June 30, 2022 - The RightLine Report
Notes From The Editor
Here's an interesting "fact." Apparently, communications experts analyzing face-to-face interactions have determined that only a small chunk of information - maybe 10% - is transmitted through what's actually said during a conversation. Another 10% is the underlying subtext and hidden meanings behind what's spoken. Making up the majority of communication is body language.
It's hard to say whether this statistic has much bearing in reality, because it's hard to quantify something like human interaction. But nonetheless, it highlights an interesting point: body language can reveal a person's thoughts or intentions, even when they aren't consciously trying to convey that information. Skilled readers of body language have an advantage in nearly any social situation - everything from dating to poker to business.
The stock market has its own "body language." Sure, you can turn on the TV and see exactly how the major indexes are doing. However, this only reveals a small amount of information. Dig deeper, and you'll find lots of important details lurking below the surface. For instance, let's say the S&P 500 is up 15 points. That's a nice move, but does the rally have any "conviction"? In other words, is the momentum likely to continue?
Daily volume readings help to answer that question. In general, a large rally that's accompanied by large volume has a high amount of "conviction." More investors/traders have committed to long positions, indicating that they expect the market to rise in the near-term. On the other hand, a rally accompanied by light volume is less likely to be sustained. Oftentimes the market will move nicely without much participation. The Holiday season is a perfect example.
Of course, terms like "weak volume" and "heavy volume" are relative; what's "normal" is dependent on the market's current climate. Frequent market observers are able to get a good sense for what "average" volume is for an index. This provides a basic benchmark for comparing daily volume readings. Those volume statistics can be found in every issue of the Rightline Report, just under the "market summary" section.
Here's to profits,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 06/30 06/30 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
MSB 24.52 -0.22 25.13 23.39 1.74/0.87 2.32
FNKO 22.32 -0.49 22.98 21.2 1.78/0.89 1.64
LEU 24.75 0.25 25.07 22.71 2.36/1.18 5.38
VIR 25.47 -0.54 26.48 24.38 2.1/1.05 3.02
RYI 21.29 -0.26 21.6 19.74 1.86/0.93 2.76
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
Questions? Send us an email using our Contact Form.
Stocks Covered Today Stock Splits
Market Summary
The major US indices were significantly lower on Thursday as recession concerns continue to put pressure on stocks. Economic headlines showed personal spending was below forecasts and income increased per expectations, while inflation was somewhat cooler than anticipated. In equities news, RH (RH $212) - previously known as Restoration Hardware - lowered its full-year guidance, while Walgreens Boots (WBA $38) Alliance "beat" quarterly profit expectations by stripping out costs pertaining to legal charges due to its alleged role in the opioid crisis. The USD/dollar, oil prices and gold were all lower, as treasuries moved higher causing yields to drop.
Jun 29, 2022 Jun 30, 2022
-------------------- --------------------
Dow 31,029.31 82.32 30,775.43 -253.88
Nasdaq 11,177.89 -3.65 11,028.74 -149.16
S&P 500 3,818.83 -2.72 3,785.38 -33.45
NYSE Volume 4.24B 4.9B
NYSE Advancers 1,144 1,280
NYSE Decliners 2,059 2,015
Nasdaq Volume 5.64B 5.68B
Nasdaq Advancers 1,642 1,890
Nasdaq Decliners 2,895 2,826
New Highs/Lows
06/23 06/24 06/27 06/28 06/29 06/30
--------------------------------------------
NYSE New Highs 4 10 14 12 9 12
NYSE New Lows 261 68 65 89 199 342
Nasdaq New Highs 36 33 26 34 13 18
Nasdaq New Lows 288 147 145 191 346 535
Stocks Covered Today Stock Splits
TRADER'S TIP: "What's It Worth?"
Garfield Drew, a prominent technician sixty years ago said that "Stocks do not sell for what they are worth, but for what people THINK they are worth." It is generally recognized among technical analysts that prices in ALL markets at ALL times are based on trader psychology instead of company fundamentals.
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 - 3785.38 June 30, 2022
52-Week High: 4818.62
52-Week Low: 3636.85
Daily Trend: DOWN
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 - 11028.74 June 30, 2022
52-Week High: 16212.23
52-Week Low: 10565.14
Daily Trend: DOWN
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 - 30775.43 June 30, 2022
52-Week High: 36952.65
52-Week Low: 29653.27
Daily Trend: DOWN
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: "Successful Traders Are Usually Risk-Averse"
Unlike the public perception that stock traders are wild and free gamblers who love to take risks, most successful professionals are just the opposite. A good example of a successful trader is Bernard Oppetit, Global Head of Equity Derivatives at Paribas, part of the international wholesale bank Groupe Paribas with assets of over $250 Billion. Here's what he has to say about risk in an interview with trader and author Alpesh Patel.
"I am very risk-averse. I would definitely take the certainty of making $10,000 than the 10% chance of making $100,000."
"The important thing is to look at risk in a rational way."
"Even though I know I will get out after a certain loss, I consider the amount I have risked as the whole amount invested. Also, I look to see what percentage probability there is of a certain percentage rise and I compare that to the risk I am taking. I would look at some kind of distribution of possible outcomes, such as a 50% chance of doing something special, or a 50% chance of doing nothing in particular, or a 50% chance of a small loss against a 50% chance of a great gain. There has to be some idea of the distribution of outcomes."
"There is a joke about an economics professor who is walking in New York with a friend. His friend notices a $100 bill on the sidewalk and points to the bill and says, "Look professor, a $100 bill." The economics professor replies, "No that can not be so, if that was a $100 bill somebody would have picked it up already." Still I believe there are opportunities to make money with very little risk."
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
Mesabi Trust (MSB: Basic Materials/Steel) - SQUEEZE PLAY. One interesting trait of price volatility is that it cycles back and forth through periods of expansion and contraction. Stocks that have recently seen their daily price range shift from an average or wide range to an extremely contracted state are ideal candidates for expansive price moves. In many cases the next move is relatively fast and covers a sizable amount of territory. To take advantage of these trades we use both a BUY and a SELL entry. This allows us to enter in whichever direction the breakout takes. In MSB's case we will enter a BUY should it reach the 25.13 level, or a SELL short trade if it drops to 23.39. As usual a trailing stop is essential, 1.74 which should be tightened to 0.87 on a 2.32 gain. MSB closed Thursday at 24.52. Earnings Report Date: Sep 12, 2022. Beta: 0.85. Market-Cap: 321.702M. Optionable.
CONSUMER CYCLICAL SECTOR
Funko, Inc. (FNKO: Consumer Cyclical/Leisure) - SQUEEZE PLAY. FNKO is caught in a dilemma. The stock's compressed price range on Thursday 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. FNKO is now at 22.32. We can capture price action either way by placing a BUY trigger at 22.98 and a SELL short trigger at 21.2. Once FNKO 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 1.78. When you acquire a 1.64 profit, tighten the stop to 0.89. Earnings Report Date: Aug 03, 2022. Beta: 2.09. Market-Cap: 1.037B. Optionable.
ENERGY SECTOR
Centrus Energy Corp. (LEU: Energy/Uranium) - SQUEEZE PLAY. Trader indecision has put LEU squarely in the center of a Bull versus Bear standoff. This tight spot should soon give way to a clear winner in the short-term, and we want to be in position for the move. To do that we've set a BUY entry at 25.07 and a SELL short entry at 22.71. Now it's up to LEU to show us which entry will be filled. Once the trade is underway place a 2.36 trailing stop, which can be tightened to 1.18 after you achieve a 5.38 profit. LEU closed on Thursday at 24.75. Earnings Report Date: Aug 09, 2022. Beta: 2.36. Market-Cap: 358.593M. Optionable.
HEALTHCARE SECTOR
Vir Biotechnology, Inc. (VIR: Healthcare/Biotechnology) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in VIR's narrowest trading range of the past seven sessions. With neither group able to take complete control on Thursday, the stock's short term destiny is up for grabs. You can capitalize on this unusually tight condition by placing both a BUY order at 26.48 and a SELL order at 24.38. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.1 trailing stop. Tighten the stop to 1.05 once you have a 3.02 gain. VIR closed Thursday at 25.47. Earnings Report Date: Aug 03, 2022. Beta: -0.58. Market-Cap: 3.372B. Optionable.
INDUSTRIALS SECTOR
Ryerson Holding Corporation (RYI: Industrials/Metal Fabrication) - 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 RYI. A move to the upside will trigger our BUY entry at 21.6, while a drop to 19.74 will trigger our SELL short entry. Follow your position with a 1.86 trailing stop. Tighten the stop to 0.93 once you have a 2.76 gain. RYI closed Thursday at 21.29. Earnings Report Date: Aug 02, 2022. Beta: 1.56. Market-Cap: 826.114M. 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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