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March 7, 2020 - 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 03/06 03/06 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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LB 22.24 -1.07 23.01 21.09 1.92/0.96 2.16
SPCE 21.66 -2.43 23.59 20.36 3.23/1.61 7.06
NVT 22.47 -0.71 23.00 21.24 1.76/0.88 1.30
BMCH 23.27 -0.91 24.00 21.99 2.01/1.00 1.58
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 www.rightline.net/education/using-quicklist.html. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to www.RightLine.net and login to the Member's area. To learn more about controlling risk go to the RightLine Risk Control System at http://www.rightline.net/education/riskcontrol.html For a glossary of terms unique to The RightLine Report go to: http://www.rightline.net/education/glossary.html Problems? If you have any difficulty viewing this report, the link below will take you to a page where you will find a list of items that may affect normal viewing within your email client. http://www.rightline.net/home/reportprob.html Questions? Send us an email using our contact form at: http://www.rightline.net/home/contact.html
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MARKET SUMMARY
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All of the US major averages closed lower on Friday despite an excellent February labor report and a shrinking trade deficit. With the focus on the coronavirus impact, equities news included a Starbucks (SBUX $75) announcement that the company expects Chinese same-store sales to fall by 50% in the second quarter, while on a positive note Costco Wholesale Corporation (COST $311) easily topped earnings and revenue estimates. Shares of COST moved higher, SBUX finished lower. Treasury yields, USD/dollar, gold and oil prices all declined. Friday On The Week
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Dow 25,865 -256.50 +456 1.79%
Nasdaq 8,575.62 -162.98 +8.25 0.1%
S&P 500 2,972 -51.57 +18 0.61%
NYSE Volume 6.66B
NYSE Advancers 543
NYSE Decliners 2461
Nasdaq Volume 4.35B
Nasdaq Advancers 691
Nasdaq Decliners 2603
New Highs/Lows
02/28 03/02 03/03 03/04 03/05 03/06
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NYSE New Highs 8 16 27 41 38 28
NYSE New Lows 938 175 171 134 389 714
Nasdaq New Highs 57 68 77 66 57 62
Nasdaq New Lows 726 171 180 128 373 623
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TRADER'S TIP:
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TRADER'S TIP: "Position Size: Finding The Right Fit" "Many people believe that in order to make healthy profits in the market that they need to own a large position (a thousand shares or whatever your big block is for you) or more. I have found repeatedly that this is not the case. In fact, it may even work against you. Trading is tremendously psychological. When you have a position that is large enough that normal fluctuations, a point or two movement in the wrong direction causes you to start to mentally calculate how much money you have lost, you begin to make decisions out of fear. Big block positions also are a leading cause of ulcers (don't worry - I made that up). When you make your trading decisions from a basis of fear and greed - you betcha, they are lousy decisions. Think in these terms. A 200-share position, that moves 20 points made you a $4,000 profit. You were able to keep a 3 or 4 point trailing stop loss on the stock meaning you were only at risk $600 to $800 at any time. An aura of tranquility pervades. When you have this feeling of tranquility is when you make your better decisions. I guarantee it. The rule of thumb is this. If your stock goes down a couple of points and your mind becomes a mental calculator, constantly calculating that you are now down two grand, then your block size is probably bigger than necessary. If you think about the trade calmly and in terms of the boundaries of your trading plan, then you are likely on track." ~ Roger Perry **************************
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: www.rightline.net/education/how_to_use_rlr_technical_analyst.html. S&P 500 - 2972.37 March 6, 2020
52-Week High: 3393.52
52-Week Low: 2722.27
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 3473.90
Resistance 2: 3238.72
Resistance 1: 3105.54
Pivot: 3003.54
Support 1: 2870.36
Support 2: 2768.36
Support 3: 2533.18
http://www.rightline.net/rlch/030620SPX.jpg
NASDAQ Composite - 8575.62 March 6, 2020
52-Week High: 9838.37
52-Week Low: 7292.22
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 10064.07
Resistance 2: 9368.88
Resistance 1: 8972.25
Pivot: 8673.69
Support 1: 8277.06
Support 2: 7978.50
Support 3: 7283.31
Dow Industrials - 25864.78 March 6, 2020
52-Week High: 29568.57
52-Week Low: 24680.57
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 29816.02
Resistance 2: 27940.30
Resistance 1: 26902.53
Pivot: 26064.58
Support 1: 25026.81
Support 2: 24188.85
Support 3: 22313.13
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MARKET CALENDAR
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--ECONOMIC REPORTS AND EVENTS (all times are Eastern):
Monday, March 09, 2020: 09-Mar None scheduled Tuesday, March 10, 2020: 10-Mar 6 am NFIB small business index Wednesday, March 11, 2020: 11-Mar 8:30 am Consumer price index 11-Mar 8:30 am Core CPI 11-Mar 2 pm Federal budget Thursday, March 12, 2020: 12-Mar 8:30 am Weekly jobless claims 12-Mar 8:30 am Producer price index 12-Mar 12 noon Financial accounts of the U.S. Friday, March 13, 2020: 13-Mar 8:30 am Import price index 13-Mar 10 am Consumer sentiment 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: http://www.rightline.net/education/economic.html
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TRADER'S TIP:
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TRADER'S TIP: "Bounce & Swing Plays" Bounce plays are among the best short-term trades available. Since these setups usually occur near predictable support and resistance areas, the plays are low-risk when followed with safety Stops. They are commonly referred to as "swing" trades. This is because they often present traders with a chance to go long on a bounce from support, and then after the stock moves higher for a profit, reverse the same play for a short-sell near resistance. The "swing" occurs between support and resistance, giving both long and short traders specific entry and exit points. For more on this type of trade go to: http://www.rightline.net/education/bounce.html. ***********************************
STOCKS COVERED IN THIS ISSUE
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CONSUMER CYCLICAL SECTOR L Brands, Inc. (LB: Consumer Cyclical/Apparel Retail) - SQUEEZE PLAY. Trader indecision has put LB 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 23.01 and a SELL short entry at 21.09. Now it's up to LB to show us which entry will be filled. Once the trade is underway place a 1.92 trailing stop, which can be tightened to 0.96 after you achieve a 2.16 profit. LB closed on Friday at 22.24. Earnings Report Date: May 19, 2020. Beta: 0.71. Market-Cap: 6.149B. Optionable. INDUSTRIALS SECTOR Virgin Galactic Holdings, Inc. (SPCE: Industrials/Aerospace & Defense) - SQUEEZE PLAY. One interesting trait of price volatility is that it cycles back and forth through periods of expansion and contraction. Stocks that have recently seen their daily price range shift from an average or wide range to an extremely contracted state are ideal candidates for expansive price moves. In many cases the next move is relatively fast and covers a sizable amount of territory. To take advantage of these trades we use both a BUY and a SELL entry. This allows us to enter in whichever direction the breakout takes. In SPCE's case we will enter a BUY should it reach the 23.59 level, or a SELL short trade if it drops to 20.36. As usual a trailing stop is essential, 3.23 which should be tightened to 1.61 on a 7.06 gain. SPCE closed Friday at 21.66. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 4.245B. Optionable. nVent Electric plc (NVT: Industrials/Electrical Equipment & Parts) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in NVT's narrowest trading range of the past seven sessions. With neither group able to take complete control on Friday, 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 23.00 and a SELL order at 21.24. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.76 trailing stop. Tighten the stop to 0.88 once you have a 1.30 gain. NVT closed Friday at 22.47. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 3.94B. Optionable. BMC Stock Holdings, Inc. (BMCH: Industrials/Building Products & Equipment) - 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. BMCH traders reached this state of stand-off on Friday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 24.00 and a SELL short trigger at 21.99. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 2.01 which can be tightened to 1.00 on a 1.58 gain. BMCH closed Friday at 23.27. Earnings Report Date: Apr 28, 2020. Beta: 1.39. Market-Cap: 1.555B. 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: http://www.rightline.net/education/riskcontrol.html Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: http://www.rightline.net/education/gap-adjusted.html ***********************************
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 ---------------- ------- -------- ------- ------ ------- Currently there are no upcoming stock splits on the major US exchanges. For a closer look at the different stages of a Stock Split go to: http://www.rightline.net/splits/index.html/#split-stages **********************************
TRADER'S CORNER
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"How To Draft A Trading Plan" "Plan Your Trade and Trade Your Plan" is a mantra that we repeat on a regular basis. Why? Because we have found that traders who carefully plan each trade have a much better chance of winning in the stock market than those who don't. In fact, properly planning a trade can literally be the difference between making money and losing money. A successful Trading Plan doesn't have to be complicated. Many traders draft their trading plans in a notebook or on index cards, while others use word processors and spreadsheets. Regardless of the method you choose, every trading plan must contain certain components to be effective. But before we get into the "essentials," let's take a quick look at a few dynamics behind "Planning Your Trade." Before drafting a plan of action, traders will want to decide what style of trading they prefer. A broad generalization of "buy and sell stocks" doesn't work - the criteria needs to be specific. Successful traders make money in different ways, but each has a well-defined method. On the other hand, a losing trader's plan is always vague and ambiguous. In trading, it pays to be precise, so decide what you like to do and build your plan around that style. Don't worry about getting locked in to a certain approach; you can always change it later as you gain experience. You can even draft more than one plan if you enjoy different types of trading. The best plans include a set of solid rules that never get broken, and a few elastic rules that allow for real-time decisions to be made when managing live trades. Our judgment improves as we gain experience, so it's good to allow some flexibility in less critical areas of your plan. At the same time, maintain unyielding rules in the more sensitive parts - such as Risk Control. Okay, now let's layout the essential ingredients to include in your personal trading plan. ~ Determine Your Time Frame The type of trading you prefer usually defines the time frame. Short term traders who enjoy a fast paced style won't find much action in weekly or monthly time frames, while less active traders generally find that the extremely short time horizons require too much time at the computer. Decide which style best suits your personality, and then select the corresponding time frame. It's usually a good idea to start by spending a few minutes each day. Begin by managing the trades using daily charts, then see if you want to shorten or lengthen the time frame. The RightLine Report offers a variety of stocks in different time frames. Due to the way these stocks are selected and the type of exit strategy used, most of the picks will work for traders who plan to hold positions anywhere from a few hours to a few weeks. ~ Locate The Best Stocks to Trade Choose a method to determine which stocks to trade. If you are experienced in the markets you probably already have a number of ideas and sources. To make it easier for our subscribers, the Right Line Report presents a wide variety of good stock choices in every issue. They are based on an assortment of trading strategies and tactics that take advantage of predictable market behaviors. You may also want to develop your own new methods for locating stocks. The educational section on our website at www.rightline.net presents numerous market concepts to help traders understand the nature of price movement, identify trends in every time frame, and choose the tools needed to capture profits. ~ Determine Entry Points This can be a challenge, for there are almost as many different ways to determine entries, as there are stocks. Again, in an effort to make it easier for our subscribers, the Right Line Report presents specific entry points for every stock in each issue. The exact level to buy or sell short is based on a wide range of technical factors used by our analysts to reduce risk and optimize the potential gain. If you choose to select your own entry points, we provide a large assortment of articles to assist you in developing your own personal methods. ~ Use An Intelligent Method to Select the Number of Shares to Trade Very few traders and investors realize the importance of balanced "Position Sizing." Most make the mistake of ignoring the size of their trading account when taking on new positions. As a result, many unknowingly join the ranks of high-risk over-traders, and soon find themselves in big trouble. Don't worry, it's easy to avoid when you have the RightLine Risk Manager to help! This simple tool is free to subscribers, but if you prefer to do the math yourself, here are the basics: "Never risk more than 2% of your trading capital in a single trade or more than 6% of your capital at a time. For example, if you have $100,000 in your trading account, the most you should be willing to risk is $2,000. Before buying a stock, review the chart to locate the best place to put a stop loss order. If you determine that the stock requires 5-points to keep you in the trade while it is trending up, the maximum number of shares that you can afford is 400. ($2,000 maximum risk divided by 5-points = 400 shares.)" You can see that although doing the calculation isn't terribly hard, the Risk Manager makes the job a whole lot easier! ~ Manage Risk With Stops You may already know, but a "stop" is an order to buy at a price above or sell at a price below the current market price. Stops, or stop orders, are used to protect our capital and lock in profits. Placing stops is easy, but locating the best place to put them can be quite challenging. To assist traders with stop placement, every stock entry in the RightLine Report includes a suggested stop level. And of course, we offer plenty of help on our website for anyone who wants to learn more about managing risk with stops. ~ Determine Your Exit Strategy After you've entered a position in a stock and it starts moving, then what? Traders have a lot of different choices when it comes to exiting trades, and the method used can make a world of difference. Some traders routinely use "trailing" stops as their exit strategy of choice, while others choose to exit when the stock hits a certain price, or breaks through a support level, or approaches a resistance level. Other traders will choose to exit based on intra-day swings or expected news releases. Some traders sell half when their target is met and let the other half ride with a trailing stop. Others sell to recover all invested capital, and only keep the stock earned with profits - essentially called free stock. This one is a wealth builder, but results in a lot of positions to manage. When making a trading plan, remember to plan not only for the upside, but the downside too. The exit strategy is one of the most important parts of any trading plan, and it is fundamental for traders to select an exit plan before entering a trade. Trade Planning is one of the most important skills that a trader can learn. Make it your strength and you will be well on your way to trading successfully. ======================================================================
Best of luck and have a Great Week!
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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 us an email using the online contact form at: http://www.rightline.net/home/contact.html or call 800-737-4518. |