Notes From The Editor

Though most traders aspire to be adaptable in all market conditions, many place limits on themselves in ways they aren't even aware of. For example, a large percentage of traders still don't use shorting as a way to increase profits. So why don't more folks take advantage of this powerful trading method?

Maybe it's because short-sellers have gotten a lot of bad press over the years. This alone has caused many individuals to falsely assume that shorting should be avoided. In the real world, declining markets are very similar to rising markets in at least one respect. Both types of markets present a trend that should be considered when making intelligent trade decisions. Of course this requires flexibility ...

The long term upside bias of the stock market has convinced many traders that shorting isn't a smart thing to do. However, the opposite is true. Traders rarely hold stocks long enough for long-term trends to impact their positions. Stock trading is based on taking advantage of shorter-term trends and price swings, while investing depends on very long-term trends and economic cycles to produce profits.

Short-term market dynamics differ from long-term in an important way. While the market has historically trended higher the past 100+ years, it hasn't moved in a straight line. Instead, prices have risen and fallen in a repeating cycle; a cycle that has trended higher over the long haul.

In some way all short-term traders take advantage of the inevitable declines. Most do this by waiting for the pullbacks to end before buying shares. Others watch for signs that the upward leg of the cycle is complete, and then enter short trades to profit from the fall.

Doing both of these allows us to significantly increase the number and quality of trading opportunities available. By keeping an open mind, we begin to understand the real benefits of short selling in relation to the constant rotation of up and down trends that occur in every time frame.

The art of shorting certainly isn't the dangerous act it's often made out to be. Using effective short-selling techniques actually lowers overall risk by letting you make money in down trending markets. From personal experience, shorting is a powerful skill to be considered by anyone who is serious about trading stocks.

Stay flexible!

- Thomas Sutton, Editor

Quick List

    
Stock     06/23     06/23      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

MEOH      20.11      0.42     20.70     19.33        1.37/0.69      2.48
GRPN      21.25      1.19     21.73     19.78        1.95/0.97      4.92
MTOR      20.09      0.16     20.82     19.27        1.55/0.78      1.92
AIMT      18.87      0.67     19.34                  1.63/0.81      2.02

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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Market Summary

The major US stock averages finished the Tuesday session in the green as the Nasdaq set another new record high and the S&P 500 advanced toward positive gains for the year. Economic headlines included positive global manufacturing in June, along with improvements and in some cases even expansion in the services sector. On the equities front, American Airlines (AAL $14) increased the size of its convertible bonds and equity offerings, while Huntsman Corporation (HUN $18) offered a mixed update on its business trends. Gold ended the day higher, the USD/dollar and oil prices declined, treasury yields were mixed.

                        Jun 22, 2020           Jun 23, 2020   
                  --------------------   --------------------
Dow                    26,025  +153.50        26,156  +131.14
Nasdaq              10,056.48  +110.35     10,131.37   +74.89
S&P 500                 3,118   +20.12         3,131   +13.43

NYSE Volume                      4.75B                  4.82B
NYSE Advancers                    1558                   1702
NYSE Decliners                    1395                   1254

Nasdaq Volume                    4.52B                  5.74B
Nasdaq Advancers                  1843                   1826
Nasdaq Decliners                  1507                   1510

                                 New Highs/Lows

                   06/16  06/17  06/18  06/19  06/22  06/23
                 --------------------------------------------
NYSE New Highs        44     57     38     68     64     63
NYSE New Lows          1      0      4      6      6      3
Nasdaq New Highs     127    154    109    167    150    200
Nasdaq New Lows        5     10      5      8     15      9
   

TRADER'S TIP: "Consistency and Discipline"

. . . He (Richard Dennis) placed classified ads proclaiming 'trader wanted,' he got some 1,000 responses from people eager to learn his methods. He settled on fewer than two dozen novices--among them two professional gamblers and a fantasy-game designer--and after a two-week training program, he gave them money to trade under his firm's auspices. Several went on to become top commodity-fund managers, including Jerry Parker of Chesapeake Capital Corp., who now manages more than US$1 billion. 'It was sink or swim. Sort of an experiment,' recalls Parker, a former accountant. Dennis ran the training, Parker says, 'because he wanted to have a certain chunk of money traded using systematic rules' while he went on and tried out new techniques.

~ Business Week

"The key is consistency and discipline. Almost anybody can come up with a list of rules that are 80% as good as what we taught. What they can't do is give people the confidence to stick to those rules even when things are going bad."

~ Richard Dennis

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 - 3131.29 June 23, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: DOWN
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 - 10131.37 June 23, 2020

52-Week High: 10221.85
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 - 26156.10 June 23, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: DOWN
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: "In Sync with the Trend = More Winners"

It's much easier to make money when we're in sync with the trend - yet even the best setups don't always produce a profit. A review of the "All Time Top Ten" mechanical trading systems tested by Futures Truth revealed that the best winning rate was 57.5%, while several were less than 50%. The key to the success of these systems is that winning trades outperformed losers by a wide margin. The stock market can be a finicky creature at times. Always use Risk Control to protect your profits and capital. One big winner can offset several small losers, so always cut losses quickly and let the winners grow.

Stocks Covered in This Issue

BASIC MATERIALS SECTOR

Methanex Corporation (MEOH: Basic Materials/Chemicals) - 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. MEOH found itself in this condition on Tuesday 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 20.70 and a SELL short trigger at 19.33. When MEOH moves outside of Tuesday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.37 trailing stop. After you've got a 2.48 profit, tighten the stop to 0.69. MEOH closed at 20.11 on Tuesday. Earnings Report Date: N/A. Beta: 2.45. Market-Cap: 1.524B. Optionable.

COMMUNICATION SERVICES SECTOR

Groupon, Inc. (GRPN: Communication Services/Internet Content & Information) - SQUEEZE PLAY. GRPN shareholders know what it feels like to be squeezed. Tuesday'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. GRPN closed Tuesday at 21.25. The plan is to enter in the right direction by placing a BUY trigger at 21.73 and a SELL short trigger at 19.78. Once GRPN establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.95. After you've collected a 4.92 profit, tighten the stop to 0.97. Earnings Report Date: Jul 28, 2020. Beta: 1.72. Market-Cap: 608.509M. Optionable.

CONSUMER CYCLICAL SECTOR

Meritor, Inc. (MTOR: Consumer Cyclical/Auto Parts) - SQUEEZE PLAY. MTOR traders on both sides of the fence are now locked in a head-to-head shootout. Tuesday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 20.82 and a SELL short trigger at 19.27. When one of the orders is filled, cancel the remaining order and enter a 1.55 trailing stop. When you've reached a 1.92 paper profit, tighten the stop to 0.78. MTOR closed at 20.09 on Tuesday. Earnings Report Date: Jul 29, 2020. Beta: 2.46. Market-Cap: 1.452B. Optionable.

HEALTHCARE SECTOR

Aimmune Therapeutics, Inc. (AIMT: Healthcare/Biotechnology) - BULLISH BOUNCE. Up-trending stocks like AIMT have a tendency to bounce their way skyward rather than travel higher in a straight line. After touching down to a moving average support level on Tuesday, AIMT is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 19.34 if positive price action occurs. As always, follow your entry with a trailing stop. A 1.63 trailer should work well with AIMT. Tighten it to 0.81 on a 2.02 gainer. Earnings Report Date: Aug 06, 2020. Beta: 0.96. Market-Cap: 1.231B. 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.

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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