Notes From The Editor

Some people think that traders and investors have little in common. In fact, there really isn't a huge difference between short-term trading and long-term investing. The biggest obstacle to seeing the twin-like relationship between the two is simple semantics. What we all need is a clear definition. For instance, what exactly is "short" term and "long" term?

Of course there is a difference in the time horizons. However the words "short" and "long" are relative, so each requires specific parameters to be useful. "Short-term" for day traders is usually defined in minutes. They consider holding a stock for a few days "long term." On the other hand, investors like mutual fund managers might consider short-term as a few weeks or months.

Consider the fact that "short-term" and "long-term" are relative to the average holding time frame of the person doing the "trading" or "investing." Long term for one person can be short term for another, and vice versa. In any case, when it comes to stocks there are certain attributes of making money that apply to all time frames.

First, the purchase of any stock should be based on a reasonable expectation of a profit. But everyone expects a profit, or they wouldn't buy the stock ... right?

Unfortunately a large number of folks think reasonable means "hopeable." They base their decisions on hope instead of reason. An example of "reasonable" might be the purchase of a stock in a strong uptrend that has just pulled back to a support level and is beginning to rebound higher. An example of "hopeable" would be buying a stock because the new CEO is related to your new neighbor.

However, even stocks with "reasonable" expectations for profit don't always produce winners. So no matter your expected holding time, every position taken in the market should include some type of risk management. You can look at it as an inexpensive insurance policy. Whether trading for the short-term or investing for the long-term, a Risk Control strategy is essential.

Buying the best number of shares in relation to your particular account size - called Position Sizing - is the first step in managing risk. The second is to use an exit strategy that protects against major losses and locks in profits as they mature.

Another factor that enhances both short and long term holdings is the trend. Yes the trend is our friend, but only when it is associated with our chosen time frame. When it comes to risking cash, vague terms like "investing" and "trading" just aren't enough.

Defining our holding period within a specific time frame allows us to locate the trend that is relative to our personal method. Whether we trade in the direction of the dominant trend, or enter counter-trend trades, it pays to be aware of the precise trend that directly affects our positions.

Also keep in mind that the stock market "clock" has more than one dimension. Factoring in price movement enables us to see another one based on profit and loss. Whether "trading" or "investing," this clock also helps us decide whether the time has come to exit a position or stick with it.

During bull markets, investors often watch their stocks appreciate much faster than they expect. However, they usually ignore the price-clock that measures REAL progress with cash. Instead of realizing it's wise to lock in profits - especially quick ones, they look at clock-time and think the gains are simply related to the passing time.

Actually, time is just one of several dynamics that determine our success or failure in the markets. It's a big mistake to let the clock - how long we originally planned to own the stock - determine our actual holding period.

As you can see there really isn't a major difference between trading and investing. The only significant distinction is found in the amount of time each position is held. Regardless of how you define these common terms, all of the requirements for being a successful trader apply to investors, and vice versa.

Enjoy the weekend!

- Thomas Sutton, Editor

Quick List

    
Stock     06/19     06/19      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

BHB       21.13      0.10     21.50     19.73        1.77/0.89      2.68
OBNK      21.24     -0.29     22.13     20.38        1.75/0.88      2.82
PPBI      21.30     -0.32     22.32     20.37        1.95/0.97      2.36
RAVN      21.00      0.11     21.96     20.36        1.60/0.80      2.32

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 access to the Risk Calculator, go to http://www.rightline.net and login to the Member's area.

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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Questions? Send us an email using our contact form at: http://www.rightline.net/home/contact.html

Market Summary

The US stock markets closed mixed on Friday yet were able to finish the week in the plus column. In equities news, Apple (KMX $92) announced it will be closing stores in several of the states experiencing upticks in COVID-19 cases, CarMax (KMX $92) reported mixed earnings results and offered upbeat commentary, while Ventas (VTR $36) cut its quarterly dividend by over 40%. Economic related reports saw retail sales for May posting a record monthly gain, regional manufacturing activity up noticeably in June, and positive housing data along with improved homebuilder sentiment. Gold, the USD/dollar and oil prices were up, treasury yields finished the session near even.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                    25,871  -208.64         +265     1.03%
Nasdaq                  9,946    +3.07         +357     3.72%
S&P 500                 3,098   -17.60          +57     1.87%

NYSE Volume                      8.55B                       
NYSE Advancers                    1027                       
NYSE Decliners                    1931                       

Nasdaq Volume                    6.14B                       
Nasdaq Advancers                  1550                       
Nasdaq Decliners                  1802                       

                                 New Highs/Lows

                   06/12  06/15  06/16  06/17  06/18  06/19
                 --------------------------------------------
NYSE New Highs        12     27     44     57     38     68
NYSE New Lows          2      6      1      0      4      6
Nasdaq New Highs      24     62    127    154    109    167
Nasdaq New Lows        7     11      5     10      5      8
   

TRADER'S TIP: "EMAs, SMAs, or DMAs?"

Did you know that EMAs - Exponential Moving Averages - are calculated based on "yesterday's" EMA? That's where the "exponential" part comes in. This means that if you're looking at a 200 Daily EMA based on 500 days of data vs. 2000 days of data, the results will be different. This explains why various charts programs display differing EMAs for the same stock. Though this calculation also affects the shorter moving averages like the 22 and 50 DMA (Daily Moving Average), it is not as dramatic as with the 200 EMA. For daily charts the most widely used 200 MA is the 200 SMA (Simple Moving Average). However, in recent years some traders have begun using 200 EMAs because of the default settings in the charting packages. It pays to know which you are viewing. For the record, at RightLine we use EMAs for all moving averages except the 200 DMA, for which we use the SMA. One powerful feature found in RightLine and some other charting programs is the ability to change the time frame referenced on the chart. While this is a very helpful feature, be aware that changing this setting will affect any displayed EMAs (Exponential Moving Average) lines.

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Boost Your Profits With Moving Averages".

S&P 500 - 3097.74 June 19, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 3452.71
Resistance 2: 3262.84
Resistance 1: 3180.29
Pivot: 3072.97
Support 1: 2990.42
Support 2: 2883.10
Support 3: 2693.23


NASDAQ Composite - 9946.12 June 19, 2020

52-Week High: 10086.89
52-Week Low: 6631.42
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 11102.83
Resistance 2: 10451.92
Resistance 1: 10199.02
Pivot: 9801.01
Support 1: 9548.11
Support 2: 9150.10
Support 3: 8499.19
        
Dow Industrials - 25871.46 June 19, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 29310.92
Resistance 2: 27543.07
Resistance 1: 26707.26
Pivot: 25775.22
Support 1: 24939.41
Support 2: 24007.37
Support 3: 22239.52
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, June 22, 2020:
22-Jun  8:30 am   Chicago Fed national activity index
22-Jun  10 am   Existing home sales

Tuesday, June 23, 2020:
23-Jun  9:45 am   Markit manufacturing index (flash)
23-Jun  9:45 am   Markit services index (flash)
23-Jun  10 am   New home sales

Wednesday, June 24, 2020:
24-Jun   9 am   FHFA home price index (year-over-year change)

Thursday, June 25, 2020:
25-Jun  8:30 am   Initial jobless claims (regular state program, SA)
25-Jun  8:30 am   Continuing jobless claims
25-Jun  8:30 am   GDP (revision)
25-Jun  8:30 am   Durable goods orders
25-Jun  8:30 am   Core capital goods orders
25-Jun  8:30 am   Trade in goods (advance report)

Friday, June 26, 2020:
26-Jun  8:30 am   Personal income
26-Jun  8:30 am   Consumer spending
26-Jun  8:30 am   Core inflation
26-Jun  10 am   Consumer sentiment index (final)

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

TRADER'S TIP: "What Can I Learn From This Trade?"

This is where the rubber meets the road! Although a trade may end when you exit the position that is often when the learning begins. One popular definition of insanity is continuing to act in the same way but expecting different results. A trading journal or diary will help answer the questions, "Now that I see the past with 20/20 vision, what would I have done differently? What did I do right? Did my emotional state of mind affect my success? Did I follow my trading plan? Did I set my stop at reasonable level?"

When you review your trades after the fact, it's amazing how easy it is to find a nugget of information that will help you with your next trades. We can't force stocks to do what we want them to, but we can learn to work with what a stock gives us. Moreover, the difference between progress and stagnation is our ability to learn from our experiences.

Stocks Covered in This Issue

FINANCIAL SERVICES SECTOR

Bar Harbor Bankshares (BHB: Financial Services/Banks-Regional) - 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 BHB's case we will enter a BUY should it reach the 21.50 level, or a SELL short trade if it drops to 19.73. As usual a trailing stop is essential, 1.77 which should be tightened to 0.89 on a 2.68 gain. BHB closed Friday at 21.13. Earnings Report Date: N/A. Beta: 0.97. Market-Cap: 328.227M. Not Optionable.

Origin Bancorp, Inc. (OBNK: Financial Services/Banks-Regional) - SQUEEZE PLAY. Trader indecision has put OBNK 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 22.13 and a SELL short entry at 20.38. Now it's up to OBNK to show us which entry will be filled. Once the trade is underway place a 1.75 trailing stop, which can be tightened to 0.88 after you achieve a 2.82 profit. OBNK closed on Friday at 21.24. Earnings Report Date: N/A. Beta: 1.10. Market-Cap: 498.628M. Not Optionable.

Pacific Premier Bancorp, Inc. (PPBI: Financial Services/Banks-Regional) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. PPBI traders reached this state of stand-off on Friday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 22.32 and a SELL short trigger at 20.37. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.95 which can be tightened to 0.97 on a 2.36 gain. PPBI closed Friday at 21.30. Earnings Report Date: Jun 26, 2020. Beta: 1.36. Market-Cap: 2.01B. Optionable.

INDUSTRIALS SECTOR

Raven Industries, Inc. (RAVN: Industrials/Specialty Industrial Machinery) - 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 RAVN. A move to the upside will trigger our BUY entry at 21.96, while a drop to 20.36 will trigger our SELL short entry. Follow your position with a 1.60 trailing stop. Tighten the stop to 0.80 once you have a 2.32 gain. RAVN closed Friday at 21.00. Earnings Report Date: Aug 20, 2020. Beta: 1.37. Market-Cap: 752.529M. 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  
---------------- -------     --------    -------     ------  -------   

Currently there are no upcoming stock splits on the major US exchanges.
    

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

"10 Ways To Master The Trade"

How do you know you're making progress on the road to successful trading? There's one obvious answer: Check your financial results. There is little doubt you're doing well if you're booking consistent profits.

But raw capital production may not be the best way to judge your growth as a trader. The road to success has many detours where profitability isn't the best measure of results. For example, we all go through phases in which introspection and skill development are more urgent than short-term profits. So let's look at 10 ways to know you're making solid progress on the road to market mastery:

1. Money management becomes your lifeline, and all your trading strategies start to revolve around its core. Risk control becomes a key aspect of every position you take. You accept that controlling losses has a far-greater impact on your bottom line than chasing gains.

2. You develop your own trading plans and strategies rather than relying on books, gurus or other people's opinions. You notice how you're finding more opportunities than you have time to trade while looking through your charts. You look forward to the trading day with a growing sense of confidence and empowerment.

3. You feel more like a student than a master. You learn new things every day and can't wait to apply them to real-life trading scenarios. You listen closely to everything you hear, trying to pick up hints and concepts that will improve your performance. You expand your studies into everything market-related, including economics, fundamentals and balance sheets.

4. You stop visiting stock boards and chat rooms, because they don't add anything to your trading goals. You realize that everyone in those places has ulterior motives. You develop a healthy skepticism about companies, market-makers and even other traders. You realize that no one is really interested in your success as a trader, except for you.

5. You become more private in your discussions about the market with family and friends. You learn to keep your opinions to yourself, because they're just idle discussion. You never talk about open positions or ask others what to do with them. You recognize that opinions count only when they're backed up by cold, hard cash.

6. Trading starts to feel like any other successful profession. Your average profits get bigger while your losses get smaller. You experience fewer drawdowns that drain your capital and undermine your confidence. Your trading day starts to get a little boring, but you prefer the lack of emotional highs and lows.

7. You grade your performance each day and recognize when your actions did not meet your rising standards. You notice how certain times of the day are particularly dangerous or rewarding for your trading style. You keep a written diary that describes your strengths and weaknesses in stark detail.

8. You never cut corners in your market analysis, no matter how tired or exhilarated you feel at the end of the day. You set aside time to review your daily results, download fresh data and uncover themes for the next session. You don't trade at all when non-market matters keep you from finishing your nightly preparation.

9. You watch all types of markets, even those you're not trading at the time. You realize the next opportunity could come from anywhere, and you want to be prepared. You also understand that your trading interests will change over time, so you want to be ready for the next big thing.

10. You keep detailed trading records and update them on a nightly basis. You look at both profits and losses with complete detachment and a keen eye for self-improvement. You don't "conveniently" fail to include those trades you'd rather forget about.

********** This guest article was written by Alan Farley, trader and author of "The Master Swing Trader." To order a copy of Alan's book, please go to http://www.invest-store.com/rightline/.

A simple yet powerful tool, the Risk Control Calculator helps you manage risk by recommending a maximum number of shares to purchase. Available to all RightLine subscribers. For access, go to http://www.rightline.net and login to the Member's area.

Disclaimer

The RightLine Report is an information service for investors and traders. It is not a solicitation nor a recommendation or offer to buy or sell securities. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. The publishers of The RightLine Report are not brokers or financial advisors, and are not acting in any way to influence the purchase or sale of any security. Stock picks, entry points and exit points should be considered an information resource to assist the trader in developing a trading plan and it is the sole responsibility of the reader to conduct his or her own due diligence before executing a trade. Trading securities should be considered speculative with a high degree of volatility and risk.

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