Notes From The Editor

All successful trading strategies share the same foundation - Risk Control. You probably already know this. Now ask yourself a question. Do you always follow your Risk Control method? Do you always use a risk calculator to determine your position size before you enter a trade? And how about trade execution? Have you ever ordered the wrong number of shares? Or bought the wrong stock? Have you ever gone short when you meant to go long?

Believe me, you're not alone. After years of talking with hundreds of traders I've come to a conclusion - intelligence and self-control are not the same thing. In the real world, a high percentage of "smart" people are extremely undisciplined. This lack of discipline often leads to silly mistakes. Many find it difficult to follow a simple routine, and they will do anything to avoid tasks they consider to be monotonous or tedious.

Trading stocks successfully requires a disciplined touch. Just like most sports, this game is repetitive. Successful traders do the same things over and over again until they can execute with precision. We're not talking about something extremely hard like single-handed pushups, but relatively easy tasks like placing buy or sell orders.

For example, trade execution is similar to filling out a personal information form online. Have you ever had to retype simple data - like a credit card or social security card number more than twice to get it right? Knowing how to get it right the first time is the kind of discipline that makes for a good trader.

This type of self-discipline isn't hard, and it certainly isn't complicated. It's one of those self-motivated things that most people either learn on their own, or they avoid it like a plague. Granted, it does help if someone reminds us to "pay attention" from time to time. I suppose that's what I'm doing right now - though I must admit that it's as good for me to hear it as it is for you.

Enjoy the weekend,

Thomas Sutton, Editor

Quick List

    
Stock     05/12     05/12      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

PARAP     23.01     -0.49      23.8     22.16        1.64/0.82       1.7
ZION      22.43     -0.25      23.3     21.29        2.01/1.01       3.2
CRNX      22.19      0.07     22.82     21.25        1.57/0.79      1.86
KDNY      23.39      0.55     23.71      22.1        1.61/0.81      2.36
INTT      20.56      0.73     21.36     19.51        1.85/0.93      2.54

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

US stocks were lower on Friday as traders continue to price in Federal Reserve Bank rate cuts by the September FOMC - Federal Open Market Committee - meeting. As earnings season winds down, analysts' expectations have been exceeded, with almost 92% of public companies having announced results already. Near 78% of these have topped earnings forecasts, well above the long-term rate of approximately 73%. Earnings growth for the quarter is down to about -2.5% compared to the same period last year, well above forecasts of a -7.0% growth rate at the start of 2023. Regardless, the quarter marks the second consecutive quarter of negative earnings growth for the S&P 500. Meanwhile, oil prices are near recent lows, with crude oil around $71 per barrel, perhaps indicating that markets expect a global slowdown in demand ahead.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 33,300.62    -8.89      -373.76    -1.11%
Nasdaq              12,284.74   -43.76       +49.33      0.4%
S&P 500              4,124.08    -6.54       -12.17    -0.29%

NYSE Volume                      3.54B                       
NYSE Advancers                   1,312                       
NYSE Decliners                   1,638                       

Nasdaq Volume                    4.18B                       
Nasdaq Advancers                 1,761                       
Nasdaq Decliners                 2,608                       

                                 New Highs/Lows

                   05/05  05/08  05/09  05/10  05/11  05/12
                 --------------------------------------------
NYSE New Highs        48     59     49     60     35     50
NYSE New Lows         49     44     76     69     86    118
Nasdaq New Highs     101     82     87    107     81     71
Nasdaq New Lows      135    113    189    171    219    250
   

TRADER'S TIP: "Minute-by-Minute"

Mature traders realize that there is no connection between the amount of time they watch their stock symbols during a session and the profits they make. Constantly over-monitoring a trade wastes time and is very distracting. Place your positions, set stops, and manage your trades on a regular schedule. Good trading habits allow you to be successful without being glued to your computer screen.

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 - 4124.08 May 12, 2023

52-Week High: 4325.28
52-Week Low: 3491.58
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4236.47
Resistance 2: 4181.12
Resistance 1: 4152.60
Pivot: 4125.76
Support 1: 4097.24
Support 2: 4070.40
Support 3: 4015.04

NASDAQ Composite - 12284.74 May 12, 2023

52-Week High: 13181.09
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 12655.66
Resistance 2: 12465.07
Resistance 1: 12374.90
Pivot: 12274.48
Support 1: 12184.31
Support 2: 12083.89
Support 3: 11893.30
        
Dow Industrials - 33300.62 May 12, 2023

52-Week High: 34712.28
52-Week Low: 28660.94
Daily Trend: DOWN
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 34717.39
Resistance 2: 34055.92
Resistance 1: 33678.27
Pivot: 33394.44
Support 1: 33016.79
Support 2: 32732.96
Support 3: 32071.48
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, May 15, 2023:
15-May  MONDAY, MAY 15   
15-May  8:30 am   Empire State manufacturing survey
15-May  TUESDAY, MAY 16   

Tuesday, May 16, 2023:
16-May  8:30 am   U.S. retail sales
16-May  8:30 am   Retail sales minus autos
16-May  9:15 am   Industrial production
16-May  9:15 am   Capacity utilization
16-May  10:00 am   Home builder confidence index
16-May  WEDNESDAY, MAY 17   

Wednesday, May 17, 2023:
17-May  8:30 am   Housing starts
17-May  THURSDAY, MAY 18   

Thursday, May 18, 2023:
18-May  8:30 am   Philadelphia Fed manufacturing survey
18-May  8:30 am   Initial jobless claims
18-May  8:30 am   Continuing jobless claims
18-May  10:00 am   Existing home sales
18-May  10:00 am   U.S. leading economic indicators
18-May  FRIDAY, MAY 19   

Friday, May 19, 2023:
19-May          None scheduled


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

TRADER'S TIP: "Trading With Uncertainty"

Successful traders learn how to be comfortable with uncertainty. It's impossible to be sure that your trade will be profitable before you enter a position. Waiting for all the right "facts" to arrive usually results in missing out on the opportunity. Accept that you can't know in advance whether or not a trade will work. Risk is a constant companion when trading. You can't eliminate it, so learn how to recognize and manage it.

New traders want all the facts before they do a trade and by the time all the facts are out the trading opportunity is gone, then they enter the trade and wonder why it didn't work. If you're about to drive to town and you need every traffic light to turn green before you leave, you'll never get out of the driveway.

Stocks Covered in This Issue

COMMUNICATION SERVICES SECTOR

Paramount Global (PARAP: Communication Services/Entertainment) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in PARAP'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 23.8 and a SELL order at 22.16. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.64 trailing stop. Tighten the stop to 0.82 once you have a 1.7 gain. PARAP closed Friday at 23.01. Earnings Report Date: N/A. Beta: 1.66. Market-Cap: N/A. Not Optionable.

FINANCIAL SERVICES SECTOR

Zions Bancorporation, National Association (ZION: Financial Services/Banks-Regional) - SQUEEZE PLAY. Trader indecision has put ZION 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 23.3 and a SELL short entry at 21.29. Now it's up to ZION to show us which entry will be filled. Once the trade is underway place a 2.01 trailing stop, which can be tightened to 1.01 after you achieve a 3.2 profit. ZION closed on Friday at 22.43. Earnings Report Date: Jul 19, 2023. Beta: 1.10. Market-Cap: 3.479B. Optionable.

HEALTHCARE SECTOR

Crinetics Pharmaceuticals, Inc. (CRNX: Healthcare/Biotechnology) - 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 CRNX's case we will enter a BUY should it reach the 22.82 level, or a SELL short trade if it drops to 21.25. As usual a trailing stop is essential, 1.57 which should be tightened to 0.79 on a 1.86 gain. CRNX closed Friday at 22.19. Earnings Report Date: Aug 10, 2023. Beta: 0.94. Market-Cap: 1.265B. Optionable.

Chinook Therapeutics, Inc. (KDNY: 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. KDNY 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 23.71 and a SELL short trigger at 22.1. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.61 which can be tightened to 0.81 on a 2.36 gain. KDNY closed Friday at 23.39. Earnings Report Date: Aug 07, 2023. Beta: N/A. Market-Cap: 1.584B. Optionable.

TECHNOLOGY SECTOR

inTEST Corporation (INTT: Technology/Semiconductor Equipment & Materials) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into INTT. A move to the upside will trigger our BUY entry at 21.36, while a drop to 19.51 will trigger our SELL short entry. Follow your position with a 1.85 trailing stop. Tighten the stop to 0.93 once you have a 2.54 gain. INTT closed Friday at 20.56. Earnings Report Date: Aug 02, 2023. Beta: N/A. Market-Cap: 240.223M. 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

"Loose Lips Sink Ships" By Chuck LeBeau

In browsing around the web I often encounter discussions of the merits of a particular trade and opinions about the direction of a market. I know that the traders who voice these opinions have good intentions and much of the discussions could be helpful to the person receiving the information. However the provider of the opinion must be very careful that he doesn't start believing too strongly in his position because he has made the mistake of going public with it.

This is an important psychological issue that I seldom see discussed. Taking losses is always difficult and the reluctance to promptly acknowledge that we are on the wrong side of the market is probably the single most costly error a trader can make. Even under the best of conditions we hate to take losses. Publicly advocating a particular trade or the direction of a market just makes being wrong all the more painful and harder to accept. If we make it a policy to go around advocating the merits of our trades it will only make it harder to recognize when we are wrong.

Many years ago when I was a young futures broker at E. F. Hutton and Company, the firm decided that it would be a good idea to send our commodity research analysts on the road whenever they came up with a well researched idea that appeared to have great potential. Let's assume for a minute that our sugar analyst has decided that sugar is going to make a big move to the upside over the next six months. After publishing his research he would be sent from city to city where he would speak at meetings for brokers and clients suggesting why everyone should be buying sugar.

At first the analyst road shows seemed like a great idea. The clients received the benefit of hearing about a well-researched idea straight from the analyst himself and also had the opportunity to ask questions and engage the analyst in a discussion of the details of the sugar market. The clients enjoyed the meetings and a lot of new commodity business was generated as a result.

However, it turns out that the objectivity of the analysts was completely lost after the story had been told and the bullish scenario presented a dozen times or more. The analyst felt obligated to the firm and to the clients. The firm had spent a lot of money to send the analyst on the road and to host these meeting all over the country. As a result of the meetings the clients now knew the analysts by name and his personal and professional reputation was clearly on the line. This analyst was now committed and he was going to be bullish on sugar regardless of what happened in the market or what new information came to light.

From the point of the tours onward the analyst would only look for information to support his opinion. To ever admit that he was wrong would be such public humiliation that the analyst would tend to ignore any contrary information and would stick to his original position through thick and thin. We eventually learned that the talented Hutton research analysts did a much better job when they were free to change their minds as new facts were revealed without the pressure and responsibility generated by their repeated espousing of a particular position on a specific trade.

Discretionary traders should learn from this example and avoid discussing their open positions or their opinion about the direction of a market. It will only distort their objectivity and make it harder to take a loss promptly when that is the best course of action. Losses that only we know about are tough enough but losses that everyone knows about become much harder to stomach and we tend to postpone our exits in hope that the market will eventually turn around and prove us right.

Remember that the best discretionary traders are usually very neutral about their positions and tend to take their guidance from the price action and the flow of new information. Its OK to listen to others talk about their positions, but don't make it a habit of discussing your open trades. It will only cost you money - especially if you repeat your opinions often enough that you might actually start believing what you are saying.

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

This article was taken from an earlier work written by author and trading veteran Chuck LeBeau. It was originally titled "Discretionary Traders - Don't Talk About Your Open Positions." Chuck is the co- author of "Computer Analysis of the Futures Market" (McGraw-Hill 1992).

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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