June 13, 2023 - The RightLine Report
Notes From The Editor
"The Trend Is Your Friend"
On a rational level most of us understand the wisdom beneath this popular market proverb. However, few traders actually know how to use the trend to produce cold hard cash. To help move the troops further along the trail of trading enlightenment, let's indulge in a quick review of "Trend Trading 101."
In essence, the trend is the general direction that stock prices are moving. This movement can be compared to the current in a river, where we all know that swimming along with the flow is relatively easy, while trying to swim against it requires much more effort and takes longer to get anywhere.
The overall stock market price trend exerts powerful forces on individual stocks. Hoping that a stock will go higher when the trend is down is like trying to swim upstream against the current.
Is the Trend REALLY Your Friend?
Before diving into a river, most swimmers would first stop to check the current. Using the same sort of caution gives informed traders a huge advantage over the majority who typically leap before they look. It pays to determine which direction the trend is headed before diving into a stock purchase.
Most people can easily understand this concept yet find it extremely difficult to apply to the stock market. To find out why, let's take a look at the first of three dominant reasons why only a small minority of traders and investors truly understand what it means to be friends with the trend.
It's All In Your Head ... This one is purely psychological. I'm talking about the common prejudice that most of us have against a declining market. How could we possibly become friends with a "downtrend"? After all, when stocks go down everybody loses money. We all KNOW that a "bad" market is our enemy ... Right?
Time for a paradigm shift. There's no such thing as a "bad market." In other words, every trend is our friend when we choose to accept it. There's no reason to fight against a market downtrend. It's bigger and stronger than any of us. Remember swimming in the current of river? In the same way both up AND down trends can be used as powerful forces to make money in stocks.
The insight gained from shifting to an unbiased market perspective allows us to recognize which trend is in control and then flow with it. This isn't rocket science. It doesn't take long to learn and isn't really that hard to do. But even if it were, we'd do it anyway, because the benefits are enormous.
Don't expect the larger crowd to understand. The stock market game requires that there be plenty of uniformed players on the field that are willing to give their investment capital away - even if they don't realize it! They have accepted the idea that any downtrend is their enemy, and by doing so contribute unknowingly to the opposing team.
They usually hold onto losing positions, watch their portfolio values drop, and hope that the problem will just go away. Instead of limiting their losses with a pre-planned exit strategy that gets them out early, they hang on to the losers until serious damage is inflicted on their capital.
Fortunately, no one has to be a part of this crowd if they choose to drop the prejudices, and learn to make both up AND down trends their friends.
That's it for now. In an upcoming issue of the RightLine Report we'll take a closer look at the skills we all need to flow with the trend, AND one of the most important reasons for the trend to become your friend - Time!
Trade well, and here's to profits!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 06/13 06/13 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
MSB 20.72 0.39 / 0
PINS 24.25 0.14 24.62 1.58/0.79 1.56
BFH 31.89 1.25 32.42 3.04/1.52 2.32
COLB 23.25 0.23 23.79 22.14 1.65/0.83 1.78
IIIN 32.40 0.25 33.06 1.99/1 1.34
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
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Stocks Covered Today Stock Splits
Market Summary
The major equity indexes rose to a new high for the year after Tuesday's consumer price index (CPI) showed that the headline inflation rate cooled to 4%, its lowest rate in more than two years. While the data were mostly in line with expectations, it does take some pressure off the Fed, which is likely to hold off from raising rates at Wednesday's meeting.
Consistent with the positive investor sentiment, cyclical sectors and small-cap stocks outperformed, while government bond yields rose. Elsewhere, after losing nearly 4.5% on Monday, oil finished 3% higher, trying to reclaim the $70 mark.
Lower energy prices were a key driver behind last month's sizable drop in headline inflation, as oil declined from $106 per barrel in May 2022 to about $72 last month, while natural gas prices have fallen even more.
The continued deceleration in inflation will be welcomed by policymakers, but the news is unlikely to meaningfully shift expectations. The surprising strength in the labor market will keep the Fed on high alert against letting its guard down too soon. But after more than a year of aggressive rate hikes and 11 months of disinflation, the door is open for policymakers to take a more patient approach, as they signaled in early May.
We expect the FOMC to hold off on hiking rates tomorrow for the first time in more than a year, but signal in its statement and new projections that it may raise rates again if data warrant it. Weaker growth that we anticipate down the road will likely pave the way for the Fed to end the historic cycle of interest-rate increases over the past 15 months
Jun 12, 2023 Jun 13, 2023
-------------------- --------------------
Dow 34,066.33 189.55 34,212.12 145.79
Nasdaq 13,461.92 202.78 13,573.32 111.40
S&P 500 4,338.93 40.07 4,369.01 30.08
NYSE Volume 3.95B 4.28B
NYSE Advancers 1,530 2,079
NYSE Decliners 1,437 893
Nasdaq Volume 4.73B 5.54B
Nasdaq Advancers 2,633 2,923
Nasdaq Decliners 1,835 1,552
New Highs/Lows
06/06 06/07 06/08 06/09 06/12 06/13
--------------------------------------------
NYSE New Highs 110 155 83 70 98 137
NYSE New Lows 18 10 18 17 12 8
Nasdaq New Highs 132 153 87 117 162 223
Nasdaq New Lows 83 58 62 73 83 71
Stocks Covered Today Stock Splits
TRADER'S TIP: "Factoring in Dividends"
When trading stocks that distribute healthy dividends, be sure to note the days of record and distribution. If you own the stock on the day of record, you will receive the specified dividend on the day of distribution - a nice little bonus!
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 - 4369.01 June 13, 2023
52-Week High: 4375.37
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 - 13573.32 June 13, 2023
52-Week High: 13594.40
52-Week Low: 10088.83
Daily Trend: UP
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 - 34212.12 June 13, 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
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, June 12, 2023: 12-Jun MONDAY, JUNE 12 12-Jun None scheduled 12-Jun TUESDAY, JUNE 13 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 13-Jun WEDNESDAY, JUNE 14 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 14-Jun THURSDAY, JUNE 15 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 15-Jun FRIDAY, JUNE 16 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
Stocks Covered Today Stock Splits
TRADER'S TIP: "Big Gaps, Big Potential"
Large upside breakout gaps can be very bullish and present a terrific buy opportunity. However, consider the move suspicious unless it takes place with heavy trade volume. The initial group of motivated buyers should attract enough attention to convince an even bigger crowd to join in. Be prepared to exit quickly if the volume doesn't support the price expansion.
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
Mesabi Trust (MSB: Basic Materials/Steel) - SQUEEZE PLAY. MSB is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at and a SELL short entry at . Once your trade is filled, enter a trailing stop. Tighten it to after a 0 gain. MSB closed on Tuesday at 20.72. Earnings Report Date: Jun 13, 2023. Beta: 0.96. Market-Cap: 271.846M. Optionable.
COMMUNICATION SERVICES SECTOR
Pinterest, Inc. (PINS: Communication Services/Internet Content & Information) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 24.25, PINS is on our radar for a BUY entry at 24.62. If you purchase shares of PINS, be sure to also place a trailing stop of 1.58. Snug it up to 0.79 on a 1.56 gain. Earnings Report Date: Jul 31, 2023. Beta: 0.99. Market-Cap: 16.581B. Optionable.
FINANCIAL SERVICES SECTOR
Bread Financial Holdings, Inc. (BFH: Financial Services/Credit Services) - 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. BFH's reaction to support on Tuesday created a Bullish Bounce setup with a BUY entry trigger at 32.42. Use a 3.04 trailing stop, which should work well with BFH's typical daily range. Tighten it to 1.52 on a 2.32 profit. BFH closed at 31.89 on Tuesday. Earnings Report Date: Jul 26, 2023. Beta: 1.94. Market-Cap: 1.598B. Optionable.
Columbia Banking System, Inc. (COLB: Financial Services/Banks-Regional) - SQUEEZE PLAY. Traders are feeling the pressure as COLB's intra-day price range on Tuesday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 23.79 and a SELL short entry at 22.14. COLB's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.65 trailing stop. Tighten it to 0.83 after you get a 1.78 gain. COLB closed Tuesday at 23.25. Earnings Report Date: Jul 19, 2023. Beta: 0.92. Market-Cap: 4.842B. Optionable.
INDUSTRIALS SECTOR
Insteel Industries, Inc. (IIIN: Industrials/Metal Fabrication) - 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 IIIN which met our setup criteria on Tuesday. The BUY trigger for this trade is at 33.06, and the trailing stop is sized at 1.99. Resize the stop to 1 upon collecting a 1.34 point gain. IIIN closed Tuesday at 32.40. Earnings Report Date: Jul 19, 2023. Beta: 1.08. Market-Cap: 629.992M. 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.
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