March 18, 2023 - The RightLine Report


Notes From The Editor

If you haven't read Mark Douglas's powerful book "The Disciplined Trader" I certainly suggest that you do. It presents a unique look at the psychology of trading and is one of my all time favorites. Mark's insightful writing reflects his years of trading successfully, so I strongly encourage you to get a copy.

There's a story in the book that illustrates how our personal experiences are determined by our earlier programming. I've included it here as an example of how our experiences shape our beliefs and then those beliefs shape our experiences in the future.

Enjoy the weekend!

- Thomas Sutton, Editor

"Free Money - Today Only"

"I was watching a local television program in spring 1987 called "Gotcha Chicago." It was about some local celebrities who played practical jokes on other Chicago notables. In one segment of the program the TV station hired a man to stand on the sidewalk along Michigan Avenue holding a sign that read "FREE MONEY- TODAY ONLY." (For those of you who are not familiar with Chicago, Michigan Avenue is home to many of the most expensive and fashionable department stores and boutiques in the city.)

The man's pockets were stuffed with cash, and he had been instructed to give money to anyone who asked for it. Considering that Michigan Avenue is one of the busiest areas of the city, how many people do you think took him up on his offer and asked for some money?

Out of all the people who walked by and read the sign, only one person stopped and said, "Great! May I have a quarter to buy a bus transfer?" Otherwise, no one would even go near him. Eventually he grew frustrated and started crying out, "Do you want any money? Please take my money. I can't give it away fast enough." Everybody just walked around him as though he didn't exist. He approached one businessman asking, "Would you like some money?" And the man responded, "Not today." The "plant" said, "How many days does this happen?" As he tried to give him a handful of cash, while continuing to say "Would you please take this?" The businessman responded with a terse "no" and walked on.

Now here is a situation where the environment was expressing itself in a way that only one person had the mental structure to perceive. For the rest of the people, there was no meaning inside of them that they could directly correlate with the actual environmental conditions. Other than the one person who asked for a quarter, nobody looked at the sign and said to themselves "Great! Somebody is giving away free money, I wonder how much he will give me."

People's responses to the conditions shouldn't be too surprising because we generally don't believe that money is ever free. And we can know what people believed about the situation by just observing their behavior. If they thought that it was possible to get free money we can assume that they would not have walked by, ignoring the opportunity to get some.

So the meaning they attached and what they experienced corresponded to their belief that "free money" isn't possible or nobody gives away money on the street-no strings attached. In fact, most people probably thought he was crazy, which would explain why people went out of their way to walk around him to avoid contact.

However, the environment was expressing itself in exactly the way in which it was representing itself. The sign reading "free money" was the truth, but the information "free money" did not connect with anything in anyone's mental environment so that it could be perceived as the truth. There was a direct one-to-one relationship between what any given individual believed, what he perceived, and what he experienced. Except for one man, everyone else obviously did not believe in the possibility of free money; they probably perceived a crazy man and thus had an erroneous experience relative to the conditions.

Now, the environment did not choose the meaning any of these people placed on the information it was offering. And if the environment did not choose, then each individual created his own experience out of the situation that was presented to him. There were a number of alternate experiences available, and each alternate experience would correspond to the type of belief someone would have about the possibilities."

Editorial    Quick List    Market Summary    Technical Analyst    Market Calendar   
Stocks Covered Today    Stock Splits      Trader's Corner

Quick List

Stock     03/17     03/17      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

PTLO      20.23      0.14     20.71     19.28        1.43/0.72      2.24
CLB       20.06     -0.15      20.4     18.77        1.63/0.82      2.52
CADE      21.04     -0.71     21.61     20.01          1.6/0.8       1.2
ELVN      22.25      0.42     22.78                  2.12/1.06       2.4
VVI       20.15     -0.56      20.7     19.34        1.36/0.68      1.66

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.

Editorial    Quick List    Market Summary    Technical Analyst    Market Calendar   
Stocks Covered Today    Stock Splits      Trader's Corner

Market Summary

The top US stock indices were significantly higher on Thursday as traders digested a robust round of economic news. Unemployment claims declined more than expected, housing construction was up much more than anticipated, import prices declined, and Philadelphia manufacturing continues to be stuck in in a contraction zone. In equities, Dollar General (DG $212) announced mixed quarterly results, while Adobe (ADBE $353) beat expectations and presented a positive outlook. Gold and the USD/dollar finished the session lower, treasury yields and oil prices were higher.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 31,861.98  -384.57       -47.66    -0.15%
Nasdaq              11,630.51   -86.76      +491.62     4.41%
S&P 500              3,916.64   -43.64       +55.05     1.43%

NYSE Volume                      9.66B                       
NYSE Advancers                     491                       
NYSE Decliners                   2,550                       

Nasdaq Volume                    8.04B                       
Nasdaq Advancers                 1,123                       
Nasdaq Decliners                 3,311                       

                                 New Highs/Lows

                   03/10  03/13  03/14  03/15  03/16  03/17
NYSE New Highs        25     14     18     12     16     13
NYSE New Lows        209    345     99    266    177    199
Nasdaq New Highs      37     31     31     28     54     35
Nasdaq New Lows      547    623    214    432    284    340

Editorial    Quick List    Market Summary    Technical Analyst    Market Calendar   
Stocks Covered Today    Stock Splits      Trader's Corner

TRADER'S TIP: "Breakouts . . . Too Late?"

Most traders believe they're too late when they find a breakout that has already taken off and left them at the station. In reality, they usually have plenty of time to get in. Instead of chasing after the crowd, it's often best for traders to wait until the stock reverses and returns back to near the initial breakout level. Pullback entries are much safer than chasing. They eliminate the pain of head fakes and normally provide just as much of a profit ride if the breakout turns out to be genuine.

The Technical Analyst

SPX Daily Chart

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 - 3916.64 March 17, 2023

52-Week High: 4637.30
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4207.85
Resistance 2: 4052.25
Resistance 1: 3984.44
Pivot: 3896.65
Support 1: 3828.84
Support 2: 3741.05
Support 3: 3585.45

NASDAQ Composite - 11630.51 March 17, 2023

52-Week High: 14646.90
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 13042.76
Resistance 2: 12252.45
Resistance 1: 11941.48
Pivot: 11462.14
Support 1: 11151.16
Support 2: 10671.82
Support 3: 9881.51
Dow Industrials - 31861.98 March 17, 2023

52-Week High: 35492.22
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 33619.67
Resistance 2: 32742.90
Resistance 1: 32302.44
Pivot: 31866.13
Support 1: 31425.67
Support 2: 30989.36
Support 3: 30112.59

Editorial    Quick List    Market Summary    Technical Analyst    Market Calendar   
Stocks Covered Today    Stock Splits      Trader's Corner

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

None scheduled
10:00 am	Existing home sales
2:00 pm	Fed interest-rate decision				
2:30 pm	Fed Chair Powell press conference
8:30 am	U.S. current account	
8:30 am	Initial jobless claims
8:30 am	Continuing jobless claims
10:00 am	New home sales
8:30 am	Durable goods	Feb.	
9:45 am	S&P Global flash U.S. services PMI	March
9.45 am	S&P Global flash U.S. manufacturing PMI
For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

Editorial    Quick List    Market Summary    Technical Analyst    Market Calendar   
Stocks Covered Today    Stock Splits      Trader's Corner

TRADER'S TIP: "Strong as Steel, Slow as Molasses"

Two of the strongest forms of trending price action are up trends and down trends that slowly inch along without any counter-trend reactions of any magnitude. This is easy to see on charts in any time frame - minutes, hours, days, weeks, or months.

Stocks Covered in This Issue


Portillo's Inc. (PTLO: Consumer Cyclical/Restaurants) - 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 PTLO's case we will enter a BUY should it reach the 20.71 level, or a SELL short trade if it drops to 19.28. As usual a trailing stop is essential, 1.43 which should be tightened to 0.72 on a 2.24 gain. PTLO closed Friday at 20.23. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.101B. Optionable.


Core Laboratories N.V. (CLB: Energy/Oil & Gas Equipment & Services) - SQUEEZE PLAY. CLB 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. CLB is now at 20.06. We can capture price action either way by placing a BUY trigger at 20.4 and a SELL short trigger at 18.77. Once CLB 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 1.63. When you acquire a 2.52 profit, tighten the stop to 0.82. Earnings Report Date: Apr 25, 2023. Beta: 2.66. Market-Cap: 935.478M. Optionable.


Cadence Bank (CADE: Financial Services/Banks-Regional) - SQUEEZE PLAY. Trader indecision has put CADE 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 21.61 and a SELL short entry at 20.01. Now it's up to CADE to show us which entry will be filled. Once the trade is underway place a 1.6 trailing stop, which can be tightened to 0.8 after you achieve a 1.2 profit. CADE closed on Friday at 21.04. Earnings Report Date: Apr 24, 2023. Beta: 1.01. Market-Cap: 3.839B. Optionable.


Enliven Therapeutics, Inc. (ELVN: Healthcare/Biotechnology) - BULLISH BOUNCE. ELVN has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Friday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return ELVN to the previously established uptrend. The Bullish Bounce set-up is the basis for our BUY entry, so be ready to go long on a rise to our trigger at 22.78. Set a trailing stop of 2.12, tightening to 1.06 on a 2.4 profit. ELVN closed at 22.25 on Friday. Earnings Report Date: May 04, 2023. Beta: N/A. Market-Cap: 912.506M. Optionable.


Viad Corp (VVI: Industrials/Specialty Business Services) - 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 VVI. A move to the upside will trigger our BUY entry at 20.7, while a drop to 19.34 will trigger our SELL short entry. Follow your position with a 1.36 trailing stop. Tighten the stop to 0.68 once you have a 1.66 gain. VVI closed Friday at 20.15. Earnings Report Date: May 03, 2023. Beta: 1.77. Market-Cap: 417.813M. 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.

Editorial    Quick List    Market Summary    Technical Analyst    Market Calendar   
Stocks Covered Today    Stock Splits      Trader's Corner

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.

Editorial    Quick List    Market Summary    Technical Analyst    Market Calendar   
Stocks Covered Today    Stock Splits      Trader's Corner

Trader's Corner

"Position Size Matters" by Alexander Elder, MD

The owner of a stock-trading firm in a suburb of New York had asked me to run a psychological training group for his traders. The traders were shocked at the idea of a psychiatrist coming in and loudly insisted they 'weren't crazy.' The group got filled only after the manager told his worst performers they had to join or else. Our results were such that six weeks later we had a waiting list for the second group.

The firm had it's own proprietary day-trading system, which worked well enough for the two top traders to make millions. Others trading the same system made less and quite a few lost money. We met once a week for two hours and focused on psychology and money management.

In one of our first meetings a trader complained that he had lost money each day for the past 13 days. His manager confirmed that he was following the firm's system but could not make any money. I said that my hat was off for anyone who could lose for 13 days straight and have the intestinal fortitude to come in and trade the next morning. I then asked how many shares he traded, since the firm set a maximum for each trader. He was permitted to buy or sell 700 shares per trade, but voluntarily reduced it to 500 while on his losing streak.

I told him to drop down to 100 shares until he had two profitable weeks during which he had more winning days than losing. Once he cleared that hurdle, he could go up to 200 shares. Then, after another 2-week profitable period, he could go up to 300 shares, and so on. He was allowed a 100 share increment after two weeks or profitable trading. If he had a single losing week, he'd have to drop back to the previous week's level until he had a new profitable 2-week period. In other words, he had to start small, go up in size slowly, and drop down fast in case of trouble.

That trader loudly objected that 100 shares was not enough - he would not be able to make any money. I told him to stop kidding himself, since trading a bigger size only let him lose more money, and he agreed to my plan. When we met a week later he reported sheepishly that he had four profitable days out of five and was profitable overall. He made very little money because his trading size was so small, but for the first time in weeks he was ahead of the game. He continued to make money during the next week and then stepped up to 200 shares. In the next meeting he asked, 'Do you think it could be psychological?' - and the group roared.

How come a man who lost money trading 500 shares made money trading 100?

As the group pondered, I took a $10 bill out of my pocket and asked whether anyone would like to earn it by climbing on top our long narrow conference table and walking on it from one end to the other. Several hands went up. Well, said I, then let me offer $1,000 to anyone who'll come up with me to the roof of our 10-story office building and use a board as wide as the table to walk above the street to the roof of another 10-story building. No one volunteered.

I started egging on the group - the board will be as wide and sturdy as the conference table, we'll do it a windless day, I'll pay $1,000 cash on the spot. Still no takers. Why? Both challenges involved walking a short distance on a two-foot wide board - but the size of the trade went up, both the reward and the risk. If you lost your balance on the conference table, you'd jump down a couple of feet and land on the carpet. If you lost your balance between two rooftops, you'd hit the asphalt 10 floors below.

When the level of risk goes up, our ability to perform goes down.

Beginners often make money on small trades. They become a little more experienced and confident, increase their trading size - and lose. Their system hasn't changed, but bigger size makes them stiffer and less nimble. Most beginners are in a hurry to make a killing, and guess who gets killed.

Overtrading means trading a size that's too large for you. Some stockbrokers outside the US offer a 'shoulder' of 10:1, allowing you to buy $10 worth of stock for every $1 you deposit with the firm. Some currency houses offer a shoulder of 1:100. Overtrading generates big commissions in a hurry. Poor futures traders look for brokers with the lowest margin requirements. If the minimum margin in gold is $2,000, an eager beaver with $10,000 may buy five contracts. Each includes 100 oz of gold, making his account swing $500 for every $1 move in gold. His equity swings 5% for every $1 change! If gold goes against him, he is cooked. If it goes his way, that beginner will be convinced he's discovered a great new way of making money, continue to trade recklessly and bust out on the next trade.

When a scuba diver puts on his tank and rolls off the side of the boat, clenching his mouthpiece, he has a device called an octopus attached to his air tank. It consists of several tubes, one leading to his mouthpiece, another to the flotation vest, and yet another to an instrument that shows how much air he has left in his tank. While enjoying the reef and the fish, he keeps glancing at the gauge to see how much air he has left. If it goes too low, he may not have enough to get back to the surface or else he may have to come up so fast his blood will boil. Scuba diving is a deadly sport for illiterates and hotheads.

Putting on a trade is like diving for treasure. There are fortunes down on the ocean floor, there is gold between the rocks. As you scoop it up, remember to glance at your air gauge. Will you calculate how much gold you can afford to take without endangering your survival? The ocean floor is littered with the remains of divers who saw great opportunities. They reached for them without thinking whether they had enough air to return to the boat.

A professional diver thinks about his air supply first. If he doesn't get any gold today, he'll go for it tomorrow. All he needs to do is survive and dive again. Beginners kill themselves by reaching for more than they can carry and running out of air. The lure of free gold on the ocean floor is too strong. Free gold! It reminds me of a Russian saying - "the only free thing is the cheese in a mousetrap."

Greed is a common emotion, not limited to humans. There are tribes in Africa that catch monkeys by putting tidbits of food into jars with narrow necks, tied to stakes in the ground. A monkey wiggles its hand into a jar, grabs a tidbit, but cannot pull it out because only an open hand can go through the narrow neck. The monkey is still tugging at the bait with its fist stuck in the jar when the hunters come to pick it up it. Monkeys do themselves in because of their greed, grabbing and refusing to let go. Think of them when you feel tempted to put on a large trade with no stop.

Simply knowing how to analyze markets will not make you a winner. A professional trader needs strong money management skills. All successful traders survive and prosper thanks to their discipline. The 2% Rule will keep you safe from the sharks, the 6% Rule from the piranhas. Then, if you have a halfway decent trading system, you'll be ahead of the game.

RightLine Risk Control Calculator 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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