June 2, 2020 - The RightLine Report
Notes From The Editor
Common Trading Mistakes...And How to Avoid Them (Part IV)
Here's part IV of our ongoing series on trading pitfalls that can get in the way of your long-term success. Take heed of the following two mistakes; they're especially dangerous!
Mistake #9: Failure to control emotions
Bad things happen when emotions run amuck. A lack of control can lead to decisions that are misguided, risky, or just plain stupid. Frustration at missing out on a great trade, for example, can trigger a haphazard decision to jump headlong at the next potential set-up. Blind hope can lead to positions that are based on emotions, rather than technical merits. Greed can cause you to cast your stop-loss strategy aside, because you don't want to miss out on further profits.
The best traders are objective. Although they feel greed, fear, and hope - just like every other human on this blue orb - they don't let those emotions influence their decisions. They take a cool, calm, and collected approach. They vent their emotions in a constructive way, away from the intensity of live market action. Their heightened self-awareness insulates them from the dangers of emotional trading.
Mistake #10: Trading with money you can't afford to lose
It's a dream of many market junkies to reach the point where they can honestly say that trading is their profession. Can it be done? Absolutely. But if you're trading for your next rent check or car payment, trouble may be just around the corner.
The reason is simple, and directly related to the previous mistake; when you're trading for your livelihood, it's next to impossible to control your emotions. Fear over losing money can cause you to bail out of a position before it hits your stop. The need to make money can cause you to take less-than-ideal positions. And in the worst-case scenario, desperation can cause you to cast all risk management aside, holding on to losing positions indefinitely.
To avoid this scenario, never trade with money you need to live. If you make enough to live on your profits, more power to you! But always be sure that you have a cushion - a savings account, for example, or other sources of income. Trading can (and will) lead to occasional losses, and you should always be able to handle those losses without worrying about paying your bills.
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
------ -------- -------- -------- -------- --------------- --------
CENTA 33.13 -0.18 33.97 2.05/1.02 2.52
STFC 20.25 0.21 20.83 19.28 1.55/0.78 2.66
BVXV 20.30 -0.64 21.28 19.24 2.04/1.02 4.02
PRLB 123.30 -1.47 127.04 10.02/5.01 10.88
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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Stocks Covered Today...Stock Splits...
Market Summary
Stocks closed higher on Tuesday, adding to the gains of April and May despite concerns over COVID-19 and the civil unrest taking place in a number of major US cities. Business reopenings appear to be the major bullish catalyst, along with Monday's upbeat global manufacturing reports. In equities headlines, Visa (V $196) announced that total payments volume in the USA declined 5% year-over-year, while Dick's Sporting Goods (DKS $38) reported that same-store sales through the first four weeks of the second quarter have progressively recovered after reopening 80% of its stores, plus its online business has increased over 250%. Oil and treasury yields finished the session higher, gold and the USD/dollar were lower.
Jun 1, 2020 Jun 2, 2020
-------------------- --------------------
Dow 25,475 +91.91 25,743 +267.63
Nasdaq 9,552 +62.18 9,608 +56.33
S&P 500 3,056 +11.42 3,081 +25.09
NYSE Volume 4.76B 5.31B
NYSE Advancers 2237 2175
NYSE Decliners 739 767
Nasdaq Volume 3.89B 4.01B
Nasdaq Advancers 1991 2060
Nasdaq Decliners 1281 1205
New Highs/Lows
05/26 05/27 05/28 05/29 06/01 06/02
--------------------------------------------
NYSE New Highs 42 21 37 28 50 56
NYSE New Lows 3 7 1 13 5 4
Nasdaq New Highs 125 49 84 82 133 104
Nasdaq New Lows 11 12 11 18 9 8
Stocks Covered Today...Stock Splits...
TRADER'S TIP: "Sizzlin' Outside? Stay Cool!"
Has the stock market and the summer heat got your emotions running hot? Chill out, and remember that though we have no control over what the market does, we do have complete control over how we respond to it. Getting angry when the market doesn't co-operate with our wishes doesn't change price action, yet the emotional stress from anger has the potential to cloud our judgment and cause us to make unwise decisions.
To avoid this sort of reaction, we can accept the fact that the market is not trying to hurt us, and for that matter is not even aware that we exist. Our reaction won't change the market, but it WILL determine whether we ultimately win or lose money in the business of trading. Stay cool, and when things get too warm, relax by the pool!
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 - 3080.82 June 2, 2020
52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: -3124864.04
Resistance 2: -18429814.80
Resistance 1: -9214907.40
Pivot: 9214907.40
Support 1: 18429814.80
Support 2: -6090043.36
Support 3: -21394994.12
NASDAQ Composite - 9608.37 June 2, 2020
52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: -3124864.04
Resistance 2: -18429814.80
Resistance 1: -9214907.40
Pivot: 9214907.40
Support 1: 18429814.80
Support 2: -6090043.36
Support 3: -21394994.12
Dow Industrials - 25742.65 June 2, 2020
52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: -3124864.04
Resistance 2: -18429814.80
Resistance 1: -9214907.40
Pivot: 9214907.40
Support 1: 18429814.80
Support 2: -6090043.36
Support 3: -21394994.12
Stocks Covered Today...Stock Splits...
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, June 01, 2020: 01-Jun 9:45 am Markit manufacturing PMI 01-Jun 10 am ISM manufacturing index 01-Jun 10 am Construction spending Tuesday, June 02, 2020: 02-Jun Varies Motor vehicle sales Wednesday, June 03, 2020: 03-Jun 8:15 am ADP employment report 03-Jun 9:45 am Markit services PMI 03-Jun 10 am ISM nonmanufacturing index 03-Jun 10 am Factory orders Thursday, June 04, 2020: 04-Jun 8:30 am Initial jobless claims (regular state program, SA) 04-Jun 8:30 am Initial jobless claims (total, not seasonally adjusted)) 04-Jun 8:30 am Trade deficit 04-Jun 8:30 am Productivity (revision) 04-Jun 8:30 am Unit labor costs (revision) Friday, June 5, 2020: 05-Jun 8:30 am Nonfarm payrolls 05-Jun 8:30 am Unemployment rate 05-Jun 8:30 am Average hourly earnings 05-Jun 3 pm Consumer credit 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: "Sometimes You Gotta . . ."
The fear of "missing out" can cloud a trader's judgment, so be sure to base all buy or sell decisions on careful planning instead of emotional reactions. The market is full of opportunities - there's plenty for everyone. Rushing in can lead to problems, so remember the old saying . . . "sometimes you gotta slow down to go fast!"
Stocks Covered in This Issue
CONSUMER DEFENSIVE SECTOR
Central Garden & Pet Company (CENTA: Consumer Defensive/Packaged Foods) - NEW HIGH DIP. CENTA's strong performance produced a new 52-week high several days ago. Since then we've been waiting for a pullback from that high in order to get on board with a low-risk entry. Tuesday's reversal near Moving Average support provides us with a New High Dip setup. Set your BUY trigger at 33.97, and follow your purchase with a 2.05 trailing stop which can be tightened to 1.02 when you have a 2.52-point gain. CENTA closed Tuesday at 33.13. Earnings Report Date: Jul 30, 2020. Beta: 0.30. Market-Cap: 1.844B. Optionable.
FINANCIAL SERVICES SECTOR
State Auto Financial Corporation (STFC: Financial Services/Insurance-Property & Casualty) - 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 STFC's case we will enter a BUY should it reach the 20.83 level, or a SELL short trade if it drops to 19.28. As usual a trailing stop is essential, 1.55 which should be tightened to 0.78 on a 2.66 gain. STFC closed Tuesday at 20.25. Earnings Report Date: Jul 30, 2020. Beta: 0.10. Market-Cap: 886.369M. Optionable.
HEALTHCARE SECTOR
BiondVax Pharmaceuticals Ltd. (BVXV: Healthcare/Biotechnology) - SQUEEZE PLAY. Trader indecision has put BVXV 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 21.28 and a SELL short entry at 19.24. Now it's up to BVXV to show us which entry will be filled. Once the trade is underway place a 2.04 trailing stop, which can be tightened to 1.02 after you achieve a 4.02 profit. BVXV closed on Tuesday at 20.30. Earnings Report Date: N/A. Beta: 1.98. Market-Cap: 204.194M. Not Optionable.
INDUSTRIALS SECTOR
Proto Labs, Inc. (PRLB: Industrials/Metal Fabrication) - NEW HIGH DIP. Basking in the light of a recent new 52-week high, PRLB shares have pulled back a bit as traders enjoy some nice profits. Now it looks like the Bull may be ready to resume the uptrend again. Tuesday's bounce from a Moving Average support zone provides us with solid setup, so be ready to enter when price reaches our BUY trigger at 127.04. Follow your long entry with a 10.02 stop, then tighten it to 5.01 after gaining 10.88. PRLB ended the Tuesday session at 123.30. Earnings Report Date: Jul 23, 2020. Beta: 1.70. Market-Cap: 3.281B. 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
---------------- ------- -------- ------- ------ -------
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.
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.
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