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June 24, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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With the daily noise and constant churn of the market, it's easy to forget what's really driving all that movement. The basic laws of supply and demand govern anything that can be bought or sold - and nowhere is this more true than the stock market.
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"QUICK LIST"
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Stock 06/23 06/23 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
SNBR 22.41 -0.32 23.07 21.44 1.63/0.82 2.28
LOB 25.06 0.59 25.48 2.23/1.12 2.44
KYMR 22.97 -0.46 23.57 21.8 1.77/0.89 2.88
RMR 23.40 -0.19 24.05 1.7/0.85 1.38
ZI 23.99 -0.28 24.59 22.79 1.8/0.9 1.98
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" at https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/
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MARKET SUMMARY
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Equities broke their weekly winning streak due to worries that lingering inflation pressures might force central banks to keep tightening, though markets finished off their lows. The S&P 500 posted a weekly loss after five straight weeks of gains, while global stocks logged their biggest weekly decline in more than three months. Oil prices were lower for the day and down almost 5% for the week. Elsewhere, government bonds and the US dollar rose, both consistent with the cautious tone in equity markets with defensive sectors outperforming. Adding to fears of hawkish central bank policies, Fed Chair Powell in his semiannual appearance on Capitol Hill Chair affirmed that more interest rates are likely ahead until additional progress is made on inflation. In our view the central bank will keep its policy restrictive this year to push inflation down by forcing some type of landing or a slowdown in the economy. We continue to think that the Fed is nearing the end of its tightening campaign. The weaker growth that we anticipate down the road and further improvement on inflation will likely pave the way for the Fed to move to the sidelines, possibly after one more rate hike next month. Putting the pullback into perspective, while the market weakness during this holiday-shortened week might feel abrupt and uncomfortable, it should be interpreted as a payback for this quarter's strong market rally. Earlier this week, volatility as proxied by the VIX index declined to a new three-year low, while the S&P 500 rallied almost 8% over the past three months and 15% year-to-date. Markets are unlikely to ignore a potential slowdown in growth as the lagged impact of the Fed's rate hikes filter through the economy. We would view any renewed phase of volatility in equities as an opportunity to position for a more sustainable rebound that is likely to have broader shoulders with more stocks and sectors participating in the upside. Friday On The Week
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Dow 33,727.43 -219.28 -571.69 -1.67%
Nasdaq 13,492.52 -138.09 -197.05 -1.44%
S&P 500 4,348.33 -33.56 -61.26 -1.39%
NYSE Volume 6.29B
NYSE Advancers 910
NYSE Decliners 2,024
Nasdaq Volume 7.93B
Nasdaq Advancers 1,445
Nasdaq Decliners 2,935
New Highs/Lows
06/16 06/19 06/20 06/21 06/22 06/23
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NYSE New Highs 145 0 69 92 50 52
NYSE New Lows 15 0 19 29 37 47
Nasdaq New Highs 217 0 91 92 67 49
Nasdaq New Lows 79 0 100 132 125 153
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TRADER'S TIP:
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TRADER'S TIP: "Paper Trading" "The purpose of rehearsal is to create the habit of the objective." ~ William H. Macy, actor Paper trading is helpful because it allows newcomers to learn and develop a certain degree of skill without putting real money into the market. However, this type of "virtual" experience is limited because it doesn't produce genuine emotional involvement. In fact there is a huge difference between the safety of imagined risk and the raw challenge of having to put cash - your cash - at risk. In the real world, emotional challenges due to routine losses usually influence a trader's attitude and decision-making process to a larger degree than ever expected. **************************
THE TECHNICAL ANALYST
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This section contains important technical data for the three major market averages -- the S&P 500, the Nasdaq Comp Index, and the Dow Industrial Average. For guidance on how to use this information, go to: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ S&P 500 - 4348.33 June 23, 2023 52-Week High: 4448.47 52-Week Low: 3491.58 Daily Trend: DOWN Weekly trend: UP Weekly Pivot Levels Resistance 3: 4593.47 Resistance 2: 4486.41 Resistance 1: 4417.37 Pivot: 4379.35 Support 1: 4310.31 Support 2: 4272.29 Support 3: 4165.23 https://www.prorightline.com/rlch/062323SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, June 26, 2023: 26-Jun None scheduled Tuesday, June 27, 2023: 27-Jun 8:30 am Durable-goods orders 27-Jun 8:30 am Durable-goods minus transportation 27-Jun 9:00 am S&P Case-Shiller home price index (20 cities) 27-Jun 10:00 am New home sales 27-Jun 10:00 am Consumer confidence Wednesday, June 28, 2023: 28-Jun 8:30 am Advanced U.S. trade balance in goods 28-Jun 8:30 am Advanced retail inventories 28-Jun 8:30 am Advanced wholesale inventories Thursday, June 29, 2023: 29-Jun 8:30 am Initial jobless claims 29-Jun 10:00 am Pending home sales Friday, June 30, 2023: 30-Jun 8:30 am Personal income (nominal) 30-Jun 8:30 am Personal spending (nominal) 30-Jun 8:30 am PCE index] 30-Jun 8:30 am Core PCE index 30-Jun 8:30 am PCE (year-over-year) 30-Jun 8:30 am Core PCE (year-over-year) 30-Jun 9:45 am Chicago Business Barometer 30-Jun 10:00 am Consumer sentiment (final) For a chart of typical Up or Down market reactions to specific major US economic reports, go to "Economic Indicator Effects" at this link: https://prorightline.com/index.php/economic-indicator-effects/
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TRADER'S TIP:
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TRADER'S TIP: "How Do You Get To Carnegie Hall?" We've all heard the answer to this old joke . . . "practice, practice, practice!" While it is certainly obvious that trading successfully requires plenty of it, many investors have yet to apply this ancient bit of oriental wisdom: "Practice is the best of all instructors." ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR Sleep Number Corporation (SNBR: Consumer Cyclical/Furnishings, Fixtures & Appliances) - SQUEEZE PLAY. Friday's narrow price range has created a potentially profitable setup in SNBR, 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 23.07 and a SELL short entry at 21.44. Let SNBR's price action determine your long or short entry. Once the order is filled, place a 1.63 trailing stop, and tighten it to 0.82 upon getting a 2.28 gain. SNBR closed Friday at 22.41. Earnings Report Date: Jul 25, 2023. Beta: 1.83. Market-Cap: 497.143M. Optionable. FINANCIAL SERVICES SECTOR Live Oak Bancshares, Inc. (LOB: Financial Services/Banks-Regional) - BULLISH BOUNCE. LOB has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Friday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return LOB 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 25.48. Set a trailing stop of 2.23, tightening to 1.12 on a 2.44 profit. LOB closed at 25.06 on Friday. Earnings Report Date: Jul 25, 2023. Beta: 1.46. Market-Cap: 1.114B. Optionable. HEALTHCARE SECTOR Kymera Therapeutics, Inc. (KYMR: Healthcare/Biotechnology) - SQUEEZE PLAY. A look at KYMR'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 23.57 and a SELL short trigger at 21.8. Once KYMR shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.77 and tighten to 0.89 on a 2.88 gain. KYMR closed Friday at 22.97. Earnings Report Date: Aug 07, 2023. Beta: 1.72. Market-Cap: 1.27B. Optionable. REAL ESTATE SECTOR The RMR Group Inc. (RMR: Real Estate/Real Estate Services) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, RMR fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 23.40, plan to buy shares at 24.05 and use a 1.7 trailing stop. Tighten the stop to 0.85 on a 1.38 gain. Earnings Report Date: Aug 02, 2023. Beta: 1.51. Market-Cap: 388.896M. Optionable. TECHNOLOGY SECTOR ZoomInfo Technologies Inc. (ZI: Technology/Software-Application) - SQUEEZE PLAY. Friday's trading action forced ZI'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 ZI 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 24.59 if ZI moves higher, and place your order to SELL short at 22.79 if price declines to that level. As usual follow your entry with a trailing stop, 1.8 should be sufficient. Reduce your stop to 0.9 on a 1.98 gain. ZI closed Friday at 23.99. Earnings Report Date: Jul 31, 2023. Beta: 0.94. Market-Cap: 11.343B. Optionable. IMPORTANT: Before entering any recommended positions, always use the RightLine "Risk Control System" to determine the level of acceptable risk and the maximum number of shares to buy. Link: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/ ***********************************
STOCK SPLIT SUMMARY
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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 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 ---------------- ------- -------- ------- ------ ------- NOTE: The number of stock split announcments goes up during Bull markets, and goes down during Bear market cycles. There are currently no upcoming stock splits that meet RightLine's proprietary criteria for split ratio, trading volume and price action. For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ **********************************
TRADER'S CORNER
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"The Profitable Trader" Let's look at the differences between profitable and unprofitable traders. Is it a question of experience, or are some folks just born with the talent to play the markets successfully? How does risk tie in with profitability? Are profitable traders more willing to make riskier trades? Author Mark Douglas talks about three stages in becoming a profitable trader. First you learn how to find promising trade setups. Second, you learn how to enter and exit those positions at the right time. Third, get to a point where you build equity on a consistent basis. The secret to this third step is really no secret at all. You master the discipline required to follow your methodology, plan or system. Traders need to make an important choice early in their careers. They can decide to follow a specific method that forces them out of the market during unfavorable conditions. Or they can master a broad range of skills, and then apply the right one at the right time. Neither approach is right or wrong, but both require paying close attention to the profit-and-loss feedback. Most unprofitable traders rely on a poorly matched execution style, or a good one they haven't mastered yet. Very often they fail to recognize critical errors in their methodology because it was learned in a book, or through inappropriate conditioning, i.e., making money on bad decisions. Realize that profitable traders know all the weak points in their strategies and exercise damage control at all times. You can't understand your methodology until you analyze your profits and losses. Identify its weaknesses quickly, and then decide if it really works at all. You may discover that your whole approach to the market isn't right for your lifestyle, emotional nature or long-term goals. For example, you could be a scalper with the disposition of an investor, or a daytrader who hates risk. Bad things will happen when your system doesn't match your personality. Traders hate to think about discipline. After all, it's not as sexy as just becoming a market gunslinger. But the bottom line is that most of us don't follow our own rules. This is ironic, because the folks who ignore the reasons they lose money are the same ones who spend thousands of dollars attending trading seminars. Personal discipline is the one thing you can't learn sitting in an audience. Discipline and money management go a long way toward becoming a profitable trader. But let's be realistic. However you trade, you must be confident in the positive expectancy of your style or methodology. This poorly understood concept refers to how much profit you can reasonably expect to make vs. each dollar risked on a trade. Gamblers know this equation as the player's edge in a casino. The problem is that most of us don't understand our strategy well enough to determine whether or not it has a positive expectancy. System traders use backtesting to gauge the positive expectancy of their systems. Retail traders choose entry and exit without this methodology, so they need to compensate through extensive record- keeping and analysis of each trade result. Even so, they could be fooling themselves into believing they have an edge in their pursuit of profitability. The sell side of the positive expectancy equation is more important than where you buy. Research suggests that a very profitable system can be built using random trade entry. Yes, you heard that right. It's possible to make money in the same way as a chimp who throws darts at a dartboard. But the hairy primate still has the same problem as the losing trader: He doesn't know when to take money off the table. Positive expectancy requires a robust exit strategy. But you already knew that, didn't you? Volumes have been written about money management techniques, such as cutting your losses, riding your winners and trading adequate reward/risk. But somehow, losing traders continue to outnumber profitable ones by a very wide margin. One aspect of positive expectancy is more difficult to manage than any pure numbers game. All trading styles experience drawdowns, and profitable ones are no exception. Traders routinely abandon profitable methods because they hate to lose money. They stop following perfectly good rules because they aren't getting the instant gratification they want from the markets. If this all sounds like a big loop from the top of our discussion, it's meant to be that way. Losing traders get stuck in a vicious cycle. They want to profit from the market so they come up with a strategy to make money. They trade the strategy until it frustrates them to the point they abandon it and go looking for another strategy. In the process, they never take the time to find out whether or not it had positive expectancy in the first place. In other words, they don't let their methodology mature enough to watch its real potency bear fruit. Which brings us back to discipline. Sure, it's boring to plan the trade and trade the plan. But it's the only way to break this losing cycle and get on the road to consistent profitability. NOTE: This special guest article was written by Alan Farley, author of "The Master Swing Trader." ======================================================================
Best of luck and have a Great Week!
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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. The publishers of The RightLine Report recommend that anyone trading securities should do so with caution, exercise prudent trading discipline and have a personal risk management strategy in place before doing so. It is possible at this or some subsequent date, the publishers and staff of The Pro Right Line Corp. may own, buy or sell securities presented. The Pro Right Line Corp. is not a financial advisory service. Its publishers, owners or investors, are not liable for any losses or damages, monetary or otherwise, that result from the content of The RightLine Report. Past RightLine Report performance may not be indicative of future performance. All subscriptions and/or use of the RightLine.net website are subject to RightLine's "Terms of Use" and "Subscriber Terms & Conditions" which are posted at www.rightline.net. Any REDISTRIBUTION of the above information, without The RightLine's written consent, is STRICTLY PROHIBITED. Copyright / The Pro Right Line Corporation - All Rights Reserved To Unsubscribe, send an email to cs@prorightline.com or call 1-312-248-4241. |