June 2, 2022 - The RightLine Report
Notes From The Editor
Whipsaw market environments are inherently difficult to trade; their abrupt directional changes seem to come out of nowhere. During these types volatile of markets you can take a few steps to protect your capital - or better yet - reap some profits.
- When it doubt, stay out! Typically a whipsaw phase will eventually resolve itself to a new trend. As long as the major indexes are moving in one direction (or bouncing between two well-defined support/resistance levels), we have a basic guide map from which we can base our trades. Staying on the sidelines guarantees that your account will be sheltered until the whipsaws end.
- Find stocks that have a lower correlation with the broader market. Oftentimes you'll run across an equity that doesn't show much correlation with the major indexes. This can even be the case with entire sectors. Stocks can generate a directional momentum all their own - strong enough to override the underlying bias created by what the market's direction.
- Find stocks with lower Betas. Lower Betas are an indication of lower volatility. These stocks are less likely to be whipped around by the market's gyrations. They may see similar directional shifts, but the magnitude of those moves tends to be smaller. This translates to safer stops and positions that tend to stay open longer. These are ideal for more conservative or longer-term traders.
Remember: there's nothing wrong with volatility. In fact, swing traders thrive on it! By keeping an eye on what the overall market is doing, you can grow your account - even when stocks are acting schizophrenic.
Here's to profits,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 06/02 06/02 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
GES 20.66 0.01 21.25 19.87 1.38/0.69 2.12
CRK 20.46 0.04 21.24 19.53 1.71/0.86 2.54
ZIM 66.37 2.06 68.51 6.59/3.3 8.28
INFA 20.85 0.59 21.23 19.53 1.7/0.85 2.74
AGR 47.56 0.28 48.29 3.24/1.62 2.04
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.
Stocks Covered Today Stock Splits
Market Summary
The top stock indices were higher on Thursday as economic news included a larger drop than expected in unemployment claims, an upward revision in productivity and unit labor costs. In equities, Microsoft (MSFT $275) reduced its guidance due to the recent upsurge in the USD, onger-than-expected operating profits and showed sequential gross margin improvement, while Hewlett Packard Enterprise (HPE $15) fell short of earnings projections and dropped its profit outlook. Gold and oil prices were higher, treasuries were mixed, and the USD/dollar declined.
Jun 1, 2022 Jun 2, 2022
-------------------- --------------------
Dow 32,813.23 -176.89 33,248.28 435.05
Nasdaq 11,994.46 -86.93 12,316.90 322.44
S&P 500 4,101.23 -30.92 4,176.82 75.59
NYSE Volume 4.59B 4.44B
NYSE Advancers 1,341 2,486
NYSE Decliners 1,972 804
Nasdaq Volume 4.72B 4.43B
Nasdaq Advancers 1,623 3,497
Nasdaq Decliners 3,113 1,178
New Highs/Lows
05/26 05/27 05/30 05/31 06/01 06/02
--------------------------------------------
NYSE New Highs 87 88 0 105 52 64
NYSE New Lows 40 36 0 33 52 38
Nasdaq New Highs 32 49 0 64 30 33
Nasdaq New Lows 165 113 0 116 190 143
Stocks Covered Today Stock Splits
TRADER'S TIP: "Moving Average Rainbows"
Place a variety of moving averages on your chart, and watch how they crossover each other and fan out into a "rainbow." The patterns that are drawn as the trend unfolds will indicate the strength of a reversal. Try a 13, 22, and 50 period Exponential Moving Average first to see how it works. This combination has shown to be effective under a wide range of conditions. Take notice of any similarities in the rainbows that have occurred historically, with particular attention to the way the rainbow takes shape after bouncing from support or resistance. This is a helpful tool to avoid head fakes, and determine true trend reversals in almost any time frame.
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 - 4176.82 June 2, 2022
52-Week High: 4818.62
52-Week Low: 3810.32
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4630.67
Resistance 2: 4347.31
Resistance 1: 4252.77
Pivot: 4063.95
Support 1: 3969.41
Support 2: 3780.59
Support 3: 3497.23
NASDAQ Composite - 12316.90 June 2, 2022
52-Week High: 16212.23
52-Week Low: 11035.69
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 13863.45
Resistance 2: 12824.26
Resistance 1: 12477.69
Pivot: 11785.08
Support 1: 11438.51
Support 2: 10745.90
Support 3: 9706.72
Dow Industrials - 33248.28 June 2, 2022
52-Week High: 36952.65
52-Week Low: 30635.76
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 36293.44
Resistance 2: 34445.42
Resistance 1: 33829.19
Pivot: 32597.39
Support 1: 31981.16
Support 2: 30749.36
Support 3: 28901.33
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Wednesday, June 01, 2022: 01-Jun 9:45 am S&P Global U.S. manufacturing PMI (final) 01-Jun 10 am ISM manufacturing index 01-Jun 10 am Job openings 01-Jun 10 am Quits 01-Jun 10 am Construction spending 01-Jun 2 pm Beige book 01-Jun Varies Motor vehicle sales (SAAR) Thursday, June 02, 2022: 02-Jun 8:30 am ADP employment report 02-Jun 8:30 am Initial jobless claims 02-Jun 8:30 am Continuing jobless claims 02-Jun 8:30 am Productivity revision (SAAR) 02-Jun 8:30 am Unit labor costs revision (SAAR) 02-Jun 10 am Factory orders 02-Jun 10 am Core capital goods orders revision Friday, June 03, 2022: 03-Jun 8:30 am Nonfarm payrolls 03-Jun 8:30 am Unemployment rate 03-Jun 8:30 am Average hourly earnings 03-Jun 8:30 am Labor-force participation, ages 25-54 03-Jun 9:45 am S&P Global U.S. services PMI (final) 03-Jun 10 am ISM services index 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: "Trading Discipline... What Exactly is it?"
In trading, discipline simply means that we always perform a basic group of essential actions every time we put on a trade - no exceptions. The reason we do this? Because research and experience has taught us that certain tactics or "rules" give us a statistical edge over the market. When we consistently use these simple rules over an extended period of time, we are much more successful than when we don't use them, or only use them when we "remember" to.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Guess', Inc. (GES: Consumer Cyclical/Apparel Retail) - 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 GES. A move to the upside will trigger our BUY entry at 21.25, while a drop to 19.87 will trigger our SELL short entry. Follow your position with a 1.38 trailing stop. Tighten the stop to 0.69 once you have a 2.12 gain. GES closed Thursday at 20.66. Earnings Report Date: Aug 23, 2022. Beta: 1.91. Market-Cap: 1.235B. Optionable.
ENERGY SECTOR
Comstock Resources, Inc. (CRK: Energy/Oil & Gas E&P) - SQUEEZE PLAY. CRK is caught in a dilemma. The stock's compressed price range on Thursday 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. CRK is now at 20.46. We can capture price action either way by placing a BUY trigger at 21.24 and a SELL short trigger at 19.53. Once CRK 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 1.71. When you acquire a 2.54 profit, tighten the stop to 0.86. Earnings Report Date: Aug 01, 2022. Beta: 0.99. Market-Cap: 4.765B. Optionable.
INDUSTRIALS SECTOR
ZIM Integrated Shipping Services Ltd. (ZIM: Industrials/Marine Shipping) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. ZIM's current price action near moving average support signals a potential BUY entry at 68.51, followed by a 6.59 trailing stop which can be tightened to 3.3 upon earning 8.28. ZIM closed Thursday at 66.37. Earnings Report Date: Aug 16, 2022. Beta: N/A. Market-Cap: 7.952B. Optionable.
TECHNOLOGY SECTOR
Informatica Inc. (INFA: Technology/Software-Infrastructure) - 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 INFA's case we will enter a BUY should it reach the 21.23 level, or a SELL short trade if it drops to 19.53. As usual a trailing stop is essential, 1.7 which should be tightened to 0.85 on a 2.74 gain. INFA closed Thursday at 20.85. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 5.838B. Optionable.
UTILITIES SECTOR
Avangrid, Inc. (AGR: Utilities/Utilities-Regulated Electric) - BULLISH BOUNCE. AGR has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Thursday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return AGR 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 48.29. Set a trailing stop of 3.24, tightening to 1.62 on a 2.04 profit. AGR closed at 47.56 on Thursday. Earnings Report Date: Jul 26, 2022. Beta: 0.36. Market-Cap: 18.39B. 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
---------------- ------- -------- ------- ------ -------
Amazon AMZN 3/9/2022 6/6/2022 20-for-1 Yes
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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