Notes From The Editor

Malcolm Gladwell published a best-selling book called "The Tipping Point," which argues that small changes can cause an idea or concept to spread like a virus and become a social epidemic. This theory can also be applied to the world of trading, as the same human tendencies that lead to tipping points in other areas of life also influence the stock market.

Gladwell's ideas are rooted in the way our brains are structured, which makes it difficult for us to maintain meaningful relationships with more than 150 people. In addition, the context in which we make decisions can also have a subconscious effect on our choices. These same factors influence the behavior of traders, as fear and greed can drive buying and selling decisions that directly impact stock prices.

Just as in other areas of life, tipping points in the stock market can occur when there is a violation of an important support or resistance level. Even if a stock's underlying fundamentals remain unchanged, a sudden shift in the technical picture can trigger a cascade effect that leads to a major price movement. Similarly, market trends can shift when enough traders begin to believe that stocks are due for a rebound after a prolonged downturn.

Gladwell's theories remind us that seemingly random events in the stock market are often driven by unseen forces, guided by human nature. While he may not have written specifically about trading, his ideas are fascinating and relevant to understanding the complex dynamics of the stock market.

Here's to profits,

Kent Barton
Senior Analyst

Quick List

    
Stock     05/16     05/16      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

BZH       21.13      0.26      21.5                  1.84/0.92      1.66
RILY      33.70      0.36     34.24                    2.8/1.4      3.42
RVNC      33.46     -0.40     34.13                  3.17/1.59      2.62
OM        20.17      0.01     20.49                  1.55/0.78      1.66
CEVA      21.32     -0.28     21.87     20.53        1.34/0.67      1.32

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

The major US stock averages closed lower Tuesday on consumer and debt-ceiling news following a Monday rally driven by mild optimism around the banking debacle. Underwhelming consumer-spending data as well as the looming debt-ceiling showdown gave bears the advantage during a session where small-caps lagged, reflecting the somewhat sour economic outlook. Cyclical stocks like energy and industrials also struggled, while treasury yields advanced slightly higher, with 10-year yields moving back above 3.5%. Equities continue to hold on to solid gains for 2023, with the S&P 500 now up more than 7%. There's a case for longer-term optimism, yet the combination of uncertainty over the debt-ceiling and a decelerating economy, plus potential downward revisions to corporate earnings estimates are likely catalysts for volatility in the near term.

                        May 15, 2023           May 16, 2023   
                  --------------------   --------------------
Dow                 33,348.60    47.98     33,012.14  -336.46
Nasdaq              12,365.21    80.47     12,343.05   -22.16
S&P 500              4,136.28    12.20      4,109.90   -26.38

NYSE Volume                      3.57B                  3.66B
NYSE Advancers                   1,982                    610
NYSE Decliners                     973                  2,387

Nasdaq Volume                    3.98B                  4.08B
Nasdaq Advancers                 2,897                  1,356
Nasdaq Decliners                 1,552                  3,102

                                 New Highs/Lows

                   05/09  05/10  05/11  05/12  05/15  05/16
                 --------------------------------------------
NYSE New Highs        49     60     35     50     43     36
NYSE New Lows         76     69     86    118     58    107
Nasdaq New Highs      87    107     81     71     77     69
Nasdaq New Lows      189    171    219    250    160    199
   

TRADER'S TIP: "The Four Deadly Sins"

Greed, Fear, Pride, and False Hope - When it comes to trading the stock market, these four are the most common and destructive emotions. Greed tells traders to buy when they should be selling, fear tries to convince traders to sell when they should be buying, while Pride and False Hope will keep traders in bad trades against their better judgment.

Successful traders understand these "Four Deadly Sins" and disarm them by making conscious choices.

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 - 4109.90 May 16, 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 - 12343.05 May 16, 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 - 33012.14 May 16, 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):    

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

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: "What If I Had A Crystal Ball?"

You don't need a crystal ball if you prepare for each trade with the "what if" approach. Always remember to ask these questions before entering any position - "What will I do if price moves in my favor?" And "What will I do if price moves against me?" Most traders and investors never consider these questions at all, so simply writing down specific answers will put you way ahead of the game.

Stocks Covered in This Issue

CONSUMER CYCLICAL SECTOR

Beazer Homes USA, Inc. (BZH: Consumer Cyclical/Residential Construction) - 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. BZH's reaction to support on Tuesday created a Bullish Bounce setup with a BUY entry trigger at 21.5. Use a 1.84 trailing stop, which should work well with BZH's typical daily range. Tighten it to 0.92 on a 1.66 profit. BZH closed at 21.13 on Tuesday. Earnings Report Date: Jul 26, 2023. Beta: 2.17. Market-Cap: 677.922M. Optionable.

FINANCIAL SERVICES SECTOR

B. Riley Financial, Inc. (RILY: Financial Services/Financial Conglomerates) - BULLISH BOUNCE. Entering a position in the early stages of a bounce is great way to get on board an up-trending stock. The "Bullish Bounce" setup identifies probable candidates by evaluating the trading action that takes place near support levels. RILY's behavior on Tuesday could very well be a sign that a new bounce is underway. Place a BUY trigger at 34.24. In the event your trigger is met, also place a 2.8 trailing stop which can be trimmed down to 1.4 when you have a 3.42 profit. RILY closed Tuesday at 33.70. Earnings Report Date: Jul 26, 2023. Beta: 1.78. Market-Cap: 948.17M. Optionable.

HEALTHCARE SECTOR

Revance Therapeutics, Inc. (RVNC: Healthcare/Biotechnology) - NEW HIGH DIP. Tuesday's price action is telling us that RVNC is preparing to move back up to the 52-week high that was set just a few days ago. Our BUY trigger at 34.13 is ready to take advantage of a likely bounce from the current support level. Once your order is filled, enter a trailing stop of 3.17. Resize the stop to 1.59 after you reach a 2.62 profit. Earnings Report Date: Aug 07, 2023. Beta: N/A. Market-Cap: 2.894B. Optionable.

Outset Medical, Inc. (OM: Healthcare/Medical Devices) - BULLISH BOUNCE. Some people hear of a stock that's performing nicely and then buy it without any regard for timing the entry. This approach usually leaves money on the table, money that could just as well be added to profits. The Bullish Bounce setup provides a well timed entry and reduces exposure to risk by placing both the entry trigger and exit stop near the bottom of the bounce. We have an opportunity to use this approach with OM which met our setup criteria on Tuesday. The BUY trigger for this trade is at 20.49, and the trailing stop is sized at 1.55. Resize the stop to 0.78 upon collecting a 1.66 point gain. OM closed Tuesday at 20.17. Earnings Report Date: Jul 31, 2023. Beta: 1.48. Market-Cap: 1.037B. Optionable.

TECHNOLOGY SECTOR

CEVA, Inc. (CEVA: Technology/Semiconductors) - 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. CEVA found itself in this condition on Tuesday 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 21.87 and a SELL short trigger at 20.53. When CEVA moves outside of Tuesday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.34 trailing stop. After you've got a 1.32 profit, tighten the stop to 0.67. CEVA closed at 21.32 on Tuesday. Earnings Report Date: Aug 07, 2023. Beta: N/A. Market-Cap: 507.081M. 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.

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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