June 21, 2022 - The RightLine Report
Notes From The Editor
One of the unique benefits of trading stocks is the opportunity to make money in any market. While traditional investors are limited to up- trends in bull markets, active traders with shorting skills can easily find opportunities in both bullish and bearish environments.
There are a number of reasons that investors normally don't short stocks. Most have never heard of shorting and have no idea what is involved. Those who are fortunate enough to hear about it are usually told that it's too hard or too risky.
In truth, shorting stocks is neither more difficult nor dangerous than buying stocks. Over the years two major fear tactics have been used to keep investors from learning how to short stocks:
1) "It's just too hard to short stocks because of the up-tick rule."
2) "It's too risky to short stocks because a loss can continue to grow indefinitely."
The first objection to shorting is outdated. The old rule that you could only go short on an up-tick was replaced years ago with a limited rule. It applies only to stocks which have fallen by 10% in price during a trading day, and applies only to the remainder of that trading day and the following trading day. During that period of time, a stock can only be sold short when the sale price is higher than the highest bid price maintained by any market maker in the stock. In other words, after a stock has fallen by 10% a short position has to be entered on an uptick. Before that, it can be entered at any time. In most cases you no longer have to wait for a stock's price to be moving up to get a short order filled.
As for the second objection, anyone who would let a loss go on forever would have to be completely incompetent or in a coma. Theoretically a perpetual loss could happen, but it actually never does. Experienced traders use stop losses and other forms of risk control. In addition, brokerages monitor shorting activities very carefully and will pull the plug on a short sale before it gets completely out of hand.
Remember that things never stay the same. To be competitive we all have to embrace change and become more flexible. If you've been thinking about learning how to short, now is a good time to get started.
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 06/21 06/21 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
SIX 21.10 -0.88 22.43 20.34 2.09/1.05 2.88
EWCZ 21.10 -0.29 22.11 20.45 1.66/0.83 3.38
GMAB 29.90 1.35 28.55 1.92/0.96 1.46
RCII 20.31 0.05 21.51 19.5 2.01/1.01 3.64
CCSI 42.39 -0.08 41 2.99/1.5 4.68
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
After a three day weekend, the major US stock market indices moved significantly higher on Tuesday despite reports that existing home sales have declined for the fourth month in and home prices increased for the 123rd consecutive month. Traders digested the news while looking ahead to Federal Bank Chairman Jerome Powell's two-day semi-annual Congressional testimony starting Wednesday for additional insight into the monetary path forward. In light equity news, Tesla (TSLA $711) announced upcoming job cuts for salaried workers, while Kellogg Company (K $70) says it will separate into three independent public companies. Gold, the USD/dollar and treasuries were lower, oil prices were higher.
Jun 20, 2022 Jun 21, 2022
-------------------- --------------------
Dow Closed 0 30,530.25 641.47
Nasdaq Closed 0 11,069.30 270.95
S&P 500 Closed 0 3,764.79 89.95
NYSE Volume 0 5.44B
NYSE Advancers 0 2,398
NYSE Decliners 0 901
Nasdaq Volume 0 5.3B
Nasdaq Advancers 0 3,252
Nasdaq Decliners 0 1,461
New Highs/Lows
06/14 06/15 06/16 06/17 06/20 06/21
--------------------------------------------
NYSE New Highs 4 5 1 2 0 11
NYSE New Lows 850 337 1,092 566 0 158
Nasdaq New Highs 15 21 14 21 0 35
Nasdaq New Lows 1,020 381 1,147 485 0 204
Stocks Covered Today Stock Splits
TRADER'S TIP: "Every Day Is A New Day"
Traders should assume nothing about future market direction. Begin each day unbiased, and let the price action determine whether you're bullish or bearish.
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 - 3764.79 June 21, 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
NASDAQ Composite - 11069.30 June 21, 2022
52-Week High: 16212.23
52-Week Low: 10565.14
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 12227.49
Resistance 2: 11548.37
Resistance 1: 11173.36
Pivot: 10869.25
Support 1: 10494.24
Support 2: 10190.12
Support 3: 9511.00
Dow Industrials - 30530.25 June 21, 2022
52-Week High: 36952.65
52-Week Low: 29653.27
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 33212.23
Resistance 2: 31720.61
Resistance 1: 30804.69
Pivot: 30228.99
Support 1: 29313.07
Support 2: 28737.37
Support 3: 27245.75
Stocks Covered Today Stock Splits
Market Calendar
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
Stocks Covered Today Stock Splits
TRADER'S TIP: "A Mythological Metaphor"
Just as Odysseus in ancient Greek mythology bound himself to the ship's mast to prevent the wail of Sirens from luring the seafarer on to dangerous rocks, traders can find safety and prosperity by securing themselves with a few important standards.
1) Don't let the crowd determine your perspective. Although many investors indulge in false group security by mimicking everyone else, successful traders listen to others but think for themselves. Instead of marching with lemmings, stay focused on locating opportunity - there's plenty of it.
2) Avoid overtrading. There are two ways to over trade - trading too often, or taking on positions that are too large. To prevent the latter, always calculate the appropriate number of shares for your personal account size. And for the former, remember there's no reason to trade in a frenzy. Instead of grabbing every setup that comes along, concentrate on each trade you make. Thoughtfully pace yourself by taking on smaller trades to stay in tune, and then load up the wagons when the time is right.
3) Cut your losses and let your winners run. This means setting stops and executing them as planned. Don't dwell on the losers, just learn and go on. Manage your winners intelligently - give them enough room to grow, but don't neglect them and let profits disappear.
4) Even though trading is supposed to be serious business, the best traders know how to laugh - especially at themselves! Relax, and give yourself regular fun breaks to clear your head. You deserve it.
5) Thinking like a winner makes you a winner. The sum of our thoughts has an interesting way of showing up in our lives. Think of yourself as successful, and you are likely to be a success.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Six Flags Entertainment Corporation (SIX: Consumer Cyclical/Leisure) - SQUEEZE PLAY. Tuesday's trading action forced SIX's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction SIX will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 22.43 if SIX moves higher, and place your order to SELL short at 20.34 if price declines to that level. As usual follow your entry with a trailing stop, 2.09 should be sufficient. Reduce your stop to 1.05 on a 2.88 gain. SIX closed Tuesday at 21.10. Earnings Report Date: Jul 26, 2022. Beta: 2.25. Market-Cap: 1.824B. Optionable.
CONSUMER DEFENSIVE SECTOR
European Wax Center, Inc. (EWCZ: Consumer Defensive/Household & Personal Products) - SQUEEZE PLAY. A look at EWCZ's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 22.11 and a SELL short trigger at 20.45. Once EWCZ shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.66 and tighten to 0.83 on a 3.38 gain. EWCZ closed Tuesday at 21.10. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.389B. Not Optionable.
HEALTHCARE SECTOR
Genmab A/S (GMAB: Healthcare/Biotechnology) - NEW LOW RISE. Another troubled bottom dweller, GMAB just recently set a new 12-month low. Having bounced since then, GMAB's bearish response to an encounter with moving average support on Tuesday shows that the stock may be ready for another move lower. Now at 29.90, an downward push to 28.55 will signal a SELL short entry. Once in the trade, place a 1.92 trailing stop which can be tightened to 0.96 after you've gained 1.46. Earnings Report Date: N/A. Beta: 0.71. Market-Cap: 19.589B. Optionable.
INDUSTRIALS SECTOR
Rent-A-Center, Inc. (RCII: Industrials/Rental & Leasing Services) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in RCII, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 21.51 and a SELL short entry at 19.5. Let RCII's price action determine your long or short entry. Once the order is filled, place a 2.01 trailing stop, and tighten it to 1.01 upon getting a 3.64 gain. RCII closed Tuesday at 20.31. Earnings Report Date: Aug 02, 2022. Beta: 1.55. Market-Cap: 1.201B. Optionable.
TECHNOLOGY SECTOR
Consensus Cloud Solutions, Inc. (CCSI: Technology/Software-Infrastructure) - BEARISH U-TURN. A quick look at the charts for CCSI show that despite the upward pressure caused by recent buying, the weekly downtrend is still in place. Tuesday's chart shows a potential return to that downtrend is in the works. This Bearish U-Turn set-up offers a potential entry point for a SHORT play. Set your trigger to SELL shares at 41, and follow your entry with a trailing stop of 2.99. Tighten the stop to 1.5 after reaching a 4.68 profit. CCSI ended the latest session at 42.39. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 848.453M. 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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