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May 16, 2023 - The RightLine Report
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NOTES FROM THE EDITOR
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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.
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"QUICK LIST"
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Stock 05/16 05/16 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
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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" at https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/
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MARKET SUMMARY
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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
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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
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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
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TRADER'S TIP:
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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
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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: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ 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 https://www.prorightline.com/rlch/051623SPX.jpg--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" at this link: https://prorightline.com/index.php/economic-indicator-effects/
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TRADER'S TIP:
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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
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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 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: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/ ***********************************
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 ---------------- ------- -------- ------- ------ ------- 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. For a closer look at the different stages of a Stock Split go to: https://prorightline.com/index.php/trading-stock-splits-stages/ ======================================================================
Best of luck and have a Great Week!
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