Notes From The Editor

In 2000 a writer named Malcolm Gladwell released a popular book called "The Tipping Point." After hearing about its insights for all these years, I finally decided to give it a read.

The basic premise of the book is that seemingly small changes can cause an idea or concept to "tip," or become an epidemic. With respect to say, fashion, this can mean that a certain type of shoe becomes wildly popular. It can work in the traditional definition of a spreading disease, or with the growing popularity of a product.

So what does this have to do with trading? Well, the concepts that Gladwell presents - and his explanations for the "tipping" phenomenon - are closely tied to human nature. For example, he asserts that because of the way our brains are structured, we have trouble belonging to groups of more than 150 people, because it's hard to maintain a meaningful relationship with that many individuals. Similarly, he argues that what's happening around us - the "context" - can influence our decisions in subconscious ways.

Stock movements are also the product of our fundamental human nature. Greed and fear move lead to buy/sell decisions that directly influence price action. These emotions also have their own tipping points - an instance in time when a trend becomes a torrent. You can see this on a stock chart, when prices shift from a gradual trend to a steep, parabolic rally or sell-off.

So what might cause a stock to "tip?" Oftentimes, it's the violation of an important support or resistance level. Even though the stock's underlying fundamentals might be unchanged, the context - or technicals - can shift in the blink of an eye. This, in turn, sets off a cascade effect that leads to a major price movement.

Basic assumptions about the market also change. For example, as the market spiraled lower in 2008 and into the first two months of 2009, a growing number of participants thought that stocks were deeply oversold and due for a bounce. This idea didn't tip into widespread acceptance until March 2009 - but once it did, the result was dramatic: the beginning of a sustained long-term uptrend that persists as the current bull market.

I'm not sure what Gladwell would say about trading, but I'm sure his thoughts would be fascinating. His observations also remind us that while some events might seem random (a large stock rally, for example, or the spread of a radical new idea), there are unseen forces - guided by human nature - that are influencing events.

Here's to profits,

Kent Barton
Senior Analyst

Quick List

    
Stock     05/06     05/06      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

TIGO      21.26     -0.54     21.74     20.36        1.38/0.69      1.36
TIGO      21.26     -0.54     21.74     20.36        1.38/0.69      1.36
NEX       11.11      0.38     11.42                  1.07/0.54      1.44
TBBK      20.45     -0.22     21.14      19.4        1.74/0.87       1.9
FTAI      20.26      0.75     20.65     18.83        1.82/0.91      1.96

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 indices were lower on Friday as traders debated with whether or not the Fed Bank can bring about a soft economic landing with its monetary policy tightening campaign. In economic news, consumer credit surged, job growth beat forecasts, yet labor force participation declined unexpectedly. Equities headlines included an surprise loss from Under Armour (UAA $11), and Zillow Group (ZG $37) issued much weaker revenue guidance than analysts predicted. The USD/dollar dropped slightly, gold and oil moved higher, treasuries were mixed.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 32,899.37   -98.60       -77.84    -0.24%
Nasdaq              12,144.66  -173.03      -189.98    -1.54%
S&P 500              4,123.34   -23.53        -8.59    -0.21%

NYSE Volume                      5.11B                       
NYSE Advancers                   1,006                       
NYSE Decliners                   2,297                       

Nasdaq Volume                    5.29B                       
Nasdaq Advancers                 1,179                       
Nasdaq Decliners                 3,521                       

                                 New Highs/Lows

                   04/29  05/02  05/03  05/04  05/05  05/06
                 --------------------------------------------
NYSE New Highs        24     13     27     53     53     28
NYSE New Lows        332    628    279    332    379    616
Nasdaq New Highs      35     28     37     40     21     24
Nasdaq New Lows      538    736    288    501    645  1,098
   

TRADER'S TIP: "Measuring Opinion"

The largely unpredictable nature of the market is due to the ever-changing consensus of opinion among investors and traders. Every trader should have some specific means of determining when it is likely that the consensus of opinion has changed within their chosen time frame. Technical Analysis can be very helpful in this area.

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 - 4123.34 May 6, 2022

52-Week High: 4818.62
52-Week Low: 4056.88
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4654.80
Resistance 2: 4409.65
Resistance 1: 4266.49
Pivot: 4164.50
Support 1: 4021.34
Support 2: 3919.35
Support 3: 3674.20

NASDAQ Composite - 12144.66 May 6, 2022

52-Week High: 16212.23
52-Week Low: 11990.15
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 14362.99
Resistance 2: 13368.13
Resistance 1: 12756.39
Pivot: 12373.27
Support 1: 11761.53
Support 2: 11378.41
Support 3: 10383.55
        
Dow Industrials - 32899.37 May 6, 2022

52-Week High: 36952.65
52-Week Low: 32272.64
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 36491.40
Resistance 2: 34823.53
Resistance 1: 33861.45
Pivot: 33155.66
Support 1: 32193.58
Support 2: 31487.79
Support 3: 29819.92
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, May 09, 2022:
09-May  10 am   Wholesale inventories (revision)
09-May  11 am   Consumer 1-year inflation expecations
09-May  11 am   Consumer 3-year inflation expecations

Tuesday, May 10, 2022:
10-May   6 am   NFIB small-business index
10-May  11 am   Real household debt (SAAR)

Wednesday, May 11, 2022:
11-May  8:30 am   Consumer price index
11-May  8:30 am   Core CPI
11-May  8:30 am   CPI (year-over-year)
11-May  8:30 am   Core CPI (year-over-year)
11-May   2 pm   Federal budget

Thursday, May 12, 2022:
12-May  8:30 am   Initial jobless claims
12-May  8:30 am   Continuing jobless claims
12-May  8:30 am   Producer price index (final demand)

Friday, May 13, 2022:
13-May  8:30 am   Import price index
13-May  10 am   UMich consumer sentiment index (preliminary)
13-May  10 am   UMich 5-year inflation expectations


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

TRADER'S TIP: "More on Bases and Consolidations"

Rule of thumb - the longer the sideways action, the bigger the move when price does finally break out in one direction or the other.

Stocks Covered in This Issue

COMMUNICATION SERVICES SECTOR

Millicom International Cellular S.A. (TIGO: Communication Services/Telecom Services) - SQUEEZE PLAY. Friday's trading session left TIGO in a very narrow price range after buyers and sellers fought to a near stalemate. Both sides are looking for some traction, and a breakout either way could provide a nice gain in the short term. To get aboard, set your BUY trigger at 21.74 and your SELL short trigger at 20.36. One of the orders will be triggered by upcoming price action. When your market order is filled, cancel the remaining trigger and enter a 1.38 trailing stop. Once you have a 1.36 profit, reduce the stop to 0.69. Earnings Report Date: Jul 28, 2022. Beta: 0.80. Market-Cap: 2.136B. Not Optionable.

Millicom International Cellular S.A. (TIGO: Communication Services/Telecom Services) - SQUEEZE PLAY. TIGO is stuck in a Bull/Bear deadlock. Fortunately for traders this impasse should be resolved soon, with one side or the other taking control. We want to be positioned for a potential quick move up or down, so get ready to catch this train with a BUY entry at 21.74 and a SELL short entry at 20.36. Once your trade is filled, enter a 1.38 trailing stop. Tighten it to 0.69 after a 1.36 gain. TIGO closed on Friday at 21.26. Earnings Report Date: Jul 28, 2022. Beta: 0.80. Market-Cap: 2.136B. Not Optionable.

ENERGY SECTOR

NexTier Oilfield Solutions Inc. (NEX: Energy/Oil & Gas Equipment & Services) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday NEX seemed intent on initiating a rebound. With moving average support nearby, NEX is at a logical place for Bulls to regroup and extend the familiar uptrend that shareholders have become accustomed to. On continued buying, plan on taking long entries with a BUY at 11.42. Manage risk with a 1.07 stop. Tighten your stop to 0.54 when you have a 1.44 profit. NEX ended the day at 11.11. Earnings Report Date: Aug 02, 2022. Beta: 2.43. Market-Cap: 2.711B. Optionable.

FINANCIAL SERVICES SECTOR

The Bancorp, Inc. (TBBK: Financial Services/Banks-Regional) - SQUEEZE PLAY. TBBK shareholders know what it feels like to be squeezed. Friday's slim price range reveals uncertainty on both sides of the table, a situation which often resolves itself by either Bears or Bulls quickly gaining a clear advantage. The question is "who will win?" Near-term market action tell us whether we should sell short or we should buy shares instead. TBBK closed Friday at 20.45. The plan is to enter in the right direction by placing a BUY trigger at 21.14 and a SELL short trigger at 19.4. Once TBBK establishes direction, place your triggered order. As soon as you are in the trade, place a trailing stop in the amount of 1.74. After you've collected a 1.9 profit, tighten the stop to 0.87. Earnings Report Date: Jul 27, 2022. Beta: 1.32. Market-Cap: 1.169B. Optionable.

INDUSTRIALS SECTOR

Fortress Transportation and Infrastructure Investors LLC (FTAI: Industrials/Rental & Leasing Services) - SQUEEZE PLAY. The ticker for Friday's session shows FTAI is now stuck in a tight price band. With the cyclical contraction and expansion nature of volatility in force, we should see a new period of price expansion in the days ahead. To improve the odds of catching the next directional wave, place a BUY trigger at 20.65 and a SELL short trigger at 18.83. When FTAI starts moving out of its narrow range, your order will be triggered. Once you're in the trade, cancel the opposing trigger and set a 1.82 trailing stop. Upon reaching a 1.96 profit, resize the stop to 0.91. Earnings Report Date: Jul 26, 2022. Beta: 1.94. Market-Cap: 2.01B. 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  
---------------- -------     --------    -------     ------  -------   
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.

Trader's Corner

"Two-Way Trading"

Years ago I attended a trading seminar that featured a simulated trading contest. There were approximately thirty traders who participated, with experience ranging from beginner to top professional. The larger group was randomly divided into seven or eight smaller groups, and each team competed for the top prize. A daily stock chart with several weeks of data was displayed on the screen at the front of the room. The chart had no symbol or date - only price, volume, and a MACD histogram. There was no way to tell how old the chart was or what time period it covered.

The contest rules were simple. Everyone was given a few minutes to review and discuss the chart in their small group, then write down whether they would go long, short, or stand aside. Each team had to give the specific setup for their entry - such as "if price rises to 20, then buy shares and place a 1-point trailing stop" or perhaps "if price drops down to the 50 day moving average, then rises to close above the high of that same bar, enter a buy order .25 above the close and place a 2-point trailing stop.

About a dozen charts were reviewed, each team's criteria were applied, and the results were calculated. There were various degrees of success, but one team's performance went well beyond the rest. Oddly, the top team was made up of three beginners who had absolutely no experience trading, and one veteran trader who had been in the business for many years. It was obvious that the three "rookies" didn't come up with the winning strategy, so later that day I asked the veteran trader if we could get together and talk about the different aspects of his approach and why it was so effective. What I learned during that meeting and in follow up conversations had a huge positive impact on my personal trading.

When it comes to evaluating trade setups, it doesn't always have to be one way or the other. Actually, in many cases you are much better off if you let the market decide whether you should go long, or go short, or stand aside. This is what I call "two-way trading."

To begin, you have to look at trade setups in a different light. Instead of trying to pre-determine which way price will move, assume that it could go in either direction and plan for both. This requires us to set aside our directional expectations. When you look at a price pattern you probably see it as either a long or a short, but the odds are good that it will work in either direction. The only problem is that we don't know which way it will go, so the solution is to let the price action tell us.

Here is how it works. The best price patterns usually contain two distinct support and resistance levels, or what some traders call pivot points. "Two-Way Trading" considers both of these levels when setting triggers for trade execution. For example, a buy entry is triggered if prices move up and break through resistance, while a short sale is triggered if prices move down and break below support.

By selecting setups where the support and resistancelevels are clearly defined, the trade can be entered with very little risk. The low risk comes from the fact that should the initial move fail, price doesn't have to move very far back to confirm that it's time to get out.

The support and resistancelevels can be either horizontal or trending - both work very well. Some of the best setups occur when prices are squeezed within a narrowing range of support and resistance, such as in a triangle formation. These sorts of trending support and resistancelevels aren't as obvious to the untrained eye, but they can provide excellent opportunities that most traders miss.

The potential up-moves and down-moves for each Two-Way Trade contain different reward/risk ratios, and in most cases a move in one direction offers considerably more profit potential than the other. I sometimes come across setups where one side appears to have a superior chance of being triggered but there is very little reward potential, while a move in the opposite direction appears unlikely but would be a huge winner if it did take place.

Two-Way Trading makes a trader's job easier because each pattern offers two potential trades. Though this method is very powerful, it isn't overly complicated. You locate price patterns with clear support and resistancelevels that offer reasonable risk and solid reward potential in either direction, then set your entry triggers and stops near the support and resistancelevels - simple as that!

~ Thomas Sutton

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

The RightLine Report is an information service for investors and traders. It is not a solicitation nor a recommendation or offer to buy or sell securities. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. The publishers of The RightLine Report are not brokers or financial advisors, and are not acting in any way to influence the purchase or sale of any security. Stock picks, entry points and exit points should be considered an information resource to assist the trader in developing a trading plan and it is the sole responsibility of the reader to conduct his or her own due diligence before executing a trade. Trading securities should be considered speculative with a high degree of volatility and risk.

The publishers of The RightLine Report recommend that anyone trading securities should do so with caution, exercise prudent trading discipline and have a personal risk management strategy in place before doing so. It is possible at this or some subsequent date, the publishers and staff of The Pro Right Line Corp. may own, buy or sell securities presented. The Pro Right Line Corp. is not a financial advisory service. Its publishers, owners or investors, are not liable for any losses or damages, monetary or otherwise, that result from the content of The RightLine Report. Past RightLine Report performance may not be indicative of future performance.

All subscriptions and/or use of the RightLine.net website are subject to RightLine's "Terms of Use" and "Subscriber Terms & Conditions" which are posted at www.rightline.net.

Any REDISTRIBUTION of the above information, without The RightLine's written consent, is STRICTLY PROHIBITED.

Copyright / The Pro Right Line Corporation - All Rights Reserved

Click Here To Unsubscribe