July 5, 2022 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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Trading is a game of probabilities. Every experienced trader knows that when it comes to the market, there are very few things that can be depended on with absolute certainty. However, even though the market's tendencies and traits are not completely reliable in every situation, they do present a powerful framework that we can use to recognize opportunities with a high probability of success.

For example, the market's fondness for bouncing at significant support levels such as the 22, 50, 100, and 200 EXPMA -- Exponential Moving Average -- is well documented. The 50 period monthly and the 200 period weekly moving averages aren't as well known, yet they carry similar support and resistance significance.

Experience reveals the realities that trade set-ups don't always produce the desired results. However there are still two very important lessons to be learned from the story told by the charts -- even when a trade setup doesn't follow through as anticipated.

The first has to do with the relationship between trade Set-ups and Triggers. For example a bounce setup should be specific enough to leave no doubt that a rebound is likely to occur. "Likely" doesn't mean "definitely." That's why the Trigger is so important in any type of trade setup.

The Trigger should always confirm the price direction that is indicated by the Set-up. Price must clearly move in the intended direction before a position is entered -- usually beyond a resistance level such as the high or opening price of the Set-up day. Sometimes price action provides a Set-up based on reversal conditions that signal a potential bounce. However, there are times when the price action does NOT confirm that the bounce is genuine. Instead of continuing higher above the previous session high, prices stall, then drop back, perhaps below the low of the day. Whenever the Trigger does not confirm an entry into a bounce Set-up, the trade should not be entered.

Which brings us to the second lesson. Just as stocks that break out above previous resistance have a very good chance of going even higher, those that fall beneath support have an increased chance of heading even lower.

Bounce trades that fail to materialize will often produce excellent short setups. Once the low of a previous session gives way, the moving average providing support will also often cave in. Once that happens, prices will normally plunge even lower as a significant technical rule comes into play ... "What once was support becomes resistance."

Bottom Line: Regardless of the specifics for each trade Set-up and Trigger, the Trigger should always confirm the price direction that is indicated by the Set-up. When price doesn't reach the trigger, stay out of the trade and be on the lookout for a break-down of support. This is where you will find some of the best shorting opportunities.

Trade well,

Thomas Sutton, Editor 

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                           "QUICK LIST"
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Stock     07/05     07/05      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

SCHN      31.02     -1.29     31.58     29.43        2.15/1.08      3.44
BYDDY     80.21      0.49     81.32                  5.69/2.85       3.7
CME      204.36      0.08    207.16                 13.69/6.85     11.82
XOMA      21.00      0.15     21.56     19.41        2.15/1.08      3.16
GBT       33.28      0.47     33.78     30.98          2.8/1.4       3.5


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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Stocks were higher on Tuesday following a long Independence Day weekend, as traders set aside recession concerns and focused on light economic news that included factory orders well above projections. In equities, Exxon Mobil (XOM $85) announced an upbeat earnings outlook for the second quarter, while Tesla (TSLA $699) reported fewer deliveries than expected and Ford Motor Company (F $11) also missed quarterly sales forecasts. Oil prices, treasuries and gold were lower, the USD/dollar set a 20-year high. 


                       Jul 4, 2022            Jul 5, 2022    
                  --------------------   --------------------
Dow                    Closed        0     30,967.82  -129.44
Nasdaq                 Closed        0     11,322.24   194.39
S&P 500                Closed        0      3,831.39     6.06

NYSE Volume                          0                  5.21B
NYSE Advancers                       0                  1,469
NYSE Decliners                       0                  1,786

Nasdaq Volume                        0                  5.06B
Nasdaq Advancers                     0                  2,720
Nasdaq Decliners                     0                  1,981

                                 New Highs/Lows

                   06/28  06/29  06/30  07/01  07/04  07/05
                 --------------------------------------------
NYSE New Highs        12      9     12     12      0      4
NYSE New Lows         89    199    342    205      0    313
Nasdaq New Highs      34     13     18     15      0     20
Nasdaq New Lows      191    346    535    318      0    477

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                              TRADER'S TIP:  
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TRADER'S TIP: "Trend, or Not?"

The trend can be an elusive rascal and is subject to many definitions. One thing is for certain - determining "the trend" requires an associated reference point, such as time frame or number of bars. To locate short-term trends on a daily chart, consider using the 10-EMA (Exponential Moving Average). If the slope is up, you can be pretty sure that the daily trend is too, and if it's down, a downtrend is likely underway. 
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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/ 
S&P 500 - 3831.39 July 5, 2022

52-Week High: 4818.62
52-Week Low: 3636.85
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4251.00
Resistance 2: 4043.81
Resistance 1: 3934.57
Pivot: 3836.62
Support 1: 3727.38
Support 2: 3629.43
Support 3: 3422.24
https://www.prorightline.com/rlch/070522SPX.jpg

NASDAQ Composite - 11322.24 July 5, 2022

52-Week High: 16212.23
52-Week Low: 10565.14
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 12873.40
Resistance 2: 12045.92
Resistance 1: 11586.88
Pivot: 11218.45
Support 1: 10759.40
Support 2: 10390.96
Support 3: 9563.49


Dow Industrials - 30967.82 July 5, 2022

52-Week High: 36952.65
52-Week Low: 29653.27
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 34044.51
Resistance 2: 32591.29
Resistance 1: 31844.27
Pivot: 31138.07
Support 1: 30391.05
Support 2: 29684.85
Support 3: 28231.63


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                             MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern): 
Monday, July 04, 2022:
04-Jul          Independence Day holiday. None scheduled

Tuesday, July 05, 2022:
05-Jul  10 am   Factory orders
05-Jul  10 am   Core capital equipment orders revision

Wednesday, July 06, 2022:
06-Jul  9:45 am   
06-Jul  10 am   ISM services index
06-Jul  10 am   Job openings
06-Jul  10 am   Quits

Thursday, July 07, 2022:
07-Jul  8:15 am   ADP employment report (monthly change)
07-Jul  8:30 am   Initial jobless claims
07-Jul  8:30 am   Continuing jobless claims
07-Jul  8:30 am   Foreign trade balance

Friday, July 08, 2022:
08-Jul  8:30 am   Nonfarm payrolls (monthly change)
08-Jul  8:30 am   Unemployment rate
08-Jul  8:30 am   Average hourly earnings
08-Jul  8:30 am   Labor force participation rate, 25-54
08-Jul  10 am   Wholesale inventories revision

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: "The Pre-Split Run"

One of the more powerful trades that we can participate in is "the pre- split run." The pre-split run is the phenomenon we often see when a stock makes a strong move higher in the days after a split announcement and before the stock actually splits. The positive publicity surrounding a stock split announcement attracts new buyers. Active investors routinely purchase these stocks prior to the split in anticipation of the pre-split run. This increased buying often moves prices higher, so be sure to keep the Upcoming Splits List handy when you are trading. You can find it in each edition of the RightLine Report or go to our web site at: http://www.rightline.net/splits/announced.html. 

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                      STOCKS COVERED IN THIS ISSUE    
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BASIC MATERIALS SECTOR

Schnitzer Steel Industries, Inc. (SCHN: Basic Materials/Steel) - SQUEEZE PLAY. SCHN is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 31.58 and a SELL short entry at 29.43. Once your trade is filled, enter a 2.15 trailing stop. Tighten it to 1.08 after a 3.44 gain. SCHN closed on Tuesday at 31.02. Earnings Report Date: N/A. Beta: 1.51. Market-Cap: 851.406M. Optionable.

CONSUMER CYCLICAL SECTOR

BYD Company Limited (BYDDY: Consumer Cyclical/Auto Manufacturers) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 80.21, BYDDY is on our radar for a BUY entry at 81.32. If you purchase shares of BYDDY, be sure to also place a trailing stop of 5.69. Snug it up to 2.85 on a 3.7 gain. Earnings Report Date: N/A. Beta: 0.65. Market-Cap: 133.844B. Not Optionable.

FINANCIAL SERVICES SECTOR

CME Group Inc. (CME: Financial Services/Financial Data & Stock Exchanges) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. CME's current price action near moving average support signals a potential BUY entry at 207.16, followed by a 13.69 trailing stop which can be tightened to 6.85 upon earning 11.82. CME closed Tuesday at 204.36. Earnings Report Date: Jul 27, 2022. Beta: 0.48. Market-Cap: 73.451B. Optionable.

HEALTHCARE SECTOR

XOMA Corporation (XOMA: Healthcare/Biotechnology) - SQUEEZE PLAY. Tuesday's trading session left XOMA 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 21.56 and your SELL short trigger at 19.41. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 2.15 trailing stop. Once you have a 3.16 profit, reduce the stop to 1.08. Earnings Report Date: Aug 03, 2022. Beta: 1.08. Market-Cap: 239.839M. Optionable.

Global Blood Therapeutics, Inc. (GBT: Healthcare/Biotechnology) - SQUEEZE PLAY. Traders are feeling the pressure as GBT's intra-day price range on Tuesday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 33.78 and a SELL short entry at 30.98. GBT's price movement will decide which entry is filled. As soon as you're in the trade, enter a 2.8 trailing stop. Tighten it to 1.4 after you get a 3.5 gain. GBT closed Tuesday at 33.28. Earnings Report Date: Aug 01, 2022. Beta: 1.11. Market-Cap: 2.166B. 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  
---------------- -------     --------    -------     ------  -------   
Amazon            AMZN       3/9/2022   6/6/2022   20-for-1   Yes

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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