June 28, 2022 - The RightLine Report
Notes From The Editor
When it comes to shopping, everybody wants a good deal. It's no surprise that the same thing is true with stocks. Even the common investment advice to "buy low and sell high" is frequently interpreted as "buy cheap." Many investors seem to forget that usual there is a reason why a cheap stock is so cheap!
Some folks are so inclined to buy cheap stocks they ignore signs that the stock could easily get even cheaper. Obvious downtrends repeatedly point to underlying reasons for a stock's demise, yet many individuals decide to buy anyway because the stock is "down" from a higher price.
Think about it for a second. People will say a stock is a bargain at $20 simply because it has dropped from a high of $60. The concept seems simple enough. The stock used to cost three times the current price, so it MUST be a good deal. Unfortunately the problem with this type of relative reasoning doesn't become clear until the stock drops to $5.
The desire for a bargain often causes normally intelligent people to make bad investment decisions. They forget that cheap stocks in downtrends usually continue to make lower highs and lower lows for much longer than expected. As investors lose money in a declining stock they will eventually leave it in search of a more attractive opportunity.
Many cheap stocks are former high-fliers that have split so many times they now have a huge number of shares in the float. This inflated condition requires massive trading volume for even minor price increases, and keeps the stock from making any significant moves. These stocks trade in a lower price range because professional traders lost interest years ago. They are too sluggish and don't move quickly enough to qualify as good trading candidates.
Bottom Line: When you're thinking about buying a stock, you want it to show positive signs that it will go up. Look for recent bullish activity in the context of a longer period of positive momentum. The same way that declining stocks tend to continue going lower, stocks moving higher in price tend to continue moving higher.
Whenever you come across a "bargain" stock, make sure you have other good reasons to buy it than just the fact that it's cheap!
Trade well,
Thomas Sutton
Stocks Covered Today Stock Splits
Quick List
Stock 06/28 06/28 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
POOL 353.08 -3.34 339.92 24.2/12.1 29.48
MCRI 59.98 0.34 57.79 4.55/2.28 5.86
FTDR 22.12 -0.26 23.01 21.41 1.6/0.8 2.2
VET 21.01 1.02 21.58 19.87 1.71/0.86 2.26
INSW 21.53 0.06 22.34 20.7 1.64/0.82 1.94
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
The major US stock indices were led lower on Tuesday by recession concerns due to the Federal Reserve Bank and other global central banks tightening monetary policy in response to chronic inflation pressures. In economic news, housing prices continued to increase, regional manufacturing activity decreased, the trade deficit narrowed, wholesale inventories rose, and June Consumer Confidence was below forecasts. In equities, Nike (NKE $103) topped quarterly earnnings estimates, though sales in China dropped, and several large banks announced dividend increases following their recent Fed Bank stress tests. Gold and the USD/dollar ended the session higher, gold was lower, treasuries finished near even.
Jun 27, 2022 Jun 28, 2022
-------------------- --------------------
Dow 31,438.26 -62.42 30,946.99 -491.27
Nasdaq 11,524.55 -83.07 11,181.54 -343.01
S&P 500 3,900.11 -11.63 3,821.55 -78.56
NYSE Volume 4.39B 4.35B
NYSE Advancers 1,785 1,020
NYSE Decliners 1,496 2,240
Nasdaq Volume 5.05B 5.43B
Nasdaq Advancers 2,302 1,234
Nasdaq Decliners 2,354 3,368
New Highs/Lows
06/21 06/22 06/23 06/24 06/27 06/28
--------------------------------------------
NYSE New Highs 11 5 4 10 14 12
NYSE New Lows 158 270 261 68 65 89
Nasdaq New Highs 35 10 36 33 26 34
Nasdaq New Lows 204 305 288 147 145 191
Stocks Covered Today Stock Splits
TRADER'S TIP: "The Market In The Mirror"
Ever notice how the stock market seems to have a mind of its own, and does whatever it pleases with little regard for what any of us think? This seemingly unpredictable and somewhat mysterious aspect of the market perpetuates the idea that Wall Street is beyond comprehension - maybe even beyond the laws of nature! Be assured that there is nothing magical going on behind the curtain. The market is made up entirely of human beings - just like you.
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 - 3821.55 June 28, 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
NASDAQ Composite - 11181.54 June 28, 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 - 30946.99 June 28, 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
Stocks Covered Today Stock Splits
Market Calendar
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
Stocks Covered Today Stock Splits
TRADER'S TIP: "More Winners, or More Profits?"
It's always nice to have a winning trade, yet a large number of winners don't always guarantee a large amount of profits. A review of the top ten most profitable mechanical trading systems of all time revealed that the best winning rate was 57.5%. Surprisingly, several of the top performers had more losers than winners. 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 at times, so make sure to use risk control to protect your profits and capital. One big winner can offset several small losers. Always cut losses quickly and let the winners grow. And remember, profits matter more than the percentage of winners.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Pool Corporation (POOL: Consumer Cyclical/Leisure) - BEARISH U-TURN. Sometimes traders hear about a stock that's in trouble and then short it without any thought to timing the entry. This method often results in less profits even when the trade moves in the desired direction. The Bearish U-Turn setup provides a smoother entry than just jumping in. It also reduces risk by placing both the entry trigger and exit stop near the top of the reversal. We'll use this approach with POOL which met our setup requirements on Tuesday. The SELL short trigger for this trade is set at 339.92, and the trailing stop is sized at 24.2. Reset the stop to 12.1 upon getting a 29.48 point gain. POOL closed Tuesday at 353.08. Earnings Report Date: Jul 20, 2022. Beta: 0.88. Market-Cap: 14.132B. Optionable.
Monarch Casino & Resort, Inc. (MCRI: Consumer Cyclical/Resorts & Casinos) - BEARISH U-TURN. Stocks stuck in a downtrend like MCRI tend to bounce downhill rather than slide lower in a straight line. After interacting with a moving average resistance level on Tuesday, MCRI is poised to drop again. To take advantage of this setup, prepare to SELL shares short at 57.79. As usual, follow your entry with a trailing stop. A 4.55 stop will fit MCRI's current price range. Tighten it to 2.28 on a 5.86 gainer. Earnings Report Date: Jul 26, 2022. Beta: 1.69. Market-Cap: 1.132B. Optionable.
Frontdoor, Inc. (FTDR: Consumer Cyclical/Personal Services) - SQUEEZE PLAY. Tuesday's trading action forced FTDR'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 FTDR 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 23.01 if FTDR moves higher, and place your order to SELL short at 21.41 if price declines to that level. As usual follow your entry with a trailing stop, 1.6 should be sufficient. Reduce your stop to 0.8 on a 2.2 gain. FTDR closed Tuesday at 22.12. Earnings Report Date: Aug 02, 2022. Beta: 0.54. Market-Cap: 1.82B. Optionable.
ENERGY SECTOR
Vermilion Energy Inc. (VET: Energy/Oil & Gas E&P) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in VET, 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 21.58 and a SELL short entry at 19.87. Let VET's price action determine your long or short entry. Once the order is filled, place a 1.71 trailing stop, and tighten it to 0.86 upon getting a 2.26 gain. VET closed Tuesday at 21.01. Earnings Report Date: Aug 15, 2022. Beta: 3.43. Market-Cap: 3.471B. Optionable.
International Seaways, Inc. (INSW: Energy/Oil & Gas Midstream) - SQUEEZE PLAY. A look at INSW'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 22.34 and a SELL short trigger at 20.7. Once INSW shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.64 and tighten to 0.82 on a 1.94 gain. INSW closed Tuesday at 21.53. Earnings Report Date: Aug 08, 2022. Beta: -0.02. Market-Cap: 1.069B. 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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