May 5, 2022 - The RightLine Report
Notes From The Editor
The News That Moves
Most of the mainstream media assumes that price movement in the stock market is all news driven. They constantly point to news events to explain why the stock market has just moved up or down. Anytime the market moves contrary to the news, it is presented as "abnormal."
As traders we know that this sort of divergence between news and price direction isn't that uncommon. It doesn't take too many years of trading to realize that while news often impacts the market, it certainly isn't the only reason that stocks move up or down.
Although there are plenty of times when the news and price trend are in harmony with each other, there are just as many times when they aren't. Whenever news seems to imply that prices should go in the opposite direction of the trend, the nature of the stock market dictates that the trend will usually prevail over time.
Becoming familiar with the nature of trends helps us to understand the extent of the relationship between news events and price movement. Just as important, support and resistance levels along the course of these trends have the potential to influence - and even regulate - the direction and extent of price movement.
From a trading perspective it's wise to locate these levels before price gets there. Not only do support and resistance zones provide low risk entry points, they can also be used as profit targets or pivot points for reversals.
Bottom Line: The answer to why stock prices don't always follow the news can be found by studying the ebb and flow of price action displayed in the charts. Yes "the news" does move stocks, but the movement usually takes place in harmony with the tenants of technical analysis.
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 05/05 05/05 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
PJT 66.54 -0.69 67.73 4.31/2.16 3.26
SKYW 27.97 -0.80 28.97 26.89 2.08/1.04 2
FCUV 14.04 0.31 14.37 1.23/0.62 2.32
ALGM 25.76 -0.61 26.46 24.44 2.02/1.01 2.24
FARO 35.54 -1.27 37 33.83 3.17/1.59 3.5
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 fell hard on Thursday, wiping out Wednesday's gains following the Fed Bank's monetary policy decision and successive comments from Chairman Jerome Powell. The Central Bank raised its fed funds target rate by 50 basis points, and Powell dispelled speculation of more aggressive hikes in the days ahead. A light economic calendar showed initial jobless claims were above forecasts and preliminary nonfarm productivity for the first quarter fell sharply. In equities, eBay (EBAY $48) topped forecasts yet cut its guidance, and ConocoPhillips (COP $103) reported a near 4X surge in quarterly profits. Gold, the USD/dollar and oil moved higher, treasuries were lower, rasing yields.
May 4, 2022 May 5, 2022
-------------------- --------------------
Dow 34,061.06 932.27 32,997.97 -1,063.09
Nasdaq 12,964.86 401.10 12,317.69 -647.16
S&P 500 4,300.17 124.69 4,146.87 -153.30
NYSE Volume 5.21B 5.08B
NYSE Advancers 2,708 395
NYSE Decliners 613 2,933
Nasdaq Volume 5.53B 5.28B
Nasdaq Advancers 3,424 780
Nasdaq Decliners 1,345 3,934
New Highs/Lows
04/28 04/29 05/02 05/03 05/04 05/05
--------------------------------------------
NYSE New Highs 22 24 13 27 53 53
NYSE New Lows 523 332 628 279 332 379
Nasdaq New Highs 43 35 28 37 40 21
Nasdaq New Lows 830 538 736 288 501 645
Stocks Covered Today Stock Splits
TRADER'S TIP: "What Is A Warrant?"
A warrant is a certificate entitling the holder to buy a specific number of shares at a specific price, usually above the current market price at the time of issuance, for an extended period anywhere from a few years to forever. Corporations often bundle warrants with another class of security - such as preferred stock - to enhance the marketability of the other class. Warrants are like call options, but with much longer time spans - sometimes years.
Warrants are offered by corporations, while exchange-traded call options are not issued by firms. If the price of the security rises to above that of the warrant's exercise price, then the investor can buy the security at the warrant's exercise price and resell it for a profit. Otherwise, the warrant will simply expire or remain unused. Warrants are listed on options exchanges and trade independently of the security with which it was issued.
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 - 4146.87 May 5, 2022
52-Week High: 4818.62
52-Week Low: 4056.88
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4492.19
Resistance 2: 4346.64
Resistance 1: 4239.28
Pivot: 4201.09
Support 1: 4093.73
Support 2: 4055.54
Support 3: 3909.99
NASDAQ Composite - 12317.69 May 5, 2022
52-Week High: 16212.23
52-Week Low: 12183.56
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 13945.36
Resistance 2: 13249.65
Resistance 1: 12792.14
Pivot: 12553.94
Support 1: 12096.43
Support 2: 11858.23
Support 3: 11162.52
Dow Industrials - 32997.97 May 5, 2022
52-Week High: 36952.65
52-Week Low: 32272.64
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 35717.84
Resistance 2: 34524.98
Resistance 1: 33751.09
Pivot: 33332.12
Support 1: 32558.23
Support 2: 32139.26
Support 3: 30946.40
Stocks Covered Today Stock Splits
Market Calendar
ECONOMIC REPORTS AND EVENTS (all times are Eastern): Monday, May 02, 2022: 02-May 9:45 am 02-May 10 am ISM manufacturing index 02-May 10 am Construction spending Tuesday, May 03, 2022: 03-May 10 am Job openings 03-May 10 am Quits 03-May 10 am Factory orders 03-May Varies Motor vehicle sales (SAAR) Wednesday, May 04, 2022: 04-May 8:15 am ADP employment report 04-May 8:30 am International trade balance 04-May 9:45 am 04-May 10 am ISM services index 04-May 2 pm FOMC statement 04-May 2:30 pm Fed Chair Jerome Powell news conference Thursday, May 05, 2022: 05-May 8:30 am Initial jobless claims 05-May 8:30 am Continuing jobless claims 05-May 8:30 am Productivity (SAAR) 05-May 8:30 am Unit labor costs (SAAR) Friday, May 06, 2022: 06-May 8:30 am Nonfarm payrolls 06-May 8:30 am Unemployment rates 06-May 8:30 am Average hourly earnings 06-May 8:30 am Labor force participation rate, 25-54 06-May 3 pm Consumer credit 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: "Feeling Lucky?"
Whether we believe it or not, we ALL get lucky from time to time. Whenever a trade offers you a much bigger and faster profit than anticipated, lock it in! Windfalls do happen, so be ready to take gains on at least half of your position and then trail a very tight stop on the balance.
Stocks Covered in This Issue
FINANCIAL SERVICES SECTOR
PJT Partners Inc. (PJT: Financial Services/Capital Markets) - BULLISH BOUNCE. PJT's positive weekly uptrend is still intact despite recent selling that has driven share prices lower. Price action on Thursday 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 PJT back in step with the bullish weekly trend, so our BUY entry trigger is set at 67.73. Once you hold a position, trail a stop of 4.31. Tighten it to 2.16 on a 3.26 gain. PJT closed at 66.54 on Thursday. Earnings Report Date: Jul 27, 2022. Beta: 0.89. Market-Cap: 1.639B. Optionable.
INDUSTRIALS SECTOR
SkyWest, Inc. (SKYW: Industrials/Airlines) - 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. SKYW 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 28.97 and a SELL short trigger at 26.89. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 2.08 which can be tightened to 1.04 on a 2 gain. SKYW closed Thursday at 27.97. Earnings Report Date: Jul 27, 2022. Beta: 1.89. Market-Cap: 1.413B. Optionable.
TECHNOLOGY SECTOR
Focus Universal Inc. (FCUV: Technology/Scientific & Technical Instruments) - BULLISH BOUNCE. The charts for FCUV show that despite the downward pressure from sellers recently, the weekly uptrend is still going strong. Buyers showed up again on Thursday, resulting in the early stages of a rebound that started near moving average support. The resulting Bullish Bounce set-up offers a potential entry point for a long play. Set your trigger to BUY shares at 14.37, and follow your entry with a trailing stop of 1.23. Tighten it to 0.62 when a 2.32 profit is reached. FCUV ended the latest session at 14.04. Earnings Report Date: N/A. Beta: -0.43. Market-Cap: 607.366M. Optionable.
Allegro MicroSystems, Inc. (ALGM: Technology/Semiconductors) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in ALGM'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 26.46 and a SELL order at 24.44. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.02 trailing stop. Tighten the stop to 1.01 once you have a 2.24 gain. ALGM closed Thursday at 25.76. Earnings Report Date: May 10, 2022. Beta: N/A. Market-Cap: 4.892B. Optionable.
FARO Technologies, Inc. (FARO: Technology/Scientific & Technical Instruments) - SQUEEZE PLAY. FARO 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 37 and a SELL short trigger at 33.83. When one of the orders is filled, cancel the remaining order and enter a 3.17 trailing stop. When you've reached a 3.5 paper profit, tighten the stop to 1.59. FARO closed at 35.54 on Thursday. Earnings Report Date: Jul 26, 2022. Beta: 1.40. Market-Cap: 649.01M. 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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