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June 3, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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It wasn't too many years ago that short-term traders were portrayed by the news media as reckless gamblers. Traders were often made to look foolish for not approaching the markets in the traditional buy-and-hold manner. Thinking back, I can't remember one interview where short-termers were asked if they also invested in longer-term holdings, yet most traders I know do both.
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"QUICK LIST"
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Stock 06/02 06/02 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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YELP 34.14 0.82 34.72 2.38/1.19 2.3
IEP 22.06 0.25 22.77 21.04 1.73/0.87 7.94
BHLB 22.38 1.55 22.81 2.27/1.14 1.52
ACAD 24.61 0.71 24.93 1.63/0.82 1.46
RXST 26.03 -0.14 26.87 24.82 2.05/1.03 2.64
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 rallied on Friday as the markets closed the week on a positive note. Investors were optimistic about the progress made on the US debt-ceiling deal and a resilient US labor market, as reflected in the latest jobs report. The bipartisan debt-ceiling agreement passed in the House of Representatives on Wednesday and was subsequently approved by the Senate on Thursday. The S&P 500 index showed a weekly increase of over 1.0%, primarily driven by the consumer discretionary sector, bringing the year's returns to 11%. Concurrently, Treasury yields continued their upward trend, with the 2-year yield rising by 0.09% to approximately 4.42%. These movements align with market expectations of an additional interest rate hike by the Federal Reserve during its July meeting. However, we believe the Fed will maintain its current stance at the June 14 meeting and rely on incoming data to determine future interest rate adjustments. Friday On The Week
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Dow 33,762.76 701.19 +669.42 2.02%
Nasdaq 13,240.77 139.78 +265.08 2.04%
S&P 500 4,282.37 61.35 +76.92 1.83%
NYSE Volume 4.46B
NYSE Advancers 2,547
NYSE Decliners 452
Nasdaq Volume 4.43B
Nasdaq Advancers 3,244
Nasdaq Decliners 1,186
New Highs/Lows
05/26 05/29 05/30 05/31 06/01 06/02
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NYSE New Highs 47 0 51 20 27 88
NYSE New Lows 75 0 78 117 76 15
Nasdaq New Highs 124 0 128 51 84 129
Nasdaq New Lows 142 0 146 202 123 54
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TRADER'S TIP:
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TRADER'S TIP: "Reversal Gaps" Morning gaps can occur in the same direction as a major trend or against it. When a gap moves against the trend, it can signal a significant trend change without any other pattern involved. This type of reversal gap after a strong rally should be taken as a serious event, especially if it occurs near a major high. The same is true of a reversal gap that takes place following a major decline. It pays to take notice of whether a gap near a high or low is in the direction of the trend or against it. **************************
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 - 4282.37 June 2, 2023 52-Week High: 4325.28 52-Week Low: 3491.58 Daily Trend: UP Weekly trend: UP Weekly Pivot Levels Resistance 3: 4512.10 Resistance 2: 4377.58 Resistance 1: 4329.97 Pivot: 4243.06 Support 1: 4195.45 Support 2: 4108.54 Support 3: 3974.02 https://www.prorightline.com/rlch/060223SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, June 05, 2023: 05-Jun MONDAY, JUNE 5 05-Jun 10:00 am Factory orders 05-Jun 10:00 am ISM services 05-Jun TUESDAY, JUNE 6 Tuesday, June 06, 2023: 06-Jun None scheduled 06-Jun WEDNESDAY, JUNE 7 Wednesday, June 07, 2023: 07-Jun 8:30 am U.S. trade deficit 07-Jun 3:00 pm Consumer credit 07-Jun THURSDAY, JUNE 8 Thursday, June 08, 2023: 08-Jun 8:30 am Initial jobless claims 08-Jun 10:00 am Wholesale inventories 08-Jun FRIDAY, JUNE 9 Friday, June 09, 2023: 09-Jun None scheduled 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: "Planning Entries" Typically when our analysts determine entry points, they evaluate it from both a longer-term and shorter-term perspective. We look at a longer-term chart when determining the underlying trend. Then use shorter-term analysis to figure out where in that longer-term trend the stock currently is. For example, if a stock sits mired in a downtrend, but is nearing the lower edge of the trading range, we'll be looking to plan for a long bounce entry but might use a slightly tighter stop since the prevailing winds are pressuring prices downward. It's a matter of integrating BOTH perspectives when formulating a plan. ***********************************
STOCKS COVERED IN THIS ISSUE
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COMMUNICATION SERVICES SECTOR Yelp Inc. (YELP: Communication Services/Internet Content & Information) - BULLISH BOUNCE. Positive price behavior near moving average support on Friday qualifies YELP for a Bullish Bounce setup. After several sessions of declining prices, YELP should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if YELP moves up to our entry trigger set at 34.72. You can also enter a 2.38 trailing stop, to be replaced with a 1.19 trailing stop when you obtain a 2.3 profit. YELP closed Friday at 34.14. Earnings Report Date: Aug 02, 2023. Beta: 1.45. Market-Cap: 2.35B. Optionable. ENERGY SECTOR Icahn Enterprises L.P. (IEP: Energy/Oil & Gas Refining & Marketing) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into IEP. A move to the upside will trigger our BUY entry at 22.77, while a drop to 21.04 will trigger our SELL short entry. Follow your position with a 1.73 trailing stop. Tighten the stop to 0.87 once you have a 7.94 gain. IEP closed Friday at 22.06. Earnings Report Date: Aug 02, 2023. Beta: 0.72. Market-Cap: 8.144B. Optionable. FINANCIAL SERVICES SECTOR Berkshire Hills Bancorp, Inc. (BHLB: Financial Services/Banks-Regional) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. BHLB's behavior on Friday could very well be a sign that a new bounce is underway. Place a BUY trigger at 22.81. In the event your trigger is met, also place a 2.27 trailing stop which can be trimmed down to 1.14 when you have a 1.52 profit. BHLB closed Friday at 22.38. Earnings Report Date: Jul 18, 2023. Beta: 0.99. Market-Cap: 990.924M. Optionable. HEALTHCARE SECTOR ACADIA Pharmaceuticals Inc. (ACAD: Healthcare/Biotechnology) - BULLISH BOUNCE. Another bullish bouncer, ACAD appears ready to resume trading in an uptrend after recent selling forced the stock lower for several days. Friday's positive price action near Moving Average support says it's time to BUY shares if ACAD reaches our entry trigger set at 24.93. Also place a 1.63 trailing stop which can be narrowed to 0.82 when you reach a 1.46 profit. ACAD closed Friday at 24.61. Earnings Report Date: Aug 07, 2023. Beta: 0.54. Market-Cap: 4.002B. Optionable. RxSight, Inc. (RXST: Healthcare/Medical Devices) - SQUEEZE PLAY. RXST is caught in a dilemma. The stock's compressed price range on Friday has resulted in a condition comparable to a wound up rubber band. We anticipate that this undecided equity will take off soon, but with the direction still in question we'll let upcoming market action tell us whether to buy shares or sell short. RXST is now at 26.03. We can capture price action either way by placing a BUY trigger at 26.87 and a SELL short trigger at 24.82. Once RXST reveals its direction, enter your triggered order and disregard the other one. As soon as your position is in place, follow up with a trailing stop of 2.05. When you acquire a 2.64 profit, tighten the stop to 1.03. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 884.549M. 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/ ***********************************
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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"Frequency of Trading is Critical" By Chuck LeBeau When building or evaluating trading systems the many benefits of systems that trade very frequently are often overlooked. A system that trades frequently has many advantages over less active systems that appear to be more desirable because they have better performance ratios. If a strategy is profitable the more it trades the more money we should make. I apologize for stating what should be obvious but you would be surprised at how often I hear discussions about selecting systems with the highest level of "expectancy" or highest "profit factor" without relating these measurements to the system's trading frequency. Simply stated, our goal should be to show the most profit with the least amount of risk and trading frequency plays a critical role in maximizing profitability and controlling our risk. Trading frequency represents opportunity for profit. The more opportunities we can find the more profit we should expect. For example, a strategy that has a very high profit factor of 4 (profit factor is total profits divided by total losses) may not produce as much profit as a more active system that has a profit factor of only 2. Since the strategy with the lower profit factor is profitable and it has many more opportunities it may easily produce more total profit than the system with the much higher profit factor. Active systems should give us a higher confidence level when analyzing our test data. In addition to increasing total profits, a very active system gives us much more data to analyze when doing our preliminary research. If we have a long-term trend-following strategy that produces only 50 trades over five years of data our positive results may not be nearly as reliable as the results from analyzing a more active strategy that produced 1000 trades over the same data sample. I would be willing to bet that the system with the larger sample of trades is more likely to produce profitable results in the future because our level of confidence must relate to the number of samples in our testing. Active systems should produce more reliable results and a smoother equity curve. If we flip a coin only ten times our odds of having 50% heads and 50% tails are not very good. However if we flip the coin one thousand times we are likely to come much closer to obtaining 50% heads and 50% tails. The same logic applies to our real-time trading. If we have a large sample of real trades then our results should come closer to our expectations than if we only have one or two trades. The active system will approach our expectations much quicker than the system that trades infrequently. If we have 50 or more trades per month with a good system we might reasonably expect to be profitable every month. However if we have a system that is only producing two or three trades per month then our monthly results will less predictable and inconsistent. The infrequent trading system might be expected to produce a profit every year but it would not be realistic to expect it to show a profit every month because the sample size in a month will be very small. ----------------------- This article is part of a larger work of the same title. The author - Chuck LeBeau - also co-wrote the book "Computer Analysis of the Futures Market." Chuck has traded the markets for many years. He specializes in trading system development and related research. ======================================================================
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. |