Notes From The Editor

Win/Loss vs. Profit/Loss

Most people don't realize that the Win/Loss Ratio is a poor way to judge trading results. This is because the Win/Loss Ratio only compares how many trades you win to how many trades you lose. It doesn't consider the most important aspect of trading ... the money.

The primary reason for trading stocks is to make a profit. Though it may seem like "making a profit" and "winning a high percentage of trades" are the same thing, they definitely are not. To evaluate and compare trading performance you need a ratio that takes actual profits and losses into account, along with the number of trades you won or lost.

This is where a simple Profit/Loss Ratio comes in. While the Win/Loss Ratio compares how many trades you win to how many trades you lose, the Profit/Loss Ratio compares how much money you make to how much money you lose. Including a Profit/Loss Ratio gives a much more accurate look at how well a trading method works as compared to the Win/Loss Ratio alone.

For example, a trading method may historically have a Win/Loss Ratio of 9/1 and a Profit/Loss Ratio of 1/10. That means out of every ten trades they won nine and lost 1. However, the Profit/Loss Ratio shows that for every dollar they make they lose ten. The Profit/Loss Ratio reveals that their "90% Winning Trades" is a big loser.

A study of different trading systems by Keener Capital Management discovered that higher winning percentages are characteristic of the worst performing strategies. By contrast, strategies with lower winning percentages were the most profitable.

Bottom Line: People are usually surprised to find that trading systems with high Win/Loss Ratios are among the worst performers. While they want to believe that a trading method with a very high percentage of winners is always "better," research proves just the opposite is usually true. Though human nature may compel us to pursue a high percentage of winners, it's best to use profit-based equations as well to measure performance.

Trade well!

Thomas Sutton, Editor

Quick List

    
Stock     07/27     07/27      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

NYT       53.87      0.48     55.02                  3.63/1.82       1.6
MMYT      92.24      2.69     95.31                      9/4.5      7.72
CTNM      21.00     -0.05     21.52     20.12          1.4/0.7      3.56
CSR       70.38      1.26      71.6                  4.68/2.34      2.58

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

Major equity indexes ended Friday on a positive note, with small and mid-cap stocks outperforming large-cap stocks. The broad sector performance saw industrials and real estate leading the gains. Bond yields fell slightly, with the 10-year Treasury yield at approximately 4.19%.

In global markets, both Asia and Europe recovered from Thursday's declines. The US dollar weakened against major currencies, while WTI oil prices fell due to concerns over Chinese demand, Bitcoin and gold prices increased.

The core personal consumption expenditure (PCE) price index, which excludes food and energy, increased by 2.6% annually through June, slightly above the 2.5% estimate but unchanged from the previous month. The headline PCE index decreased to 2.5% year-over-year, as anticipated, from 2.6% the prior month. Consumption expenditures rose by 0.3%, a modest decline from May's 0.4% but above expectations, reflecting a resilient consumer who is beginning to reduce spending.

Personal income grew by 0.2%, falling short of expectations and the previous month. We anticipate that the core PCE reading will support the Fed's likely interest rate cuts later this year, potentially in September and December. Inflation is expected to continue moderating in the latter half of the year, aided by slower increases in shelter costs and wage growth. Labor market cooling, evidenced by fewer job openings and a gradual rise in unemployment, may also contribute to reduced wage pressures.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 40,589.34   654.27      +301.81     0.75%
Nasdaq              17,357.88   176.16      -369.06    -2.08%
S&P 500              5,459.10    59.88        -45.9    -0.83%

NYSE Volume                      3.67B                       
NYSE Advancers                   2,289                       
NYSE Decliners                     511                       

Nasdaq Volume                     5.3B                       
Nasdaq Advancers                 3,091                       
Nasdaq Decliners                 1,186                       

                                 New Highs/Lows

                   07/19  07/22  07/23  07/24  07/25  07/26
                 --------------------------------------------
NYSE New Highs        48    100    214    111    178    214
NYSE New Lows         18     21     17     28     29     17
Nasdaq New Highs      56     99    238    167    214    243
Nasdaq New Lows      104     92     89    117    108     69
   

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.

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 29	
None scheduled
				
TUESDAY, JULY 30					
9:00 am	S&P Case-Shiller home price index
10:00 am	Consumer confidence	
10:00 am	Job openings

WEDNESDAY, JULY 31					
8:15 am	ADP employment	
8:30 am	Employment cost index	
9:45 am	Chicago Business Barometer (PMI)	
10:00 am	Pending home sales			
2:00 pm	FOMC interest-rate decision				
2:30 pm	Fed Chair Powell press conference
				
THURSDAY, AUG 1					
8:30 am	Initial jobless claims	
8:30 am	U.S. productivity	
9:45 am	S&P U.S. manufacturing PMI	
10:00 am	ISM manufacturing	
10:00 am	Construction spending	

FRIDAY, AUG. 2					
8:30 am	U.S. employment report	
8:30 am	U.S. unemployment rate	
8:30 am	U.S. hourly wages	
8:30 am	Hourly wages year over year		
10:00 am	Factory orders

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

TRADER'S TIP: "Paid Two Ways"

"When it comes to trading the stock market, everyone is paid two ways - in money and experiences. Learn from the experiences first, and the money will follow."

Stocks Covered in This Issue

COMMUNICATION SERVICES SECTOR

The New York Times Company (NYT: Communication Services/Publishing) - NEW HIGH DIP. Stocks in the early stages of a bounce tend to move higher. This is especially true when a strong performer in an established uptrend dips to a well-known support level. NYT fits this model perfectly. After setting a new 52-week high a few days back, the stock dipped for several sessions due to profit taking. Now the price action is signaling there is a reversal underway. Plan to buy this dip if the bounce lifts NYT to our entry level BUY trigger at 55.02. Set a trailing stop of 3.63 and tighten to 1.82 on a 1.6 gain. NYT closed Friday at 53.87. Earnings Report Date: Aug 7, 2024. Beta: 1.05. Market-Cap: 8.851B. Optionable.

CONSUMER CYCLICAL SECTOR

MakeMyTrip Limited (MMYT: Consumer Cyclical/Travel Services) - BULLISH BOUNCE. The charts for MMYT show that despite the downward pressure from sellers recently, the weekly uptrend is still going strong. Buyers showed up again on Friday, resulting in the early stages of a rebound that started near moving average support. The resulting Bullish Bounce set-up offers a potential entry point for a long play. Set your trigger to BUY shares at 95.31, and follow your entry with a trailing stop of 9. Tighten it to 4.5 when a 7.72 profit is reached. MMYT ended the latest session at 92.24. Earnings Report Date: N/A. Beta: 1.30. Market-Cap: 10.126B. Optionable.

HEALTHCARE SECTOR

Contineum Therapeutics, Inc. (CTNM: Healthcare/Biotechnology) - SQUEEZE PLAY. One interesting trait of price volatility is that it cycles back and forth through periods of expansion and contraction. Stocks that have recently seen their daily price range shift from an average or wide range to an extremely contracted state are ideal candidates for expansive price moves. In many cases the next move is relatively fast and covers a sizable amount of territory. To take advantage of these trades we use both a BUY and a SELL entry. This allows us to enter in whichever direction the breakout takes. In CTNM's case we will enter a BUY should it reach the 21.52 level, or a SELL short trade if it drops to 20.12. As usual a trailing stop is essential, 1.4 which should be tightened to 0.7 on a 3.56 gain. CTNM closed Friday at 21.00. Earnings Report Date: N/A. Beta: --. Market-Cap: 540.189M. Optionable.

REAL ESTATE SECTOR

Centerspace (CSR: Real Estate/REIT - Residential) - NEW HIGH DIP. CSR's upward price momentum produced a brand new 52-week high just a few sessions ago. Shares have been sliding downhill since reaching that point, but the bounce that took place during Friday's trading could be telling us the short-term decline is over. We need to confirm that sellers are exiting, so we'll wait for CSR to move a bit higher before buying this stock. Set your BUY trigger at 71.6, and then enter a trailing stop of 4.68. Tighten the stop to 2.34 when you accumulate a 2.58-point gain. CSR finished the Friday session at 70.38. Earnings Report Date: Jul 29, 2024. Beta: 0.89. Market-Cap: 1.109B. 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

"15 Ways To Trade Moving Averages"

Reading a chart without moving averages is like baking a cake without butter or eggs. Those simple lines above or below current price tell many tales, and their uses in market interpretation are unparalleled. Simply stated, they're the most valuable indicators in technical analysis.

You can trade without moving averages, but you do so at your own risk. After all, these lines represent median levels where your competition will make important buying or selling decisions. So it makes sense to predict what they're going to do before the fact, rather than afterward.

Here are 15 ways you can manage opportunity through moving averages:

1. The 20-day moving average commonly marks the short-term trend, the 50-day moving average the intermediate trend, and the 200-day moving average the long-term trend of the market.

2. These three settings represent natural boundaries for price pullbacks. Two forces empower those averages: First, they define levels where profit- and loss-taking should ebb following strong price movement. Second, their common recognition draws a crowd that perpetrates a self-fulfilling event whenever price approaches.

3. Moving averages generate false signals during range-bound markets because they're trend-following indicators that measure upward or downward momentum. They lose their power in any environment that shows a slow rate of price change.

4. The characteristic of moving averages changes as they flatten and roll over. The turn of an average toward horizontal signifies a loss of momentum for that time frame. This increases the odds that price will cross the average with relative ease. When a set of averages flatline and draw close to one another, price often swivels back and forth across the axis in a noisy pattern.

5. Moving averages emit continuous signals because they're plotted right on top of price. Their relative correlation with price development changes with each bar. They also exhibit active convergence-divergence relationships with all other forms of support and resistance.

6. Use exponential moving averages, or EMAs, for longer time frames but shift down to simple moving averages, or SMAs, for shorter ones. EMAs apply more weight to recent price change, while SMAs view each data point equally.

7. Short-term SMAs let traders spy on other market participants. The public uses simple moving average settings because they don't understand EMAs. Good intraday signals rely more on how the competition thinks than the technicals of the moment.

8. Place five-, eight- and 13-bar SMAs on intraday charts to measure short-term trend strength. In strong moves, the averages will line up and point in the same direction. But they flip over one at a time at highs and lows, until price finally surges through in the other direction.

9. Price location in relation to the 200-day moving average determines Long-term investor psychology. Bulls live above the 200-day moving average, while bears live below it. Sellers eat up rallies below this line in the sand, while buyers come to the rescue above it.

10. When the 50-day moving average pierces the 200-day moving average in either direction, it predicts a substantial shift in buying and selling behavior. The 50-day moving average rising above the 200-day moving average is called a Golden Cross, while the bearish piercing is called a Death Cross.

11. It's harder for price to break above a declining moving average than a rising moving average. Conversely, it's harder for price to drop through a rising moving average than a declining moving average.

12. Moving averages set to different time frames reveal trend velocity through their relationships with each other. Measure this with a classic Moving Average-Convergence-Divergence (MACD) indicator, or apply multiple averages to your charts and watch how they spread or contract over different time.

13. Place a 60-day volume moving average across green and red volume histograms in the lower chart pane to identify when specific sessions draw unexpected interest. The slope of the average also identifies hidden buying and selling pressure.

14. Don't use long-term moving averages to make short-term predictions because they force important data to lag current events. A trend may already be mature and nearing its end by the time a specific moving average issues a buy or sell signal.

15. Support and resistance mechanics develop between moving averages as they flip and roll. Look for one average to bounce on the other average, rather than break through it immediately. After a crossover finally takes place, that level becomes support or resistance for future price movement.

********************

This special guest article was written by Alan Farley, author of "The Master Swing Trader."

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

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

Click Here To Unsubscribe