May 30, 2024 - The RightLine Report
Notes From The Editor
How To Use Moving Averages
As veteran RightLine readers know, we favor a technical approach to trading stocks. The reason is simple: the twists and turns of shorter- term trades can be more accurately gauged by technicals. Fundamental expectations, on the other hand, take more time to come to fruition.
There are numerous ways to apply technical analysis. A whole boatload of indicators and oscillators are at our disposal. Some traders even invent new ones based on their observations. While there is certainly nothing wrong with in-depth analysis, too many indicators can obscure the most important aspect of a stock's movement - its price action.
Moving averages can be thought of as dynamic trendlines that follow equity's price. A simple trend, connecting two or more relative highs/lows, is one of the easiest technical concepts to grasp. However, these have a major limitation: they don't adapt to price changes.
The solution is to create a trend that incorporates daily price changes. Moving averages do exactly that. Take the "50 DMA" for example - the 50-day moving average. This indicator averages out the trading price for the previous 50 days. It's also constantly updated during the trading day, creating a constantly moving line on the stock chart.
The most useful aspect of moving averages is the fact that they often provide either support or resistance. This is especially helpful in market climates - much like the one we're seeing right now - when many stocks are moving to long-term or historical highs. With well- established trendlines left in the dust, the moving averages provide a logical rebound target during pullbacks.
Moving average crossovers are another way to apply the indicator. When an MA with a shorter period crosses an MA with a longer period, a directional change could be underway. One of the most useful crossovers is the 50/200. These two key moving averages, with their longer-term timeframes, tend to be reliable. If the 50 DMA rises through the 200 DMA, more upside could be in store. The inverse in true when the 50 DMA descends through the 200 DMA.
While moving averages are typically used on daily intervals, they can also be applied to other timeframes to provide helpful charting roadmaps. Weekly charts often show interesting correlations - for example, a long-term uptrend might feature repeated bounces off the 22- week MA. Daytraders can also use the same techniques, applying MA's to intra-day intervals.
Within the next few days we'll take a closer look at this versatile technical indicator and see how it can be applied in everyday situations.
Here's to Profits,
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
Stock 05/30 05/30 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
RYAN 55.23 1.10 56.15 3.48/1.74 2.48
ITOS 17.15 -0.19 17.73 1.29/0.65 1.56
NTLA 22.10 0.43 22.53 20.99 1.54/0.77 2.58
NVCR 22.27 0.26 22.97 21.35 1.62/0.81 2.18
CGEM 22.79 0.11 23.4 21.67 1.73/0.87 4.28
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
Stocks experienced mostly downward movement on Thursday, primarily due to weakness in the technology sector. This decline was fueled by disappointing guidance from software giant Salesforce, which announced its quarterly results after the market close the previous day. However, sectors outside of mega-cap tech stocks performed relatively well, with every sector of the S&P 500 closing higher except for technology and communication services.
Notably, utilities and real estate emerged as the top performers. Additionally, both mid-cap and small-cap stocks recorded healthy gains for the day. Bond yields also decreased, with the 10-year Treasury yield settling around 4.55%. This decline in bond yields followed downward revisions to the first-quarter real GDP data, which revealed that the economy expanded at a 1.3% quarterly pace, down from the initial estimate of 1.6% growth.
Overseas, Asian markets experienced losses overnight, while European markets closed higher in response to improved eurozone economic sentiment compared to the previous month. In the commodity space, oil prices ended lower, hovering around $78 per barrel, while gold prices remained relatively stable.
The potential positive aspect of softer economic growth data is that it could alleviate inflationary pressures and prompt the Fed to consider interest rate cuts. We have maintained the view that replicating the economic strength seen in the second half of 2023 would be challenging, and we anticipate GDP growth in the range of 1.5% to 2% this year, supported by favorable labor market conditions and potential Fed rate cuts later in the year.
May 29, 2024 May 30, 2024
-------------------- --------------------
Dow 38,441.54 -411.32 38,111.48 -330.06
Nasdaq 16,920.58 -99.30 16,737.08 -183.50
S&P 500 5,266.95 -39.09 5,235.48 -31.47
NYSE Volume 3.56B 3.82B
NYSE Advancers 461 2,130
NYSE Decliners 2,380 658
Nasdaq Volume 6.68B 6.67B
Nasdaq Advancers 1,110 2,450
Nasdaq Decliners 3,102 1,744
New Highs/Lows
05/23 05/24 05/27 05/28 05/29 05/30
--------------------------------------------
NYSE New Highs 82 99 0 126 37 71
NYSE New Lows 71 41 0 53 86 46
Nasdaq New Highs 139 91 0 137 63 71
Nasdaq New Lows 163 115 0 118 159 99
Stocks Covered Today Stock Splits
TRADER'S TIP: "Turning Hunter-Gatherers Into Investors"
Studies show that when it comes to intelligent investing, human beings just aren't wired very well. Investors are emotionally driven, and are usually unaware of their own self-destructive behavior. The instinctive "fight or flight" response in each of us serves an important purpose, but it doesn't lend itself to the capital markets. For example, in one study the majority of investors sold their winning positions to make up for losers, then held the losers way too long in hopes they would recover. This is the opposite of what should be done. Winning stocks tend to keep on winning, while losers usually keep losing. The most common management strategy used by successful traders is pretty simple. Get rid of losers quickly, and keep winners profitable with a stop order based exit strategy.
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
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 TIP: "Always Plan For Three Possibilities"
As traders and investors we've learned not to spend too much time speculating on market direction, but to focus on careful planning and trade management. It's far better to prepare and have a specific plan ready for any possible price action than to become so devoted to our expectations that we fail to plan for the opposite of what we expect to happen.
The market, and our chosen stocks can really only do three simple things that affect price: (1) move up, (2) move down, or (3) stay the same. Unless our trading plan includes specific instructions on what we will do in the event any one of these three scenarios occur, the plan is incomplete.
Stocks Covered in This Issue
FINANCIAL SERVICES SECTOR
Ryan Specialty Holdings, Inc. (RYAN: Financial Services/Insurance - Specialty) - BULLISH BOUNCE. Some people hear of a stock that's performing nicely and then buy it without any regard for timing the entry. This approach usually leaves money on the table, money that could just as well be added to profits. The Bullish Bounce setup provides a well timed entry and reduces exposure to risk by placing both the entry trigger and exit stop near the bottom of the bounce. We have an opportunity to use this approach with RYAN which met our setup criteria on Thursday. The BUY trigger for this trade is at 56.15, and the trailing stop is sized at 3.48. Resize the stop to 1.74 upon collecting a 2.48 point gain. RYAN closed Thursday at 55.23. Earnings Report Date: Aug 1, 2024. Beta: 0.57. Market-Cap: 14.384B. Optionable.
HEALTHCARE SECTOR
iTeos Therapeutics, Inc. (ITOS: Healthcare/Biotechnology) - BULLISH BOUNCE. Everyone familiar with price charts knows that a stock tends to bounce its way higher rather than move in a straight line. The lower levels of these short-term rebounds offer a safe and often early entry into stocks that are in the process of establishing longer-term uptrends. ITOS's reaction to support on Thursday created a Bullish Bounce setup with a BUY entry trigger at 17.73. Use a 1.29 trailing stop, which should work well with ITOS's typical daily range. Tighten it to 0.65 on a 1.56 profit. ITOS closed at 17.15 on Thursday. Earnings Report Date: Aug 6, 2024. Beta: 1.27. Market-Cap: 619.508M. Optionable.
Intellia Therapeutics, Inc. (NTLA: Healthcare/Biotechnology) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in NTLA's narrowest trading range of the past seven sessions. With neither group able to take complete control on Thursday, 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 22.53 and a SELL order at 20.99. Regardless of which order is triggered, cancel the other one and follow your entry with a 1.54 trailing stop. Tighten the stop to 0.77 once you have a 2.58 gain. NTLA closed Thursday at 22.10. Earnings Report Date: Aug 1, 2024. Beta: 1.85. Market-Cap: 2.132B. Optionable.
NovoCure Limited (NVCR: Healthcare/Medical Devices) - 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. NVCR 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 22.97 and a SELL short trigger at 21.35. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 1.62 which can be tightened to 0.81 on a 2.18 gain. NVCR closed Thursday at 22.27. Earnings Report Date: N/A. Beta: 0.49. Market-Cap: 2.396B. Optionable.
Cullinan Therapeutics, Inc. (CGEM: Healthcare/Biotechnology) - SQUEEZE PLAY. CGEM 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 23.4 and a SELL short trigger at 21.67. When one of the orders is filled, cancel the remaining order and enter a 1.73 trailing stop. When you've reached a 4.28 paper profit, tighten the stop to 0.87. CGEM closed at 22.79 on Thursday. Earnings Report Date: Aug 8, 2024. Beta: -0.00. Market-Cap: 1.313B. 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
---------------- ------- -------- ------- ------ -------
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.
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