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     05/10     05/10      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

FYBR      26.00      0.20      26.5     24.73        1.77/0.89      2.16
ONEW      24.32     -0.06     24.69     23.05        1.64/0.82       2.2
IRMD      43.59      0.89     44.16                  2.87/1.44      2.36
CTRE      24.69      0.14     25.17                  1.33/0.67      0.76
DMRC      22.96     -0.06     23.44      21.9        1.54/0.77      1.74

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

Stocks ended the week on a positive note, marking the third consecutive week of gains. However, global equities and commodities showed mixed performance, with oil prices declining and gold prices rising. Leading the charge were sectors like technology, financial services, consumer staples, and health care, indicating an overall optimistic sentiment across both growth and defensive sectors.

Friday saw minimal data releases, rounding off a relatively quiet week, as markets await key employment and inflation reports. Despite the lack of major news, equity markets continued their upward trajectory, drawing support from positive corporate earnings and expectations of potential easing in Fed policy down the line.

Bond markets remained cautious, with the 10-year yield inching slightly higher, hovering around the 4.5% level. Nonetheless, rates have retreated notably since the beginning of May, returning to levels seen in early April. This retreat follows indications from the Fed that it is not considering immediate rate hikes in response to persistent inflationary pressures observed in recent months.

The upcoming consumer price index (CPI) report for April will likely shape the trajectory of both stock and bond markets. While concerns over persistent inflation initially led to apprehension about the Fed's ability to cut rates this year, recent sentiments have turned more positive following the Fed's reassurance that it expects inflation to moderate over time. The CPI report will serve as a litmus test for the market's current optimism.

Looking ahead, we anticipate that the Fed's next move will likely be a rate cut, albeit occurring later than initially expected. While we may experience some volatility in inflation data, we believe both inflation and long-term interest rates will gradually trend lower as we progress through the latter half of the year.

                      Thursday               On The Week      
                  --------------------   --------------------
Dow                 39,387.76   331.37      +1162.1     3.04%
Nasdaq              16,346.26    43.51       +505.3     3.19%
S&P 500              5,214.08    26.41      +149.88     2.96%

NYSE Volume                      3.73B                       
NYSE Advancers                   1,986                       
NYSE Decliners                     805                       

Nasdaq Volume                    4.52B                       
Nasdaq Advancers                 2,626                       
Nasdaq Decliners                 1,578                       

                                 New Highs/Lows

                   05/02  05/03  05/06  05/07  05/08  05/09
                 --------------------------------------------
NYSE New Highs        80    123    169     75    139    192
NYSE New Lows         26     18     19    212     32     18
Nasdaq New Highs      81    131    153    159     98    158
Nasdaq New Lows      101     79     54     70     84     93
   

TRADER'S TIP: "Closing Positions Before Earnings And Getting Back In"

Because price action immediately after earnings announcements often ends up surprising traders, we suggest closing positions before the company releases their earnings report. However, if a stock is moving in a solid trend - long or short - and earnings support that trend, you may want to jump back into the trade after the company reports earnings. This can be profitable at times, but don't chase the stock. If it has jumped more than 5% beyond your exit point, let it go.

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, MAY 13					
9:00 am	Fed Vice Chair Philip Jefferson and Cleveland Fed President Loretta Mester				

TUESDAY, MAY 14					
8:30 am	Producer price index
8:30 am	PPI year over year			
8:30 am	Core PPI	
8:30 am	Core PPI year over year
9:10 am	Fed Gov Lisa Cook speaks				
10:00 am	Fed Chair Jerome Powell speaks
				
WEDNESDAY, MAY 15					
8:30 am	Consumer price index
8:30 am	CPI year over year			
8:30 am	Core CPI	
8:30 am	Core CPI year over year	
8:30 am	U.S. retail sales	
8:30 am	Retail sales minus autos	
8:30 am	Empire State manufacturing survey	
10:00 am	Home builder confidence index	
10:00 am	Business inventories	March		
12:00 pm	Minneapolis Fed President Neel Kashkari speaks				
3:20 pm	Fed Gov. Michelle Bowman speaks
				
THURSDAY, MAY 16					
8:30 am	Initial jobless claims			
8:30 am	Philadelphia Fed manufacturing survey
8:30 am	Housing starts	
8:30 am	Building permits	
8:30 am	Import price index	
8:30 am	Import price index minus fuel	
9:15 am	Industrial production	
9:15 am	Capacity utilization	
1:00 pm	New York Fed President Williams speaks				
10:00 am	Fed Vice Chair for Supervision Michael Barr testifies				
12:00 pm	Cleveland Fed President Loretta Mester speaks				
3:50 pm	Atlanta Fed President Raphael Bostic speaks
				
FRIDAY, MAY 17					
10:00 am	U.S. leading economic indicators
10:15 am	Fed Governor Christopher Waller speaks

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

TRADER'S TIP: "A Bane or Boon?"

Volatility can be a double-edged sword when trading, but a few reminders can help keep things in perspective. First of all, recall that volatility is what creates trading opportunities, so as long as we focus on the short term, share prices that move dramatically should be welcomed. Secondly, risk management is a must when volatile conditions prevail. Make absolutely certain that exit strategies are pre-planned in order to avoid unwanted losses. And finally, use the Gap Open Strategy to help determine buy and sell points. You'll be glad you did! For more on the Gap Open Strategy go to: http://www.rightline.net/education/gapopen.html

Stocks Covered in This Issue

COMMUNICATION SERVICES SECTOR

Frontier Communications Parent, Inc. (FYBR: Communication Services/Telecom Services) - SQUEEZE PLAY. Friday's narrow price range has created a potentially profitable setup in FYBR, 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 26.5 and a SELL short entry at 24.73. Let FYBR's price action determine your long or short entry. Once the order is filled, place a 1.77 trailing stop, and tighten it to 0.89 upon getting a 2.16 gain. FYBR closed Friday at 26.00. Earnings Report Date: Aug 2, 2024. Beta: 1.05. Market-Cap: 6.462B. Optionable.

CONSUMER CYCLICAL SECTOR

OneWater Marine Inc. (ONEW: Consumer Cyclical/Specialty Retail) - SQUEEZE PLAY. Traders are feeling the pressure as ONEW's intra-day price range on Friday 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 24.69 and a SELL short entry at 23.05. ONEW's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.64 trailing stop. Tighten it to 0.82 after you get a 2.2 gain. ONEW closed Friday at 24.32. Earnings Report Date: Aug 1, 2024. Beta: 2.55. Market-Cap: 389.687M. Optionable.

HEALTHCARE SECTOR

IRADIMED CORPORATION (IRMD: Healthcare/Medical Devices) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. IRMD's reaction to support on Friday created a Bullish Bounce setup with a BUY entry trigger at 44.16. Use a 2.87 trailing stop, which should work well with IRMD's typical daily range. Tighten it to 1.44 on a 2.36 profit. IRMD closed at 43.59 on Friday. Earnings Report Date: Aug 1, 2024. Beta: 0.87. Market-Cap: 552.032M. Optionable.

REAL ESTATE SECTOR

CareTrust REIT, Inc. (CTRE: Real Estate/REIT - Healthcare Facilities) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 24.69, CTRE is on our radar for a BUY entry at 25.17. If you purchase shares of CTRE, be sure to also place a trailing stop of 1.33. Snug it up to 0.67 on a 0.76 gain. Earnings Report Date: Aug 1, 2024. Beta: 1.05. Market-Cap: 3.508B. Optionable.

TECHNOLOGY SECTOR

Digimarc Corporation (DMRC: Technology/Information Technology Services) - SQUEEZE PLAY. DMRC 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 23.44 and a SELL short entry at 21.9. Once your trade is filled, enter a 1.54 trailing stop. Tighten it to 0.77 after a 1.74 gain. DMRC closed on Friday at 22.96. Earnings Report Date: Jul 31, 2024. Beta: 1.17. Market-Cap: 490.731M. 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.

Trader's Corner

"Hammer Time"

Technicians throughout the world have adopted the Japanese practice of candlestick charting. In fact, many have abandoned Western bars in favor of this visual tool that generates detailed information from short-term price movement. Of all candlestick patterns, single bar hammers and dojis provide the most versatile immediate feedback. Western technical analysis rarely offers such dependable single bar signals.

These formations print when a significant battle between bulls and bears ends in a draw. Two characteristics generate their predictive power:

1. High to low range greater than average.

2. Closing tick equal to or near opening tick.

Dojis represent perfect opening-closing balance as price finishes exactly where it started. Hammers need only close so that the central body of the candlestick is less than one-third the length of the bar's total range. But the body must sit near one end of the bar's action. Dojis and hammers predict immediate reversals within the time frames they are created. Their significance directly relates to their position within the overall chart pattern. When appearing on high volume near significant highs or lows, they may represent price extremes signifying an important change in trend. If printed within an ongoing congestion pattern, they often reflect market makers or specialists "cleaning out" stops in one direction so they can move the market in the opposite direction.

Retracement science assists traders in predicting events subsequent to one of these important candles. Shifting down one time frame from the bar reveals the length of the short-term trend being reversed by the long finger. Very often, dojis and hammers represent first rise/first failure setups within the smaller time frame. This further predicts where the reversal momentum will fade for a test of the candle.

Following a doji or hammer reversal, a test of the candle high or low often takes place within 3 to 5 bars. When the test fails, expect price to thrust sharply forward, especially when overbought/oversold indicators show no divergence. When the test succeeds, shift down one time frame again and trade the setup according to double bottom/double top strategy. Specifically look for price to surge on the breakout past the high/low of the initial reversal generated by the candle.



Hundreds of stocks printed long-legged dojis and hammers during the dramatic October 1998 reversal day. DELL never returned to test its low following a death-defying leap into the abyss. Pay close attention to gap support or resistance created by the bar following the candle event.

>

Price returns to test ALTR's new high doji and reverses. Reviewing this chart on a 5-min intraday interval reveals a classic double top scenario. Aggressive traders often enter short sales at doji tops, recognizing their hidden power.

*********************************************************

This guest article was written by Alan Farley, trader and author of "The Master Swing Trader."

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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