July 7, 2022 - The RightLine Report
Notes From The Editor
Volatility can be a swing trader's best friend. The more the market gyrates, the more trade set-ups are created. And when stocks are moving faster, it takes less time for profitable set-ups to come to fruition.
Of course, this presents a double-edged sword. Take it from someone who cut his trading teeth in the wild and wooly late-90's; when stocks are moving quickly, you can lose money just as fast as you can make it.
The key to success in any fast-moving market is to take volatility into account before you enter a trade, when you're developing an exit plan. To do that, we turn again to our good friend Average True Range (ATR). As a general rule of thumb, it's a good idea to take a stock's average daily range - then double it to find the amount of your initial trailing stop. So if XYZ has an ATR of 2.15, you'd set your trailing stop to 4.30.
The double-ATR method reduces the chances that you'll get stopped out by intraday swings, but still offers protection if the stock starts to trend against you. But again, this is only a rule of thumb. Stop placement also needs to take other factors into account, such as likely support/resistance levels, trendlines, and the amount of upside or downside potential (reward) that the set-up offers.
On the most basic level, factoring in a stock's trading range is crucial because it recognizes that there's no one-size-fits-all approach to risk management. Since the trading landscape is always shifting, it's essential to adapt to those changes. This is important ground to cover, so in the near future we'll take a closer look at making ATRs and intelligent stop placement part of a winning strategy.
Here's to profits,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 07/07 07/07 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
NOG 24.28 1.15 24.95 23.25 1.7/0.85 4.5
DK 24.35 0.77 25.31 23.33 1.98/0.99 3.34
FUTU 52.20 2.29 52.97 4.3/2.15 6.74
ABBV 152.00 -0.53 154.58 9.12/4.56 6.74
YOU 22.27 0.22 23.16 21.36 1.8/0.9 4.14
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
Stocks were higher on Thursday, as the S&P 500 and Nasdaq posted a fourth consecutive bullish session in the face of recession concerns and tighter Fed Bank monetary policies. Economic news included a narrower trade deficit than expected and an uptick in unemployment claims. In equities, Merck & Co (MRK $93) is reportedly in talks to buy Seagen(SGEN $178) in a $40-billion deal. Gold and oil advanced upward in price, while treasuries were lower, while the USD/dollar finished near even.
Jul 6, 2022 Jul 7, 2022
-------------------- --------------------
Dow 31,037.68 69.86 31,384.55 346.87
Nasdaq 11,361.85 39.61 11,621.35 259.49
S&P 500 3,845.08 13.69 3,902.62 57.54
NYSE Volume 4.46B 4.15B
NYSE Advancers 1,240 2,494
NYSE Decliners 2,013 752
Nasdaq Volume 4.85B 4.72B
Nasdaq Advancers 1,947 3,426
Nasdaq Decliners 2,646 1,124
New Highs/Lows
06/30 07/01 07/04 07/05 07/06 07/07
--------------------------------------------
NYSE New Highs 12 12 0 4 12 11
NYSE New Lows 342 205 0 313 182 59
Nasdaq New Highs 18 15 0 20 25 24
Nasdaq New Lows 535 318 0 477 209 118
Stocks Covered Today Stock Splits
TRADER'S TIP: "Small Stocks & Big Moves"
Studies show that most stocks which increase in price by ten times or more are "small-cap" or "micro-cap." This is due to the relatively low number of shares available. As demand for the stock increases, the price rises dramatically. If you want big explosive moves, think small- cap.
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 - 3902.62 July 7, 2022
52-Week High: 4818.62
52-Week Low: 3636.85
Daily Trend: UP
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
NASDAQ Composite - 11621.35 July 7, 2022
52-Week High: 16212.23
52-Week Low: 10565.14
Daily Trend: UP
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 - 31384.55 July 7, 2022
52-Week High: 36952.65
52-Week Low: 29653.27
Daily Trend: UP
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
Stocks Covered Today Stock Splits
Market Calendar
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
Stocks Covered Today Stock Splits
TRADER'S TIP: "Ten Feet Tall and Bullet Proof"
The height of a support or resistance zone determines its strength. For example a thick congestion zone is more resistant than a thin one. As a rule of thumb a zone height equal to 1% of the current price is considered minor, 3% is intermediate, and 7% or more is major support or resistance.
Stocks Covered in This Issue
ENERGY SECTOR
Northern Oil and Gas, Inc. (NOG: Energy/Oil & Gas E&P) - SQUEEZE PLAY. A look at NOG'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 24.95 and a SELL short trigger at 23.25. Once NOG shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.7 and tighten to 0.85 on a 4.5 gain. NOG closed Thursday at 24.28. Earnings Report Date: Aug 03, 2022. Beta: 2.16. Market-Cap: 1.934B. Optionable.
Delek US Holdings, Inc. (DK: Energy/Oil & Gas Refining & Marketing) - SQUEEZE PLAY. Thursday's trading action forced DK'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 DK 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 25.31 if DK moves higher, and place your order to SELL short at 23.33 if price declines to that level. As usual follow your entry with a trailing stop, 1.98 should be sufficient. Reduce your stop to 0.99 on a 3.34 gain. DK closed Thursday at 24.35. Earnings Report Date: Aug 04, 2022. Beta: 1.63. Market-Cap: 1.723B. Optionable.
FINANCIAL SERVICES SECTOR
Futu Holdings Limited (FUTU: Financial Services/Capital Markets) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. FUTU's reaction to support on Thursday created a Bullish Bounce setup with a BUY entry trigger at 52.97. Use a 4.3 trailing stop, which should work well with FUTU's typical daily range. Tighten it to 2.15 on a 6.74 profit. FUTU closed at 52.20 on Thursday. Earnings Report Date: Aug 09, 2022. Beta: 0.45. Market-Cap: 7.673B. Optionable.
HEALTHCARE SECTOR
AbbVie Inc. (ABBV: Healthcare/Drug Manufacturers-General) - BULLISH BOUNCE. Some people hear of a stock that's performing nicely and then buy it without any regard for timing the entry. This approach usually leaves money on the table, money that could just as well be added to profits. The Bullish Bounce setup provides a well timed entry and reduces exposure to risk by placing both the entry trigger and exit stop near the bottom of the bounce. We have an opportunity to use this approach with ABBV which met our setup criteria on Thursday. The BUY trigger for this trade is at 154.58, and the trailing stop is sized at 9.12. Resize the stop to 4.56 upon collecting a 6.74 point gain. ABBV closed Thursday at 152.00. Earnings Report Date: Jul 28, 2022. Beta: 0.75. Market-Cap: 268.601B. Optionable.
TECHNOLOGY SECTOR
Clear Secure, Inc. (YOU: Technology/Software-Application) - SQUEEZE PLAY. Thursday's narrow price range has created a potentially profitable setup in YOU, 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 23.16 and a SELL short entry at 21.36. Let YOU's price action determine your long or short entry. Once the order is filled, place a 1.8 trailing stop, and tighten it to 0.9 upon getting a 4.14 gain. YOU closed Thursday at 22.27. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 3.337B. 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
---------------- ------- -------- ------- ------ -------
Gamestop GME 7/7/2022 7/22/2022 4-for-1 Yes
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.
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