May 19, 2022 - The RightLine Report
Notes From The Editor
Raise your hand if you've been here before. A trade is entered, the stock moves against you, and soon you're holding a losing position. Gradually the losses mount until you're facing an unwelcome decision: bail out for an unacceptably large loss, or hold on in the hopes that the stock will somehow bounce back.
While major losing positions can reverse course and turn into winners, odds of that happening are relatively low. But for many traders, there's always that temptation to keep holding on as the stock plumbs the depths of painful losses. If you do this enough times - or even once, if you take a large position - your account could face massive damage.
This is one of the reasons we constantly preach the value of risk management. While it's natural for hope to creep into your mental framework as a trade slips deeper into the red, that raw emotion can also cloud your better judgment. When it comes to managing potential losses, there's no room for inconsistency; you need to be machine-like in your efforts to limit risk.
Setting a reasonable stop-loss before you enter the trade will all but guarantee that you never face an unacceptable loss. (The only exception here is the rare case in which a stock gaps above or below your stop). What is "reasonable"? That depends partially on the stock's recent volatility and key support/resistance levels. But the most important factor is your own personal risk tolerance.
Ask yourself honestly: do you have the self-discipline to exit a position when it hits your maximum-pain level? If not, it's crucial that you place a "hard-stop" with your broker. This will take you out of the position, even if you aren't watching the market. By the same token, hard stops make it possible to swing trade when you're occupied during the trading day.
Position sizing is the other key element of limiting your risk. Combined with a steadfast adherence to honoring your stops, you can ensure that losing positions - an inevitable fact of life for any trader - will always be manageable, and never take an inordinate chunk out of your account.
For a step-by-step guide to controlling risk, click over to https://prorightline.com/rightline-risk-control-system/.
You can also find a powerful risk calculator at https://prorightline.com/risk-calculator/.
Here's to profits,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 05/19 05/19 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
ELY 20.08 -0.38 20.81 19.34 1.47/0.74 2.06
URBN 20.27 -0.84 21.14 19.65 1.49/0.75 1.92
GRBK 22.51 -0.06 23.29 21.61 1.68/0.84 2.02
CAE 22.91 -0.26 23.56 21.98 1.58/0.79 2.34
NTNX 21.12 0.18 21.89 20.15 1.74/0.87 2.74
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.
Stocks Covered Today Stock Splits
Market Summary
US stocks were lower on Thursday as the market wrestles with inflation pressures weighing on corporate profit margins. Kohl's Corporation (KSS $45) fell short of earnings predictions and lowered guidance, adding to disappointing quarterly results from Walmart (WMT $119) and Target (TGT $153) earlier this week. In other equity news, Cisco Systems Inc. (CSCO $42) missed revenue forecasts and released soft guidance, while Amazon (AMZN $2,146) is reportedly reducing its hiring plans. The latest economic calendar pointed to slowing economic activity, with existing home sales falling, leading indicators unexpectedly dropping, unemployment claims moving higher, and Philadelphia manufacturing growth slowing more than analysts expected. The USD/dollar declined, oil prices, gold and treasuries rose, putting downside pressure on yields.
May 18, 2022 May 19, 2022
-------------------- --------------------
Dow 31,490.07 -1,164.52 31,253.13 -236.94
Nasdaq 11,418.15 -566.37 11,388.50 -29.66
S&P 500 3,923.68 -165.17 3,900.79 -22.89
NYSE Volume 5.17B 5.24B
NYSE Advancers 547 1,709
NYSE Decliners 2,768 1,574
Nasdaq Volume 5.1B 5.19B
Nasdaq Advancers 994 2,612
Nasdaq Decliners 3,660 2,018
New Highs/Lows
05/12 05/13 05/16 05/17 05/18 05/19
--------------------------------------------
NYSE New Highs 4 12 32 50 24 9
NYSE New Lows 1,044 202 188 171 346 323
Nasdaq New Highs 11 13 21 26 17 8
Nasdaq New Lows 1,706 316 335 202 348 358
Stocks Covered Today Stock Splits
TRADER'S TIP: "Decisions, Decisions"
Trading successfully isn't rocket science, but it does take commitment. Just as you would review your trades and learn from them, take the time to review your attitudes, and adjust them to reflect a realistic winning attitude. Attitude is an acquired skill, just like every other aspect of trading and investing. When you decide you want to do it, you will. A wish changes nothing, but a decision changes everything!
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 - 3900.79 May 19, 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 - 11388.50 May 19, 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 - 31253.13 May 19, 2022
52-Week High: 36952.65
52-Week Low: 31016.41
Daily Trend: DOWN
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 Rookie, Bigger is Better .... Right?"
Not exactly. Always take small positions if you are new to the stock "track." Novice traders should focus on learning how to drive the car before trying to win the race.
Stocks Covered in This Issue
CONSUMER CYCLICAL SECTOR
Callaway Golf Company (ELY: Consumer Cyclical/Leisure) - 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. ELY traders reached this state of stand-off on Thursday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 20.81 and a SELL short trigger at 19.34. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.47 which can be tightened to 0.74 on a 2.06 gain. ELY closed Thursday at 20.08. Earnings Report Date: Aug 08, 2022. Beta: 1.84. Market-Cap: 3.709B. Optionable.
Urban Outfitters, Inc. (URBN: Consumer Cyclical/Apparel Retail) - SQUEEZE PLAY. URBN traders on both sides of the fence are now locked in a head-to-head shootout. Thursday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 21.14 and a SELL short trigger at 19.65. When one of the orders is filled, cancel the remaining order and enter a 1.49 trailing stop. When you've reached a 1.92 paper profit, tighten the stop to 0.75. URBN closed at 20.27 on Thursday. Earnings Report Date: May 24, 2022. Beta: 1.43. Market-Cap: 1.939B. Optionable.
Green Brick Partners, Inc. (GRBK: Consumer Cyclical/Residential Construction) - SQUEEZE PLAY. The ticker for Thursday's session shows GRBK is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 23.29 and a SELL short trigger at 21.61. When GRBK starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 1.68 trailing stop. Upon reaching a 2.02 profit, resize the stop to 0.84. Earnings Report Date: Aug 01, 2022. Beta: 1.42. Market-Cap: 1.09B. Optionable.
INDUSTRIALS SECTOR
CAE Inc. (CAE: Industrials/Aerospace & Defense) - SQUEEZE PLAY. CAE shareholders know what it feels like to be squeezed. Thursday's slim price range reveals uncertainty on both sides of the table, a situation which often resolves itself by either Bears or Bulls quickly gaining a clear advantage. The question is "who will win?" Near-term market action tell us whether we should sell short or we should buy shares instead. CAE closed Thursday at 22.91. The plan is to enter in the right direction by placing a BUY trigger at 23.56 and a SELL short trigger at 21.98. Once CAE establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.58. After you've collected a 2.34 profit, tighten the stop to 0.79. Earnings Report Date: Jun 02, 2022. Beta: 2.05. Market-Cap: 7.311B. Optionable.
TECHNOLOGY SECTOR
Nutanix, Inc. (NTNX: Technology/Software-Infrastructure) - 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. NTNX found itself in this condition on Thursday 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 21.89 and a SELL short trigger at 20.15. When NTNX moves outside of Thursday's range, one of the orders will be filled. Once you hold a position of shares, cancel the unfilled order and place a 1.74 trailing stop. After you've got a 2.74 profit, tighten the stop to 0.87. NTNX closed at 21.12 on Thursday. Earnings Report Date: May 25, 2022. Beta: 1.49. Market-Cap: 4.658B. 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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