19, 2022. Beta: N/A. Market-Cap: 40.296B. Optionable.
CONSUMER CYCLICAL SECTOR
Camping World Holdings, Inc. (CWH: Consumer Cyclical/Auto & Truck Dealerships) - 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. CWH 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 27.59 and a SELL short trigger at 25.66. When CWH 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 1.93 trailing stop. After you've got a 2.36 profit, tighten the stop to 0.97. CWH closed at 26.79 on Friday. Earnings Report Date: Aug 02, 2022. Beta: 2.81. Market-Cap: 1.117B. Optionable.
ENERGY SECTOR
Delek US Holdings, Inc. (DK: Energy/Oil & Gas Refining & Marketing) - SQUEEZE PLAY. DK traders on both sides of the fence are now locked in a head-to-head shootout. Friday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 23.77 and a SELL short trigger at 22.03. When one of the orders is filled, cancel the remaining order and enter a 1.74 trailing stop. When you've reached a 3.56 paper profit, tighten the stop to 0.87. DK closed at 22.88 on Friday. Earnings Report Date: Aug 04, 2022. Beta: 1.63. Market-Cap: 1.619B. Optionable.
FINANCIAL SERVICES SECTOR
Symbotic Inc. (SYM: Financial Services/Shell Companies) - 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 SYM which met our setup criteria on Friday. The BUY trigger for this trade is at 20.26, and the trailing stop is sized at 3.14. Resize the stop to 1.57 upon collecting a 5.96 point gain. SYM closed Friday at 19.87. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 10.5B. Optionable.
TECHNOLOGY SECTOR
Lightspeed Commerce Inc. (LSPD: Technology/Software-Application) - BEARISH U-TURN. The weight of LSPD's declining weekly trend was lightened recently when shares began to move upward. However, like a swimmer against the tide LSPD encountered strong resistance on Friday. Price action indicates a likely return to the previous downtrend, so plan to short LSPD upon reaching our SELL trigger at 19.42. Set a 2.89 trailing stop which can be tightened to 1.45 after you have a 3.24 gain. LSPD ended the latest session at 20.29. Earnings Report Date: Aug 04, 2022. Beta: 3.03. Market-Cap: 3.03B. 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
---------------- ------- -------- ------- ------ -------
Gamestop GME 7/7/2022 7/22/2022 4-for-1 Yes
Alphabet GOOG 2/1/2022 7/18/2022 20-for-1 Yes
Nasdaq Inc NDAQ 7/20/2022 8/29/2022 3-for-1 Yes
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
"WISHFUL THINKING: Thoughts from Dr. Alex Elder"
If you toss a frog into a pan of warm water and heat it very slowly you can boil it alive. When pain increases bit by bit, our natural tendency to do nothing and wait for an improvement. A sleepwalking trader keeps giving a losing trade more time, while it is slowly boiling him alive.
A sleepwalker hopes and dreams. He says, I know, my stock is going to come back, it always did before. Winners accept occasional losses, take them quickly and move on. Losers postpone taking losses, and some are foolish enough to look for a silver lining in a disaster. A broker calls his client and says, "I've got good news and bad news. What's the bad news? That stock you bought at 80 - it is down to 20. And what's the good news? The decline was on low volume."
An amateur enters a trade as if buying a lottery ticket. He waits for the wheel of fortune to decide whether he wins or loses. Professionals, on the other hand, have ironclad plans for getting out, either with a profit or a small loss. A key difference between professionals and amateurs is their planning for exits. Beginners dream of profits but are always ready to give a trade "more time to work out."
A sleepwalking trader buys a stock at 35 and puts in a stop at 32. The stock begins to sink, he says, 'I will give the market a little more room to breathe,' and moves his stop down to 30. This is a fatal mistake - he has breached his discipline, violated his own plan.
You may move your stops only one way - in the direction of the trade. Stops are like a ratchet on a sailboat, designed to take the slack out of your sails. If you start giving your trade "more room to breathe," that extra slack will swing and hurt you. Even if the market rewards you for breaking the rules on one trade, it will lay an even bigger trap for you on the next trade.
The best time to make decisions is before you enter a trade. Your money is not at risk, and you can weigh benefits and risks. Once you put on a trade, you begin to form an emotional attachment to it. The market will do its best to hypnotize you and lure you into making emotional decisions. Write down an exit plan and follow it!
Turning a losing trade into an "investment" is a disease of small private traders, but some institutional traders can catch it also. Disasters at banks and major financial firms have occurred when poorly supervised traders lost money in short-term trades and stuck them into long-term accounts, hoping that time will bail them out. If you are losing in the beginning, you'll lose in the end. Do not put off the hour of reckoning. The first loss is the best loss - this is the rule of those who trade with their eyes open.
A neighbor of mine had struggled with the markets for eight years before he grew into an internationally famous successful trader. Today many of our friends in New York like to reminisce about the days he clerked on one of the smaller exchanges in the city and struggled to make ends meet. An old trader said to me, 'I knew him then, and I thought he would succeed. He had the right combination of being very careful and having this optimism you need to get up in the morning and believe you're going to make money trading the markets.'
In order to succeed in trading you need both self-confidence and humility (also known as caution). If you have one but not the other, you're in a dangerous position. If you have self-confidence but no caution, you'll be arrogant, which is deadly for traders. If you have caution but no confidence, you won't be able to pull the trigger on your trades.
You need confidence to say - the market is going up, I believe it will continue to rally, I am going to get long and ride this trend. On the other hand, you need humility to accept the uncertainty of the markets - and to run fast when a trade goes against you.
It is a hallmark of emotional maturity to be aware of two conflicting feelings at the same time. When you feel a surge of confidence in your trading idea, it is hard to have the humility to think of the downside risk - but if you cannot think of the risk, you cannot handle it. When the market goes against you and hits your predetermined exit level, you have to humbly give a sell order, no matter how confident you feel about your analysis.
Being a trader is a journey of self-discovery. Trade long enough, and you will face all your feelings, including anxiety, greed, fear, and anger. But self-discovery is the byproduct, not the primary goal of trading. The main goal is to minimize losses and accumulate equity. Keep asking yourself - "What is my profit target in this trade" and "What will I do to protect my capital in this trade?"
A good trader accepts total responsibility for the outcome of every trade - even though he knows that others are trying to take his money. If other traders or even brokers take your money, you are still responsible. You have to keep improving your trading plans. You need to cultivate both self-confidence and humility.
EXITING TRADES
Whenever you plan a trade, three factors must be crystal-clear in your mind - where to get in, where to take profits, and where to bail out in case of an emergency. Daydreaming about profits will not make you rich. You must know at what point you will collect your winnings or else cut and run if the market turns against you.
Professional traders spend a lot of time and energy planning their exits from trades. Where to take profits, when to cut losses, how to maintain a good ratio between them in order to maximize gains and minimize losses - these and related questions are paramount in the pros' minds.
When people approach the markets, they go through a natural progression. Their first baby steps are stumbling but overconfident, while a pro is cautious but firm. Beginners keep looking for what to buy (they almost never sell short), like puppies that eat anything they find on the ground, including some very unhealthy stuff. The pros sniff and choose the best morsels. In trading, newbies are eagerly looking for markets to enter, without much thought about the exits. The pros are quite matter-of-factly about entries but very particular about exits. They have discovered the essential truth - you do not get paid for entering trades, you get paid for exiting them.
Planning for an exit must begin before you enter a trade. One of the first things we must do when looking at a new stock or a future, is measure the width of its channel. Let us see whether it is wide enough to be worth trading. We know that an "A" trader takes 30% or more out of a channel, while a "C" trader takes 10%. If we begin by accepting the possibility that we may have a C trade, then let us decide whether 10% of that channel is a worthwhile target. If a channel is 20 points wide, even a 10% gain will give us some money, but if the channel is only 5 points wide, then 10% will bring us peanuts, not worth the risk.
Exiting trades is more complex than entering them. It is simple to get in using a limit order to minimize slippage; either we are in or we aren't. Exits are much more challenging. We need to have a profit target, which will keep shifting as the trade goes on. We need to have a protective stop with a sensible formula for moving it as the trade moves in our favor. Sophisticated traders who swing large positions have strategies for canceling profit targets when they recognize especially powerful trends or taking only partial profits and carrying the rest of their position with a new exit strategy for runaway trends.
Exits sound complex because they are. As one multimillionaire said about trading, 'If this was easy, mermaids would be doing it.' Entering a trade can be as easy as buying a lottery ticket, but then the music starts and exits separate winners from losers.
**************
Dr. Elder is the author of several books including the classic "Trading For A Living." He also authored "Come Into My Trading Room: A Complete Guide To Trading" and his newest work "Sell and Sell Short."
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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