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March 19, 2022 - The RightLine Report
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NOTES FROM THE EDITOR
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3 Misconceptions About Trading
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"QUICK LIST"
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Stock 03/18 03/18 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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CENX 24.38 0.20 24.75 22.52 2.23/1.12 3.36
CVI 21.82 0.27 22.36 1.88/0.94 2.36
BTU 21.88 -0.04 22.46 20.42 2.04/1.02 4.42
CCXI 25.56 0.30 26.31 24.07 2.24/1.12 3.76
HEAR 20.34 -0.31 21.09 19.56 1.53/0.77 3.48
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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US stocks moved higher on Friday despite ongoing global geopolitical concerns to post one of the best bullish weeks since November 2020. In economic news, existing home sales declined more than expected and the Leading Index improved over last month. Earnings headlines featured a surprise quarterly loss from GameStop (GME $91), while FedEx Corporation (FDX $219) fell short of analysts' profit forecasts but reaffirmed its annual outlook. Oil prices and the USD/dollar stepped higher, treasuries were mixed and gold finished lower. Friday On The Week
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Dow 34,754.93 274.17 +1810.74 5.5%
Nasdaq 13,893.84 279.06 +1050.03 8.18%
S&P 500 4,463.12 51.45 +258.81 6.16%
NYSE Volume 8.68B
NYSE Advancers 2,208
NYSE Decliners 1,094
Nasdaq Volume 8.48B
Nasdaq Advancers 3,219
Nasdaq Decliners 1,445
New Highs/Lows
03/11 03/14 03/15 03/16 03/17 03/18
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NYSE New Highs 58 32 27 44 52 59
NYSE New Lows 338 724 390 174 67 57
Nasdaq New Highs 51 36 28 34 57 60
Nasdaq New Lows 446 921 562 254 114 78
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TRADER'S TIP:
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TRADER'S TIP: "When Your Indicators Contradict The Trend" Due to their overly sensitive nature, some technical indicators will turn in one direction while the price trend remains in the other. A rule of thumb - whenever a price trend and indicators are in conflict, always go with price until the trend is broken. **************************
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 - 4463.12 March 18, 2022 52-Week High: 4818.62 52-Week Low: 3853.50 Daily Trend: UP Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 4970.77 Resistance 2: 4667.09 Resistance 1: 4565.10 Pivot: 4363.41 Support 1: 4261.42 Support 2: 4059.73 Support 3: 3756.05 https://www.prorightline.com/rlch/031822SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, March 21, 2022: 21-Mar 8 am Atlanta Fed President Raphael Bostic speaks 21-Mar 8:30 am Chicago Fed national activity index 21-Mar 12 noon Fed Chair Jerome Powell speaks at NABE conference Tuesday, March 22, 2022: 22-Mar None scheduled Wednesday, March 23, 2022: 23-Mar 10 am New home sales (SAAR) Thursday, March 24, 2022: 24-Mar 8:30 am Initial jobless claims 24-Mar 8:30 am Continuing jobless claims 24-Mar 8:30 am Durable goods orders 24-Mar 8:30 am Core capital goods orders 24-Mar 8:30 am Current account deficit 24-Mar 9:45 am Markit manufacturing PMI (flash) 24-Mar 9:45 am Markit services PMI (flash) Friday, March 25, 2022: 25-Mar 10 am UMich consumer sentiment index (final) 25-Mar 10 am 5-year inflation expectations (final) 25-Mar 10 am Pending home sales index 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: "When Volatility Steps Up On Fed Day" When volatility steps up, it may be time for some traders to sit down. During times of wild and erratic trading, don't be afraid to let things settle down before attempting to take advantage of the situation. Often times, new traders get caught up in the euphoria of rapidly changing prices, but then get stung on poor fills, slow fills, market manipulation, and the likes. Unless you've got the experience and tools to successfully trade during "crunch" times, it may be best to just sit and watch. A good example of this type of trading situation arrives with each Fed interest rate announcement, after which, the pits tend to go wild for a time before traders and investors settle down to more orderly trading. ***********************************
STOCKS COVERED IN THIS ISSUE
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BASIC MATERIALS SECTOR Century Aluminum Company (CENX: Basic Materials/Aluminum) - SQUEEZE PLAY. CENX shareholders know what it feels like to be squeezed. Friday's slim price range reveals uncertainty on both sides of the table, a situation which often resolves itself by either Bears or Bulls quickly gaining a clear advantage. The question is "who will win?" Near-term market action tell us whether we should sell short or we should buy shares instead. CENX closed Friday at 24.38. The plan is to enter in the right direction by placing a BUY trigger at 24.75 and a SELL short trigger at 22.52. Once CENX establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 2.23. After you've collected a 3.36 profit, tighten the stop to 1.12. Earnings Report Date: May 03, 2022. Beta: 2.41. Market-Cap: 2.378B. Optionable. ENERGY SECTOR CVR Energy, Inc. (CVI: Energy/Oil & Gas Refining & Marketing) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, CVI fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 21.82, plan to buy shares at 22.36 and use a 1.88 trailing stop. Tighten the stop to 0.94 on a 2.36 gain. Earnings Report Date: May 02, 2022. Beta: 1.68. Market-Cap: 2.598B. Optionable. Peabody Energy Corporation (BTU: Energy/Thermal Coal) - SQUEEZE PLAY. Sometimes when Bulls and Bears face off in the market arena for a typical day-long battle, there is no clear winner. This is evident when the daily price range contracts to an unusually narrow state. BTU found itself in this condition on Friday when neither buyers or sellers were able to push ahead. This setup provides traders a chance to hop on board the next breakout - whether it's to the upside or down - with little risk of loss. To do this place a BUY order at 22.46 and a SELL short trigger at 20.42. When BTU moves outside of Friday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 2.04 trailing stop. After you've got a 4.42 profit, tighten the stop to 1.02. BTU closed at 21.88 on Friday. Earnings Report Date: Apr 27, 2022. Beta: 1.13. Market-Cap: 3.186B. Optionable. HEALTHCARE SECTOR ChemoCentryx, Inc. (CCXI: Healthcare/Biotechnology) - SQUEEZE PLAY. The ticker for Friday's session shows CCXI is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 26.31 and a SELL short trigger at 24.07. When CCXI starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 2.24 trailing stop. Upon reaching a 3.76 profit, resize the stop to 1.12. Earnings Report Date: Apr 27, 2022. Beta: 1.89. Market-Cap: 1.811B. Optionable. TECHNOLOGY SECTOR Turtle Beach Corporation (HEAR: Technology/Consumer Electronics) - SQUEEZE PLAY. HEAR traders on both sides of the fence are now locked in a head-to-head shootout. Friday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 21.09 and a SELL short trigger at 19.56. When one of the orders is filled, cancel the remaining order and enter a 1.53 trailing stop. When you've reached a 3.48 paper profit, tighten the stop to 0.77. HEAR closed at 20.34 on Friday. Earnings Report Date: May 03, 2022. Beta: 1.45. Market-Cap: 352.405M. 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 ---------------- ------- -------- ------- ------ ------- ACM Research ACMR 3/4/2022 3/24/2022 3-for-1 Yes PAM Transport PTSI 3/9/2022 3/30/2022 2-for-1 Yes Amazon AMZN 3/9/2022 6/6/2022 20-for-1 Yes 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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"Morning Gap Strategies" Having trouble with those irritating morning gaps? You're not alone. Many of us spend hours working on new setups, only to watch them go up in smoke overnight. But there's no need to throw out all of your hard work just yet. You can do a quick analysis, adjust your trading strategy and get into a good position well after the crowd pulls the trigger on a gap play. Many traders still place market orders before the open and walk away. Unfortunately, this is a sucker move that yields the worst fills imaginable. Take a few extra minutes to plan your gap entry, and you'll get much better prices. No, this isn't a daytrading column, although it will benefit anyone who plays in the intraday markets. It's for swing traders trying to fine-tune their entries and get positioned where they can take home the most money. Here are some strategies you can use. See Chart - https://prorightline.com/rlr/TCnvda122003.gif Stand aside at the open, and use the third-bar swing to find the best gap entry. This is a dependable reversal or expansion move on the five- minute chart, occurring 11 or 12 minutes into the new trading day. This phenomenon is a relic of the old 15-minute quote delay. In past years, painting the tape before retail investors could access stock prices ensured a few extra pennies for market insiders. Because retailers were the last "paper" in the door, natural forces would then take over and trigger reversals or breakouts. Although real-time market access has grown substantially, this third-bar swing still shows its face on many days. See Chart - https://prorightline.com/rlr/TCmro122003.gif Let the stock draw the first three five-minute bars, and then use the high and low of this "three-bar range" as support and resistance levels. A buy signal issues when price exceeds the high of the three- bar range after an up gap. A sell signal issues when price exceeds the low of the three-bar range after a down gap. It's a simple technique that works like a charm in many cases. If you use this technique, though, a few caveats are in order to avoid whipsaws and other market traps. The most common is a first swing that lasts longer than three bars. If an obvious range builds in four, five or even six bars, use those to define your support and resistance levels. Also consider the higher noise level in five-minute charts. A breakout that extends only a tick or two can be easily reversed and trap you in a sudden loss. So let others take the bait at these levels, while you find pullbacks and narrow range bars for trade execution. See Chart - https://prorightline.com/rlr/TCnwre122003.gif Gap location is more important than the gap itself. Does the opening bar push price into longer-term support or resistance? A strong up gap may force a stock through several resistance levels and plant it firmly on top of new support. Or it can push it straight into an impenetrable barrier, from which the path of least resistance is straight down. See Chart - https://prorightline.com/rlr/TCover122003.gif Three-bar range support and resistance often need to complete a testing pattern before they will yield to higher or lower prices. This comes in the form of a small cup and handle, or an inverse cup-and-handle pattern. Simply stated, price reverses the first time it tries to exceed an old high or low, but succeeds on the subsequent try. Price gaps generate other action levels as well. The most obvious is the support line in an up gap (or resistance line in a down gap). We'll call these "reverse break" lines. Violation of the reverse break can trigger price acceleration toward the gap fill line. These market mechanics make perfect sense: everyone who entered a position in the direction of the gap is losing money once price moves past the reverse break line. See Chart - https://prorightline.com/rlr/TCoverb122003.gif The gap fill line marks support in an up gap and resistance in a down gap. In other words, the odds favor a reversal when price reaches it. Paradoxically, this is a terrible place for swing traders to enter new positions. The reverse break line will resist price from re-entering the three-bar range. In fact, price bouncing like a pinball from the fill line to the reverse break line and back to the fill line sets off a powerful trading signal in the opposite direction. It predicts the demise of the gap and a significant reversal. The flip side of this reversal is a failure of a failure signal. In other words, price overcomes resistance at the reverse break line and retests the high of an up gap (or low of a down gap). The ability of price to retest these levels issues a strong signal to take positions in the direction of the gap. ********************** This special guest article was written by Alan Farley, trader and author of "The Master Swing Trader." ======================================================================
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