March 31, 2022 - The RightLine Report
Notes From The Editor
Trading The Squeeze
"When you come to a fork in the road, take it!" These humorous words spoken by baseball great Yogi Berra often apply to how we trade the stock market. A quick look at the "Stocks Covered" secction of the RightLine Report usually reveals at least one "squeeze play." We're not talking about the familiar baseball bunt play, but a trade setup that has the potential to put profits in your pocket!
Allow me to step back in time to a personal sports analogy for a moment. As a former Little League first baseman, I distinctly remember the old squeeze play Coach Bryant taught to "our team" of hyper-active fifth graders.
For anyone who isn't familiar with a squeeze play, it takes place when the batter bunts with a runner on third base. The play is designed to advance the runner home. The runner on third is taught to wait to be sure that the batter has successfully bunted before racing towards home plate.
Unfortunately, when I was the runner on third I didn't always remember the "wait" part. Several times I tried to get a head start. As a result of this over-anticipation I once found myself trapped between third and home, with a couple of opposing players breathing down my neck!
A stock market squeeze play takes place when prices are constricted in narrowing range between support and resistance. Longs (buyers) hold onto their positions because support hasn't been broken yet, and shorts hold onto their positions because resistance hasn't broken yet.
With the spread between the range getting smaller and smaller each day, the "squeeze" obviously can't go on forever. At some point one side or the other gives up. When this happens price moves quickly and powerfully in the direction of least resistance.
The key to a successful squeeze play is to first identify the opposing support and resistance levels. Then you wait - like the runner on third - until price action indicates one side or the other is giving up. You then enter a position in the direction of the move. Because the support and resistance levels are close together, stops can be set wide enough to accommodate normal intra-day price movement, yet still allow a low risk entry.
Bottom line: Price squeezed into a much smaller-than-average range causes a dramatic drop in volatility. Due to the cyclical and explosive nature of volatility, powerful price moves tend to occur soon after these narrow range setups. But there's no reason to jump in too fast. Be patient, let the market show its hand first, and you'll get a low risk entry with the potential for high reward!
Trade well,
Thomas Sutton ~Editor
Note: Although most stocks are influenced by the price movement of the S&P 500, SPY trades almost directly in sync with the index, and offers an easy way to go either long or short. For more info and charts on "Trading The Squeeze" go to https://prorightline.com/trading-squeeze-plays-for-profits/.
Stocks Covered Today Stock Splits
Quick List
Stock 03/31 03/31 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
IPI 82.14 1.52 86.12 9.47/4.74 17.34
CDXS 20.62 0.14 21.62 19.95 1.67/0.84 2.36
BLFS 22.73 -0.17 23.62 21.94 1.68/0.84 2.76
DE 415.45 -0.10 426.2 25.01/12.51 33.9
PAGS 20.06 0.02 20.55 19.06 1.49/0.75 2.12
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.
Stocks Covered Today Stock Splits
Market Summary
US stocks were lower on Thursday as the market closed out the toughest quarter in two years despite the recent rally that started on March 15th. Traders continue to focus on the global economic impact of the Russian invasion of Ukraine. On the economic front, Chicago manufacturing growth accelerated far more than predicted, while unemployment claims accelerated slightly more than expected. Personal income grew in line with analysts's forecasts, though spending was below the anticipated level. In light equities news, Walgreens Boots Alliance beat quarterly earnings expectations and maintained guidance. Shares were lower. Gold, the USD/dollar, and treasuries were all higher, oil prices declined.
Mar 30, 2022 Mar 31, 2022
-------------------- --------------------
Dow 35,228.81 -65.38 34,678.35 -550.46
Nasdaq 14,442.27 -177.36 14,220.52 -221.76
S&P 500 4,602.45 -29.15 4,530.41 -72.04
NYSE Volume 4.47B 4.91B
NYSE Advancers 1,420 1,348
NYSE Decliners 1,906 2,042
Nasdaq Volume 5.48B 5.51B
Nasdaq Advancers 1,576 1,726
Nasdaq Decliners 3,129 3,100
New Highs/Lows
03/24 03/25 03/28 03/29 03/30 03/31
--------------------------------------------
NYSE New Highs 95 169 75 117 120 119
NYSE New Lows 98 187 139 74 25 73
Nasdaq New Highs 77 91 67 92 78 91
Nasdaq New Lows 103 168 162 78 83 125
Stocks Covered Today Stock Splits
TRADER'S TIP: "Big Day, Small Gain?"
It can be easy to think you are the only one not raking in huge profits when your stocks don't move up dramatically on a big market rally day. Rest assured this is not true. Many traders talk when they're winning, yet you won't hear a peep out of the same bunch when they're losing. This can make it seem like everyone else is trading better than you. That's an illusion. Don't worry about performance during any one session. Remind yourself that you're in this for the long haul. Keep any losses reasonable, stay in the game, and you'll make it fine.
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".
S&P 500 - 4530.41 March 31, 2022
52-Week High: 4818.62
52-Week Low: 3992.76
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4747.92
Resistance 2: 4626.19
Resistance 1: 4584.62
Pivot: 4504.46
Support 1: 4462.89
Support 2: 4382.73
Support 3: 4261.00
NASDAQ Composite - 14220.52 March 31, 2022
52-Week High: 16212.23
52-Week Low: 12555.35
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 15095.95
Resistance 2: 14559.74
Resistance 1: 14364.52
Pivot: 14023.53
Support 1: 13828.31
Support 2: 13487.32
Support 3: 12951.11
Dow Industrials - 34678.35 March 31, 2022
52-Week High: 36952.65
52-Week Low: 32272.64
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 35917.03
Resistance 2: 35316.14
Resistance 1: 35088.69
Pivot: 34715.25
Support 1: 34487.80
Support 2: 34114.36
Support 3: 33513.47
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, March 28, 2022: 28-Mar 8:30 am Trade in goods, advance report Tuesday, March 29, 2022: 29-Mar 9 am Case-Shiller national house price index (year-on-year) 29-Mar 9 am FHFA national house price index (year-on-year) 29-Mar 10 am Consumer confidence index 29-Mar 10 am Job openings 29-Mar 10 am Quits Wednesday, March 30, 2022: 30-Mar 8:15 am ADP employment report 30-Mar 8:30 am GDP revision (SAAR) 30-Mar 8:30 am Gross domestic income (SAAR) 30-Mar 8:30 am Corporate profits (year-on-year) Thursday, March 31, 2022: 31-Mar 8:30 am Initial jobless claims 31-Mar 8:30 am Continuing jobless claims 31-Mar 8:30 am Nominal personal income 31-Mar 8:30 am Nominal consumer spending 31-Mar 8:30 am PCE price index 31-Mar 8:30 am Core PCE price index 31-Mar 8:30 am PCE price index (year-on-year) 31-Mar 8:30 am Core PCE price index (year-on-year) 31-Mar 8:30 am Real disposable income 31-Mar 8:30 am Real consumer spending 31-Mar 9:45 am Chicago PMI Friday, April 01, 2022: 01-Apr 8:30 am Nonfarm payrolls 01-Apr 8:30 am Unemployment rate 01-Apr 8:30 am Average hourly earnings 01-Apr 8:30 am Labor-force participation rate, ages 25-54 01-Apr 9:45 am Markit manufacturing PMI (final) 01-Apr 10 am ISM manufacturing index 01-Apr 10 am Construction spending 01-Apr Varies Motor vehicle sales For a chart of typical Up or Down market reactions to specific major US economic reports go to: Economic Indicator Effects
Stocks Covered Today Stock Splits
TRADER'S TIP: "Extended Hours and Erroneous Fills"
You'll sometimes find offers in extended hours trading that seem to good to be true. Don't celebrate too quickly when you buy a $20 stock for $15 bucks. Just remember that the person on the other side of your trade can contest the transaction (after the fact) whenever the sale price is too far away from the closing price. Stock buys and sells outside of the market range are considered "erroneous fills" and can be broken by the brokerage or Electronic Communication Network. For example, the ECN "Island" looks at a trade 20% outside the market price as an "erroneous fill."
Stocks Covered in This Issue
BASIC MATERIALS SECTOR
Intrepid Potash, Inc. (IPI: Basic Materials/Agricultural Inputs) - BULLISH BOUNCE. Positive price behavior near moving average support on Thursday qualifies IPI for a Bullish Bounce setup. After several sessions of declining prices, IPI should soon begin trading in step with its established weekly uptrend. Tell your broker to BUY shares if IPI moves up to our entry trigger set at 86.12. You can also enter a 9.47 trailing stop, to be replaced with a 4.74 trailing stop when you obtain a 17.34 profit. IPI closed Thursday at 82.14. Earnings Report Date: May 02, 2022. Beta: 2.08. Market-Cap: 1.111B. Optionable.
HEALTHCARE SECTOR
Codexis, Inc. (CDXS: Healthcare/Biotechnology) - SQUEEZE PLAY. CDXS shareholders know what it feels like to be squeezed. Thursday'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. CDXS closed Thursday at 20.62. The plan is to enter in the right direction by placing a BUY trigger at 21.62 and a SELL short trigger at 19.95. Once CDXS establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.67. After you've collected a 2.36 profit, tighten the stop to 0.84. Earnings Report Date: May 04, 2022. Beta: 1.74. Market-Cap: 1.344B. Optionable.
BioLife Solutions, Inc. (BLFS: Healthcare/Medical Instruments & Supplies) - SQUEEZE PLAY. The ticker for Thursday's session shows BLFS 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 23.62 and a SELL short trigger at 21.94. When BLFS 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 1.68 trailing stop. Upon reaching a 2.76 profit, resize the stop to 0.84. Earnings Report Date: May 11, 2022. Beta: 1.78. Market-Cap: 946.634M. Optionable.
INDUSTRIALS SECTOR
Deere & Company (DE: Industrials/Farm & Heavy Construction Machinery) - NEW HIGH DIP. The price momentum required to set a new high doesn't usually disappear over night. Traders can capitalize on this fact by entering positions when stocks making new highs pull back to a support level, then follow the pullback with signs of bouncing higher. DE meets the setup criteria, so get ready to BUY into this outstanding performer at 426.2. Enter a trailing stop of 25.01 when your order is filled, then tighten it to 12.51 on a 33.9 gain. Earnings Report Date: May 20, 2022. Beta: 0.99. Market-Cap: 127.453B. Optionable.
TECHNOLOGY SECTOR
PagSeguro Digital Ltd. (PAGS: Technology/Software-Infrastructure) - 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. PAGS found itself in this condition on Thursday 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 20.55 and a SELL short trigger at 19.06. When PAGS moves outside of Thursday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.49 trailing stop. After you've got a 2.12 profit, tighten the stop to 0.75. PAGS closed at 20.06 on Thursday. Earnings Report Date: May 31, 2022. Beta: N/A. Market-Cap: 6.597B. 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.
Stocks Covered Today Stock Splits
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
---------------- ------- -------- ------- ------ -------
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
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.
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