Notes From The Editor

Developing Your Own Charting Strategy

In this day and age of online stock trading, it's easy to forget how vastly things have changed in the last 20 years. "Back in the day," there was litle broadband internet access. For many, there was no internet at all. And charting programs were highly specialized, expensive, and difficult to use. No wonder stock brokers used to be so popular.

Thanks to technological advances, these limitations seem like a distant memory. However, this blessing can also be a curse; with an endless supply of information and chart indicators available, how can you filter through the clutter and make sense of what's happening? Focusing on that basic question, here are some general guidelines:

- Price action is King. This tells the true, objective tale of a stock's performance, and reflects the fundamental emotions of fear and greed. Along the same lines, support and resistance levels should be given top priority. Because they tend to be watched so closely by so many traders, these key levels can act as major pivot points.

- Watch the moving averages. "MA's" are another indicator that's closely watched - and the good news is that these are available on nearly any charting platform. You'll see moving averages constantly referred to in RightLine set-ups - particularly the 200, 100, 50, 22, and 13 EXPMA's (Exponential Moving Averages). Just like major support and resistance levels, these can have a major impact on price movement.

- Don't drown in the alphabet soup of having too many other indicators. RSI, MACD, ADX, CCI, and OBV are just some of the technical indicators available to traders. A typical mistake is to think that if you have an eye on several of these, you'll paint a more accurate picture of the market. But what often happens is the opposite: the gauges will give conflicting signals, and you'll wind up suffering from "analysis paralysis."

- Simplify! The better approach is to focus on a handful of indicators, get to know their behavior, and use them to supplement your price observations. Momentum-tracking oscillators such as stochastics and MACD can be particularly helpful in this respect. But whatever you use, never base a trading decision solely on what an indicator is doing; only use it to "confirm' what you're seeing on the chart.

Here's to profits,

Kent Barton
Senior Analyst

Quick List

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

SDA       12.80      1.11     13.98                  3.05/1.53      2.76
IDYA      24.45      0.06     24.89     23.27        1.62/0.81      2.14
INBX      24.49      0.44     25.04     23.13        1.91/0.96       3.8
FORM      31.15      1.00     31.88                  3.03/1.52      1.84
SSTI      24.61      0.28     25.07      23.5        1.57/0.79      2.98

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" 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.

Market Summary

US stocks finished higher on Tuesday despite the absence of significant economic releases and the completion of most corporate earnings announcements. Market attention is expected to turn towards two key events next week: the release of the May Consumer Price Index (CPI) report and the Federal Open Market Committee (FOMC) meeting. These upcoming events are anticipated to provide valuable insights and shape market sentiment moving forward. The S&P 500's impressive performance in the beginning of the year can be attributed to the strong contributions from three key sectors: information technology, communication services, and consumer discretionary. These sectors have all experienced significant gains of over 20% year-to-date.

In comparison, the industrials sector, which is the next best-performing sector, has seen more modest growth with a 2.52% gain for the year. In addition, these three sectors have consistently demonstrated positive performance in recent weeks, with communication services and consumer discretionary sectors recording positive returns for four consecutive weeks, and the information technology sector for three consecutive weeks. On the other hand, certain cyclical asset classes like small-cap equities have not performed as well as the S&P 500 year-to-date. The labor market has proven to be a strong and resilient component of the economy, as evidenced by the surpassing of payroll addition expectations last week. However, it's worth noting that wage growth has been moderate, and there has been a slight increase in the unemployment rate. Given these factors, we anticipate a pause in interest rate hikes during the upcoming June meeting. Nevertheless, we cannot disregard the potential for another rate increase in July, as the Federal Reserve aims to steer inflation towards its long-term target of 2%.

                        Jun 5, 2023            Jun 6, 2023    
                  --------------------   --------------------
Dow                 33,562.86  -199.90     33,573.28    10.42
Nasdaq              13,229.43   -11.34     13,276.42    46.99
S&P 500              4,273.79    -8.58      4,283.85    10.06

NYSE Volume                       3.5B                     4B
NYSE Advancers                   1,041                  2,348
NYSE Decliners                   1,913                    632

Nasdaq Volume                    4.36B                  4.84B
Nasdaq Advancers                 1,767                  3,183
Nasdaq Decliners                 2,656                  1,243

                                 New Highs/Lows

                   05/30  05/31  06/01  06/02  06/05  06/06
                 --------------------------------------------
NYSE New Highs        51     20     27     88     43    110
NYSE New Lows         78    117     76     15     24     18
Nasdaq New Highs     128     51     84    129    125    132
Nasdaq New Lows      146    202    123     54     71     83
   

TRADER'S TIP: "The Market Shows Its Hand"

Breakouts through key resistance levels, and breakdowns through key support levels both signal price moves that are likely to persist for some time. The power of trend is one of the strongest allies a trader can have, so make it your friend regardless of whether it is up or down. This means learning to play the market from both sides - buying when the trend is up, and selling short when the trend is down. Leave your Bull or Bear bias at the door and let the market tell you what IT wants to do!

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 - 4283.85 June 6, 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

NASDAQ Composite - 13276.42 June 6, 2023

52-Week High: 13330.65
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 14128.57
Resistance 2: 13602.06
Resistance 1: 13421.41
Pivot: 13075.56
Support 1: 12894.91
Support 2: 12549.05
Support 3: 12022.54
        
Dow Industrials - 33573.28 June 6, 2023

52-Week High: 34712.28
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 35625.07
Resistance 2: 34524.58
Resistance 1: 34143.67
Pivot: 33424.08
Support 1: 33043.17
Support 2: 32323.59
Support 3: 31223.10
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

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

TRADER'S TIP: "Accredited Investor"

This is the SEC term for a person or entity meeting any of the criteria listed below:

"The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

1) a bank, insurance company, registered investment company, business development company, or small business investment company;

2) an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;

3) a charitable organization, corporation, or partnership with assets exceeding $5 million;

4) a director, executive officer, or general partner of the company selling the securities;

5) a business in which all the equity owners are accredited investors;

6) a natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase;

7) a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or

8) a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes."

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

SunCar Technology Group Inc. (SDA: Consumer Cyclical/Auto & Truck Dealerships) - NEW HIGH DIP. Basking in the light of a recent new 52-week high, SDA shares have pulled back a bit as traders enjoy some nice profits. Now it looks like the Bull may be ready to resume the uptrend again. Tuesday's bounce from a Moving Average support zone provides us with solid setup, so be ready to enter when price reaches our BUY trigger at 13.98. Follow your long entry with a 3.05 stop, then tighten it to 1.53 after gaining 2.76. SDA ended the Tuesday session at 12.80. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.069B. Not Optionable.

HEALTHCARE SECTOR

IDEAYA Biosciences, Inc. (IDYA: Healthcare/Biotechnology) - 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 IDYA's case we will enter a BUY should it reach the 24.89 level, or a SELL short trade if it drops to 23.27. As usual a trailing stop is essential, 1.62 which should be tightened to 0.81 on a 2.14 gain. IDYA closed Tuesday at 24.45. Earnings Report Date: Aug 14, 2023. Beta: 0.85. Market-Cap: 1.401B. Optionable.

Inhibrx, Inc. (INBX: Healthcare/Biotechnology) - SQUEEZE PLAY. Trader indecision has put INBX 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 25.04 and a SELL short entry at 23.13. Now it's up to INBX to show us which entry will be filled. Once the trade is underway place a 1.91 trailing stop, which can be tightened to 0.96 after you achieve a 3.8 profit. INBX closed on Tuesday at 24.49. Earnings Report Date: Aug 07, 2023. Beta: 2.86. Market-Cap: 1.068B. Optionable.

TECHNOLOGY SECTOR

FormFactor, Inc. (FORM: Technology/Semiconductors) - BULLISH BOUNCE. FORM's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Tuesday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move FORM back in step with the bullish weekly trend, so our BUY entry trigger is set at 31.88. Once you hold a position, trail a stop of 3.03. Tighten it to 1.52 on a 1.84 gain. FORM closed at 31.15 on Tuesday. Earnings Report Date: Jul 25, 2023. Beta: 1.23. Market-Cap: 2.403B. Optionable.

SoundThinking, Inc. (SSTI: Technology/Software-Application) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in SSTI's narrowest trading range of the past seven sessions. With neither group able to take complete control on Tuesday, 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 25.07 and a SELL order at 23.5. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.57 trailing stop. Tighten the stop to 0.79 once you have a 2.98 gain. SSTI closed Tuesday at 24.61. Earnings Report Date: Aug 07, 2023. Beta: 1.47. Market-Cap: 301.357M. 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.

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  
---------------- -------     --------    -------     ------  -------   

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.      

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.

Disclaimer

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