May 25, 2024 - The RightLine Report
Notes From The Editor
What if the government mandated a prerequisite skills assessment for all investors before engaging in stock transactions? Rest assured, such a regulation isn't on the horizon, at least not in the foreseeable future. Nonetheless, if it were to materialize, most RightLine readers would effortlessly ace the test. Conversely, many investors lack the necessary education and understanding of the market's intricacies.
While there's no quick fix, ample education certainly proves invaluable. As one of RightLine's core principles suggests, "Think education is expensive? Try ignorance."
Unfortunately, many investors inadvertently opt for ignorance. Despite perceiving stock trading as inherently risky, their lack of comprehension often prevents them from accessing the most potent profit-generating tool available: trading.
Trading is invaluable for efficiently honing profit-making skills. I'm hard-pressed to find a better method for compressing extensive market experience into such a brief timeframe. Through the iterative process of strategic planning, live position entry, risk management, and trade execution to exit, your abilities will sharpen at an unprecedented pace. Once you master the art of trading, you can apply it across various timeframes, be it minutes, days, weeks, months, or years.
For aspiring investors willing to delve into trading, patience is key. Similar to sports and music, achieving a high level of consistent performance requires several years of experience.
Any structure's stability hinges on its foundation. A crucial element in the foundation of successful trading is the straightforward practice of position sizing. This modest procedure inherently shields against substantial losses while enabling profit accumulation, even amidst the most uncertain market climates.
Trade wisely!
Thomas Sutton, Editor
Stocks Covered Today Stock Splits Trader's Corner
Quick List
Stock 05/24 05/24 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
HOOD 20.51 1.27 20.83 2.34/1.17 1.94
MARA 21.21 1.13 22.02 2.76/1.38 3.22
SILK 21.93 0.40 22.42 21 1.42/0.71 2.44
TXG 22.59 -0.36 23.35 21.82 1.53/0.77 3
OSCR 20.56 -0.40 21.45 19.89 1.56/0.78 2.26
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 Trader's Corner
Market Summary
Stocks ended the week on a positive note, rebounding from earlier losses. The Nasdaq, primarily composed of technology stocks, achieved a new record high. Recent declines were fueled by revised expectations of fewer Federal Reserve rate cuts in response to the stronger-than-anticipated Purchasing Managers' Index (PMI) report released yesterday. Friday's durable goods orders, surpassing consensus estimates, further contributed to market optimism. Small- and mid-cap stocks outpaced large-cap counterparts.
Across sectors, performance was diverse, with communication services, technology, and utilities leading the pack, while healthcare was the sole sector in the red. Globally, both Asian and European markets experienced declines amid concerns of prolonged higher interest rates. The USD/dollar slightly weakened against major currencies. In commodities, WTI oil prices edged up, nearing $78 per barrel, ahead of the summer driving season. Gold prices dipped modestly, retracing from earlier highs reached this week.
As corporate earnings season winds down, 96% of S&P 500 companies have reported first-quarter results, which have largely surpassed expectations, bolstering recent market gains. Approximately 80% of companies have exceeded analyst forecasts, with an average positive surprise of 7.9%. Year-over-year earnings growth for the first quarter stands at a robust 6%, marking the highest rate since Q1 2022. Forecasts suggest earnings growth will accelerate throughout the year, reaching 11% annually. This broad-based earnings performance across sectors indicates the potential for underperforming sectors to catch up, contributing to the extension of the economic expansion.
Friday On The Week
-------------------- --------------------
Dow 39,069.59 4.33 -934 -2.33%
Nasdaq 16,920.79 184.76 +234.82 1.41%
S&P 500 5,304.72 36.88 +1.45 0.03%
NYSE Volume 3.01B
NYSE Advancers 2,046
NYSE Decliners 740
Nasdaq Volume 5.85B
Nasdaq Advancers 2,722
Nasdaq Decliners 1,477
New Highs/Lows
05/17 05/20 05/21 05/22 05/23 05/24
--------------------------------------------
NYSE New Highs 187 239 184 116 82 99
NYSE New Lows 25 29 33 47 71 41
Nasdaq New Highs 159 224 141 120 139 91
Nasdaq New Lows 67 101 112 109 163 115
Stocks Covered Today Stock Splits Trader's Corner
TRADER'S TIP: "Changing Horses In The Middle Of The Stream"
Here's another good reason to avoid changing rules in the middle of a trade. Waiting to finish the trade before making rule changes emphasizes the importance of having a "formal" set of trading procedures. Including a rule that regulates how and when you change your rules implies that you respect for your own rules. This one rule alone will improve your bottom line and set you apart from casual traders with no consistent methods.
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".
Stocks Covered Today Stock Splits Trader's Corner
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): MONDAY, MAY 27 Memorial Day holiday TUESDAY, MAY 28 12:55 am Cleveland Fed President Loretta Mester and Fed Gov. Michelle Bowman speak in Japan 9:00 am S&P Case-Shiller home price index 9:55 am Minneapolis Fed President Neel Kashkari speaks 10:00 am Consumer confidence 1:00 pm Fed Gov. Lisa Cook and San Francisco Fed President Mary Daly speak WEDNESDAY, MAY 29 1:45 pm New York Fed President John Williams speaks 2:00 pm Fed Beige Book 7:00 pm Atlanta Fed President Raphael Bostic speaks THURSDAY, MAY 30 8:30 am Initial jobless claims 8:30 am GDP (first revision) 8:30 am Advanced U.S. trade balance in goods 8:30 am Advanced retail inventories 8:30 am Advanced wholesale inventories 10:00 am Pending home sales 12:05 pm New York Fed President John Williams speaks 5:00 pm Dallas Fed President Lorie Logan speaks FRIDAY, MAY 31 8:30 am Personal income 8:30 am Personal spending 8:30 am PCE index 8:30 am PCE (year-over-year) 8:30 am Core PCE index 8:30 am Core PCE (year-over-year) 9:45 am Chicago Business Barometer (PMI) 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 Corner
TRADER'S TIP: "Another Good Trade"
When screening for "another" stock that might yield higher-than-average trading potential, our analysts employ a wide number of tactics. One is to sift through the day's highest percentage gainers and losers, which oftentimes yield similar price moves either in the same direction, or else the opposite, for the following day. Additionally, we'll often find plays from the news ticker, which also tends to create volatility (and therefore profit potential!). And finally, a glance through the active sector list provides a glimpse into where the money on Wall Street may be headed next! Again, these are just starting points, but we've got to start somewhere.
Stocks Covered in This Issue
FINANCIAL SERVICES SECTOR
Robinhood Markets, Inc. (HOOD: Financial Services/Capital Markets) - BULLISH BOUNCE. Up-trending stocks like HOOD have a tendency to bounce their way skyward rather than travel higher in a straight line. After touching down to a moving average support level on Friday, HOOD is poised to lift off again. To take advantage of this setup, prepare to BUY shares at 20.83 if positive price action occurs. As always, follow your entry with a trailing stop. A 2.34 trailer should work well with HOOD. Tighten it to 1.17 on a 1.94 gainer. Earnings Report Date: Aug 2, 2024. Beta: 1.74. Market-Cap: 18.025B. Optionable.
Marathon Digital Holdings, Inc. (MARA: Financial Services/Capital Markets) - BULLISH BOUNCE. If you are looking for another bouncer with profits in mind, MARA fits the bill. Shares have been in retreat-mode lately, but now this stock is in the process of bouncing from support. Currently priced at 21.21, plan to buy shares at 22.02 and use a 2.76 trailing stop. Tighten the stop to 1.38 on a 3.22 gain. Earnings Report Date: Aug 6, 2024. Beta: 5.39. Market-Cap: 5.789B. Optionable.
HEALTHCARE SECTOR
Silk Road Medical, Inc (SILK: Healthcare/Medical Devices) - SQUEEZE PLAY. Friday's trading action forced SILK'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 SILK 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 22.42 if SILK moves higher, and place your order to SELL short at 21 if price declines to that level. As usual follow your entry with a trailing stop, 1.42 should be sufficient. Reduce your stop to 0.71 on a 2.44 gain. SILK closed Friday at 21.93. Earnings Report Date: Jul 30, 2024. Beta: 1.44. Market-Cap: 865.005M. Optionable.
10x Genomics, Inc. (TXG: Healthcare/Health Information Services) - SQUEEZE PLAY. TXG is caught in a dilemma. The stock's compressed price range on Friday has resulted in a condition comparable to a wound up rubber band. We anticipate that this undecided equity will take off soon, but with the direction still in question we'll let upcoming market action tell us whether to buy shares or sell short. TXG is now at 22.59. We can capture price action either way by placing a BUY trigger at 23.35 and a SELL short trigger at 21.82. Once TXG reveals its direction, enter your triggered order and disregard the other one. As soon as your position is in place, follow up with a trailing stop of 1.53. When you acquire a 3 profit, tighten the stop to 0.77. Earnings Report Date: Aug 1, 2024. Beta: 1.94. Market-Cap: 2.704B. Optionable.
Oscar Health, Inc. (OSCR: Healthcare/Healthcare Plans) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into OSCR. A move to the upside will trigger our BUY entry at 21.45, while a drop to 19.89 will trigger our SELL short entry. Follow your position with a 1.56 trailing stop. Tighten the stop to 0.78 once you have a 2.26 gain. OSCR closed Friday at 20.56. Earnings Report Date: Aug 6, 2024. Beta: 1.65. Market-Cap: 4.877B. 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 Trader's Corner
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.
Stocks Covered Today Stock Splits Trader's Corner
Trader's Corner
"The History, Science & Art of Technical Analysis"
The very first chartists in the United States appeared at the turn of the century. They included Charles Dow, the author of the famous stock market theory, and William Hamilton who succeeded Dow as the editor of the Wall Street Journal.
After the famous stock market "crash" of 1929, Hamilton advocated the use of charting in an editorial entitled "The Turn of The Tide" and then proceeded to lay out the principles of Dow's stock market theory in a book titled The Stock Market Barometer.
The decade of the 1930's was the Golden Age of charting. Many innovative researchers published their work during that period including Richard D. Wyckoff, a trader who started in 1888 as a 15- year-old stock runner, W.D. Gann who began his career as a stockbroker in 1906, and R.N.Elliott, widely known for the "Elliott Wave Theory."
Their work went into two distinct directions. Researchers such as Wyckoff saw charts as a graphic record of market supply and demand, while others including Gann and Elliott searched for a perfect order in the markets.
In 1948, Edwards and McGee published a book called Technical Analysis of Stock Trends. They popularized the use of chart formations such as triangles, rectangles, head and shoulders, as well as support, resistance and trend lines.
Things have changed a great deal since then. In the 40s, daily volume of an active stock on the NYSE was only several hundred shares. Today it's not uncommon to see an active stock trade tens of millions of shares each day.
Bears were firmly in control of the stock market in the "good old days", but as years passed, the balance of power shifted to favor bulls. However, with bears back in the cockpit the past couple of years, some of the market tendencies that were evident back then are reappearing on the charts.
Early technical analysts noted that stock market tops were sharp and fast, while bottoms took a long time to develop. That was true in the de-flationary era of the 30s and 40s, but from the 50s until mid 2000 bottoms tended to form quickly while tops took longer.
The beginnings of technical analysis go back much further than the early nineteen hundreds. Japanese rice traders began using candlestick charts some two centuries before the first chartists appeared in America.
Before you envision lots of dripping wax and flaming wicks, the term candlestick was adopted because of the similar appearance between candles and the symbols used to represent price that were drawn on each chart.
The Japanese focus is on the relationship between opening and closing prices and on patterns that include several candles. They consider highs and lows relatively unimportant.
Unfortunately, most candlestick chartist's fail to use many tools of Western analysts. They ignore volume and have no trend lines. This now appears to be changing as modern analysts combine Western technical indictors with classical candlestick patterns. A classic case of east meets west.
OK, that's enough history for now. Let's take a quick look at two subjects, which help determine the success or failure of technical analysis in action.
Is it Science or Art?
"It would be possible to describe everything scientifically, but it would make no sense; it would be without meaning, as if you described a Beethoven symphony as a variation of wave pressure." ~Albert Einstein
It may come as a surprise to find that technical analysis combines the dual categories of science and art. Although the subjects appear to be at opposite ends of the spectrum, joining them together creates a dual perspective that provides remarkable market insight.
The resulting combination can be compared to night-vision goggles that let you see what others can't - like trend lines. This advantage gives you an edge and helps shift the odds into your favor.
Science 101
The scientific aspect of technical analysis presents itself in many forms. There are literally dozens of separate indicators and unlimited ways of applying them. A lot of research went into developing these components, and even more to determine effectiveness and reliability.
Studies have shown that the wide array of technical indicators and methods exhibit different degrees of success depending on how, when and under what condition they are applied.
Art - So what is it, a Picasso or a Rembrandt?
The artistic qualities of technical analysis become obvious the instant you look at a visual display on a computer screen. Colorful charts graphically reveal elements of technical analysis as different indicators are painted in patterns and lines. Talk about abstract art!
One look and you feel like it should be hanging in a metropolitan art museum. Less obvious than the graphic display but just as important is the impact of artistic interpretation. OK, so how should we interpret this painting?
Although the price bars are determined by actual stock prices, the placement of each line, the number of bars included in each moving average and whether any technical indicators are used depends on the preference of the individual.
It may look good, but no matter how pretty the picture, it is far more important that the final choice of technical tools and patterns can be used by the trader to produce profits.
- Summary
It turns out that technical analysis is a hybrid of art and science that has evolved over the centuries. Due to the complex choices that have to be made, many newcomers will never recognize the tremendous value of TA, and will remain unaware of the powerful forces at work behind the scenes.
For those who desire a long-term relationship with the markets, the time and energy spent to learn how to use this powerful technology will be well rewarded!
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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