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June 18, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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Several years ago a friend and trader offered me some advice that I've found to be extremely valuable. We were discussing the obvious pressures that go along with trading the market, and particularly the sleepless nights that can result when holding large positions in volatile markets.
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"QUICK LIST"
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Stock 06/17 06/17 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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FEAM 20.96 -0.82 21.97 19.85 2.12/1.06 3.4
EAT 24.11 0.17 24.89 23.03 1.86/0.93 3.5
INMD 22.18 0.31 23 21.3 1.7/0.85 3.1
RCMT 21.98 0.00 22.88 20.69 2.19/1.1 4.5
CFLT 20.09 1.42 20.72 18.44 2.28/1.14 4
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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Two out of the three major stock indexes were up slightly on Friday ahead of a three-day Juneteenth Holiday weekend, though all three still chalked up a weekly loss. The S&P 500 and the Nasdaq both advanced higher, while the Dow gave back a few points. Rising recession concerns top the list as several key global central banks have tightened monetary policies, demonstrated by this week's largest rate hike by the US Fed Bank since 1994. Economic reports helped keep recession worries alive, as the Leading Economic Index dropped for the third month in a row, and industrial production was lower than predicted. In equities, United States Steel Corporation (X $20) announced a stronger outlook than expected, as Adobe (ADBE $361) beat quarterly profit estimates yet reported soft guidance. Oil prices and gold were lower, treasuries were mixed, the USD/dollar moved higher.
Friday On The Week
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Dow 29,888.78 -38.29 -1504.01 -4.79%
Nasdaq 10,798.35 152.25 -541.67 -4.78%
S&P 500 3,674.84 8.07 -226.02 -5.79%
NYSE Volume 8.95B
NYSE Advancers 1,977
NYSE Decliners 1,316
Nasdaq Volume 7.9B
Nasdaq Advancers 3,107
Nasdaq Decliners 1,578
New Highs/Lows
06/10 06/13 06/14 06/15 06/16 06/17
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NYSE New Highs 4 1 4 5 1 2
NYSE New Lows 251 801 850 337 1,092 566
Nasdaq New Highs 23 22 15 21 14 21
Nasdaq New Lows 464 1,138 1,020 381 1,147 485
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TRADER'S TIP:
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TRADER'S TIP: "Consistent Profits Are No Accident" Successful trading doesn't just happen by chance. It requires an open mind, willingness to learn, discipline, skillful execution, and the ability to forgive self inflicted damage. As with all things of quality, it is the "wise choice of many alternatives."
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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 - 3674.84 June 17, 2022 52-Week High: 4818.62 52-Week Low: 3636.87 Daily Trend: DOWN Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 4119.18 Resistance 2: 3917.90 Resistance 1: 3796.37 Pivot: 3716.62 Support 1: 3595.09 Support 2: 3515.34 Support 3: 3314.06 https://www.prorightline.com/rlch/061722SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, June 20, 2022: 20-Jun Tuesday, June 21, 2022: 21-Jun 8:30 am Chicago Fed national activity index 21-Jun 10 am Existing home sales (SAAR) Wednesday, June 22, 2022: 22-Jun None scheduled Thursday, June 23, 2022: 23-Jun 8:30 am Initial jobless claims 23-Jun 8:30 am Continuing jobless claims 23-Jun 8:30 am Current account 23-Jun 9:45 am 23-Jun 9:45 am Friday, June 24, 2022: 24-Jun 10 am UMich consumer sentiment index (final) 24-Jun 10 am 5-year inflation expectations (final) 24-Jun 10 am New home sales (SAAR) 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: "Drawing Trend Lines - The Basics" Every trader and investor should learn to recognize and identify price trends within their chosen time frame. This is a relatively simple - yet very valuable - skill used to confirm the direction that an individual stock or market is moving. While overall price movement on a chart may seem obvious to some, even market strategists at major brokerages and trading institutions use trend lines to help determine exactly when a current trend is in play. In a nutshell, a trend line is simply a straight line that connects a series of highs or lows on a price chart. Learning to draw trend lines isn't complicated at all, and most charting software includes a trend line tool that makes learning this skill even easier. Look at a price chart in any time frame and notice the high points across the top. Then imagine that the highs are peaks of a mountain range that you are viewing from a distance. Starting on the left side, draw a straight line across the top of the peaks so that only the two highest peaks are connected. Is the line moving up? Or is it moving down? If the line is up, then the mountain peaks are in an up-trend from left to right. If the line is headed down, then the trend is down. As with most skills, drawing a trend line isn't always so simple. Some traders prefer to use opening or closing prices instead of highs, while others will use any of these to find the best "fit." Regardless of your preferred method, taking the first steps towards learning to recognize a trend isn't difficult at all.
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STOCKS COVERED IN THIS ISSUE
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BASIC MATERIALS SECTOR 5E Advanced Materials Inc. (FEAM: Basic Materials/Specialty Chemicals) - SQUEEZE PLAY. FEAM 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. FEAM closed Friday at 20.96. The plan is to enter in the right direction by placing a BUY trigger at 21.97 and a SELL short trigger at 19.85. Once FEAM establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 2.12. After you've collected a 3.4 profit, tighten the stop to 1.06. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 9.325B. Not Optionable. CONSUMER CYCLICAL SECTOR Brinker International, Inc. (EAT: Consumer Cyclical/Restaurants) - SQUEEZE PLAY. EAT 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 24.89 and a SELL short entry at 23.03. Once your trade is filled, enter a 1.86 trailing stop. Tighten it to 0.93 after a 3.5 gain. EAT closed on Friday at 24.11. Earnings Report Date: Aug 24, 2022. Beta: 2.36. Market-Cap: 1.057B. Optionable. HEALTHCARE SECTOR InMode Ltd. (INMD: Healthcare/Medical Devices) - SQUEEZE PLAY. Friday's trading session left INMD 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 and your SELL short trigger at 21.3. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.7 trailing stop. Once you have a 3.1 profit, reduce the stop to 0.85. Earnings Report Date: Jul 26, 2022. Beta: 2.12. Market-Cap: 1.843B. Optionable. INDUSTRIALS SECTOR RCM Technologies, Inc. (RCMT: Industrials/Engineering & Construction) - SQUEEZE PLAY. The ticker for Friday's session shows RCMT 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 22.88 and a SELL short trigger at 20.69. When RCMT 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 2.19 trailing stop. Upon reaching a 4.5 profit, resize the stop to 1.1. Earnings Report Date: Aug 08, 2022. Beta: 1.01. Market-Cap: 222.763M. Optionable. TECHNOLOGY SECTOR Confluent, Inc. (CFLT: Technology/Software-Infrastructure) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. CFLT found itself in this condition on Friday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 20.72 and a SELL short trigger at 18.44. When CFLT moves outside of Friday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 2.28 trailing stop. After you've got a 4 profit, tighten the stop to 1.14. CFLT closed at 20.09 on Friday. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 5.592B. 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/
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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
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Amazon AMZN 3/9/2022 6/6/2022 20-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/
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TRADER'S CORNER
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"Profiting From Psychological Support and Resistance" Sometimes the stock market seems to take on a life of its own. Rather than perceiving price movement as a reflection of human emotions, traders often come to view the whole process as mechanistic and impersonal. Actually, this viewpoint isn't entirely without merit. After all, a healthy chunk of stock trading volume each day is based on the cold calculations of computerized programs. But someone has to tell those computers what to do - artificial intelligence hasn't evolved to the point where machines can make all of their own decisions. Ultimately, every buy and sell order that enters the market comes from somebody's expectation that a stock or market will move higher or lower. The participation of thousands of traders anticipating a certain price movement often creates a "herd mentality" where clear levels of support and resistance can be identified. "Psychological" levels are one of the most common - and intuitive - forms of support and resistance. Their existence stems from the simple fact that humans give special significance to round numbers. Specifically, stocks tend to find support/resistance at increments of 10. This tendency is even stronger at major "milestones" such as 50 and 100. Higher-valued indexes also find areas of psychological significance. The most striking example is Dow 10,000. Take a look at the price action in 2005, and you'll see that a 30-month rally started after bouncing from that level in April of the same year. When it comes to stocks, look for price action to level out on decreasing volume as the equity approaches a round number. Like most forms of support and resistance, these zones of congestion aren't set in stone - they might be pierced several times before a breakout or breakdown occurs. Increased volume and confirmation from technical indicators such as MACD and stochastics help to differentiate "head fakes" from the more meaningful moves. In addition to increments of 10 (40, 50, 60, etc), "minor" psychological support and resistance sometimes develops at the mid-point between those levels (45, 55, 65, and so on). For stocks trading in the single digits, 5.00 and 10.00 can be formidable resistance levels. See the daily chart - Best Buy (BBY): https://prorightline.com/rlr/TC0509041.jpg This chart of Best Buy should help to illustrate these tendencies. Let's break down the various points of interest: 1.) BBY developed support near 50 in late-January/early-February 2004. 2.) 55 emerged as a stubborn resistance level. 3.) BBY plummeted through the support at 50. This breakdown was accompanied by higher-than-average volume; a good sign that the move was not a head-fake. 4.) The sell-off continued until shares found support at 45. 5.) A breakout attempt was made in late-April 2004 as BBY moved through resistance at 55. However, without an uptick in volume the move had little conviction. The stock was quickly pushed back below resistance. Psychological levels are especially helpful when it comes to gauging where a stock might go once it hits the clear air space of all-time highs. An equity trading in "blue-sky territory" has no technical resistance, but does face potential obstacles at increments of 10, and to a lesser extent 5. See the daily chart - eBay Inc. (EBAY): https://prorightline.com/rlr/TC0509042.jpg Something else to keep in mind is the strong magnetic pull of the 100-dollar price level. A good rule of thumb is that once a stock hits 90, odds favor a continued move up to 100. It's a sort of self-fulfilling prophecy; potential sellers expect more upside, so they stay on the sidelines. Meanwhile, shareholders refrain from taking profits until that logical upside target is reached. Once you get the hang of it, it's easy to incorporate psychological levels into your chart analysis. Here are some things to look for: - Is the stock trading at or near all-time highs? If so, has it already shown a tendency to find resistance at 5-dollar and 10-dollar increments? - How has price action reacted as psychological levels were approached? Does the stock have a tendency to hesitate and gyrate near the round number, or does it tend to easily slice through those levels? - Note how volume accompanies price action as shares approach psychological support/resistance. Certain patterns often repeat themselves. Once recognized, they can be used to help anticipate future movement. - Check to see if other technical indicators such as stochastics, MACD, and RSI have tended to provide confirmation for moves above and below psychological levels.
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Best of luck and have a Great Week!
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