Notes From The Editor

I've always enjoyed learning from the best traders I can find. One of the most influential and certainly on my personal "best" list is futures trader Linda Bradford.

Years ago Linda wrote a number of classic trading rules that she felt "withstood the test of time." Below are several that I've found to be extremely helpful when trading stocks.

Linda's Rules

1. The difference between winners and losers isn't so much native ability as it is discipline exercised in avoiding mistakes.

2. Continually strive for patience, perseverance, determination, and rational action.

3. Lose your opinion - not your money.

4. Keep a positive attitude, no matter what happens.

5. Don't take the market home.

6. Assimilate into your very bones a set of trading rules that works for you.

7. Place the stop at the time you make your trade.

8. Never get into the market because you are anxious from waiting.

9. Losses make the trader studious - not profits. Take advantage of every loss to improve your knowledge of market action.

10. The most difficult task in speculation is not prediction but self- control. You are the most important element in the equation for success.

11. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.

12. Always discipline yourself by following a pre-determined set of rules.

13. A key to successful trading is knowing yourself and your stress point.

14. You must have a program, you must know your program, and you must follow your program.

15. Split your profits right down the middle and never risk more than 50% of them again in the market.

Enjoy the weekend!

Thomas Sutton, Editor

Quick List

    
Stock     06/09     06/09      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

PPBI      21.57     -0.10     21.95     20.52        1.43/0.72      1.88
PRAA      23.06     -0.40     23.82     22.21        1.61/0.81      4.22
ETNB      20.30      0.12     20.76     19.37         1.39/0.7      2.08
OTEX      42.08      0.47     42.78                  2.68/1.34      1.56
TEAM     171.99      1.60    176.28                 12.55/6.28      13.6

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.

Market Summary

Stock markets closed the week with little change after a quiet period. The lack of significant data or headlines allowed investors to focus on upcoming inflation and Federal Reserve announcements. Looking ahead, the coming week is expected to have a significant impact on market sentiment in the months to come. The release of the consumer price index (CPI) on Tuesday will be closely watched, followed by the Fed's rate announcements on Wednesday. Core inflation is projected to continue its downward trend, nearing the 5% mark, which it has not been below since November 2021.

While we anticipate a moderation in core CPI over the rest of the year, any deviations from this trend could briefly undermine the current market rally, which has been driven by expectations of an approaching end to rate hikes. All eyes will be on the Fed's announcement, as they are likely considering a pause in rate hikes. However, given the mix of recent data, the announcement may be a toss-up between a pause or an additional 0.25% hike. The market will closely scrutinize the Fed's messaging regarding its approach in the coming months, particularly its willingness to pause or raise rates further based on upcoming inflation data.

The S&P 500 reached a new high for 2023 this week, continuing its rebound that has seen a 20% increase from the October low. Growth-oriented investments, especially in the technology sector, have been driving this market rally, with the Nasdaq gaining over 27% year-to-date.

However, this week saw a shift in market dynamics, with small-cap stocks outperforming and value-style investments surpassing growth. While this may not indicate a new trend in underlying performance, it underscores the importance of diversification.

Despite the market's positive momentum, it looks like the somewhat narrow leadership and the market's reliance on a shift in Fed policy - which requires declining inflation - could lead to periods of volatility as we progress through the summer.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 33,876.78    43.17      +114.02     0.34%
Nasdaq              13,259.14    20.62       +18.37     0.14%
S&P 500              4,298.86     4.93       +16.49     0.39%

NYSE Volume                      3.79B                       
NYSE Advancers                   1,119                       
NYSE Decliners                   1,819                       

Nasdaq Volume                    4.42B                       
Nasdaq Advancers                 1,545                       
Nasdaq Decliners                 2,850                       

                                 New Highs/Lows

                   06/02  06/05  06/06  06/07  06/08  06/09
                 --------------------------------------------
NYSE New Highs        88     43    110    155     83     70
NYSE New Lows         15     24     18     10     18     17
Nasdaq New Highs     129    125    132    153     87    117
Nasdaq New Lows       54     71     83     58     62     73
   

TRADER'S TIP: "Market Mischief: Headfakes & Whipsaws"

Headfakes and whipsaws are terms used to describe market action with sharp price movement and abrupt reversals. This type of "yo-yo" action can cause a trader's stop to be triggered soon after a position is entered. Headfakes and whipsaws often result when market makers and other "deep pockets" push prices in one direction in an attempt to convince traders that the move is legit, then abruptly reverse the move.

Headfakes, whipsaws, and other false breakouts are a normal part of trading, so condition yourself not to let them frustrate you. Even the best-looking trade will blow up sometimes, yet it really doesn't matter because the loss is contained when you apply solid risk control. Just remember that we're playing a game of odds where the "edge" in our trading plan provides profits over time.

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 - 4298.86 June 9, 2023

52-Week High: 4325.28
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4417.28
Resistance 2: 4355.73
Resistance 1: 4327.29
Pivot: 4294.18
Support 1: 4265.74
Support 2: 4232.63
Support 3: 4171.08

NASDAQ Composite - 13259.14 June 9, 2023

52-Week High: 13385.95
52-Week Low: 10088.83
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 13837.79
Resistance 2: 13541.32
Resistance 1: 13400.23
Pivot: 13244.85
Support 1: 13103.76
Support 2: 12948.38
Support 3: 12651.91
        
Dow Industrials - 33876.78 June 9, 2023

52-Week High: 34712.28
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 34901.85
Resistance 2: 34326.22
Resistance 1: 34101.50
Pivot: 33750.59
Support 1: 33525.87
Support 2: 33174.96
Support 3: 32599.33
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, June 12, 2023:
12-Jun          None scheduled  

Tuesday, June 13, 2023:
13-Jun  6:00 am   NFIB optimism index
13-Jun  8:30 am   Consumer price index
13-Jun  8"30 am   Core CPI
13-Jun  8:30 am   CPI year over year
13-Jun  8:30 am   Core CPI year over year  

Wednesday, June 14, 2023:
14-Jun  8:30 am   Producer price index
14-Jun  8"30 am   Core PPI
14-Jun  8:30 am   PPI year over year
14-Jun  8:30 am   Core PPI year over year
14-Jun  2:00 pm   Fed decision on interest-rate policy
14-Jun  2:30 pm   Fed Chairman Powell press conference  

Thursday, June 15, 2023:
15-Jun  8:30 am   Initial jobless claims
15-Jun  8:30 am   U.S. retail sales
15-Jun  8:30 am   Retail sales minus autos
15-Jun  8:30 am   Import price index
15-Jun  8:30 am   Import price index minus fuel
15-Jun  8:30 am   Empire State manufacturing survey
15-Jun  8:30 am   Philadelphia Fed manufacturing survey
15-Jun  9:15 am   Industrial production
15-Jun  9:15 am   Capacity utilization
15-Jun  10:00 am   Business inventories  

Friday, June 16, 2023:
16-Jun  10:00 am   Consumer sentiment


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

TRADER'S TIP: "A School of Fish"

Have you ever watched a school of fish in the water? It's amazing how quickly these co-dependent aquatic creatures can change direction. The action of a single fish impacts the entire group, and vice versa. Just like the "school" of fish influences each individual fish that makes up the school, the larger stock market influences the price movement of the individual stocks that make up the market. Not all stocks move in exactly the same direction and same speed as the larger market, yet the greater "school" of stocks - as represented by the indices - dramatically affects the price movement of most individual stocks.

Stocks Covered in This Issue

FINANCIAL SERVICES SECTOR

Pacific Premier Bancorp, Inc. (PPBI: Financial Services/Banks-Regional) - SQUEEZE PLAY. The ticker for Friday's session shows PPBI is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 21.95 and a SELL short trigger at 20.52. When PPBI starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 1.43 trailing stop. Upon reaching a 1.88 profit, resize the stop to 0.72. Earnings Report Date: Jul 19, 2023. Beta: 1.18. Market-Cap: 2.066B. Optionable.

PRA Group, Inc. (PRAA: Financial Services/Credit Services) - SQUEEZE PLAY. Friday's trading session left PRAA 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 23.82 and your SELL short trigger at 22.21. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.61 trailing stop. Once you have a 4.22 profit, reduce the stop to 0.81. Earnings Report Date: Aug 07, 2023. Beta: 1.16. Market-Cap: 903.256M. Optionable.

HEALTHCARE SECTOR

89bio, Inc. (ETNB: Healthcare/Biotechnology) - SQUEEZE PLAY. ETNB shareholders know what it feels like to be squeezed. Friday's slim price range reveals uncertainty on both sides of the table, a situation which often resolves itself by either Bears or Bulls quickly gaining a clear advantage. The question is "who will win?" Near-term market action tell us whether we should sell short or we should buy shares instead. ETNB closed Friday at 20.30. The plan is to enter in the right direction by placing a BUY trigger at 20.76 and a SELL short trigger at 19.37. Once ETNB establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.39. After you've collected a 2.08 profit, tighten the stop to 0.7. Earnings Report Date: Aug 09, 2023. Beta: 0.77. Market-Cap: 1.5B. Optionable.

TECHNOLOGY SECTOR

Open Text Corporation (OTEX: Technology/Software-Application) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, OTEX fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 42.08, plan to buy shares at 42.78 and use a 2.68 trailing stop. Tighten the stop to 1.34 on a 1.56 gain. Earnings Report Date: Aug 02, 2023. Beta: 1.07. Market-Cap: 11.393B. Optionable.

Atlassian Corporation (TEAM: Technology/Software-Application) - BULLISH BOUNCE. TEAM has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Friday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return TEAM to the previously established uptrend. The Bullish Bounce set-up is the basis for our BUY entry, so be ready to go long on a rise to our trigger at 176.28. Set a trailing stop of 12.55, tightening to 6.28 on a 13.6 profit. TEAM closed at 171.99 on Friday. Earnings Report Date: N/A. Beta: 0.82. Market-Cap: 47.733B. 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  
---------------- -------     --------    -------     ------  -------   

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.

Trader's Corner

"The History, Science & Art of Technical Analysis"

The very first chartists in the United States appeared at the turn of the century. They included Charles Dow, the author of the famous stock market theory, and William Hamilton who succeeded Dow as the editor of the Wall Street Journal.

After the famous stock market "crash" of 1929, Hamilton advocated the use of charting in an editorial entitled "The Turn of The Tide" and then proceeded to lay out the principles of Dow's stock market theory in a book titled The Stock Market Barometer.

The decade of the 1930's was the Golden Age of charting. Many innovative researchers published their work during that period including Richard D. Wyckoff, a trader who started in 1888 as a 15- year-old stock runner, W.D. Gann who began his career as a stockbroker in 1906, and R.N.Elliott, widely known for the "Elliott Wave Theory."

Their work went into two distinct directions. Researchers such as Wyckoff saw charts as a graphic record of market supply and demand, while others including Gann and Elliott searched for a perfect order in the markets.

In 1948, Edwards and McGee published a book called Technical Analysis of Stock Trends. They popularized the use of chart formations such as triangles, rectangles, head and shoulders, as well as support, resistance and trend lines.

Things have changed a great deal since then. In the 40s, daily volume of an active stock on the NYSE was only several hundred shares. Today it's not uncommon to see an active stock trade tens of millions of shares each day.

Bears were firmly in control of the stock market in the "good old days", but as years passed, the balance of power shifted to favor bulls. However, with bears back in the cockpit the past couple of years, some of the market tendencies that were evident back then are reappearing on the charts.

Early technical analysts noted that stock market tops were sharp and fast, while bottoms took a long time to develop. That was true in the de-flationary era of the 30s and 40s, but from the 50s until mid 2000 bottoms tended to form quickly while tops took longer.

The beginnings of technical analysis go back much further than the early nineteen hundreds. Japanese rice traders began using candlestick charts some two centuries before the first chartists appeared in America.

Before you envision lots of dripping wax and flaming wicks, the term candlestick was adopted because of the similar appearance between candles and the symbols used to represent price that were drawn on each chart.

The Japanese focus is on the relationship between opening and closing prices and on patterns that include several candles. They consider highs and lows relatively unimportant.

Unfortunately, most candlestick chartist's fail to use many tools of Western analysts. They ignore volume and have no trend lines. This now appears to be changing as modern analysts combine Western technical indictors with classical candlestick patterns. A classic case of east meets west.

OK, that's enough history for now. Let's take a quick look at two subjects, which help determine the success or failure of technical analysis in action.

Is it Science or Art?

"It would be possible to describe everything scientifically, but it would make no sense; it would be without meaning, as if you described a Beethoven symphony as a variation of wave pressure." ~Albert Einstein

It may come as a surprise to find that technical analysis combines the dual categories of science and art. Although the subjects appear to be at opposite ends of the spectrum, joining them together creates a dual perspective that provides remarkable market insight.

The resulting combination can be compared to night-vision goggles that let you see what others can't - like trend lines. This advantage gives you an edge and helps shift the odds into your favor.

Science 101

The scientific aspect of technical analysis presents itself in many forms. There are literally dozens of separate indicators and unlimited ways of applying them. A lot of research went into developing these components, and even more to determine effectiveness and reliability.

Studies have shown that the wide array of technical indicators and methods exhibit different degrees of success depending on how, when and under what condition they are applied.

Art - So what is it, a Picasso or a Rembrandt?

The artistic qualities of technical analysis become obvious the instant you look at a visual display on a computer screen. Colorful charts graphically reveal elements of technical analysis as different indicators are painted in patterns and lines. Talk about abstract art!

One look and you feel like it should be hanging in a metropolitan art museum. Less obvious than the graphic display but just as important is the impact of artistic interpretation. OK, so how should we interpret this painting?

Although the price bars are determined by actual stock prices, the placement of each line, the number of bars included in each moving average and whether any technical indicators are used depends on the preference of the individual.

It may look good, but no matter how pretty the picture, it is far more important that the final choice of technical tools and patterns can be used by the trader to produce profits.

- Summary

It turns out that technical analysis is a hybrid of art and science that has evolved over the centuries. Due to the complex choices that have to be made, many newcomers will never recognize the tremendous value of TA, and will remain unaware of the powerful forces at work behind the scenes.

For those who desire a long-term relationship with the markets, the time and energy spent to learn how to use this powerful technology will be well rewarded!

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

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