May 10, 2022 - The RightLine Report
Notes From The Editor
A RightLine Report subscriber asks for clarification about holding both long and short entries in the same stock ...
"I like your inputs and technical analysis. In one of your reports you mentioned that some people trade the market both ways. What I understood is that they go long and short at the same time, two accounts, I assume. Can you lead me more into a better understanding of this technique of trading? Thanks!"
Trading "both ways" in the same security - long and short - is usually done at different times. For example, you might enter a long trade in the SPY on a bounce from support. When the price rises to a known level of resistance, exit, take your profits and reverse the SPY trade to a short for the expected move downward. This is the most common way of trading "both ways," though not at the same time.
A way to trade both ways at the same time is to have one long position in a stock that is trending higher, and a short position in a different stock that is trending lower. This allows you to take advantage of strong trends in different stocks - even when the trends are counter to each other.
There are even occasions when it is wise to trade the same stock or market in both directions at the same time. Though it may seem contradictory at first, it is sometimes a good strategy to hold two opposing positions in the same stock at the same time - but NOT the same time frame.
For example, you might have a long-term position in SPY held an IRA or 401-k retirement account that you manage using weekly charts. We refer to this position as being in a "weekly time frame." At the same "time" you may hold another position in SPY, only this one is intended to take advantage of a short-term decline expected to occur over the next few days.
We would refer to this second position as being in a "daily time frame." You may hold your weekly time frame position for several months or even years, while the daily trade is normally held for less than a couple of weeks.
Bottom line: There is a huge difference between the "same time" and the "same time frame." Holding opposing positions in the same stock in the same time frame is at best a breakeven proposition. Actually, it's never as good as break even, because you have to deduct brokerage fees and related costs.
On the other hand, it is often a good strategy to hold both long and short positions in the same stock in different time frames. Just be sure that you fully understand the difference between "time" and "time frame" before you do it.
Trade Well!
~Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 05/10 05/10 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
HTHT 25.87 0.51 27.21 24.85 2.36/1.18 3.58
SFM 25.66 0.75 26.03 24.33 1.7/0.85 2.18
IRMD 31.42 1.26 32.39 29.69 2.7/1.35 4.1
IESC 28.27 1.39 28.84 26.28 2.56/1.28 2.2
FRGE 25.13 1.54 26.72 5.37/2.69 6.86
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 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
The major US stock indices were lower on Tuesday as traders contemplated several challenges including tightening of monetary policy by the Fed Bank, increasingly higher inflation, and the potential for slower economic growth. In equites news, Pfizer (PFE $49) has agreed to acquire migraine therapy maker Biohaven Pharmaceutical Holding Company (BHVN $140) for $148.50 per share in cash, while the share price of Peloton Interactive (PFE $49) dropped after the company reported posting a deeper quarterly loss than expected and warned that it is under capitalized. Gold and oil prices moved lower, the USD/dollar and treasuries finished higher.
May 9, 2022 May 10, 2022
-------------------- --------------------
Dow 32,245.70 -653.67 32,160.74 -84.96
Nasdaq 11,623.25 -521.41 11,737.67 114.42
S&P 500 3,991.24 -132.10 4,001.05 9.81
NYSE Volume 5.99B 5.97B
NYSE Advancers 407 1,413
NYSE Decliners 3,034 1,957
Nasdaq Volume 5.93B 6.28B
Nasdaq Advancers 758 2,088
Nasdaq Decliners 4,177 2,800
New Highs/Lows
05/03 05/04 05/05 05/06 05/09 05/10
--------------------------------------------
NYSE New Highs 27 53 53 28 12 5
NYSE New Lows 279 332 379 616 1,063 911
Nasdaq New Highs 37 40 21 24 23 22
Nasdaq New Lows 288 501 645 1,098 1,711 1,381
Stocks Covered Today Stock Splits
TRADER'S TIP: "Beyond a Reasonable Doubt"
It's impossible to predict with 100% accuracy, which trades will be successful and which won't. There are always doubts - even the best setups will present conflicting possible outcomes as you access the odds. Don't let this deter you. Use the RightLine Risk Control Calculator to determine a reasonable amount to risk, and then enter the position. If the trade doesn't go in your favor your proper position sizing and stop placement contain the damage. Remember that you have to put money in the market to win. Just do it . . . Wisely! You can check out the RightLine Risk Control Calculator at http://www.rightline.net/home/gate_rm.html
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 - 4001.05 May 10, 2022
52-Week High: 4818.62
52-Week Low: 3958.17
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4654.80
Resistance 2: 4409.65
Resistance 1: 4266.49
Pivot: 4164.50
Support 1: 4021.34
Support 2: 3919.35
Support 3: 3674.20
NASDAQ Composite - 11737.67 May 10, 2022
52-Week High: 16212.23
52-Week Low: 11566.28
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 14362.99
Resistance 2: 13368.13
Resistance 1: 12756.39
Pivot: 12373.27
Support 1: 11761.53
Support 2: 11378.41
Support 3: 10383.55
Dow Industrials - 32160.74 May 10, 2022
52-Week High: 36952.65
52-Week Low: 31887.89
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 36491.40
Resistance 2: 34823.53
Resistance 1: 33861.45
Pivot: 33155.66
Support 1: 32193.58
Support 2: 31487.79
Support 3: 29819.92
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, May 09, 2022: 09-May 10 am Wholesale inventories (revision) 09-May 11 am Consumer 1-year inflation expecations 09-May 11 am Consumer 3-year inflation expecations Tuesday, May 10, 2022: 10-May 6 am NFIB small-business index 10-May 11 am Real household debt (SAAR) Wednesday, May 11, 2022: 11-May 8:30 am Consumer price index 11-May 8:30 am Core CPI 11-May 8:30 am CPI (year-over-year) 11-May 8:30 am Core CPI (year-over-year) 11-May 2 pm Federal budget Thursday, May 12, 2022: 12-May 8:30 am Initial jobless claims 12-May 8:30 am Continuing jobless claims 12-May 8:30 am Producer price index (final demand) Friday, May 13, 2022: 13-May 8:30 am Import price index 13-May 10 am UMich consumer sentiment index (preliminary) 13-May 10 am UMich 5-year inflation expectations 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: "Closing Shop For The Holidays"
Keep a close watch on trading conditions when a market holiday approaches. Professional traders will often leave early for an extra day away from the office, and many will close positions to avoid holding over a long holiday weekend. Volume is typically light and once institutional money managers are away, small traders can often push a few stocks around increasing volatility substantially. Always make sure you have a reliable risk control system in place.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Huazhu Group Limited (HTHT: Consumer Cyclical/Lodging) - SQUEEZE PLAY. Tuesday's narrow price range has created a potentially profitable setup in HTHT, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 27.21 and a SELL short entry at 24.85. Let HTHT's price action determine your long or short entry. Once the order is filled, place a 2.36 trailing stop, and tighten it to 1.18 upon getting a 3.58 gain. HTHT closed Tuesday at 25.87. Earnings Report Date: May 23, 2022. Beta: 1.34. Market-Cap: 9.577B. Optionable.
CONSUMER DEFENSIVE SECTOR
Sprouts Farmers Market, Inc. (SFM: Consumer Defensive/Grocery Stores) - SQUEEZE PLAY. Traders are feeling the pressure as SFM'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 26.03 and a SELL short entry at 24.33. SFM's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.7 trailing stop. Tighten it to 0.85 after you get a 2.18 gain. SFM closed Tuesday at 25.66. Earnings Report Date: Aug 03, 2022. Beta: 0.34. Market-Cap: 2.813B. Optionable.
HEALTHCARE SECTOR
IRadimed Corporation (IRMD: Healthcare/Medical Devices) - SQUEEZE PLAY. Tuesday's trading action forced IRMD'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 IRMD 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 32.39 if IRMD moves higher, and place your order to SELL short at 29.69 if price declines to that level. As usual follow your entry with a trailing stop, 2.7 should be sufficient. Reduce your stop to 1.35 on a 4.1 gain. IRMD closed Tuesday at 31.42. Earnings Report Date: Jul 28, 2022. Beta: 0.82. Market-Cap: 394.66M. Not Optionable.
INDUSTRIALS SECTOR
IES Holdings, Inc. (IESC: Industrials/Engineering & Construction) - SQUEEZE PLAY. A look at IESC'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 28.84 and a SELL short trigger at 26.28. Once IESC shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 2.56 and tighten to 1.28 on a 2.2 gain. IESC closed Tuesday at 28.27. Earnings Report Date: Aug 03, 2022. Beta: 1.24. Market-Cap: 587.674M. Not Optionable.
TECHNOLOGY SECTOR
Forge Global Holdings, Inc. (FRGE: Technology/Software-Application) - BULLISH BOUNCE. Up-trending stocks like FRGE have a tendency to bounce their way skyward rather than travel higher in a straight line. After touching down to a moving average support level on Tuesday, FRGE is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 26.72 if positive price action occurs. As always, follow your entry with a trailing stop. A 5.37 trailer should work well with FRGE. Tighten it to 2.69 on a 6.86 gainer. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 4.174B. 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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