July 6, 2023 - The RightLine Report
Notes From The Editor
Tapping Into the Power of Relative Strength Analysis
The broader market's direction tends to have the largest impact on the movement of any given stock. However, it's difficult to design a trading strategy solely around this tendency. The reason is simple: individual equities don't usually march in lock-step with the overall market. They sometimes underperform or outperform, or "fade" the major indices by moving entirely in the opposite direction.
A common-sense tool called relative strength analysis can help us draw useful conclusions when stocks diverge from the broader market. The idea is simple: when you're looking at a stock, compare it to a chart of the S&P 500 (the best gauge of overall market performance). How does it look - especially over the past month or so? Has the stock roughly mirrored the S&P's price action? Has it moved in the same direction, but at a faster or slower pace? Or has it faded the index with a move in the opposite direction?
Just by eyeballing the two charts - the index and the stock - you can reach some interesting conclusions about the stock's strength (or lack thereof). If shares are outperforming the S&P 500 during a bullish period, that's a good sign that more buying might be in store over the near-term. Similarly, an underperforming uptrend in a rising market (also called relative weakness) would be a bearish sign.
But wait...you don't have to stop with just looking at the S&P 500. Relative strength analysis can also be used with sector indices. This is a good idea, as it accounts for sector-specific strength or weakness. For example, you could compare Intel (INTC) to not only the S&P 500, but also the semiconductor index (SOX). This would give you a deeper understanding of how INTC is performing versus the overall chip sector.
You can even perform this analysis with two stocks. This comes in handy when you're torn between two similar trade set-ups in the same sector. To take the INTC example one step further, you might compare it to, say, Advanced Micro Devices (AMD) to see which one has been stronger. The one showing relative strength would probably be a better candidate for a long trade.
Some charting programs offer a simple way of charting relative strength; a rising line shows that the stock in question is outperforming, while a falling line shows relative weakness. But oftentimes, the best tool is your eyeballs! Compare, contrast, and drill down to find your best trade.
Here's to profits,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 07/06 07/06 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
CTGO 23.01 0.09 23.65 21.7 1.95/0.98 3.12
BMEA 21.55 -0.90 22.41 20.75 1.66/0.83 4.7
BHVN 22.91 -0.23 23.32 21.8 1.52/0.76 2.98
CDRE 21.96 0.17 22.32 1.55/0.78 1.14
AAPL 191.81 0.47 194.54 11.07/5.54 5.88
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
Market Summary
On Thursday, US stocks experienced a widespread decline following the release of a jobs report that surpassed expectations, raising concerns among traders and investors about the potential need for higher interest rates to curb inflationary pressures. Additionally, short-term Treasury yields reached their highest levels in 16 years in response to the data.
The report, issued by payroll processor ADP, revealed that the economy added 497,000 private sector jobs in June, more than double the anticipated number and marking the largest monthly gain since July 2022. In a separate release, the government's Job Openings and Labor Turnover Survey (JOLTS) indicated a 2.6% increase in the "quit" rate, suggesting that more workers are confident enough in the labor market to leave their current positions.
Typically, a robust labor market would be viewed as a positive indicator for the overall economy. However, for a Federal Reserve focused on managing inflation, such strength poses a challenge, particularly when price increases continue to exceed the central bank's long-term target rate of 2%.
Given the unexpected impact of Thursday's jobs figures, investors are likely to closely monitor the release of the Labor Department's employment report for June, scheduled for Friday morning.
Despite crude oil futures reaching a two-week high, the energy sector performed poorly, ranking among the weakest sectors. Regional banks and Consumer Discretionary stocks also experienced declines. Furthermore, volatility expectations, as indicated by the VIX, surged to their highest level since late May.
Jul 5, 2023 Jul 6, 2023
-------------------- --------------------
Dow 34,288.64 -129.83 33,922.26 -366.38
Nasdaq 13,791.65 -25.12 13,679.04 -112.61
S&P 500 4,446.82 -8.77 4,411.59 -35.23
NYSE Volume 3.49B 3.68B
NYSE Advancers 869 462
NYSE Decliners 2,066 2,521
Nasdaq Volume 5.35B 6.12B
Nasdaq Advancers 1,534 1,034
Nasdaq Decliners 2,850 3,349
New Highs/Lows
06/29 06/30 07/03 07/04 07/05 07/06
--------------------------------------------
NYSE New Highs 149 225 93 0 53 29
NYSE New Lows 19 16 7 0 13 34
Nasdaq New Highs 111 169 85 0 67 36
Nasdaq New Lows 120 76 61 0 66 140
Stocks Covered Today Stock Splits
TRADER'S TIP: "The Importance of Convergence"
When charting a stock or index, always be on the lookout for technical convergence. Consider it very important anytime two or more trend lines, moving averages, pivotal highs or lows, and other support or resistance levels show up in the same price zone.
Convergence multiplies the supportive or resistive strength of the combined elements, and increases the likelihood of a price reversal at that junction. Whenever a convergence zone isn't able to deflect price, the breakthrough indicates the trend in place is gaining momentum.
Use this insight to your advantage - from the moment you begin evaluating the strength of a potential setup, all the way to the point you exit the trade. Each new convergence along the way provides you with extremely valuable information!
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 - 4411.59 July 6, 2023
52-Week High: 4458.48
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4673.11
Resistance 2: 4542.71
Resistance 1: 4496.54
Pivot: 4412.31
Support 1: 4366.14
Support 2: 4281.91
Support 3: 4151.51
NASDAQ Composite - 13679.04 July 6, 2023
52-Week High: 13864.06
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 14610.85
Resistance 2: 14128.59
Resistance 1: 13958.25
Pivot: 13646.33
Support 1: 13475.99
Support 2: 13164.07
Support 3: 12681.81
Dow Industrials - 33922.26 July 6, 2023
52-Week High: 34712.28
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 35875.81
Resistance 2: 35018.78
Resistance 1: 34713.19
Pivot: 34161.75
Support 1: 33856.16
Support 2: 33304.72
Support 3: 32447.69
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Friday, July 07, 2023: 07-Jul 8:30 am U.S. employment report 07-Jul 8:30 am U.S. unemployment rate 07-Jul 8:30 am U.S. hourly wages 07-Jul 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
Stocks Covered Today Stock Splits
TRADER'S TIP: "Mistakes"
"The greatest mistake you can make in life is to be continually fearing you will make one."
~ Elbert Hubbard
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
Contango Ore, Inc. (CTGO: Basic Materials/Gold) - SQUEEZE PLAY. Thursday's trading action forced CTGO'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 CTGO 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 23.65 if CTGO moves higher, and place your order to SELL short at 21.7 if price declines to that level. As usual follow your entry with a trailing stop, 1.95 should be sufficient. Reduce your stop to 0.98 on a 3.12 gain. CTGO closed Thursday at 23.01. Earnings Report Date: Aug 29, 2023. Beta: 0.52. Market-Cap: 179.478M. Not Optionable.
HEALTHCARE SECTOR
Biomea Fusion, Inc. (BMEA: Healthcare/Biotechnology) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in BMEA, 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 22.41 and a SELL short entry at 20.75. Let BMEA's price action determine your long or short entry. Once the order is filled, place a 1.66 trailing stop, and tighten it to 0.83 upon getting a 4.7 gain. BMEA closed Thursday at 21.55. Earnings Report Date: N/A. Beta: -1.38. Market-Cap: 762.894M. Optionable.
Biohaven Ltd. (BHVN: Healthcare/Biotechnology) - SQUEEZE PLAY. A look at BHVN'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 23.32 and a SELL short trigger at 21.8. Once BHVN shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.52 and tighten to 0.76 on a 2.98 gain. BHVN closed Thursday at 22.91. Earnings Report Date: Aug 03, 2023. Beta: N/A. Market-Cap: 1.563B. Optionable.
INDUSTRIALS SECTOR
Cadre Holdings, Inc. (CDRE: Industrials/Aerospace & Defense) - BULLISH BOUNCE. The charts for CDRE show that despite the downward pressure from sellers recently, the weekly uptrend is still going strong. Buyers showed up again on Thursday, 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 22.32, and follow your entry with a trailing stop of 1.55. Tighten it to 0.78 when a 1.14 profit is reached. CDRE ended the latest session at 21.96. Earnings Report Date: Aug 10, 2023. Beta: N/A. Market-Cap: 825.389M. Optionable.
TECHNOLOGY SECTOR
Apple Inc. (AAPL: Technology/Consumer Electronics) - BULLISH BOUNCE. AAPL's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Thursday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move AAPL back in step with the bullish weekly trend, so our BUY entry trigger is set at 194.54. Once you hold a position, trail a stop of 11.07. Tighten it to 5.54 on a 5.88 gain. AAPL closed at 191.81 on Thursday. Earnings Report Date: Jul 26, 2023. Beta: 1.29. Market-Cap: 3.059T. 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
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.
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