September 10, 2019 - The RightLine Report
Notes From The Editor
One of the most oft-repeated pieces of stock market advice is to "trade what you see, not what you think." This axiom seems to suggest two things: don't trade on emotion, and base your decisions on observations rather than expectations. After several losing trades, I learned early in my trading career that these words should be taken to heart.Keeping emotions in check is especially important in strong Bull or Bear markets. Greed, hope, and fear are contagious and can spread like wildfire when the crowd reaches extremes. Take the dot-com boom just before Y2K, when tech stocks were climbing into the stratosphere.
Back then, traders would rush in with buy orders based on the simple expectation of higher prices. Neither the fundamentals (which showed extremely high valuations) nor the technicals (which were blatantly overbought) played a role in their decisions. The cycle of frenzied buying finally spun out of control, and traders who ignored signs of a market downturn suffered major hits to their accounts.
The same dynamic is repeated every day on a smaller scale. I've seen this first-hand on many occasions, watching stocks poised to break out. Typically when they finally cross over resistance, many traders will jump onboard on the expectation of an upward surge. However, the overall technical picture doesn't always support this outlook; volume can be weak on the breakout, the oscillators may already be overbought, and the stock can lag behind the broader market. Within a few minutes the upward spike can reverse into a "head-fake" pullback, and traders who buy the breakout may end up holding losing positions.
The beauty of technical analysis is that it forces you to trade based on what is happening. If certain conditions aren't met, the order is never placed. But with the "trade what you see" approach, is there any room for instinct and "gut-feeling"? You bet!
Webster's defines "intuition" as "instinctive knowing, without the use of rational processes." Trading involves interpreting countless pieces of information. Things like relative strength, oscillator movement, price action, and market news all factor into buy/sell decisions. The gut-feeling that sometimes arises when making a trading decision can be thought of as your brain's overall reaction after processing all that information.
Sometimes a trade set-up looks good but just doesn't "feel right." When this happens, double check to see that you're using a solid risk management strategy that includes position sizing and stop placement. This will ensure that the gut-feeling doesn't stem from a fear of taking an unacceptable loss. If the instinct still remains, it may be your subconscious mind telling you that there's something amiss with the set-up.
When in doubt, go with your gut! The great thing about the market is that there's always another trading opportunity just around the bend.
Kent Barton
Senior Analyst
Stocks Covered Today Stock Splits
Quick List
| Stock Symbol | 09/10 Price | 09/10 +/- | Buy Entry | Short Entry | Trailing Stops Initial/Tighten | Gain Amount |
|---|---|---|---|---|---|---|
| LVGO | 23.35 | -0.12 | 24.28 | 22.19 | 2.09/1.04 | 5.68 |
| INMD | 25.20 | -0.85 | 26.88 | 24.00 | 2.88/1.44 | 3.58 |
| CGC | 27.43 | 0.20 | 27.95 | 25.56 | 2.39/1.20 | 2.86 |
| NAV | 28.77 | -0.05 | 29.58 | 27.47 | 2.11/1.05 | 2.08 |
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
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Stocks Covered Today Stock Splits
Market Summary
US stocks finished the Tuesday session in a mixed mode as the S&P 500 and the Dow inched higher, while the Nasdaq dipped slightly lower. Domestic economic news included declines in small business optimism and job openings. On the equities front, Moody's downgraded Ford Motor Company's (F $9) credit rating to junk status (get ready for an avalanche of jokes from Chevy owners) and HD Supply Holdings (HDS $39) topped earnings expectations but lowered its guidance. The USD/dollar and treasury yields were up, oil prices were mixed and gold was lower.
Sep 9, 2019 Sep 10, 2019
-------------------- --------------------
Dow 26,836 +38.05 26,909 +73.92
Nasdaq 8,087 -15.64 8,084.16 - 3.28
S&P 500 2,978 -0.28 2,979 +0.96
NYSE Volume 4.20B 4.39B
NYSE Advancers 1809 1712
NYSE Decliners 1132 1218
Nasdaq Volume 2.30B 2.37B
Nasdaq Advancers 1892 2006
Nasdaq Decliners 1257 1128
New Highs/Lows
09/02 09/04 09/05 09/06 09/09 09/10
--------------------------------------------
NYSE New Highs 0 219 178 138 118 82
NYSE New Lows 0 30 11 20 16 10
Nasdaq New Highs 0 81 103 80 74 48
Nasdaq New Lows 0 83 52 47 60 42
Stocks Covered Today Stock Splits
TRADER'S TIP: "Every Day Is A New Day"
Traders should assume nothing about future market direction. Begin each day unbiased, and let the price action determine whether you're bullish or bearish.
The Technical Analyst
For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Boost Your Profits With Moving Averages".
S&P 500 - 2979.39 September 10, 2019 52-Week High: 3027.98 52-Week Low: 2346.58 Daily Trend: UP Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 3140.16 Resistance 2: 3046.15 Resistance 1: 3012.43 Pivot: 2952.14 Support 1: 2918.41 Support 2: 2858.12 Support 3: 2764.11 NASDAQ Composite - 8084.16 September 10, 2019 52-Week High: 8339.64 52-Week Low: 6190.11 Daily Trend: UP Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 8602.46 Resistance 2: 8315.36 Resistance 1: 8209.21 Pivot: 8028.27 Support 1: 7922.11 Support 2: 7741.16 Support 3: 7454.07 Dow Industrials - 26909.43 September 10, 2019 52-Week High: 27398.68 52-Week Low: 21712.53 Daily Trend: UP Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 28310.81 Resistance 2: 27428.16 Resistance 1: 27112.81 Pivot: 26545.51 Support 1: 26230.16 Support 2: 25662.86 Support 3: 24780.21
Stocks Covered Today Stock Splits
Market Calendar
EARNINGS REPORTS RELEASE DATES:For a complete list of upcoming earnings announcements, visit the RightLine Earnings Calendar.
ECONOMIC REPORTS AND EVENTS (all times are Eastern):
Monday, September 09, 2019: 3 pm Consumer credit Tuesday, September 10, 2019: 6 am NFIB small business index 10 am Job openings 10 am Real median household income Wednesday, September 11, 2019: 8:30 am Producer price index 10 am Wholesale inventories Thursday, September 12, 2019: 8:30 am Weekly jobless claims 8:30 am Consumer price index 8:30 am Core CPI 2 pm Federal budget Friday, September 13, 2019: 8:30 am Retail sales 8:30 am Retail sales ex-autos 8:30 am Import prices 10 am Consumer sentiment index 10 am Business inventoriesFor 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: "Drawing Trend Lines - The Basics"
Every trader and investor should learn to recognize and identify price trends within their chosen time frame. This is a relatively simple - yet very valuable - skill used to confirm the direction that an individual stock or market is moving. While overall price movement on a chart may seem obvious to some, even market strategists at major brokerages and trading institutions use trend lines to help determine exactly when a current trend is in play.
In a nutshell, a trend line is simply a straight line that connects a series of highs or lows on a price chart. Learning to draw trend lines isn't complicated at all, and most charting software includes a trend line tool that makes learning this skill even easier. Look at a price chart in any time frame and notice the high points across the top. Then imagine that the highs are peaks of a mountain range that you are viewing from a distance. Starting on the left side, draw a straight line across the top of the peaks so that only the two highest peaks are connected.
Is the line moving up? Or is it moving down? If the line is up, then the mountain peaks are in an up-trend from left to right. If the line is headed down, then the trend is down. As with most skills, drawing a trend line isn't always so simple. Some traders prefer to use opening or closing prices instead of highs, while others will use any of these to find the best "fit." Regardless of your preferred method, taking the first steps towards learning to recognize a trend isn't difficult at all.
Stocks Covered in This Issue
HEALTHCARE SECTORLivongo Health, Inc. (LVGO: Healthcare/Medical Devices) - SQUEEZE PLAY. Trader indecision has put LVGO 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 24.28 and a SELL short entry at 22.19. Now it's up to LVGO to show us which entry will be filled. Once the trade is underway place a 2.09 trailing stop, which can be tightened to 1.04 after you achieve a 5.68 profit. LVGO closed on Tuesday at 23.35. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 2.496B. Optionable.
InMode Ltd. (INMD: Healthcare/Medical Devices) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in INMD's narrowest trading range of the past seven sessions. With neither group able to take complete control on Tuesday, 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 26.88 and a SELL order at 24.00. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.88 trailing stop. Tighten the stop to 1.44 once you have a 3.58 gain. INMD closed Tuesday at 25.20. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 664.214M. Not Optionable.
Canopy Growth Corporation (CGC: Healthcare/Drug Manufacturers - Specialty & Generic) - 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. CGC traders reached this state of stand-off on Tuesday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 27.95 and a SELL short trigger at 25.56. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 2.39 which can be tightened to 1.20 on a 2.86 gain. CGC closed Tuesday at 27.43. Earnings Report Date: N/A. Beta: 3.68. Market-Cap: 8.162B. Optionable.
INDUSTRIALS SECTOR
Navistar International Corporation (NAV: Industrials/Truck Manufacturing) - SQUEEZE PLAY. NAV traders on both sides of the fence are now locked in a head-to-head shootout. Tuesday'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 29.58 and a SELL short trigger at 27.47. When one of the orders is filled, cancel the remaining order and enter a 2.11 trailing stop. When you've reached a 2.08 paper profit, tighten the stop to 1.05. NAV closed at 28.77 on Tuesday. Earnings Report Date: N/A. Beta: 2.19. Market-Cap: 2.487B. 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
---------------- ------- ------- ------- ------ -------
SPS Commerce SPSC JUL 25 AUG 23 2-for-1 Yes
Penns Woods Banc PWOD SEP 3 OCT 1 3-for-2 No
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.