Notes From The Editor

One of the side effects of being a trader is that you start to see aspects of the market reflected in all sorts of "real-life" situations. Perhaps this isn't so surprising, when you consider that the equity world - while seemingly chaotic - is ultimately guided by humans and human nature.

I had one of these moments while talking to a friend who is a dedicated martial artist. He practices Aikido - a style largely based on the concept of redirecting the energy of an incoming attack for the purposes of self-defense. Aikido also asserts that this basic principle can be applied to other areas of life. That naturally got me thinking about stocks.

Often you'll hear traders talk about the stock market as if it was a competitive arena where an opponent - the "other guy" - must always be outsmarted or bested in order to score a profitable trade.

I think this perspective is a bit simplistic. It might be more applicable to institutional traders who throw massive amounts of money around. But for us retail traders, the market is going to move how it wants to - regardless of what we do. So instead of thinking of the movement as some sort of competitive event, I prefer to view it a constantly changing directional flow which I can quickly adapt to.

Still, the "energy redirection" principle seems applicable here. It's helpful to think of stock charts as not simply time/price representations, but gauges of energy and momentum. For every strong price move, there is often a strong countermove. These counter- reactions often produce the best trading set-ups - rebounds from support, reversals from resistance, and so on.

Momentum and energy can also be represented by various oscillators. The daily stochastics and MACD are among the best indicators for predicting or confirming momentum changes. When both price action and the oscillators are signaling a change, there's a high probability of a sustained price move that can yield profits.

Some market participants base their entire trading style on redirection. With a "contrarian" approach, they wait for a big move, then take a trade in the opposite direction once a retracement begins. This style avoids breakouts and breakdowns, in favor of momentum reversals.

After talking to my friend, I've seriously thought about trying my hand (and feet) at Aikido. There's something appealing about combining the physical aspect with its philosophical outlook ... and it just might help me become a better trader.

Here's to profits,

Kent Barton
Senior Analyst

Quick List

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

KSS       20.30     -0.68     21.15     19.43        1.72/0.86      3.58
HGV       21.10     -0.45     21.62     20.21        1.41/0.70      2.50
WHD       20.16     -0.51     20.72     19.28        1.44/0.72      2.70
BHB       20.37     -0.31     21.03     19.71        1.32/0.66      2.28

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 access to the Risk Calculator, go to http://www.rightline.net and login to the Member's area.

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

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Market Summary

Stocks closed lower on Tuesday following the release of economic data from Europe that was softer than expected and uncertainty over the impact of China's new security law in Hong Kong. Other data showed the demand in May for labor in the USA rose unexpectedly. In equities, shares of Novavax (NVAX $104) surged over 30% higher after the company was awarded $1.6 billion from the government's biotech program named Operation Warp Speed, with a goal to begin delivering millions of doses of a safe vaccine for COVID-19 as early as late 2020. Gold and the USD/dollar finished the session higher, oil prices remained the same, while treasury yields were mostly lower.

                        Jul 6, 2020            Jul 7, 2020    
                  --------------------   --------------------
Dow                    26,287  +459.67        25,890  -396.85
Nasdaq                 10,434  +226.02     10,343.89   -89.76
S&P 500                 3,180   +49.71         3,145   -34.40

NYSE Volume                      4.85B                  4.67B
NYSE Advancers                    2084                    710
NYSE Decliners                     916                   2281

Nasdaq Volume                    4.55B                  4.36B
Nasdaq Advancers                  2179                    908
Nasdaq Decliners                  1164                   2407

                                 New Highs/Lows

                   06/30  07/01  07/02  07/03  07/06  07/07
                 --------------------------------------------
NYSE New Highs        58     50     91      0     96     55
NYSE New Lows          6      2      3      0      3      5
Nasdaq New Highs     102    110    177      0    220    128
Nasdaq New Lows       16     14     11      0     19     19
   

TRADER'S TIP: "What Is A Warrant?"

A warrant is a certificate entitling the holder to buy a specific number of shares at a specific price, usually above the current market price at the time of issuance, for an extended period anywhere from a few years to forever. Corporations often bundle warrants with another class of security - such as preferred stock - to enhance the marketability of the other class. Warrants are like call options, but with much longer time spans - sometimes years.

Warrants are offered by corporations, while exchange-traded call options are not issued by firms. If the price of the security rises to above that of the warrant's exercise price, then the investor can buy the security at the warrant's exercise price and resell it for a profit. Otherwise, the warrant will simply expire or remain unused. Warrants are listed on options exchanges and trade independently of the security with which it was issued.

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Boost Your Profits With Moving Averages".

S&P 500 - 3145.32 July 7, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3430.79
Resistance 2: 3264.67
Resistance 1: 3197.36
Pivot: 3098.55
Support 1: 3031.24
Support 2: 2932.43
Support 3: 2766.31


NASDAQ Composite - 10343.89 July 7, 2020

52-Week High: 10518.98
52-Week Low: 6631.42
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 11354.06
Resistance 2: 10707.30
Resistance 1: 10457.48
Pivot: 10060.54
Support 1: 9810.72
Support 2: 9413.78
Support 3: 8767.02
        
Dow Industrials - 25890.18 July 7, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 27925.95
Resistance 2: 26817.64
Resistance 1: 26322.50
Pivot: 25709.33
Support 1: 25214.19
Support 2: 24601.02
Support 3: 23492.71
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, July 06, 2020:
06-Jul  9:45 am   Markit services PMI (final)
06-Jul  10 am   ISM nonmanufacturing index

Tuesday, July 07, 2020:
07-Jul  10 am   Job openings

Wednesday, July 08, 2020:
08-Jul   3 pm   Consumer credit

Thursday, July 09, 2020:
09-Jul  8:30 am   Initial jobless claims (regular state program)
09-Jul  8:30 am   Continuing jobless claims (regular state program)
09-Jul  10 am   Wholesale inventories

Friday, July 10, 2020:
10-Jul  8:30 am   Producer price index (final demand)



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

TRADER'S TIP: "What's Your Focus?"

Although most traders give the "enter" side of the trading equation a high priority, the "exit" side is far more important. Inexperienced market players often watch their positions go up, then slide all the way back down. It's easy to forget that paper profits only become "real" when they are converted to cash. Profitable exit strategies require active management, and deserve much more attention than entries.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Kohl's Corporation (KSS: Consumer Cyclical/Department Stores) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into KSS. A move to the upside will trigger our BUY entry at 21.15, while a drop to 19.43 will trigger our SELL short entry. Follow your position with a 1.72 trailing stop. Tighten the stop to 0.86 once you have a 3.58 gain. KSS closed Tuesday at 20.30. Earnings Report Date: Aug 18, 2020. Beta: 1.76. Market-Cap: 3.202B. Optionable.

Hilton Grand Vacations Inc. (HGV: Consumer Cyclical/Resorts & Casinos) - SQUEEZE PLAY. Trader indecision has put HGV 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 21.62 and a SELL short entry at 20.21. Now it's up to HGV to show us which entry will be filled. Once the trade is underway place a 1.41 trailing stop, which can be tightened to 0.70 after you achieve a 2.50 profit. HGV closed on Tuesday at 21.10. Earnings Report Date: Jul 30, 2020. Beta: 2.26. Market-Cap: 1.793B. Optionable.

ENERGY SECTOR

Cactus, Inc. (WHD: Energy/Oil & Gas Equipment & Services) - SQUEEZE PLAY. WHD is caught in a dilemma. The stock's compressed price range on Tuesday has resulted in a condition comparable to a wound up rubber band. We anticipate that this undecided equity will take off soon, but with the direction still in question we'll let upcoming market action tell us whether to buy shares or sell short. WHD is now at 20.16. We can capture price action either way by placing a BUY trigger at 20.72 and a SELL short trigger at 19.28. Once WHD reveals its direction, enter your triggered order and disregard the other one. As soon as your position is in place, follow up with a trailing stop of 1.44. When you acquire a 2.70 profit, tighten the stop to 0.72. Earnings Report Date: Aug 03, 2020. Beta: 2.49. Market-Cap: 1.519B. Optionable.

FINANCIAL SERVICES SECTOR

Bar Harbor Bankshares (BHB: Financial Services/Banks-Regional) - 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 BHB's case we will enter a BUY should it reach the 21.03 level, or a SELL short trade if it drops to 19.71. As usual a trailing stop is essential, 1.32 which should be tightened to 0.66 on a 2.28 gain. BHB closed Tuesday at 20.37. Earnings Report Date: N/A. Beta: 0.99. Market-Cap: 316.421M. Not 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  
---------------- -------     --------    -------     ------  -------   

Currently there are no upcoming stock splits on the major US exchanges.
    

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 to all RightLine subscribers. For access, go to http://www.rightline.net and login to the Member's area.

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