May 17, 2022 - The RightLine Report
Notes From The Editor
Ask someone the question "What is a stock trader's main goal?" and you'll probably hear something like "To make a lot of money!" It surprises many people to find that the major goal of a truly successful trader isn't just to make money, but to make the best trades possible.
Most folks don't understand stock trading, and many believe that traders spend all day just thinking about money. It helps for them to look at other professions for comparison. Teachers, contractors, attorneys, doctors, and mechanics are all paid for what they do, but most don't count their money while they're working. Those that constantly think of money instead of the job at hand pay a severe price for not focusing on what's truly important. How would you feel if your doctor always wanted to talk about was how much money he or she was making?
Repeatedly calculating the amount of money in a trade sends a warning signal that a trader's emotions are running too high. In a highly emotional state of mind it's easy to let feelings substitute for intelligent trade management. Uneasiness over how much money is on the table quickly moves a trader from relaxation to apprehension. Fortunately it's not that hard to switch back to a much more productive trading mindset.
Here's how to do it. Immediately after entering a trade and putting initial stops in place, write down your feelings in your trading journal. If you are uneasy or feel overly concerned about the trade, take a short break away from your desk. Depending on which you prefer, either go for brief walk, or lie down with your eyes closed for at least ten to fifteen minutes.
As you are walking or resting, think about the fact that you have done everything needed to protect against any serious financial damage that might result from the trade. Calmly consider that you use the risk calculator to determine the number of shares in your position, and you set stops to prevent any possible harm.
As you begin to relax, feel the satisfaction that comes from knowing you are trading intelligently. Realize that it really doesn't matter whether price moves in the desired direction for this specific trade or not. Remind yourself that trading successfully doesn't depend on any one trade.
Contemplate the concept that trading with risk control prevents even a series of losses from spoiling your trading success. Take comfort in the reality that trading is a repetitive process that allows you to learn and improve your skills as you progress.
When you resume trading, you may still feel the temptation to concentrate on the cash in play. Just remember that money doesn't have to be the center of your focus. Money is simply the byproduct of the thoughts and subsequent actions you take while calmly trading stocks.
It helps tremendously to put your attention on the different aspects of your personal trading routine. By highlighting the importance of stock selection, trade planning, risk control, and execution, the money will soon become just a pleasant afterthought. And yes, it's certainly okay to enjoy counting the profits once the trade is closed!
Trade well,
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 05/17 05/17 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
GOOS 20.82 0.61 19.5 1.98/0.99 2.2
BTU 22.87 0.74 23.66 21.71 1.95/0.98 5.06
SAVA 22.76 1.94 20.61 2.66/1.33 4.46
CSTL 20.13 0.64 20.78 19.05 1.73/0.87 3.72
FATE 23.73 1.09 24.37 22.19 2.18/1.09 5.24
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 stock indices were significantly higher on Tuesday as the market faces ongoing challenges, notably the Fed Bank's aggressive tightening campaign to lower inflation. In economic headlines, industrial production, capacity utilization, business inventories and retail sales all moved higher, yet homebuilder sentiment dropped to its lowest level in almost two years due to rising prices and mortgage rates. In equities news, Walmart (WMT $131) lost ground after falling short on estimates, shares of Home Depot (HD $301) were higher after home the improvement retailer announced excellent earnings and raised its full-year guidance, while Twitter (TWTR $38) remained in focus after Elon Musk said the acquizition deal is still on hold. Gold finished near even, the USD/dollar, oil prices and treasuries were lower, lifting yeilds.
May 16, 2022 May 17, 2022
-------------------- --------------------
Dow 32,223.42 26.76 32,654.59 431.17
Nasdaq 11,662.79 -142.21 11,984.52 321.73
S&P 500 4,008.01 -15.88 4,088.85 80.84
NYSE Volume 4.45B 4.88B
NYSE Advancers 1,688 2,485
NYSE Decliners 1,621 845
Nasdaq Volume 4.91B 5.09B
Nasdaq Advancers 1,999 3,596
Nasdaq Decliners 2,713 1,127
New Highs/Lows
05/10 05/11 05/12 05/13 05/16 05/17
--------------------------------------------
NYSE New Highs 5 13 4 12 32 50
NYSE New Lows 911 784 1,044 202 188 171
Nasdaq New Highs 22 16 11 13 21 26
Nasdaq New Lows 1,381 1,574 1,706 316 335 202
Stocks Covered Today Stock Splits
TRADER'S TIP: "Trading Smarter"
"A key requirement for trading smarter is to become totally objective. When committing hard-earned money to any investment, it's real easy to also commit your emotions. Emotional trading is probably the most common pitfall that traders face today. Generally, by letting emotions rule your trade decisions, the market has a funny way of finding and exposing this weakness. My experience has shown me that stock prices are determined by investor psychology, and both psychology and stock prices move in trends. These trends can be visually captured on price charts, and objectively analyzed using various technical tools and indicators. Once you know the trend of a trade candidate, you can then begin to look at optimal entry points, as well as identify risk levels and profit targets. This can all be done prior to entering a trade to help you mentally rehearse a trade's potential outcome ahead of time. If you don't mentally rehearse your trades before entering them, it is far easier to allow your emotions to take control when events go unexpectedly against you."
~ Martin Pring, Technical Analyst and Trader
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 - 4088.85 May 17, 2022
52-Week High: 4818.62
52-Week Low: 3858.87
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4432.80
Resistance 2: 4210.41
Resistance 1: 4117.14
Pivot: 3988.01
Support 1: 3894.74
Support 2: 3765.60
Support 3: 3543.20
NASDAQ Composite - 11984.52 May 17, 2022
52-Week High: 16212.23
52-Week Low: 11108.76
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 13398.49
Resistance 2: 12516.64
Resistance 1: 12160.82
Pivot: 11634.79
Support 1: 11278.97
Support 2: 10752.94
Support 3: 9871.09
Dow Industrials - 32654.59 May 17, 2022
52-Week High: 36952.65
52-Week Low: 31228.22
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 35106.91
Resistance 2: 33582.96
Resistance 1: 32889.81
Pivot: 32059.01
Support 1: 31365.86
Support 2: 30535.06
Support 3: 29011.11
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Wednesday, May 18, 2022: 18-May 8:30 am Building permits (SAAR) 18-May 8:30 am Housing starts (SAAR) 18-May 8:30 am Philadelphia Fed manufacturing index Thursday, May 19, 2022: 19-May 8:30 am Initial jobless claims 19-May 8:30 am Continuing jobless claims 19-May 10 am Existing home sales (SAAR) Friday, May 20, 2022: 20-May 8:30 am Advance services report Monday, May 23, 2022: 16-May 8:30 am Empire state manufacturing index Tuesday, May 24, 2022: 17-May 8:30 am Retail sales 17-May 8:30 am Retail sales excluding vehicles 17-May 9:15 am Industrial production index 17-May 9:15 am Capacity utilization 17-May 10 am NAHB home builders' index 17-May 10 am Business inventories (revision) 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: "Hey Vinnie, I think I got a personality!"
Traders come in all shapes, sizes, and dispositions. It's important for each of us to recognize the type of person we are, then trade within that makeup. Identify your personality, and genuinely come to terms with your current strengths and limitations instead of what you would like to be. As you mature as a trader and individual you will acquire new skills and a wide range of positive qualities. Just remember that change takes time, so be who you are now, have no pretensions about it, and trade in a style that suits YOUR personality.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Canada Goose Holdings Inc. (GOOS: Consumer Cyclical/Apparel Manufacturing) - BEARISH U-TURN. The weight of GOOS's declining weekly trend was lightened recently when shares began to move upward. However, like a swimmer against the tide GOOS encountered strong resistance on Tuesday. Price action indicates a likely return to the previous downtrend, so plan to short GOOS upon reaching our SELL trigger at 19.5. Set a 1.98 trailing stop which can be tightened to 0.99 after you have a 2.2 gain. GOOS ended the latest session at 20.82. Earnings Report Date: May 19, 2022. Beta: 1.37. Market-Cap: 2.218B. Optionable.
ENERGY SECTOR
Peabody Energy Corporation (BTU: Energy/Thermal Coal) - SQUEEZE PLAY. Trader indecision has put BTU 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 23.66 and a SELL short entry at 21.71. Now it's up to BTU to show us which entry will be filled. Once the trade is underway place a 1.95 trailing stop, which can be tightened to 0.98 after you achieve a 5.06 profit. BTU closed on Tuesday at 22.87. Earnings Report Date: Jul 27, 2022. Beta: 1.20. Market-Cap: 3.289B. Optionable.
HEALTHCARE SECTOR
Cassava Sciences, Inc. (SAVA: Healthcare/Biotechnology) - BEARISH U-TURN. SAVA's chronic decline over the past weeks was relieved by a recent upward bounce that has boosted hope for weary shareholders. Unfortunately for them, Tuesday's price action near moving average support indicates the bullish rebound may be over. If this turns out to be the case, short-sellers can enter a SELL position at 20.61. Control risk with a 2.66 stop that can be resized to 1.33 on a gain of 4.46. SAVA closed at 22.76 on Tuesday. Earnings Report Date: Aug 01, 2022. Beta: 0.57. Market-Cap: 912.237M. Optionable.
Castle Biosciences, Inc. (CSTL: Healthcare/Diagnostics & Research) - 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 CSTL's case we will enter a BUY should it reach the 20.78 level, or a SELL short trade if it drops to 19.05. As usual a trailing stop is essential, 1.73 which should be tightened to 0.87 on a 3.72 gain. CSTL closed Tuesday at 20.13. Earnings Report Date: Aug 08, 2022. Beta: 0.58. Market-Cap: 528.632M. Optionable.
Fate Therapeutics, Inc. (FATE: Healthcare/Biotechnology) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in FATE's narrowest trading range of the past seven sessions. With neither group able to take complete control on Tuesday, 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 24.37 and a SELL order at 22.19. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.18 trailing stop. Tighten the stop to 1.09 once you have a 5.24 gain. FATE closed Tuesday at 23.73. Earnings Report Date: Aug 02, 2022. Beta: 1.56. Market-Cap: 2.293B. 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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