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March 23, 2024 - The RightLine Report
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NOTES FROM THE EDITOR
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It's often said that history repeats itself. Nowhere is this more true than on Wall Street.
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"QUICK LIST"
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Stock 03/22 03/22 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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CNK 17.97 0.16 18.29 1.16/0.58 1.28
MARA 20.87 -0.91 21.84 19.97 1.87/0.94 7.02
KURA 21.40 0.04 22.18 20.68 1.5/0.75 2.5
CSPI 20.74 -0.47 21.57 19.38 2.19/1.1 8.24
ALAR 22.00 -0.16 23.79 20.94 2.85/1.43 3.3
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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After closing at record highs on Thursday, stocks took a breather on Friday, with the Dow and the Russell 2000 falling. The Nasdaq posted its fifth consecutive gain, helped by mega-cap tech. There were no economic releases on the calendar, and the focus was on corporate news. Shares of FedEx jumped more than 7% after the company exceeded earnings expectations and announced a $5 billion stock-repurchase program. On the other hand, shares of Nike and Lululemon fell on profit warnings, while shares of Tesla declined after reports that the automaker reduced electric-car production at its plant in China as EV sales growth slows. Despite today's hesitation, stocks ended the week with a sizable gain, which came on the back of dovish central-bank developments. Government bond yields were lower, and the dollar hit a one-month high against major currencies. Global equity markets are on track for their best weekly gain this year, as several major central banks reinforced expectations that the start of rate cuts is around the corner. To start with, the Fed maintained its projection for three rate cuts this year despite a stronger growth and inflation outlook. The Fed will remain data-dependent, but the March statement and press conference signaled that the bank has a clear bias toward easing. North of the border, the Bank of Canada's deliberation summary mentioned that the bank sees conditions for rate cuts this year. Also this week, the Swiss National Bank became the first major bank to cut rates, delivering the first rate cut in nine years. Elsewhere, the Bank of England kept policy unchanged, but a dovish shift in the votes signaled stronger support for rate cuts. The one exception was the Bank of Japan, which hiked rates for the first time in 17 years and ended its yield-curve control policy, but that move was broadly anticipated. In our view, a pivot toward easier policy by most central banks in response to easing inflation pressures, rather than a growth slowdown, strengthens the case for a soft landing and validates the bull market in stocks. Next week brings a fresh reading of the Fed's preferred measure of inflation, the core personal consumption expenditure (PCE) price index, though the data will be released when markets will be closed in observance of the Good Friday holiday. Given the already reported consumer and producer prices, which both surprised to the upside in February, we would expect the PCE to also show a strong monthly gain. But that should not surprise markets and might not elicit much of a reaction, especially after Fed Chair Powell downplayed the hotter January and February inflation readings as bumps in the road. With a few days to go, the first quarter has been a very positive one for equities, with the S&P 500 rising almost 10%, supported by ongoing economic resilience, a reacceleration in corporate profits, and expectations for a Fed pivot. We think that the macroeconomic backdrop will remain positive in the quarters ahead, but markets might enter a choppier phase. Friday On The Week
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Dow 39,475.90 -305.47 +761.13 1.97%
Nasdaq 16,428.82 26.98 +455.65 2.85%
S&P 500 5,234.18 -7.35 +117.09 2.29%
NYSE Volume 3.39B
NYSE Advancers 942
NYSE Decliners 1,859
Nasdaq Volume 4.36B
Nasdaq Advancers 1,485
Nasdaq Decliners 2,756
New Highs/Lows
03/15 03/18 03/19 03/20 03/21 03/22
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NYSE New Highs 106 141 175 292 440 233
NYSE New Lows 53 39 34 32 17 20
Nasdaq New Highs 84 97 93 226 342 127
Nasdaq New Lows 140 128 126 99 55 93
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TRADER'S TIP:
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TRADER'S TIP: "Bases Loaded?" Success rarely comes from over-leveraging your account and putting everything on one or two rolls of the dice. Yes, high-octane homeruns are nice, but steady base hits are less risky and add up over time. Be patient - you'll get your share of points as a result of trading smart. Take a different route than the crowd by locating low-risk trade setups and applying Risk Control to every position. Disciplined consistency may not be as dramatic as shooting wildly from the hip, but you're much more likely to hit your profit target. **************************
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/ https://www.prorightline.com/rlch/032224SPX.jpg--ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, MARCH 25 10:00 am New home sales TUESDAY, MARCH 26 8:30 am Durable-goods orders 8:30 am Durable-goods minus transportation 9:00 am S&P Case-Shiller home price index (20 cities) 10:00 am Consumer confidence WEDNESDAY, MARCH 27 None scheduled THURSDAY, MARCH 28 8:30 am Initial jobless claims 8:30 am GDP (2nd revision) 9:45 am Chicago Business Barometer (PMI) 10:00 am Pending home sales 10:00 am Consumer sentiment (final) FRIDAY, MARCH 29 8:30 am Advanced U.S. trade balance in goods 8:30 am Advanced retail inventories 8:30 am Advanced wholesale inventories 8:30 am Personal income (nominal) 8:30 am Personal spending (nominal) 8:30 am PCE index] 8:30 am Core PCE index 8:30 am PCE (year-over-year) 8:30 am Core PCE (year-over-year) 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: "Slippage" "Price slippage" is the difference in the price of the stock that appears on the ticker at the time you place a trade, and the price at which your order is actually filled. "Transaction slippage" is the difference between estimated and actual transaction costs. To control slippage, always trade liquid stocks, avoid low volume issues, and use limit orders whenever possible. ***********************************
STOCKS COVERED IN THIS ISSUE
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COMMUNICATION SERVICES SECTOR Cinemark Holdings, Inc. (CNK: Communication Services/Entertainment) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. CNK's reaction to support on Friday created a Bullish Bounce setup with a BUY entry trigger at 18.29. Use a 1.16 trailing stop, which should work well with CNK's typical daily range. Tighten it to 0.58 on a 1.28 profit. CNK closed at 17.97 on Friday. Earnings Report Date: May 03, 2024. Beta: 2.28. Market-Cap: 2.185B. Optionable. FINANCIAL SERVICES SECTOR Marathon Digital Holdings, Inc. (MARA: Financial Services/Capital Markets) - SQUEEZE PLAY. Friday's trading action forced MARA's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction MARA will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 21.84 if MARA moves higher, and place your order to SELL short at 19.97 if price declines to that level. As usual follow your entry with a trailing stop, 1.87 should be sufficient. Reduce your stop to 0.94 on a 7.02 gain. MARA closed Friday at 20.87. Earnings Report Date: May 08, 2024. Beta: 5.40. Market-Cap: 5.586B. Optionable. HEALTHCARE SECTOR Kura Oncology, Inc. (KURA: Healthcare/Biotechnology) - SQUEEZE PLAY. KURA 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. KURA is now at 21.40. We can capture price action either way by placing a BUY trigger at 22.18 and a SELL short trigger at 20.68. Once KURA 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 1.5. When you acquire a 2.5 profit, tighten the stop to 0.75. Earnings Report Date: May 08, 2024. Beta: 0.86. Market-Cap: 1.629B. Optionable. TECHNOLOGY SECTOR CSP Inc. (CSPI: Technology/Information Technology Services) - SQUEEZE PLAY. A look at CSPI's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 21.57 and a SELL short trigger at 19.38. Once CSPI shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 2.19 and tighten to 1.1 on a 8.24 gain. CSPI closed Friday at 20.74. Earnings Report Date: May 08, 2024. Beta: 1.29. Market-Cap: 202.296M. Not Optionable. Alarum Technologies Ltd. (ALAR: Technology/Software - Infrastructure) - 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 ALAR. A move to the upside will trigger our BUY entry at 23.79, while a drop to 20.94 will trigger our SELL short entry. Follow your position with a 2.85 trailing stop. Tighten the stop to 1.43 once you have a 3.3 gain. ALAR closed Friday at 22.00. Earnings Report Date: N/A. Beta: 0.10. Market-Cap: 139.213M. Not 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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Stop Loss Questions And Answers - Part II I get more questions about stop losses than about any other subject. Clearly this strategy causes traders a lot of pain and confusion. Some of it stems from the schizoid nature of our modern markets. But most of it reflects an underlying weakness in trade management skills. What takes place at the end of a trade usually reflects decisions made at the beginning. In other words, the best entries usually lead to the most profitable exits. This is the most urgent wisdom I can give when it comes to stop-loss placement. We can spend hours deciding whether a stock is a good buy or a good sell, but this emphasis is often misplaced. Over time, carefully chosen exits are more important than great entries. You don't believe me? Just ask all those folks who bought tech stocks in the late 1990s. I've compiled a question-and-answer session that addresses the most important elements of stop-loss strategy. Q: I want to hold on to a trade as long as the pattern stays intact. So I place my stop loss just outside the edge of the pattern. But what do I do when price breaks out in my favor for a bar or two and then falls back into the pattern? A: You need to exit right away after a false breakout or breakdown, regardless of where you've placed your stop loss. The false move creates overhead supply (or underlying demand in a short sale) and raises the odds the pattern will break the other way. This is classic pattern-failure dynamics. Rigid stop-loss placement with global rules undermines good trade management. Management is more important than knowledge and all the technical analysis in the world. You have to be a manager of your trades and your trading style. That gives you the courage to re-enter good positions when you get blown out of them, if and when conditions change. Q: A stock breaks out and moves in my favor, but my stop gets hit most of the time on a pullback. How can I avoid this? A: This scenario illustrates the major problem traders face when they chase breakouts. For example, you get a breakout and a strong move in your favor. You're taught to protect profits, so you place a stop-loss that guards some of the gains in anticipation of making more money when the stock runs. But the nature of price mechanics suggests that after an initial rally, a stock will pull back to test the original breakout level. Both of your stop-loss choices have problems. First you protect profits with a trailing stop, but you risk getting hit when price pulls back to the breakout level. Second, you place the stop under the breakout level, but then you turn a winner into a loser. This also adds risk, because pullbacks often overshoot support-resistance just to get to the stops that are buried there. The pullback from a rally is a two-edged sword, because it's a buy signal and a stop-loss level at the same time. In other words, if I'm already positioned I feel the need to sell, but if I'm not positioned, I feel the need to buy. The solution is counterintuitive and simple. Train yourself to avoid breakout entries and instead trade pullback entries. Q: Should I lift my stop-loss when I know the stock will gap against my position when it opens? A: I usually lift the stop-loss, but every case is different. Watch the pre- and postmarket trading, and see how much pressure the stock faces and whether it's trading above or below major support-resistance. The ability to hold higher price levels predicts that the stock will stabilize when the market opens. Keep in mind that New York Stock Exchange stocks may give few clues in extended hours. When there's news that could affect the stock, I pull the stop loss and keep the position through the open. Then I try to hold for the first 10 to 15 minutes to see if it reverses or runs. If the stock starts to run or breaks a large support-resistance level, I get out immediately. The strategy can lead to a larger loss, but it's a tradeoff, because the gap prints the high or low for the day more than 70% of the time. Q: Do market insiders see our stop-loss orders and purposely try to trigger them? A: Some brokers hold stops locally, while others send them out to the "floor." But it doesn't really matter whether insiders see them or not because they know where you'll place them, even if they're not physical. Millions of traders came before you and applied the same logic to stop placement that you do every day. So unless you find a more creative way to accomplish this task, you'll wind up selling at the worst possible price anyway. Q: Once a trade turns profitable, when do I adjust the stop loss to ensure I won't take a loss? And thereafter, if the trade continues in my favor, what rule do I use for trailing stops? A: I figure an amount of initial wiggle room based on my goals for the trade. If the reward target is several points away, the stock needs to move around a lot, and I don't want to get in its way. If it's a small trade, I don't want to lose a penny after I get the first thrust away from my entry price. The best strategy as the trade evolves is to use support-resistance on the 60-minute chart to move your trailing stop. For example, you get your rally and the stock congests for a few bars. When price breaks even higher, move your stop behind the last congestion pattern. This way, price needs to break the smaller support before it hits your trailing stop. Get more aggressive as the stock approaches your reward target. Shift your strategy after the price passes 75% of the distance between your entry and intended exit. At that point, there's no sense risking a bundle in order to make a few pennies. Move the stop in close so any small reversal takes you out of the trade. Q: How can we trade profitably with stop-gunning games going on all the time? A: Stop-running or stop-gunning (both terms are used) occurs when a price is pushed through support or resistance in order to trigger the stops that are hiding there. After the stop supply is exhausted, the market bounces back in the other direction, usually winding up where it was before the exercise began. You only have two choices if you're positioned before a stop-gunning exercise. First, keep the stop-loss outside commonly targeted price levels. This is tough to do because it adds a lot of risk to the trade. Second, keep the stop loss in very close and take another position after the stop-gunning is over. Look to step into stop-gunning games from the sidelines rather than being a sitting duck with a position bought or sold at a dangerous level. You can often get dramatic fills with good timing during these games. Q: Why do I always place my stop loss at an exact high or low? A: You're describing a condition known as trader's disease. It's caused by the market tendency to gravitate toward the price that causes the most pain. Options traders are especially vulnerable to this affliction. It's not really sinister, it's just the nature of the market. Start by realizing that volatile stocks can't be traded with tight and scientific stops, because all their support-resistance levels are channeled. This pushes a stock back and forth through common stop levels but keeps the ongoing trend intact. If you get up close to a price chart, you'll notice there's large bar-to-bar overlap most of the time. This makes it hard to get your move without getting shaken out. Q: How can I keep my stop loss from getting hit all the time on Nasdaq tech stocks? A: Keep your size down when trading volatile stocks. Before you trade, ask yourself how far that stock can move in its natural wiggle. This quick analysis takes a long time to master and is complicated by the tendency of market volatility to change from day to day. You can also avoid getting your stops hit by picking lower-beta stocks to trade. This means avoiding most four-letter stocks. Q: When should I use a stop-limit order? A: I never use a stop limit on anything. It's too easy for the stock to go right through your price, not get filled, and trigger a deeper loss. When you want out, you want out. When you need to get out, you need to get out. A regular stop-loss order becomes a market order when price trades through it. This gives you more control than a stop-limit order, as long as you choose your stock wisely. Keep in mind the more volatile the stock, the wider the potential loss will be on this type of order. When possible, pick lower-volatility stocks that will hit your stop and trigger at that price, without slippage. ******************** This guest article was written by Alan Farley, author of "The Master Swing Trader." If you haven't already, be sure to read "Stop Loss Questions And Answers - Part I" in last weekend's issue of the RightLine Report. ======================================================================
Best of luck and have a Great Week!
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DISCLAIMER
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. |