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July 9, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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Stock trading is much more rewarding when you view it as a means of self-improvement rather than just a way to earn money. It makes sense when you think about it. Money is a result of learning to trade well, and the process of learning to trade well requires us to improve on a number of important levels.
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"QUICK LIST"
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Stock 07/08 07/08 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
GRBK 21.43 0.15 21.88 20.47 1.41/0.71 2.18
TRDA 11.77 0.87 12.05 1.96/0.98 2.6
TARS 14.71 -0.15 15.11 1.32/0.66 1.66
ACLX 20.19 0.22 20.66 18.94 1.72/0.86 6.5
IGMS 20.75 -0.08 21.61 19.79 1.82/0.91 2.98
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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The major US stock indices were mixed on Friday, as he S&P 500 and Dow closed slightly lower, while the Nasdaq finished in bullish territory. In economic news, the June nonfarm payroll reportshowed job growth to be much stronger than predicted and the unemployment rate remained low, yet labor force participation surprisingly dropped. In addition, the final May report on wholesale inventories was revised to a smaller pace of growth than initially released and consumer credit declined in May. In equity headlines, Levi Strauss & Co (LEVI $17) beat quarterly profit estimates and increased its dividend, while Costco Wholesale (COST $502) announced strong June sales numbers. The USD/dollar and treasuries were lower, gold and oil prices were higher. Friday On The Week
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Dow 31,338.15 -46.40 +240.89 0.77%
Nasdaq 11,635.31 13.96 +507.46 4.56%
S&P 500 3,899.38 -3.24 +74.05 1.94%
NYSE Volume 3.59B
NYSE Advancers 1,498
NYSE Decliners 1,708
Nasdaq Volume 4.57B
Nasdaq Advancers 2,467
Nasdaq Decliners 2,089
New Highs/Lows
07/01 07/04 07/05 07/06 07/07 07/08
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NYSE New Highs 12 0 4 12 11 7
NYSE New Lows 205 0 313 182 59 56
Nasdaq New Highs 15 0 20 25 24 27
Nasdaq New Lows 318 0 477 209 118 83
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TRADER'S TIP:
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TRADER'S TIP: "Get Rich Quick" Only an extremely tiny percentage of individuals who enter the stock market to get rich quick ever accomplish that goal. Most of them bust our rather quickly. This is due to the tendency for "get rich quick" folks to accept way too much risk - usually by putting too much of their account into one position. **************************
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 - 3899.38 July 8, 2022 52-Week High: 4818.62 52-Week Low: 3636.85 Daily Trend: UP Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 4206.19 Resistance 2: 4029.75 Resistance 1: 3964.56 Pivot: 3853.31 Support 1: 3788.12 Support 2: 3676.87 Support 3: 3500.43 https://www.prorightline.com/rlch/070822SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, July 11, 2022: 11-Jul 11 am 3-year inflation expectations Tuesday, July 12, 2022: 12-Jul 6 am NFIB small-business index Wednesday, July 13, 2022: 13-Jul 8:30 am Consumer price index (monthly) 13-Jul 8:30 am Core CPI (monthly) 13-Jul 8:30 am CPI (year-over-year) 13-Jul 8:30 am Core CPI (year-over-year) 13-Jul 2 pm Beige book 13-Jul 2 pm Federal budget (comparison vs. year-ago) Thursday, July 14, 2022: 14-Jul 8:30 am Producer price index final demand (monthly) 14-Jul 8:30 am Initial jobless claims 14-Jul 8:30 am Continuing jobless claims Friday, July 15, 2022: 15-Jul 8:30 am Retail sales 15-Jul 8:30 am Retail sales excluding vehicles 15-Jul 8:30 am Import price index 15-Jul 8:30 am Empire state manufacturing index 15-Jul 9:15 am Industrial production index 15-Jul 9:15 am Capacity utilization 15-Jul 10 am UMich consumer sentiment index (preliminary) 15-Jul 10 am UMich 5-year inflation expectations (preliminary) 15-Jul 10 am Business inventories 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 Two Basic Types of Technical Indicators" Technical indicators use math calculations to measure the relationship of current price action to previous prices. Most indicators fall under one of two categories - Trend-Following or Oscillators. Moving Averages and MACD are two well-known trend-following indicators, while Stochastics and RSI are both popular Oscillators. Trend-Following indicators react slowly, and look far into the past to help uncover the future. On the other hand, Oscillators respond quickly to short-term price fluctuations, moving up and down between Overbought and Oversold conditions. There are advantages and disadvantages to each type of indicator, so it is best to use indicators from both groups. This allows the negative features to offset each other while leaving the positive aspects intact. ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR Green Brick Partners, Inc. (GRBK: Consumer Cyclical/Residential Construction) - SQUEEZE PLAY. Trader indecision has put GRBK 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 21.88 and a SELL short entry at 20.47. Now it's up to GRBK to show us which entry will be filled. Once the trade is underway place a 1.41 trailing stop, which can be tightened to 0.71 after you achieve a 2.18 profit. GRBK closed on Friday at 21.43. Earnings Report Date: Aug 01, 2022. Beta: 1.47. Market-Cap: 1.038B. Optionable. HEALTHCARE SECTOR Entrada Therapeutics, Inc. (TRDA: Healthcare/Biotechnology) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. TRDA's behavior on Friday could very well be a sign that a new bounce is underway. Place a BUY trigger at 12.05. In the event your trigger is met, also place a 1.96 trailing stop which can be trimmed down to 0.98 when you have a 2.6 profit. TRDA closed Friday at 11.77. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 369.173M. Not Optionable. Tarsus Pharmaceuticals, Inc. (TARS: Healthcare/Biotechnology) - BULLISH BOUNCE. Another bullish bouncer, TARS appears ready to resume trading in an uptrend after recent selling forced the stock lower for several days. Friday's positive price action near Moving Average support says it's time to BUY shares if TARS reaches our entry trigger set at 15.11. Also place a 1.32 trailing stop which can be narrowed to 0.66 when you reach a 1.66 profit. TARS closed Friday at 14.71. Earnings Report Date: Aug 02, 2022. Beta: N/A. Market-Cap: 387.275M. Optionable. Arcellx, Inc. (ACLX: Healthcare/Biotechnology) - 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 ACLX. A move to the upside will trigger our BUY entry at 20.66, while a drop to 18.94 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 6.5 gain. ACLX closed Friday at 20.19. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 884.051M. Not Optionable. IGM Biosciences, Inc. (IGMS: Healthcare/Biotechnology) - 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 IGMS's case we will enter a BUY should it reach the 21.61 level, or a SELL short trade if it drops to 19.79. As usual a trailing stop is essential, 1.82 which should be tightened to 0.91 on a 2.98 gain. IGMS closed Friday at 20.75. Earnings Report Date: Aug 08, 2022. Beta: -0.16. Market-Cap: 882.427M. 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 ---------------- ------- -------- ------- ------ ------- Gamestop GME 7/7/2022 7/22/2022 4-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/ **********************************
TRADER'S CORNER
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"Market Liquidity and Fund Flows" You may remember from high school economics that business operates on the basic principle of "supply and demand." If there is a lot of demand for a limited amount of supply, prices will go higher, if there is more supply than demand, than prices will go lower. In the stock market, the principle works the same way. If there are more people who want to buy (demand) than there are people who want to sell (supply) prices will head higher, and visa versa. Successfully forecasting short-term supply/demand for stocks can improve our odds as traders, but is it possible to do it? To find out, let's take a look at the providers of mutual fund flows and liquidity numbers to see how they can be helpful to traders. - Who Provides the Mutual Fund Flow Data? There are three premier companies that specialize in tracking flows in and out of mutual funds: Trim Tabs, AMG Data (Lipper), and the Investment Company Institute. Even though each company provides its own specific interpretation of the data, they all understand how important these flows are to the market. At RightLine, we primarily use the TrimTabs reports. Trim Tabs Fund Flows report attempts to reliably forecast the Investment Company Institute's results by taking a sampling of approximately 850 statistically significant funds. The ICI numbers are more comprehensive, but are not always released as quickly as Trim Tabs. - Trim Tabs Trim Tabs is the only independent research service that publishes daily and weekly in-depth coverage of stock market liquidity going back to 1990. Charles Biderman, a former Barron's Financial Weekly editor, is the originator of the "Liquidity Theory". This view is based on the premise that the total market capitalization - price - is a function of liquidity, and has nothing to do with value. The Mutual Fund Flows provided by TrimTabs is very popular with the media, but the Liquidity Report really gives a much broader picture of how money is shifting in and out of the market. TrimTabs considers liquidity a "coincident indicator" to stock prices. In other words, if we know where liquidity is heading, then we'll know where stock prices are heading at the same time. The "Mutual Fund Flows" are the net amount of money either going in or out of mutual funds. Trim Tabs surveys over 850 equity and bond funds daily to calculate this figure. The flows are categorized as follows: ~ Total Equity Funds are made up of US Equity funds and International funds. ~ The US Equity funds include "Aggressive Growth", "Growth", and "Growth and Income" funds. ~ The Total Bond funds include Hybrid (stock and bond) funds, Government and GNMA bonds, Municipal Bonds, Corporate/Income/Global bond funds, and High Yield funds. If US Equity funds show a significant inflow, the individual fund managers scramble to put the money to work in the market by buying stock. On the other hand, if there are major outflows from mutual funds, the fund managers liquidate stock to fulfill redemption requests from fund shareholders. - Trim Tabs Liquidity Calculation Liquidity is the difference between inflows and outflows of cash in the stock market over a given period of time. Trim Tabs calculates liquidity by adding US Equity Fund Inflows, two-thirds of newly announced cash takeovers, one-third of completed cash takeovers and subtracting new offerings. Cash takeovers of publicly traded companies are considered a new inflow of cash into the market. On the other hand, new offerings (IPOs) are considered a drain on liquidity because they "use" money that would have been available for investing in the "previously-existing" stocks. Liquidity tends to run higher during tax refund season and year-end bonus time, and lower near dates when people and companies have to pay their taxes. The Trim Tabs website can be seen at https://www.trimtabs.com/. - Investment Company Institute The Investment Company Institute gets its data from ICI members, which represent 95 percent of the total investment company industry's assets. The ICI web site shows similar information as the Trim Tabs Fund Flows, but as mentioned above, it covers a wider number of sources and isn't released as quickly. ICI reports the assets of money market funds to the Federal Reserve Board each week and makes this data available to the public on a weekly basis. The Institute also reports monthly on three broad categories of funds. They are: (1) Short-term funds which include tax-exempt money market funds; (2) Taxable retail and institutional money market funds; and (3) All funds other than money market funds - such as stock, income, corporate bond and municipal bond funds. For more information you can visit ICI's website at: https://www.ici.org/new/index.html. - AMG Data (Lipper) AMG Data (Lipper) is another respected company that provides mutual fund flow information. They offer weekly aggregate and fund specific Money Flow reports on just about any sector. They maintain an archive of historical fund flow reports and year-end statistical data dating back to 1992 on all AMG sectors. AMG collects and reports the numbers for all fund groups as soon as each company releases data. Vanguard, Fidelity, and American Funds report month-end numbers early the following month. Information on weekly reporting funds is for each week ended Wednesday. Monthly flows are calculated by combining weekly reported flows and monthly reported flows for each month. AMG's "Cash Track" describes the rate at which money is coming into or going out of a sector. Most funds report weekly, and some report monthly, so AMG uses a 4-week moving average across the entire set of funds, even those that report less often. Weekly reporting funds include 93% of the share classes, which represent 75% of the total fund assets. The AMG Data (Lipper) Services website is at https://www.lipperusfundflows.com. Bottom Line: In conclusion, market liquidity and fund flow reports have historically been a timely indicator of investor sentiment and current demand. While liquidity and fund flows aren't something you would necessarily consider before each trade, this information can give you valuable insight into the market's current supply and demand situation. ======================================================================
Best of luck and have a Great Week!
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