Notes From The Editor

"The Trend Is Your Friend"

On a rational level most of us understand the wisdom beneath this popular market proverb. However, few traders actually know how to use the trend to produce profits. To help us move further along the trail of trading enlightenment, let's indulge in a quick review of "Trend Trading 101."

In essence, the trend is the general direction that stock prices are moving. This movement can be compared to the current in a river, where we all know that swimming along with the flow is relatively easy, while trying to swim against it requires much more effort and takes longer to get anywhere.

The overall stock market price trend exerts powerful forces on individual stocks. Hoping that a stock will go higher when the trend is down is like trying to swim upstream against the current.

Is the Trend REALLY Your Friend?

Before diving into a river, most swimmers would first stop to check the current. Using the same sort of caution gives informed traders a huge advantage over the majority who typically leap before they look. It pays to determine which direction the trend is headed before diving into a stock purchase.

Most people can easily understand this concept yet find it extremely difficult to apply to the stock market. To find out why, let's take a look at the first of three dominant reasons why only a small minority of traders and investors truly understand what it means to be friends with the trend.

It's All In Your Head ... This one is purely psychological. Most people are very biased against declining markets. How could we possibly become friends with a "downtrend"? After all, when stocks go down everybody loses money. We all KNOW that a "bad" market is our enemy. Right?

Time for a paradigm shift. There's no such thing as a "bad market." In other words, every trend is our friend when we choose to accept it. There's no reason to fight against a market downtrend. It's bigger and stronger than any of us. Remember swimming in the current of river? In the same way both up AND down trends can be used as powerful forces to make money in stocks.

The insight gained from shifting to an unbiased market perspective allows us to recognize which trend is in control and then flow with it. This isn't rocket science. It doesn't take long to learn and isn't really that hard to do. But even if it were, we'd do it anyway, because the benefits are enormous.

Don't expect the larger crowd to understand. The stock market game requires that there be plenty of uniformed players on the field that are willing to give their investment capital away - even if they don't realize it! They have accepted the idea that any downtrend is their enemy, and by doing so contribute unknowingly to the opposing team.

They usually hold onto losing positions, watch their portfolio values drop, and hope that the problem will just go away. Instead of limiting their losses with a pre-planned exit strategy that gets them out early, they hang on to the losers until serious damage is inflicted on their capital.

Fortunately, no one has to be a part of this crowd if they choose to drop the prejudices, and learn to make both up AND down trends their friends.

That's it for now. In an upcoming issue of the RightLine Report we'll take a closer look at the skills we all need to flow with the trend, AND one of the most important reasons for the trend to become your friend - Time!

Trade well.

- Thomas Sutton, Editor

Quick List

    
Stock     03/24     03/24      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

CASH      20.26      0.32     21.83     19.17        2.66/1.33      3.42
WBS       20.63      2.21     21.02     18.90        2.12/1.06      4.64
AMH       20.32      2.17     20.64                  2.51/1.25      2.50
CTXS     122.00      0.40    127.65                 14.68/7.34     10.86

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 access to the Risk Calculator, go to http://www.rightline.net and login to the Member's area.

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

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Market Summary

The US stock market rallied on Tuesday as trader optimism increased that Congress will deliver a highly-anticipated $2.0 trillion fiscal stimulus package after failing to do so twice over the past two days. Economic news was sluggish due to the extremely restrictive measures on public and business interaction by state and federal government in response to the COVID-19 virus. Gold, treasury yields and crude oil prices all closed higher, while the USD/dollar lost ground.

                        Mar 23, 2020           Mar 24, 2020   
                  --------------------   --------------------
Dow                    18,592  -582.05        20,705   +2,113
Nasdaq               6,860.67   -18.84      7,417.86  +557.18
S&P 500                 2,237   -67.52         2,447  +209.93

NYSE Volume                      7.34B                  7.56B
NYSE Advancers                     676                   2791
NYSE Decliners                    2361                    244

Nasdaq Volume                    4.29B                  4.41B
Nasdaq Advancers                  1285                   2888
Nasdaq Decliners                  2040                    459

                                 New Highs/Lows

                   03/17  03/18  03/19  03/20  03/23  03/24
                 --------------------------------------------
NYSE New Highs         8     14      5      1      2      1
NYSE New Lows       1324   2235   1051    299    805     87
Nasdaq New Highs      12     16     13      8      7      8
Nasdaq New Lows     1106   1698    811    336    783    115
   

TRADER'S TIP: "Staying Focused On What You Need To Learn"

"There is a tremendous difference between focusing on money and focusing on using your trading as an exercise to identify what you need to learn. The first will cause you to focus on what the markets are giving you or are taking away from you. The second perspective causes you to focus your attention on your ability to give yourself money. With the first perspective, you are placing some of the responsibility onto the markets to do something for you. With the second perspective, you assume all the responsibility."

~ Mark Douglas, "The Disciplined Trader"

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Boost Your Profits With Moving Averages".

S&P 500 - 2447.33 March 24, 2020

52-Week High: 3393.52
52-Week Low: 2191.86
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 2947.72
Resistance 2: 2665.26
Resistance 1: 2485.09
Pivot: 2382.80
Support 1: 2202.63
Support 2: 2100.34
Support 3: 1817.88


NASDAQ Composite - 7417.86 March 24, 2020

52-Week High: 9838.37
52-Week Low: 6631.42
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 8467.70
Resistance 2: 7731.86
Resistance 1: 7305.69
Pivot: 6996.02
Support 1: 6569.85
Support 2: 6260.18
Support 3: 5524.34
        
Dow Industrials - 20704.91 March 24, 2020

52-Week High: 29568.57
52-Week Low: 18213.65
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 25654.88
Resistance 2: 22804.06
Resistance 1: 20989.02
Pivot: 19953.24
Support 1: 18138.20
Support 2: 17102.42
Support 3: 14251.60
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, March 23, 2020:
23-Mar  8:30 am   Chicago Fed national activity

Tuesday, March 24, 2020:
24-Mar  9:45 am   Markit manufacturing PMI (flash)
24-Mar  9:45 am   Markit services PMI (flash)
24-Mar  10 am   New home sales

Wednesday, March 25, 2020:
25-Mar  8:30 am   Durable goods orders
25-Mar  8:30 am   Core capital goods orders

Thursday, March 26, 2020:
26-Mar  8:30 am   Weekly jobless claims
26-Mar  8:30 am   GDP
26-Mar  8:30 am   Advance trade in goods

Friday, March 27, 2020:
27-Mar  8:30 am   Personal income
27-Mar  8:30 am   Consumer spending
27-Mar  8:30 am   Core inflation
27-Mar  10 am   Consumer sentiment



For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Setting Stops For Short Positions"

Here are a few options for setting stops on short positions:

1. On daily charts, set the stop just above yesterday's high unless it was a big down day. Then move the stop closer to today's open.

2. Set the stop just above a recent minor or major resistance level.

3. Use the daily Average True Range to determine the expected movement for the stock, and set the stop just beyond the range amount. (ATR is a feature found in RightLine Charts and other charting packages.)Set the stop the instant your order gets filled. Move stops down as the stock declines, first to break even, then to protect profits. When you use trailing stops on a short position, don't raise stops - lower them. As the stock moves down and tends to "bottom out" or market conditions become bullish, "tighten the stop" which will effectively employ a "down or out" strategy.

Stocks Covered in This Issue

FINANCIAL SERVICES SECTOR

Meta Financial Group, Inc. (CASH: Financial Services/Banks-Regional) - SQUEEZE PLAY. CASH is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 21.83 and a SELL short entry at 19.17. Once your trade is filled, enter a 2.66 trailing stop. Tighten it to 1.33 after a 3.42 gain. CASH closed on Tuesday at 20.26. Earnings Report Date: N/A. Beta: 1.37. Market-Cap: 736.37M. Optionable.

Webster Financial Corporation (WBS: Financial Services/Banks-Regional) - SQUEEZE PLAY. Traders are feeling the pressure as WBS's intra-day price range on Tuesday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 21.02 and a SELL short entry at 18.90. WBS's price movement will decide which entry is filled. As soon as you're in the trade, enter a 2.12 trailing stop. Tighten it to 1.06 after you get a 4.64 gain. WBS closed Tuesday at 20.63. Earnings Report Date: Apr 15, 2020. Beta: 1.37. Market-Cap: 1.89B. Optionable.

REAL ESTATE SECTOR

American Homes 4 Rent (AMH: Real Estate/REIT-Residential) - BULLISH BOUNCE. Some people hear of a stock that's performing nicely and then buy it without any regard for timing the entry. This approach usually leaves money on the table, money that could just as well be added to profits. The Bullish Bounce setup provides a well timed entry and reduces exposure to risk by placing both the entry trigger and exit stop near the bottom of the bounce. We have an opportunity to use this approach with AMH which met our setup criteria on Tuesday. The BUY trigger for this trade is at 20.64, and the trailing stop is sized at 2.51. Resize the stop to 1.25 upon collecting a 2.50 point gain. AMH closed Tuesday at 20.32. Earnings Report Date: Apr 29, 2020. Beta: 0.62. Market-Cap: 6.112B. Optionable.

TECHNOLOGY SECTOR

Citrix Systems, Inc. (CTXS: Technology/Software-Application) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. CTXS's behavior on Tuesday could very well be a sign that a new bounce is underway. Place a BUY trigger at 127.65. In the event your trigger is met, also place a 14.68 trailing stop which can be trimmed down to 7.34 when you have a 10.86 profit. CTXS closed Tuesday at 122.00. Earnings Report Date: Apr 21, 2020. Beta: 1.00. Market-Cap: 14.928B. 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  
---------------- -------     --------    -------     ------  -------   

Currently there are no upcoming stock splits on the major US exchanges.
    

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 to all RightLine subscribers. For access, go to http://www.rightline.net and login to the Member's area.

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