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July 29, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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Trading, or Investing?
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"QUICK LIST"
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Stock 07/28 07/28 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
FVRR 29.07 1.48 29.46 27.26 2.2/1.1 2.26
LMND 21.75 0.99 22.21 1.76/0.88 1.8
QTRX 23.34 0.46 23.74 22.34 1.4/0.7 2.32
TYGO 24.96 0.77 25.53 2.28/1.14 3.2
EBIX 28.30 1.09 29.32 26.9 2.42/1.21 4.04
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 saw a boost in gains on Friday driven by positive technology earnings and favorable reports on Core PCE and Employment Cost Index. Core PCE rose 4.1% year over year, while the month-to-month gain was on target at 0.2%. Employment costs also increased by 1.0%, just below the forecast of 1.1%. Market breadth remained strong, with advancers outnumbering decliners by over 4 to 1 in the mid-morning. The implied probability of a Fed pause at the September meeting remained high at over 80%, with the first expected rate cuts anticipated in early 2024. Leading sectors in early trading were Communications, Consumer Discretionary, and Consumer Staples, all gaining more than 1%, while Energy was the only sector in the red, following the decline in oil prices. n terms of data, the Atlanta Fed published its initial GDP nowcast, predicting a 3.5% Real GDP growth in Q3, which would be the strongest growth since Q4 2021. On the housing front, the median starter home price in the US has increased by 46% since 2019, and the monthly mortgage payment for these homes has more than doubled in the same period. June PCE inflation is at its lowest level since April 2021, indicating that the Fed may be gaining control over inflation. However, it's essential to remain cautious and not assume rate cuts will be pulled back into 2023 prematurely. Despite a mid-afternoon dip, stocks bounced back towards highs as the trading day neared its end. Market breadth eased slightly from the morning levels but still favored advancers over decliners by more than 3:1. In terms of industries, Energy rebounded into positive territory alongside oil, while Real Estate and Utilities slipped into the red. Communications led the gainers, followed by Consumer Discretionary, and Technology. Both growth and value sectors enjoyed gains, with growth being the outperformer. Friday On The Week
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Dow 35,459.29 176.57 +231.6 0.66%
Nasdaq 14,316.66 266.55 +283.85 2.02%
S&P 500 4,582.23 44.82 +45.89 1.01%
NYSE Volume 4B
NYSE Advancers 2,106
NYSE Decliners 863
Nasdaq Volume 4.46B
Nasdaq Advancers 3,219
Nasdaq Decliners 1,143
New Highs/Lows
07/21 07/24 07/25 07/26 07/27 07/28
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NYSE New Highs 94 103 123 113 151 119
NYSE New Lows 7 10 15 6 17 12
Nasdaq New Highs 106 93 130 123 171 126
Nasdaq New Lows 68 97 106 104 109 85
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TRADER'S TIP:
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TRADER'S TIP: "Invest In Learning" Someone once said that "Good judgment comes from experience, and experience comes from bad judgment." Humorous, yes, and often true. Just be aware that there is more than one way to benefit from "experience." All of us have learned some things the hard way. This is the most common method of learning - make a mistake, and pay for it. Thankfully, there is a better way - gaining good judgment from the experiences of OTHERS! Learning from the mistakes and successes of other traders is far superior to unintentionally investing in over-priced lessons of our own. **************************
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 - 4582.23 July 28, 2023 52-Week High: 4607.07 52-Week Low: 3491.58 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 4729.63 Resistance 2: 4651.12 Resistance 1: 4616.67 Pivot: 4572.62 Support 1: 4538.17 Support 2: 4494.11 Support 3: 4415.60 https://www.prorightline.com/rlch/072823SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, July 31, 2023: 31-Jul 8:30 am Chicago Business Barometer 31-Jul 2:00 pm Fed senior loan survey Tuesday, August 01, 2023: 01-Aug 10:00 am Job openings 01-Aug 10:00 am ISM manufacturing 01-Aug 10:00 am Construction spending Wednesday, August 02, 2023: 02-Aug 8:15 am ADP employment Thursday, August 03, 2023: 03-Aug 8:30 am Initial jobless claims 03-Aug 8:30 am U.S. Productivity (prelim) 03-Aug 10:00 am ISM services 03-Aug 10:00 am Factory orders Friday, August 04, 2023: 04-Aug 8:30 am U.S. nonfarm payroll 04-Aug 8:30 am U.S. unemployment rate 04-Aug 8:30 am U.S. hourly wages 04-Aug 8:30 am Hourly wages year over year 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: "Fire Drill" At some time or another, every online trader will experience a "technical problem." Computers, Internet Service Providers, charting tools, data feeds, broker access - even the phone and electrical power can break down temporarily. These interruptions are inevitable, so you might as well plan for them. Arrange a backup for every aspect of your trading process, then conduct a "fire drill" so you will know exactly what to do when the real disruptions come. You'll certainly be glad you did! ***********************************
STOCKS COVERED IN THIS ISSUE
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COMMUNICATION SERVICES SECTOR Fiverr International Ltd. (FVRR: Communication Services/Internet Content & Information) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in FVRR's narrowest trading range of the past seven sessions. With neither group able to take complete control on Friday, the stock's short term destiny is up for grabs. You can capitalize on this unusually tight condition by placing both a BUY order at 29.46 and a SELL order at 27.26. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.2 trailing stop. Tighten the stop to 1.1 once you have a 2.26 gain. FVRR closed Friday at 29.07. Earnings Report Date: Aug 03, 2023. Beta: 1.69. Market-Cap: 1.098B. Optionable. FINANCIAL SERVICES SECTOR Lemonade, Inc. (LMND: Financial Services/Insurance-Property & Casualty) - BULLISH BOUNCE. Up-trending stocks like LMND have a tendency to bounce their way skyward rather than travel higher in a straight line. After touching down to a moving average support level on Friday, LMND is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 22.21 if positive price action occurs. As always, follow your entry with a trailing stop. A 1.76 trailer should work well with LMND. Tighten it to 0.88 on a 1.8 gainer. Earnings Report Date: Aug 02, 2023. Beta: 1.38. Market-Cap: 1.511B. Optionable. HEALTHCARE SECTOR Quanterix Corporation (QTRX: Healthcare/Medical Devices) - 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 QTRX's case we will enter a BUY should it reach the 23.74 level, or a SELL short trade if it drops to 22.34. As usual a trailing stop is essential, 1.4 which should be tightened to 0.7 on a 2.32 gain. QTRX closed Friday at 23.34. Earnings Report Date: Aug 08, 2023. Beta: 1.33. Market-Cap: 873.119M. Optionable. TECHNOLOGY SECTOR Tigo Energy, Inc. (TYGO: Technology/Solar) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, TYGO fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 24.96, plan to buy shares at 25.53 and use a 2.28 trailing stop. Tighten the stop to 1.14 on a 3.2 gain. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.451B. Not Optionable. Ebix, Inc. (EBIX: Technology/Software-Application) - SQUEEZE PLAY. Trader indecision has put EBIX squarely in the center of a Bull versus Bear standoff. This tight spot should soon give way to a clear winner in the short-term, and we want to be in position for the move. To do that we've set a BUY entry at 29.32 and a SELL short entry at 26.9. Now it's up to EBIX to show us which entry will be filled. Once the trade is underway place a 2.42 trailing stop, which can be tightened to 1.21 after you achieve a 4.04 profit. EBIX closed on Friday at 28.30. Earnings Report Date: Aug 07, 2023. Beta: 2.43. Market-Cap: 874.51M. 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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"How Important Is A High Percentage of Winners?" I sometimes see advertisements for trading services that proudly proclaim an ultra-high percentage of winners. These ads remind me of my early trading days. Like most rookies, I thought that a high percentage of wins was necessary to be successful. A lot of water has flowed under the trading bridge since then. I've learned that things aren't always as they seem - especially in the stock market! Here's an example of what I mean - pretend for a minute that we're at the local county fair. As we walk down the fairway there are two games of chance side by side. The guy at the first booth leans over the counter and says, "Give it a try - a dollar a play, four out of 10 winners every time!" At the next booth the fellow behind the counter shouts, "Step right up - a buck a play, six out of 10 winners guaranteed." Assuming that we're there to have fun (and make a little money if we get lucky), which game should we play? At first glance it looks simple. Both games cost the same per play, but one has a higher percentage of winners. Of course we would take the six-out-of-ten game over the four-out-of-ten-game. But what if we took a step closer and found that the lower odds game paid out $4 for each winner, but the second game paid only $2. How would that affect our choice? Now lets do the math. The first game costs $10 for ten plays, with four winners at $4 each. That's 4 times $4, or $16 in winnings. Subtract the $10 to play and we're left with $6 profit. The second game costs the same to play, but we end up with six winners. That's 6 times the $2 payoff for each winner, or $12 total minus the $10 to play leaves us with $2. It's clear in this case that the lower percentage game pays off the most because each winner is twice the amount as in game two. In other words, the same amount invested in a lower percentage game produced three times the profits because the payoff per winner is higher. It's obvious in this example that the higher reward to risk ratio in the first game was a very important component in the profitability of the game. That exact same aspect is true in trading stocks. While our intuition may tell us that a trading method with a very high percentage of winners is always "better," logic indicates otherwise. Not only should we consider the percentage of winners when deciding which strategy to use, but we should also consider the reward to risk ratio. All things being equal, a high percentage approach will produce higher profits. However, there is a severe penalty for pushing too hard toward a high percentage of wins. The unpredictable and relatively efficient nature of the stock market insures that traders who follow this approach will be forced into two very damaging situations - smaller profits and larger losses. To maintain the high number of winners, traders are forced to limit the reward for each trade and take quick profits. Strategies that depend on small profits are capable of high winning percentages, yet to achieve this high win-to-loss ratio they also have to take on more risk per trade. If they limit the amount of risk or loss per trade, the percentage of winners drops too. A study of different trading systems by Keener Capital Management show that higher winning percentages are characteristic of the worst performing strategies. By contrast, strategies with lower winning percentages were the most profitable. In summary, a high percentage of wins don't necessarily mean more profit. Robust trading strategies require risk control tactics that include reasonable stop placement. Instead of trying to maintain a very high win-to-loss ratio, traders will benefit more by focusing on trade management to arrive at a profitable balance between risk and reward. A simple yet extremely effective guideline is to: - Limit losses to reasonable amounts - Use trailing stops to lock in accumulating profits - Let the winners grow! ======================================================================
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. |