Notes From The Editor

In the ever-changing market, it's important to adjust your trading strategy from time to time. These adjustments are usually subtle, like including more shorts than longs or exploring different sectors. But how can you determine if an idea is worth pursuing?

The key is to start with no-risk and low-risk experiments. Once you spot a promising pattern, give it a test run with a paper trade. To keep track of your observations, it's a good idea to maintain a trading diary. In it, you can jot down your thoughts about the setup, the market conditions, and the final results. This will help you validate whether the idea is worth investing your money in.

When you feel confident about your new idea, take a conservative approach and start with a smaller position than usual. If these "test" positions yield positive results, you can gradually increase your position size to your typical level.

Now, how often should you adapt and change with the market? Well, that depends on what's happening around you. Sometimes, certain market patterns can persist for weeks or even months, and you can build your trading strategy around them until they no longer work.

In more volatile market conditions, patterns can shift rapidly, and each day brings a new dynamic. This requires a more agile approach, where you stay alert and open to new opportunities on a daily basis.

It's easy to become complacent during upward-trending markets, where long setups tend to outperform shorts and pullbacks create buying opportunities. However, it's important to remember that nothing lasts forever. Sooner or later, a pullback can turn into a full-blown bearish retracement, and the dynamics shift once again. Those who are prepared to adapt will be well-positioned to seize gains when that happens.

Remember, flexibility and adaptability are key in the dynamic world of trading!

Here's to profits,

Kent Barton
Senior Analyst

Quick List

    
Stock     05/19     05/19      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

INBX      25.16      0.87     25.56                  1.76/0.88       3.6
HROW      21.32      0.36     21.94     20.27        1.67/0.84       2.6
HROW      21.32      0.36     21.94     20.27        1.67/0.84       2.6
RXST      25.56      1.03     26.03     23.97        2.06/1.03      1.26
SSTI      25.88      0.35     26.48     24.83        1.65/0.83      1.94

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 inidces were slightly lower on Friday yet still logged the biggest weekly gain since March.Despite earlier optimism that a debt-ceiling deal could be reached by Sunday, the talks came to a halt midday Friday after Republican negotiators blamed the White House for resisting spending cuts. Though it is very likely that the debt-ceiling impasse will be resolved, it may come down to the wire, as it has in recent years. In equities, corporate earnings have held up better than expected. Shares of Deere jumped higher, as the farm equipment manufacturer topped profit estimates and boosted its guidance for the full year. On the flip side, shares of Foot Locker tumbled hard, as the company cut its sales and profit forecast. More broadly, the first-quarter earnings season is almost complete, as 95% of the S&P 500 companies have reported. Every S&P 500 sector has beat sales and earnings growth estimates except for utilities. Along with the rise in stocks, the uptick in bond yields was another notable development this week. Hawkish commentary from Fed officials temporarily pushed the probability of one more quarter-point hike in June above 40%, from 15% a week ago. But the chance of another Fed hike fell again to 22% later in the day after Fed Chair Powell said rates may not have to rise as much as expected to curb inflation. Absent a big surprise in the next inflation and jobs data coming out before the June meeting, the Fed appears ready to step to the sidelines.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 33,426.63  -109.28      +126.01     0.38%
Nasdaq              12,657.90   -30.94      +373.16     3.04%
S&P 500              4,191.98    -6.07        +67.9     1.65%

NYSE Volume                      4.05B                       
NYSE Advancers                   1,169                       
NYSE Decliners                   1,776                       

Nasdaq Volume                    3.94B                       
Nasdaq Advancers                 1,966                       
Nasdaq Decliners                 2,372                       

                                 New Highs/Lows

                   05/12  05/15  05/16  05/17  05/18  05/19
                 --------------------------------------------
NYSE New Highs        50     43     36     56     82     75
NYSE New Lows        118     58    107     80     45     45
Nasdaq New Highs      71     77     69     85    115    108
Nasdaq New Lows      250    160    199    144    104     98
   

TRADER'S TIP: "Do Gaps Always Fill?"

Contrary to popular opinion, gaps don't always fill. In fact, price gaps form some of the best levels of support and resistance. The bigger the gap, the more significant the support or resistance zone.

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 - 4191.98 May 19, 2023

52-Week High: 4325.28
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 4377.68
Resistance 2: 4274.63
Resistance 1: 4233.30
Pivot: 4171.58
Support 1: 4130.25
Support 2: 4068.53
Support 3: 3965.48

NASDAQ Composite - 12657.90 May 19, 2023

52-Week High: 13181.09
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 13487.75
Resistance 2: 13019.37
Resistance 1: 12838.63
Pivot: 12550.99
Support 1: 12370.25
Support 2: 12082.61
Support 3: 11614.23
        
Dow Industrials - 33426.63 May 19, 2023

52-Week High: 34712.28
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 34655.32
Resistance 2: 34008.61
Resistance 1: 33717.62
Pivot: 33361.90
Support 1: 33070.91
Support 2: 32715.19
Support 3: 32068.48
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, May 22, 2023:
22-May  MONDAY, MAY 22   
22-May          None scheduled
22-May  TUESDAY, MAY 23   

Tuesday, May 23, 2023:
23-May  8:30 am   
23-May  8:30 am   
23-May  10:00 am   New home sales
23-May  WEDNESDAY, MAY 24   

Wednesday, May 24, 2023:
24-May  2:00 pm   Minutes of Fed's May FOMC meeting
24-May  THURSDAY, MAY 25   

Thursday, May 25, 2023:
25-May  8:30 am   GDP (first revision)
25-May  8:30 am   Corporate profits
25-May  8:30 am   Initial jobless claims
25-May  8:30 am   Continuing jobless claims
25-May  10:00 am   Pending home sales
25-May  FRIDAY, MAY 26   

Friday, May 26, 2023:
26-May  8:30 am   Durable-goods orders
26-May  8:30 am   Durable-goods minus transportation
26-May  8:30 am   Personal income (nominal)
26-May  8:30 am   Personal spending (nominal)
26-May  8:30 am   PCE index
26-May  8:30 am   Core PCE index
26-May  8:30 am   PCE (year-over-year)
26-May  8:30 am   Core PCE (year-over-year)
26-May  8:30 am   Advanced U.S. trade balance in goods
26-May  8:30 am   Advanced retail inventories
26-May  8:30 am   Advanced wholesale inventories
26-May  10:00 am   Consumer sentiment (final)


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

TRADER'S TIP: "Whipping the Sea"

You have to analyze your behavior in the market instead of acting out your feelings. We get angry at the market, we become afraid of it, we develop silly superstitions. All the while, the market keeps cycling through its rallies and declines like an ocean going through its storms and calm periods. Mark Douglas writes in The Disciplined Trader that in the market, There is no beginning, middle, or end - only what you create in your own mind. Rarely do any of us grow up learning to operate in an arena that allows for complete freedom of creative expression, with no external structure to restrict it in any way."

We try to cajole or manipulate the market, acting like the ancient emperor Xerxes, who ordered his soldiers to horsewhip the sea for sinking his fleet. Most of us are not aware how manipulative we are, how we bargain, how we act out our feelings in the market. Most of us consider ourselves the center of the universe and expect every person or group to be either good or bad to us. This does not work in the market which is completely impersonal."

~ Dr. Alex Elder, trader and author of "Trading For A Living"

Stocks Covered in This Issue

HEALTHCARE SECTOR

Inhibrx, Inc. (INBX: Healthcare/Biotechnology) - BULLISH BOUNCE. INBX's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Friday shows that traders are aware of the moving average support zone now in play, and they are ready to consider buying again. A shift up from this point will attract even more buyers. The new buying should move INBX back in step with the bullish weekly trend, so our BUY entry trigger is set at 25.56. Once you hold a position, trail a stop of 1.76. Tighten it to 0.88 on a 3.6 gain. INBX closed at 25.16 on Friday. Earnings Report Date: Aug 07, 2023. Beta: 2.86. Market-Cap: 1.097B. Optionable.

Harrow Health, Inc. (HROW: Healthcare/Drug Manufacturers-Specialty & Generic) - SQUEEZE PLAY. Traders are feeling the pressure as HROW's intra-day price range on Friday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 21.94 and a SELL short entry at 20.27. HROW's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.67 trailing stop. Tighten it to 0.84 after you get a 2.6 gain. HROW closed Friday at 21.32. Earnings Report Date: Aug 07, 2023. Beta: N/A. Market-Cap: 642.201M. Optionable.

Harrow Health, Inc. (HROW: Healthcare/Drug Manufacturers-Specialty & Generic) - SQUEEZE PLAY. Friday's narrow price range has created a potentially profitable setup in HROW, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 21.94 and a SELL short entry at 20.27. Let HROW's price action determine your long or short entry. Once the order is filled, place a 1.67 trailing stop, and tighten it to 0.84 upon getting a 2.6 gain. HROW closed Friday at 21.32. Earnings Report Date: Aug 07, 2023. Beta: N/A. Market-Cap: 642.201M. Optionable.

RxSight, Inc. (RXST: Healthcare/Medical Devices) - SQUEEZE PLAY. A look at RXST's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 26.03 and a SELL short trigger at 23.97. Once RXST shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 2.06 and tighten to 1.03 on a 1.26 gain. RXST closed Friday at 25.56. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 868.577M. Optionable.

TECHNOLOGY SECTOR

SoundThinking, Inc. (SSTI: Technology/Software-Application) - SQUEEZE PLAY. Friday's trading action forced SSTI's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction SSTI will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 26.48 if SSTI moves higher, and place your order to SELL short at 24.83 if price declines to that level. As usual follow your entry with a trailing stop, 1.65 should be sufficient. Reduce your stop to 0.83 on a 1.94 gain. SSTI closed Friday at 25.88. Earnings Report Date: Aug 07, 2023. Beta: N/A. Market-Cap: 316.908M. 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

"Hammer Time"

Technicians throughout the world have adopted the Japanese practice of candlestick charting. In fact, many have abandoned Western bars in favor of this visual tool that generates detailed information from short-term price movement. Of all candlestick patterns, single bar hammers and dojis provide the most versatile immediate feedback. Western technical analysis rarely offers such dependable single bar signals.

These formations print when a significant battle between bulls and bears ends in a draw. Two characteristics generate their predictive power:

1. High to low range greater than average.

2. Closing tick equal to or near opening tick.

Dojis represent perfect opening-closing balance as price finishes exactly where it started. Hammers need only close so that the central body of the candlestick is less than one-third the length of the bar's total range. But the body must sit near one end of the bar's action. Dojis and hammers predict immediate reversals within the time frames they are created. Their significance directly relates to their position within the overall chart pattern. When appearing on high volume near significant highs or lows, they may represent price extremes signifying an important change in trend. If printed within an ongoing congestion pattern, they often reflect market makers or specialists "cleaning out" stops in one direction so they can move the market in the opposite direction.

Retracement science assists traders in predicting events subsequent to one of these important candles. Shifting down one time frame from the bar reveals the length of the short-term trend being reversed by the long finger. Very often, dojis and hammers represent first rise/first failure setups within the smaller time frame. This further predicts where the reversal momentum will fade for a test of the candle.

Following a doji or hammer reversal, a test of the candle high or low often takes place within 3 to 5 bars. When the test fails, expect price to thrust sharply forward, especially when overbought/oversold indicators show no divergence. When the test succeeds, shift down one time frame again and trade the setup according to double bottom/double top strategy. Specifically look for price to surge on the breakout past the high/low of the initial reversal generated by the candle.



Hundreds of stocks printed long-legged dojis and hammers during the dramatic October 1998 reversal day. DELL never returned to test its low following a death-defying leap into the abyss. Pay close attention to gap support or resistance created by the bar following the candle event.

>

Price returns to test ALTR's new high doji and reverses. Reviewing this chart on a 5-min intraday interval reveals a classic double top scenario. Aggressive traders often enter short sales at doji tops, recognizing their hidden power.

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

This guest article was written by Alan Farley, trader and author of "The Master Swing Trader."

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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