July 23, 2024 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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Momentum can be a trader's best friend. Once a stock has established a reliable trend, price action seems to develop a life of its own. Jumping on that trend at the right point - when there are no immediate support/resistance levels to get in to the way - is a great way to take advantage of the sustained movement.

But what about those cases when a stock is almost going vertical? In strong Bull markets this is a common occurrence. A stock generates so much momentum that it rises nearly every day. It's human nature to see a rocketing equity and think "hey, I've got to get in on that!" The problem with this approach is that the unbridled momentum can suddenly shift without warning, leaving you with a loss and the dubious distinction of having bought at the top.

There are some good rules of thumb to avoid this. The first is to simply step away if the stock has shown some huge recent gains. For instance, a 20% rally over the past week or so sharply increases the likelihood of a profit-taking pullback. Traders who follow the daily stochastic indicator can quantify this; if the stochastics are pushed to the overbought extreme, with no more room to move, the short-term upside potential may be maxed out.

Also avoid rallying equities that are approaching areas of historical resistance or congestion. While levels dating back several years may seem irrelevant, they're often used as profit-targets for traders who have already been in the stock for awhile. Bears also use these as logical areas to regroup and mount a counter-offensive.

The best approach to trade a rocketing stock is to wait for a pullback to a key support level or moving average. Positive momentum increases the likelyhood of a rebound at these junctions, and profitable realignment with the upward trend. Scan through charts of rallying stocks to find examples of this breakout/pullback/reversal pattern. Accompanied by a solid risk management strategy, this can be a powerful tool in your arsenal of trade set-ups.

Here's to profits,

Kent Barton
Senior Analyst 

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                           "QUICK LIST"
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Stock     07/23     07/23      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

PAAS      22.92      0.06     23.31                  1.28/0.64      1.14
PGR      215.90     -0.40    219.29                  11.1/5.55      6.68
CTNM      21.49      0.10     21.87      20.7        1.17/0.59      4.56
VRNA      22.48     -0.40     23.35     21.62        1.73/0.87       2.1
FWRD      25.15      0.10      25.6     23.76        1.84/0.92       2.3


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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Equities ended slightly lower on Tuesday, oscillating around the flat line as investors balanced concerns over the evolving political landscape with anticipation for quarterly earnings reports. Despite the added uncertainty from political developments, the stock market has held its ground thanks to strong underlying fundamentals, which will be further illuminated by upcoming corporate performance updates. After a relatively calm period in May and June, market volatility has increased recently, with the S&P 500 averaging a 1% daily swing over the past four trading days. Bond yields remained stable on Tuesday, with 10-year US Treasury rates up nearly 10 basis points (0.10%) over the past week but down about 25 basis points (0.25%) for July.

Markets took a pause amid a flurry of headlines and data, including political shifts, anticipated earnings from major tech firms, and an important inflation report due on Friday, which could significantly impact Federal Reserve policy decisions in the near future.

The focus shifts to earnings results this week, with second-quarter announcements starting off robustly. Major banks have mostly exceeded expectations, and Tuesday saw General Motors and UPS report their results. GM reported higher-than-expected profits, while UPS fell short of consensus estimates. UPS's results offer insights into consumer activity. Despite missing estimates, shipping volume growth in the US suggests household spending remains resilient. Key reports will come from Alphabet (Google) and Tesla, scheduled to release their earnings after market close on Tuesday. As in previous quarters, results from these major tech companies are likely to influence market sentiment for the rest of the earnings season.

Overall, expectations are for nearly 10% earnings growth for the second quarter. If this pace continues, it would validate the market's rally this year and support equity performance for the rest of 2024.


                       Jul 22, 2024           Jul 23, 2024   
                  --------------------   --------------------
Dow                 40,415.44   127.91     40,358.09   -57.35
Nasdaq              18,007.57   280.63     17,997.35   -10.22
S&P 500              5,564.41    59.41      5,555.74    -8.67

NYSE Volume                       3.4B                   3.5B
NYSE Advancers                   2,073                  1,465
NYSE Decliners                     697                  1,338

Nasdaq Volume                    5.12B                  4.97B
Nasdaq Advancers                 2,954                  2,352
Nasdaq Decliners                 1,289                  1,859

                                 New Highs/Lows

                   07/16  07/17  07/18  07/19  07/22  07/23
                 --------------------------------------------
NYSE New Highs       419    314    244     48    100    214
NYSE New Lows          4      4     11     18     21     17
Nasdaq New Highs     499    362    228     56     99    238
Nasdaq New Lows       34     38     65    104     92     89

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                              TRADER'S TIP:  
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TRADER'S TIP: "What's It Worth?"

Garfield Drew, a prominent technician sixty years ago, said that "Stocks do not sell for what they are worth, but for what people THINK they are worth." It is generally recognized among technical analysts that prices in ALL markets at ALL times are based on trader psychology instead of company fundamentals. 
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                         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/ 
https://www.prorightline.com/rlch/072324SPX.jpg





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                             MARKET CALENDAR
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--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" 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: "Earnings: Holding Through or Getting Back In"

It's no secret that we believe in avoiding undue risk. Because earnings reports often end up surprising traders, we often suggest closing out positions before the company announces earnings. However, if a stock is moving in a solid trend (long or short) and earnings estimates support that trend, experienced traders will often elect to drastically reduce the number of shares in their position and hold them through the earnings announcement. In some cases traders jump back into the trade after the company reports better than expected earnings. This can be profitable at times, but don't chase the stock. If it has jumped more than 5% beyond your exit point, you're probably better off waiting for price to pull back to a moving average support level. 

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                      STOCKS COVERED IN THIS ISSUE    
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BASIC MATERIALS SECTOR

Pan American Silver Corp. (PAAS: Basic Materials/Gold) - 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. PAAS's behavior on Tuesday could very well be a sign that a new bounce is underway. Place a BUY trigger at 23.31. In the event your trigger is met, also place a 1.28 trailing stop which can be trimmed down to 0.64 when you have a 1.14 profit. PAAS closed Tuesday at 22.92. Earnings Report Date: Aug 7, 2024. Beta: 1.35. Market-Cap: 8.346B. Optionable.

FINANCIAL SERVICES SECTOR

The Progressive Corporation (PGR: Financial Services/Insurance - Property & Casualty) - NEW HIGH DIP. As a rule of thumb, outstanding stocks like PGR continue to perform well for extended periods of time. The recent pullback from a new 52-week high gives us a chance to enter a position without taking much risk. PGR's price behavior on Tuesday points to another move higher, so prepare to BUY shares at the trigger price of 219.29. Once in, follow the purchase with a 11.1 trailing stop. Change the stop to 5.55 upon gaining 6.68 points. PGR closed Tuesday at 215.90. Earnings Report Date: Aug 6, 2024. Beta: 0.36. Market-Cap: 126.453B. Optionable.

HEALTHCARE SECTOR

Contineum Therapeutics, Inc. (CTNM: Healthcare/Biotechnology) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in CTNM, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 21.87 and a SELL short entry at 20.7. Let CTNM's price action determine your long or short entry. Once the order is filled, place a 1.17 trailing stop, and tighten it to 0.59 upon getting a 4.56 gain. CTNM closed Tuesday at 21.49. Earnings Report Date: N/A. Beta: --. Market-Cap: 552.794M. Optionable.

Verona Pharma plc (VRNA: Healthcare/Biotechnology) - SQUEEZE PLAY. A look at VRNA'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 23.35 and a SELL short trigger at 21.62. Once VRNA shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.73 and tighten to 0.87 on a 2.1 gain. VRNA closed Tuesday at 22.48. Earnings Report Date: Aug 1, 2024. Beta: 0.44. Market-Cap: 1.823B. Optionable.

INDUSTRIALS SECTOR

Forward Air Corporation (FWRD: Industrials/Integrated Freight & Logistics) - SQUEEZE PLAY. Tuesday's trading action forced FWRD'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 FWRD 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 25.6 if FWRD moves higher, and place your order to SELL short at 23.76 if price declines to that level. As usual follow your entry with a trailing stop, 1.84 should be sufficient. Reduce your stop to 0.92 on a 2.3 gain. FWRD closed Tuesday at 25.15. Earnings Report Date: Jul 31, 2024. Beta: 1.00. Market-Cap: 664.926M. 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/ 

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                           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/ 
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Best of luck and have a Great Week!
 
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