Notes From The Editor

Unexpected volatility is a fact of life in the stock market. For traders holding at least a few days, it's important to keep stop losses wide enough to ride out the daily gyrations - while at the same time, keeping risk to a manageable minimum. It's a balancing act that's easier said than done.

The simple act of using a stop-loss puts you head and shoulders above many traders/investors. Placing a limit on how much you stand to lose on any given trade prevents a manageable loss from turning into a big hit.

Stop placement, however, isn't an automatic and thoughtless procedure. Good stops take into account both a trader's intended timeframe and the stock's expected volatility.

Traders who intend to remain in a trade for more than a day will need to be prepared to ride out more price movement. Similarly, more movement should be expected of a stock with heightened volatility.

Imagine buying a stock that's sitting at 35.00. A trader might choose to place a stop at 34.50, with the thought that it's a great way to limit downside risk. This might very well be the case - but only if the equity tends to be a slow mover. Banking, utility, and raw materials stocks often fall into this category.

On the other hand, you'd run the risk of being stopped out in a matter of hours if you're dealing with a more volatile mover - something like a tech stock that covers a wide price range throughout a session.

The "Beta" line you find at the end of every stock write-up gives some insight into how much price movement to expect. A Beta of 1.00 means that an equity tends to be as volatile as the S&P 500, while a reading of 2.00 would indicate twice as much volatility.

"Average True Range" (ATR) is another way to gauge choppiness. The indictor measures the average range that a stock traces in one session. Under most circumstances, a trade's initial stop should never be less that the ATR. This would be begging to get bounced out of a stock before it had a chance to perform.

Rightline set-ups are typically designated with a "swing trade" in mind. The holding period is expected to be anywhere from 3 days to 3 weeks, sometimes longer. Our analysts determine stops based on the anticipated movement that a stock might experience over that timeframe, taking into account both the Beta and ATR. Technical analysis also plays a key role here; analyzing a daily chart often reveals subtle tendencies that don't show up in the indicators.

Stop placement is anything but arbitrary. After all, how you get out is just as important as how you get in.

Here's to profits!

Kent Barton
Senior Analyst

Quick List

    
Stock     03/27     03/27      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

BOWL      13.36      0.29     13.62                  0.86/0.43      1.22
AORT      20.53      0.51     20.89                  1.41/0.71      1.16
LBPH      20.11      0.27     20.74     19.22        1.52/0.76      3.04
RNA       24.05      0.85     24.71     22.79        1.92/0.96      2.98
AKRO      24.39      0.21     25.33     23.42        1.91/0.96      6.02

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

Equity markets closed lower on Tuesday, with the S&P 500 logging a decline of roughly 0.3% for the day. Health care emerged as the top-performing sector, gaining about 0.3%, while utilities lagged behind, shedding over 1%. In overseas markets, European markets mostly finished higher following a better-than-expected consumer confidence reading in Germany. On the US economic front, new orders for manufactured durable goods increased by 1.4% month-over-month in February, rebounding from two consecutive monthly declines.

Additionally, the consumer confidence index reading for March fell slightly below market expectations, driven by reduced optimism surrounding future business conditions, labor-market conditions, and income expectations. Treasury yields ticked modestly lower on the day, with the 2-year yield finishing around 4.59% and the 10-year yield at 4.23%.

Equity leadership has broadened over the past month. Stocks have continued their momentum from 2023, with the S&P 500 reaching all-time highs and currently up by about 10% year-to-date. Following their substantial gains in 2023, the information technology and communication services sectors once again emerged as the top-performing sectors in 2024, each gaining over 13%. From a style perspective, growth has once again outperformed value at the start of the year. The Russell 1000 Growth Index has risen by roughly 12% year-to-date compared to around 7% for the Russell 1000 Value Index. However, the past month has witnessed a broader leadership, with energy, utilities, and materials emerging as the top-performing sectors. Over the same period, value-style stocks have gained 3.8% compared to a 2.4% gain for growth-style stocks.

Looking ahead, we anticipate a more balanced performance between growth- and value-style stocks, with some of the laggards from 2023 potentially catching up throughout 2024. Potential catalysts for broader participation in equity markets could include lower inflation, a Federal Reserve that pivots to interest rate cuts around midyear, and improving earnings trends in value-style stocks.

                        Mar 25, 2024           Mar 26, 2024   
                  --------------------   --------------------
Dow                 39,313.64  -162.26     39,392.09    78.45
Nasdaq              16,384.47   -44.35     16,426.05    41.58
S&P 500              5,218.19   -15.99      5,227.36     9.17

NYSE Volume                      3.34B                  3.88B
NYSE Advancers                   1,173                  1,255
NYSE Decliners                   1,632                  1,535

Nasdaq Volume                    4.65B                  5.15B
Nasdaq Advancers                 1,740                  1,769
Nasdaq Decliners                 2,479                  2,464

                                 New Highs/Lows

                   03/19  03/20  03/21  03/22  03/25  03/26
                 --------------------------------------------
NYSE New Highs       175    292    440    233    176    147
NYSE New Lows         34     32     17     20     25     33
Nasdaq New Highs      93    226    342    127    112    119
Nasdaq New Lows      126     99     55     93    110    126
   

TRADER'S TIP: "Moving Average Rainbows"

Place a variety of moving averages on your chart, then watch how they crossover each other and fan out into a "rainbow." The patterns that are drawn as the trend unfolds will indicate the strength of a reversal. Try 13, 22, and 50 period Exponential Moving Averages to see how it works. This combination has shown to be effective under a wide range of conditions.

Take notice of any similarities in the rainbows that have occurred historically, with particular attention to the way the rainbow takes shape after bouncing from support or resistance. This is a helpful tool to avoid head fakes, and determine true trend reversals in almost any time frame.

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".

Market Calendar

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

TRADER'S TIP: "Short-term Trading = Long Term Results"

Occasionally we hear from traders who are frustrated and can't seem to do anything right. They usually haven't made money for a while and are starting to feel as if they never will.

The problem could be thinking short-term -- not about their trades but about their results. Even if your trades last only minutes or hours, you have to think about your results over the long term.

The laws of probabilities allow for losing streaks which can sometimes run longer than you think is possible. Realize that when you have a run of losers, it doesn't necessarily reflect your skill as a trader.

Every trader - no matter how good - has some periods of time when they do poorly. The most important thing you can do is to keep working at it day after day. When combined with Risk Management, persistence and hard work lead to good results.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Bowlero Corp. (BOWL: Consumer Cyclical/Leisure) - 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. BOWL's behavior on Tuesday could very well be a sign that a new bounce is underway. Place a BUY trigger at 13.62. In the event your trigger is met, also place a 0.86 trailing stop which can be trimmed down to 0.43 when you have a 1.22 profit. BOWL closed Tuesday at 13.36. Earnings Report Date: May 17, 2024. Beta: 0.48. Market-Cap: 2B. Optionable.

HEALTHCARE SECTOR

Artivion, Inc. (AORT: Healthcare/Medical Devices) - 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 AORT which met our setup criteria on Tuesday. The BUY trigger for this trade is at 20.89, and the trailing stop is sized at 1.41. Resize the stop to 0.71 upon collecting a 1.16 point gain. AORT closed Tuesday at 20.53. Earnings Report Date: May 02, 2024. Beta: 1.66. Market-Cap: 846.351M. Optionable.

Longboard Pharmaceuticals, Inc. (LBPH: Healthcare/Biotechnology) - SQUEEZE PLAY. Trader indecision has put LBPH 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 20.74 and a SELL short entry at 19.22. Now it's up to LBPH to show us which entry will be filled. Once the trade is underway place a 1.52 trailing stop, which can be tightened to 0.76 after you achieve a 3.04 profit. LBPH closed on Tuesday at 20.11. Earnings Report Date: May 07, 2024. Beta: 1.29. Market-Cap: 724.306M. Optionable.

Avidity Biosciences, Inc. (RNA: Healthcare/Biotechnology) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in RNA'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 24.71 and a SELL order at 22.79. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.92 trailing stop. Tighten the stop to 0.96 once you have a 2.98 gain. RNA closed Tuesday at 24.05. Earnings Report Date: May 07, 2024. Beta: 0.71. Market-Cap: 1.917B. Optionable.

Akero Therapeutics, Inc. (AKRO: Healthcare/Biotechnology) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. AKRO traders reached this state of stand-off on Tuesday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 25.33 and a SELL short trigger at 23.42. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.91 which can be tightened to 0.96 on a 6.02 gain. AKRO closed Tuesday at 24.39. Earnings Report Date: May 13, 2024. Beta: -0.37. Market-Cap: 1.682B. 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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