June 25, 2022 - The RightLine Report 

 
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                      NOTES FROM THE EDITOR
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The Long and Short of It ...

Most people look at falling markets negatively. The media reports any selling in a mortally serious tone, while bullish cheerleaders comfort the masses with promises of better days ahead. Negative sentiment intensifies along with the selling and desperate prayers are offered up as everyone nervously holds their breath.

Well, not everyone. Every day more mainstream investors are taking advantage of normal down trends in the market by learning to sell stocks short. In fact, mainstream stock investment authors such as William J. O'Neil - founder of the popular business newspaper Investor's Business Daily - have written books that utilize shorting as a means of "Winning in Good Times and Bad."

Some folks are surprised to find that a conservative well heeled senior investor like Mr. O'Neil is telling investors they should learn how to sell short. As surprising as it may seem, you only have to look back to when Bill began his investing and trading career to see why he is willing to take this "extreme" position.

In the early sixties O'Neil was a young stockbroker for a major NYSE member firm. Based on his research he decided to close out all of his long positions in the market by the spring of 1962. Then he started selling short. By the end of the year he had made a sizable profit while almost everyone else was getting crushed in one of the worst bear markets of that era. A year later he bought a seat on the New York Stock Exchange and started his own firm.

After more than four decades investing and studying the markets, Bill believes there are two main reasons why most investors don't sell short. First is the obvious lack of knowledge about the subject. The second reason is the psychological resistance to selling.

Beyond the educational, emotional, and mental programming required to get our heads in gear, a big part of our job as active investors is to find the dominant market trend and profit from it - even when it's down. Of course the "dominant trend" differs from one time frame to the next, so we want to make sure that the trend we trade matches our individual trading strategy.

Some "normal" investors might scoff at the notion of shorting, but successful traders aren't normal. While accepting the fact that we can't change the stock market's direction, we don't miss out on opportunities offered by the inevitable "Bear" periods that are an inevitable part of repetitive market cycles. Nor do we let Bears damage our trading accounts - even if "everyone" else does.

Trade well!

~ Thomas Sutton, Editor 

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                           "QUICK LIST"
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Stock     06/24     06/24      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

LAC       21.82      0.29     22.68     20.76        1.92/0.96      3.52
BALY      20.61      1.73     21.44     19.68        1.76/0.88      2.34
STR       23.11      0.46     23.73     21.74           1.99/1       2.5
NMM       22.57     -0.06     23.52     21.72          1.8/0.9      2.62


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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Stocks were higher on Friday, with the S&P 500 Index snapping a three-week losing streak as traders set aside recent concerns about recession. The economic calendar offered some encouraging reports as new home sales surprisingly surged higher, and though consumer sentiment set another record low, the inflation outlook components were somewhat better. In equities, all 34 financial institutions that took part in the US Fed Bank's annual stress test passed, as FedEx (FDX $243) fell short of quarterly earnings estimates but presented an upbeat outlook. Oil prices and gold were higher, the USD/dollar and treasuries were lower, moving yields higher


                     Friday                 On The Week      
                  --------------------   --------------------
Dow                 31,500.68   823.32      +1611.9     5.39%
Nasdaq              11,607.62   375.43      +809.27     7.49%
S&P 500              3,911.74   116.01       +236.9     6.45%

NYSE Volume                      8.95B                       
NYSE Advancers                   2,669                       
NYSE Decliners                     563                       

Nasdaq Volume                   10.29B                       
Nasdaq Advancers                 3,072                       
Nasdaq Decliners                 1,472                       

                                 New Highs/Lows

                   06/17  06/20  06/21  06/22  06/23  06/24
                 --------------------------------------------
NYSE New Highs         2      0     11      5      4     10
NYSE New Lows        566      0    158    270    261     68
Nasdaq New Highs      21      0     35     10     36     33
Nasdaq New Lows      485      0    204    305    288    147

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                              TRADER'S TIP:  
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TRADER'S TIP: "Trend Line Breaks"

A broken trend line indicates that the dominant market crowd has lost its power. A trend line break is only valid when prices close on the other side of the trend line. 
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                         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 - 3911.74 June 24, 2022

52-Week High: 4818.62
52-Week Low: 3636.85
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4374.34
Resistance 2: 4097.54
Resistance 1: 4004.64
Pivot: 3820.74
Support 1: 3727.84
Support 2: 3543.94
Support 3: 3267.14
https://www.prorightline.com/rlch/062422SPX.jpg

NASDAQ Composite - 11607.62 June 24, 2022

52-Week High: 16212.23
52-Week Low: 10565.14
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 13235.51
Resistance 2: 12261.02
Resistance 1: 11934.32
Pivot: 11286.53
Support 1: 10959.83
Support 2: 10312.04
Support 3: 9337.55


Dow Industrials - 31500.68 June 24, 2022

52-Week High: 36952.65
52-Week Low: 29653.27
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 34618.45
Resistance 2: 32754.43
Resistance 1: 32127.55
Pivot: 30890.41
Support 1: 30263.53
Support 2: 29026.39
Support 3: 27162.37


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                             MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern): 
Monday, June 27, 2022:
27-Jun  8:30 am   Durable goods orders
27-Jun  8:30 am   Core capital goods orders
27-Jun  10 am   Pending home sales index

Tuesday, June 28, 2022:
28-Jun  8:30 am   Trade in goods (advance)
28-Jun   9 am   
28-Jun  10 am   Consumer confidence index

Wednesday, June 29, 2022:
29-Jun  8:30 am   Gross domestic product revision (SAAR)
29-Jun  8:30 am   Final domestic demand revision (SAAR)
29-Jun  8:30 am   Gross domestic income revision (SAAR)

Thursday, June 30, 2022:
30-Jun  8:30 am   Initial jobless claims
30-Jun  8:30 am   Continuing jobless claims
30-Jun  8:30 am   PCE inflation (monthly)
30-Jun  8:30 am   Core PCE inflation (monthly)
30-Jun  8:30 am   PCE inflation (year-over-year)
30-Jun  8:30 am   Core PCE inflation (year-over-year)
30-Jun  8:30 am   Nominal personal income
30-Jun  8:30 am   Nominal consumer spending
30-Jun  8:30 am   Real disposable income
30-Jun  8:30 am   Real consumer spending
30-Jun  9:45 am   Chicago PMI

Friday, July 01, 2022:
01-Jul  9:45 am   
01-Jul  10 am   ISM manufacturing index
01-Jul  10 am   Construction spending

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: "S & R"

The stock market is always influenced by "technical" features. Included in this group are certain price levels that traders call "Support and Resistance." In one sense they represent traffic cops that either repel price movement or allow it to proceed. If you're new to the markets, you might want to visit the "Education" section of our website at www.RightLine.net and review the articles on "Support & Resistance." Successful trading does require a basic understanding of these key terms. Fortunately it's not overly complicated.

Note: Price action often moves through support and resistance levels intra-day, only to return within their boundaries before the closing bell. Take note that a closing price is usually much more significant than intra day moves. 

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                      STOCKS COVERED IN THIS ISSUE    
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BASIC MATERIALS SECTOR

Lithium Americas Corp. (LAC: Basic Materials/Other Industrial Metals & Mining) - SQUEEZE PLAY. LAC is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 22.68 and a SELL short entry at 20.76. Once your trade is filled, enter a 1.92 trailing stop. Tighten it to 0.96 after a 3.52 gain. LAC closed on Friday at 21.82. Earnings Report Date: Aug 03, 2022. Beta: 1.60. Market-Cap: 2.934B. Not Optionable.

CONSUMER CYCLICAL SECTOR

Bally's Corporation (BALY: Consumer Cyclical/Resorts & Casinos) - SQUEEZE PLAY. Friday's trading session left BALY in a very narrow price range after buyers and sellers fought to a near stalemate. Both sides are looking for some traction, and a breakout either way could provide a nice gain in the short term. To get aboard, set your BUY trigger at 21.44 and your SELL short trigger at 19.68. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.76 trailing stop. Once you have a 2.34 profit, reduce the stop to 0.88. Earnings Report Date: Aug 08, 2022. Beta: 2.00. Market-Cap: 1.083B. Optionable.

ENERGY SECTOR

Sitio Royalties Corp. (STR: Energy/Oil & Gas E&P) - SQUEEZE PLAY. STR shareholders know what it feels like to be squeezed. Friday'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. STR closed Friday at 23.11. The plan is to enter in the right direction by placing a BUY trigger at 23.73 and a SELL short trigger at 21.74. Once STR establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.99. After you've collected a 2.5 profit, tighten the stop to 1. Earnings Report Date: Aug 02, 2022. Beta: N/A. Market-Cap: 506.929M. Optionable.

INDUSTRIALS SECTOR

Navios Maritime Partners L.P. (NMM: Industrials/Marine Shipping) - SQUEEZE PLAY. The ticker for Friday's session shows NMM is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 23.52 and a SELL short trigger at 21.72. When NMM starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 1.8 trailing stop. Upon reaching a 2.62 profit, resize the stop to 0.9. Earnings Report Date: Jul 25, 2022. Beta: 2.16. Market-Cap: 681.549M. 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/ 

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                           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  
---------------- -------     --------    -------     ------  -------   
Amazon            AMZN       3/9/2022   6/6/2022   20-for-1   Yes

For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ 

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                           TRADER'S CORNER
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"The Squeeze Play"

So are you Bullish or Bearish? When it comes to choosing trade setups, it doesn't always have to be one way or the other. Actually, in many cases you are much better off letting the market tell you whether to go long, or to go short, or just stand aside. This is what the Squeeze Play is all about.

Not to be confused with a "short squeeze," the Squeeze Play gets its name from one of the trade setup conditions - an extremely narrow price range which indicates a dramatic drop in volatility. Due to the cyclical nature of volatility, powerful price moves often occur soon after these low-volatility situations.

To begin, let's look at this type of trade setup in a different light than most traders would. Instead of trying to pre-determine which way price will move, we will assume that it could go either direction and plan for both. This means setting aside any expectations we may have for near-term price direction, and letting the upcoming price action determine which way we will enter the trade.

Here is how it works. The Squeeze Play contains both a support and a resistance level which are used to set potential triggers for trade execution. For example, a buy entry is triggered if price moves up and breaks through resistance, while a short sale is triggered if price moves down and breaks below support.

By selecting setups where there is a clearly defined narrow range between the support and resistance levels, we can enter in either direction with very little risk. The low risk comes from the fact that should the initial move fail - price doesn't have to go very far back to confirm that it's time to get out.

Here is an example of a Squeeze Play setup:

See Chart - https://prorightline.com/rlr/TCSqueezeAcopy.jpg

Price volatility tends to go through repeating cycles of contraction and expansion. Once price has contracted and "squeezed" into a very narrow range, it invariably begins to expand. This expansion causes price to quickly "break out" of the narrow support & resistance boundaries, and often causes a short-term trend to develop in one direction or the other.

Below is the same chart shown as above - only this one includes the short-term price action after breaking out of the range of the setup bar:

See Chart - https://prorightline.com/rlr/TCSqueezeBcopy.jpg

When you first look at a Squeeze Play setup you probably see it as either a long or a short. The only problem is that we don't know which way price will go, so the solution is to let the price action tell us. The narrow range setup bar gives a perfect opportunity to place a low risk stop.

Although the example used in this article is a BUY, the concept works the same way for short sales. If price breaks down through support, then you would enter a SHORT and place an exit stop just above the top of the resistance level.

Squeeze Plays make a trader's job easier because each pattern offers two potential trades. Though this method is very powerful, isn't complicated. The key is to locate low volatility price patterns with clear support & resistance levels that offer reasonable risk and reward potential in either direction. Then you set your entry triggers and stops a calculated distance beyond the S&R levels - simple as that! 
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Best of luck and have a Great Week!
 
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