Notes From The Editor

While most new traders spend their time looking for the one "secret" to success in the stock market, there are actually several basic skills needed to flourish. Among these abilities are how to select stocks for trading, when to buy and sell your shares, and how to manage risk. Some people acquire the needed expertise through costly "learning experiences." Others pay an even higher price when they run out of money long before they understand how the market actually operates.

The best and most direct route to success is a well-rounded stock trading education. Despite the obvious benefits of this approach, the majority of folks don't do it. Most are in a big hurry and don't want to spend the time it takes to really become a skillful stock trader. Though some take a stab at learning, many just want someone to tell them when to buy and when to sell. This can be a high-risk way to approach the market. In truth, after a few inevitable losses the short-cutters usually lose trust in their advisor and give up.

Or they go on a perpetual hunt for a market guru that delivers nothing but winners. Unfortunately, no one wins all the time. Even if they did, there are tremendously important lessons to be learned from losses. Most veteran traders readily admit that they have gained more trading insight from their losers as their winners. The losers, break-evens, and winners all combine to teach us how to consistently profit from trading the stock market.

One a related note, it comes as a surprise to most folks that the "key" to success isn't a high rate of winners to losers. Instead, trying to maintain a very high win to loss ratio can have the opposite effect. Striving for exceptionally high win percentages typically causes traders to take profits too soon, to insure that the trade goes into the book as a winner.

Selling too early does not allow the little guys to develop into the full-grown winners that are needed to offset unavoidable losses and transaction costs. At the same time, their losing trades are held way too long in the hope that they will turn around and become winners. After all, a losing trade doesn't really qualify as a loser until it's sold ... right?

The real key is to be in the market for the big moves, and not lose much money in between these trends. The only way to profit from these moves is to have open positions. Many traders and investors pull out when the trend is flat or declining. They try to predict when the next big uptrend will occur. Unfortunately, this strategy often results in missing the best part of the move.

Instead of spending most of the time on the sidelines trying to forecast when the next major rally will occur, the best approach is to stay in the game. This gives valuable experience and teaches us how to trade properly from both sides of the market.

Through repetition we quickly learn winning skills. We discover how to control risk, and become adept at working in harmony with the trend. With experience we learn to manage each trade on its own merits. I suppose if you really want just one secret to trading stocks successfully, it has to be ... a good education!

Trade Well!

~ Thomas Sutton, Editor

Quick List

    
Stock     05/28     05/28      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

FVRR      25.03      0.37     25.45                  1.93/0.97      1.82
MNRO      23.74      0.23     24.23     22.63          1.6/0.8      2.04
PCRX      30.05      0.36      30.8                     1.99/1      2.18
CSTL      24.53      0.16     25.23     23.58        1.65/0.83      0.08
AGNCP     23.96      0.02     24.27                  1.15/0.58      0.44

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

Following the Memorial holiday break, major indexes saw a slight uptick at the opening on Tuesday but ultimately closed mostly lower, with government bond yields on the rise. Weak Treasury auctions and hawkish comments from the Fed spurred the benchmark 10-year yield back above 4.5%. However, the Nasdaq, driven by NVIDIA's post-earnings surge, managed to secure a gain.

The focus remains on inflation and central bank policies, with investors eyeing Friday's inflation data and Fed speeches for clues on rate cut timing. Meanwhile, WTI oil surged 3% today, following a 1% increase yesterday, amid heightened tensions in the Middle East, though prices hover around $80, maintaining their position within the past 12-month range.

Innovation in artificial intelligence (AI) propelled the Nasdaq to new highs last week, helping US stocks rebound from April losses. NVIDIA, as the industry leader, experienced a surge in its shares post-earnings, showcasing robust AI computing spending. While AI holds promise for productivity gains across sectors, its full impact will unfold gradually. Currently, early adopters benefit, but broader gains are anticipated as companies effectively apply AI to enhance existing processes. While the tech sector leads this month's performance, gains are more widespread compared to last year, with 10 of 11 sectors trending higher (energy being the sole exception). International equity markets are also catching up to America, with major indexes in Europe, the U.K. and China matching or outperforming the S&P 500, amid a softened USD/dollar and improving global growth.

The focus this week centers on the Fed's preferred inflation measure, the core PCE inflation (personal consumption expenditures price index), due on Friday. Expectations suggest a 0.2% month-over-month increase in April, maintaining the annual rate at 2.8%, amid a persisting downtrend in inflation. This trajectory suggests room for the Fed to enact one or two rate cuts in the latter half of the year. Despite potential volatility from future Fed policies and the upcoming presidential election, rising corporate profits, continued economic expansion, and the prospect of lower yields later in the year provide a favorable backdrop for markets.

                        May 27, 2024           May 28, 2024   
                  --------------------   --------------------
Dow                    Closed        0     38,852.86  -216.73
Nasdaq                 Closed        0     17,019.88    99.09
S&P 500                Closed        0      5,306.04     1.32

NYSE Volume                          0                  3.76B
NYSE Advancers                       0                    989
NYSE Decliners                       0                  1,833

Nasdaq Volume                        0                  6.32B
Nasdaq Advancers                     0                  1,816
Nasdaq Decliners                     0                  2,436

                                 New Highs/Lows

                   05/21  05/22  05/23  05/24  05/27  05/28
                 --------------------------------------------
NYSE New Highs       184    116     82     99      0    126
NYSE New Lows         33     47     71     41      0     53
Nasdaq New Highs     141    120    139     91      0    137
Nasdaq New Lows      112    109    163    115      0    118
   

TRADER'S TIP: "Position Size: Finding The Right Fit"

"Many people believe that in order to make healthy profits in the market that they need to own a large position (a thousand shares or whatever your big block is for you) or more. I have found repeatedly that this is not the case. In fact, it may even work against you. Trading is tremendously psychological. When you have a position that is large enough that normal fluctuations, a point or two movement in the wrong direction causes you to start to mentally calculate how much money you have lost, you begin to make decisions out of fear. Big block positions also are a leading cause of ulcers (don't worry - I made that up).

When you make your trading decisions from a basis of fear and greed - you betcha, they are lousy decisions. Think in these terms. A 200-share position, that moves 20 points made you a $4,000 profit. You were able to keep a 3 or 4 point trailing stop loss on the stock meaning you were only at risk $600 to $800 at any time. An aura of tranquility pervades. When you have this feeling of tranquility is when you make your better decisions. I guarantee it.

The rule of thumb is this. If your stock goes down a couple of points and your mind becomes a mental calculator, constantly calculating that you are now down two grand, then your block size is probably bigger than necessary. If you think about the trade calmly and in terms of the boundaries of your trading plan, then you are likely on track."

~ Roger Perry

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".

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

TRADER'S TIP: "Accredited Investor"

This is the SEC term for a person or entity meeting any of the criteria listed below. Certain restricted offerings, hedge funds, limited partnerships, and angel investor networks are open only to accredited investors.

1) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer or general partner of a general partner of that issuer.

2) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000.

3) Any natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

4) Any trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase of the securities is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.

5) Any organization that was not formed for the purpose of acquiring the securities being sold, with total assets in excess of $5,000,000.

6) Any entity in which all of the equity owners are Accredited Investors.

Stocks Covered in This Issue

COMMUNICATION SERVICES SECTOR

Fiverr International Ltd. (FVRR: Communication Services/Internet Content & Information) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 25.03, FVRR is on our radar for a BUY entry at 25.45. If you purchase shares of FVRR, be sure to also place a trailing stop of 1.93. Snug it up to 0.97 on a 1.82 gain. Earnings Report Date: Aug 1, 2024. Beta: 1.69. Market-Cap: 968.714M. Optionable.

CONSUMER CYCLICAL SECTOR

Monro, Inc. (MNRO: Consumer Cyclical/Auto Parts) - 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 MNRO's case we will enter a BUY should it reach the 24.23 level, or a SELL short trade if it drops to 22.63. As usual a trailing stop is essential, 1.6 which should be tightened to 0.8 on a 2.04 gain. MNRO closed Tuesday at 23.74. Earnings Report Date: Jul 24, 2024. Beta: 1.14. Market-Cap: 709.876M. Optionable.

HEALTHCARE SECTOR

Pacira BioSciences, Inc. (PCRX: Healthcare/Drug Manufacturers - Specialty & Generic) - BULLISH BOUNCE. PCRX has charted an upward weekly trend until recently when sellers showed up to push prices lower. On Tuesday the selling ran into solid support. A potential bounce up from this level should attract buyers and likely return PCRX to the previously established uptrend. The Bullish Bounce set-up is the basis for our BUY entry, so be ready to go long on a rise to our trigger at 30.8. Set a trailing stop of 1.99, tightening to 1 on a 2.18 profit. PCRX closed at 30.05 on Tuesday. Earnings Report Date: Jul 31, 2024. Beta: 0.77. Market-Cap: 1.399B. Optionable.

Castle Biosciences, Inc. (CSTL: Healthcare/Diagnostics & Research) - SQUEEZE PLAY. Trader indecision has put CSTL 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 25.23 and a SELL short entry at 23.58. Now it's up to CSTL to show us which entry will be filled. Once the trade is underway place a 1.65 trailing stop, which can be tightened to 0.83 after you achieve a 0.08 profit. CSTL closed on Tuesday at 24.53. Earnings Report Date: Jul 31, 2024. Beta: 0.93. Market-Cap: 677.205M. Optionable.

REAL ESTATE SECTOR

AGNC Investment Corp. (AGNCP: Real Estate/REIT - Mortgage) - BULLISH BOUNCE. This trader-friendly setup turns repetitive stock behavior into real profits. Based on the tendency for up-trending stocks to drop briefly and then resume the up-trend, the Bullish Bounce places traders into excellent stocks when conditions are primed for more skyward movement. AGNCP's current price action near moving average support signals a potential BUY entry at 24.27, followed by a 1.15 trailing stop which can be tightened to 0.58 upon earning 0.44. AGNCP closed Tuesday at 23.96. Earnings Report Date: Jul 22, 2024. Beta: 1.44. Market-Cap: --. 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.

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.

Disclaimer

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