September 17, 2022 - The RightLine Report

                      NOTES FROM THE EDITOR

Healthy Trading Behavior

As traders we can all benefit from regular self-evaluation. Viewing ourselves objectively is a valuable skill, so long as we aren't too hard or too easy in the way we apply it. To help gain insight into your personal trading behaviors, here are a few questions to ask yourself when trading ...

Am I acting rationally and following a planned course of action? Or have I discarded my plan and started chasing after anything that moves? Am I quietly confident and present a disciplined approach toward each trade? Or am I thinking about giving up and never buying another stupid stock again? Do I buy too many shares and then sweat nervously throughout the entire trade? Or do I use a conservative approach when sizing my positions in order to avoid feeling uncomfortable as the trade progresses?

An honest exploration of your answers to these questions should help reveal the emotional components of your trading behaviors - both positive and negative. As you objectively reflect on your responses to your questions and answers, you will begin to recognize the thoughts and feelings that produce any specific action.

This method of evaluation makes you more aware of the subtle neural processes involved in creating all of your thoughts and behavior. Tapping into this internal communication process let's you make adjustments as needed to improve your effectiveness as a trader.

It's really not very complicated, although intellectually knowing the correct thing to do in a situation is not the same as being emotionally aligned with it. For example, we all know that we should practice Risk Control on every trade. This basically means that we first select our position size using the proven methods discussed on the RightLine website, place the trade at the suggested entry level, and then use stops to protect against a possible loss.

Simple enough, right? Intellectually, yes, but the first emotional challenge comes if the trade moves against us and reaches our planned stop. Now we have to make a decision. Do we accept the loss, which may have occurred very quickly, or do we give in to our emotions, ignore the stop and start hoping that the trade will turn around? As easy as it is to know that the wisest course of action is to follow the trading plan, it can be very difficult to accept when the moment comes.

At this point most traders first try using sheer willpower to force themselves to follow the plan. However, as the emotional situation heats up, the temptation to abandon the plan often prevents them from getting out of the trade immediately. While setting an automatic sell- stop in advance certainly helps, it doesn't always stop a trader from cancelling the stop when a trade goes the wrong way. We might as well face the fact that our emotions are usually more powerful than our plans.

Don't worry if this happens to you - it's completely normal. The internal conflict comes from an emotionally charged "program" which creates the avoidance behavior. It is reluctant to make changes and accept new ideas, even when the new ideas are better than the old ones. "Losing" is something that we've all been conditioned - programmed - to avoid, so taking a loss willingly is a brand new concept for most of us. Just thinking about a financial loss causes the vast majority of traders to feel uncomfortable. To make it easier to accept, you have to understand how that part of you thinks and feels about taking a loss, and then do a little "reprogramming."

Ask yourself ... Is it wise to take a small intelligent loss in order to avoid a much bigger, unintelligent loss? Now see if you have thoughts and feelings for both a yes and a no answer. "Yes, it's smarter to take a small loss, but no, it doesn't feel good at all ..." is a typical thought response which reveals a conflict between emotions and desired behavior.

This increased awareness of the relationship between thoughts and emotions enables you to change and improve the quality of the emotions that generate undesired behavior. The improved emotional state allows integration of conflicting emotions, thoughts and actions into a cooperative team. The process helps resolve inner cognitive clashes that produce unwanted behaviors.

Bottom Line: Though willpower wins over emotions initially, emotions eventually win over willpower - at least in most cases. Studies involving traumatized war veterans show that emotionally charged memories can cause unwanted behavior. The first step in the direction of improving any behavior is to first be aware of the link between your memories, emotions and behaviors. Then you can go about the process of changing any negative emotions that relate to specific memories in order to create the desired behavior.

We'll have more on the "how to" part of this subject in future Reports. In the meantime be sure to pay attention to any thoughts and feelings associated with trading related behavior that you want to change or improve.

Enjoy the weekend!

~Thomas Sutton, Editor

                           "QUICK LIST"

Stock     09/16     09/16      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

X         20.14     -0.16      20.6     19.12        1.48/0.74      2.02
VIR       20.02     -0.29      20.4                  1.47/0.74      2.26
RNA       20.83     -0.37      21.4     19.53        1.87/0.94      2.88
KDNY      20.91     -0.65     21.47     19.91        1.56/0.78      2.36
PIXY      20.19      0.93     20.97     17.82        3.15/1.58       8.6

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" at In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to

To learn more about controlling risk go to the RightLine Risk Control System at

For a glossary of terms unique to The RightLine Report go to:

Questions? Send us an email using our contact form at:
                           MARKET SUMMARY

US stocks were lower on Friday as traders remained bearish for the third week in a row in the midst of inflationary concerns. Inflation data released this week strengthened expectations that the Federal Reserve Bank and other central banks around the globe will continue to be very aggressive with monetary policy, particularly when it comes to raising interest rates. In equity headlines, the price of General Electric (GE $66) shares dropped after the company warned that supply chain issues will negatively impact its cashflow, while FedEx (FDX $161) plunged over 20% following an earnings pre-announcement that included guidance well below expectations. Economic highlights include an uptick in consumer sentiment, though the increase was at a lower rate than predicted. Treasuries were mixed, the USD/dollar was lower, oil prices closed near even, and gold ended the session higher.

                     Friday                 On The Week      
                  --------------------   --------------------
Dow                 30,822.42  -139.40     -1329.29    -4.13%
Nasdaq              11,448.40  -103.95      -663.91    -5.48%
S&P 500              3,873.33   -28.02      -194.03    -4.77%

NYSE Volume                      8.25B                       
NYSE Advancers                     862                       
NYSE Decliners                   2,347                       

Nasdaq Volume                    7.64B                       
Nasdaq Advancers                 1,415                       
Nasdaq Decliners                 3,151                       

                                 New Highs/Lows

                   09/09  09/12  09/13  09/14  09/15  09/16
NYSE New Highs        36     42     17     33     18     13
NYSE New Lows         29     37    105    183    176    362
Nasdaq New Highs      48     57     37     37     25     26
Nasdaq New Lows       95     97    218    265    266    477

                              TRADER'S TIP:  

TRADER'S TIP: "Bases Loaded?"

Success rarely comes from over-leveraging your account and putting everything on one or two rolls of the dice. Yes, high-octane homeruns are nice, but steady base hits are less risky and add up over time. Be patient - you'll get your share of points as a result of trading smart.

Take a different route than the crowd by locating low-risk trade setups and applying Risk Control to every position. Disciplined consistency may not be as dramatic as shooting wildly from the hip, but you're much more likely to hit your profit target.
                         THE TECHNICAL ANALYST

This section contains important technical data for the three major market averages -- the S&P 500, the Nasdaq Comp Index, and the Dow Industrial Average.

For guidance on how to use this information, go to:
S&P 500 - 3873.33 September 16, 2022

52-Week High: 4818.62
52-Week Low: 3636.85
Daily Trend: DOWN
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4507.62
Resistance 2: 4225.42
Resistance 1: 4049.37
Pivot: 3943.22
Support 1: 3767.17
Support 2: 3661.03
Support 3: 3378.83
NASDAQ Composite - 11448.40 September 16, 2022 52-Week High: 16212.23 52-Week Low: 10565.14 Daily Trend: DOWN Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 13585.04 Resistance 2: 12631.77 Resistance 1: 12040.08 Pivot: 11678.50 Support 1: 11086.81 Support 2: 10725.23 Support 3: 9771.96
Dow Industrials - 30822.42 September 16, 2022 52-Week High: 36952.65 52-Week Low: 29653.27 Daily Trend: DOWN Weekly trend: DOWN Weekly Pivot Levels Resistance 3: 35200.10 Resistance 2: 33246.14 Resistance 1: 32034.28 Pivot: 31292.18 Support 1: 30080.32 Support 2: 29338.22 Support 3: 27384.26
************************** MARKET CALENDAR **************************
--ECONOMIC REPORTS AND EVENTS (all times are Eastern):
MONDAY, SEPT. 19					
10 am	NAHB home builders' index	Sept

TUESDAY, SEPT. 20					
8:30 am	Building permits (SAAR)	Aug
8:30 am	Housing starts (SAAR)	Aug

10 am	Existing home sales (SAAR)	Aug
2 pm	Federal Reserve statement
2:30 pm	Fed Chair Jerome Powell news conference
8:30 am	Initial jobless claims	Sept. 17
8:30 am	Continuing jobless claims	Sept. 10
8:30 am	Current account deficit (% of GDP)	Q2
10 am	Leading economic indicators	Aug

FRIDAY, SEPT. 23					
9:45 am	S&P U.S. manufacturing PMI (flash)	Sept
9:45 am	S&P U.S. services PMI (flash)	Sept

For a chart of typical Up or Down market reactions to specific major US economic reports, go to "Economic Indicator Effects" at this link:
                              TRADER'S TIP: 

TRADER'S TIP: "Keep It Simple"

When it comes to trading, bigger and more complex methods aren't usually better. However, over-simplification can have the same negative effects as over-complication. When trimming back unnecessary components from your trading approach, be sure to avoid increasing risk. All successful traders maintain a balance, with most leaning toward the KISS side of the equation.

                      STOCKS COVERED IN THIS ISSUE    


United States Steel Corporation (X: Basic Materials/Steel) - SQUEEZE PLAY. Traders are feeling the pressure as X's intra-day price range on Friday shrunk to the narrowest spread in over a week. The tension between buyers and sellers should provide enough pent-up engergy for a breakout move in the days ahead, so get ready to trade with the new trend. To achieve that, place a BUY entry at 20.6 and a SELL short entry at 19.12. X's price movement will decide which entry is filled. As soon as you're in the trade, enter a 1.48 trailing stop. Tighten it to 0.74 after you get a 2.02 gain. X closed Friday at 20.14. Earnings Report Date: Oct 26, 2022. Beta: 2.15. Market-Cap: 4.778B. Optionable.


Vir Biotechnology, Inc. (VIR: 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. VIR's reaction to support on Friday created a Bullish Bounce setup with a BUY entry trigger at 20.4. Use a 1.47 trailing stop, which should work well with VIR's typical daily range. Tighten it to 0.74 on a 2.26 profit. VIR closed at 20.02 on Friday. Earnings Report Date: Nov 02, 2022. Beta: -0.29. Market-Cap: 2.655B. Optionable.

Avidity Biosciences, Inc. (RNA: Healthcare/Biotechnology) - SQUEEZE PLAY. A look at RNA's daily chart shows what a price squeeze is all about. The constricted high-low daily trading range has produced a setup similar to a tightly coiled spring. Expect price to move sharply soon, with the direction yet to be determined. Let the upcoming market action resolve whether you will buy shares or sell short. To capture a move either way, place a BUY trigger at 21.4 and a SELL short trigger at 19.53. Once RNA shows which way it's headed, place your triggered entry order. As soon as your order is filled, follow with a trailing stop of 1.87 and tighten to 0.94 on a 2.88 gain. RNA closed Friday at 20.83. Earnings Report Date: Nov 07, 2022. Beta: 0.88. Market-Cap: 1.086B. Optionable.

Chinook Therapeutics, Inc. (KDNY: Healthcare/Biotechnology) - SQUEEZE PLAY. Friday's trading action forced KDNY's daily price range into an abnormally narrow state. This translates into opportunity; for the cyclical nature of price volatility is to shrink extensively, then swell rapidly as shares move in one direction or another. Instead of trying to predict the direction KDNY will take when price volatility begins to increase, we'll set both a BUY (long) and a SELL (short) trigger to get us into the right trade. Be ready to BUY shares at 21.47 if KDNY moves higher, and place your order to SELL short at 19.91 if price declines to that level. As usual follow your entry with a trailing stop, 1.56 should be sufficient. Reduce your stop to 0.78 on a 2.36 gain. KDNY closed Friday at 20.91. Earnings Report Date: Nov 01, 2022. Beta: N/A. Market-Cap: 1.315B. Optionable.


ShiftPixy, Inc. (PIXY: Industrials/Staffing & Employment Services) - SQUEEZE PLAY. Friday's narrow price range has created a potentially profitable setup in PIXY, as sellers and buyers find themselves in a near tie for control of price direction. The next short-term trend could go either way, so prepare for a move out of the draw within the next day or so. Set a BUY entry at 20.97 and a SELL short entry at 17.82. Let PIXY's price action determine your long or short entry. Once the order is filled, place a 3.15 trailing stop, and tighten it to 1.58 upon getting a 8.6 gain. PIXY closed Friday at 20.19. Earnings Report Date: N/A. Beta: 1.49. Market-Cap: 183.999M. Optionable.

IMPORTANT: Before entering any recommended positions, always use the RightLine "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 SPLIT SUMMARY

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 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  
---------------- -------     --------    -------     ------  -------   
Nasdaq Inc        NDAQ       7/20/2022  8/29/2022    3-for-1   Yes
Tesla             TSLA       8/5/2022   8/25/2022    3-for-1   Yes
Palo Alto Net     PANW       8/23/22    9/14/22      3-for-1   Yes

For a closer look at the different stages of a Stock Split go to:

                           TRADER'S CORNER

"Morning Gap Strategies"

Having trouble with those irritating morning gaps? You're not alone. Many of us spend hours working on new setups, only to watch them go up in smoke overnight. But there's no need to throw out all of your hard work just yet. You can do a quick analysis, adjust your trading strategy and get into a good position well after the crowd pulls the trigger on a gap play.

Many traders still place market orders before the open and walk away. Unfortunately, this is a sucker move that yields the worst fills imaginable. Take a few extra minutes to plan your gap entry, and you'll get much better prices. No, this isn't a daytrading column, although it will benefit anyone who plays in the intraday markets. It's for swing traders trying to fine-tune their entries and get positioned where they can take home the most money. Here are some strategies you can use.

See Chart -

Stand aside at the open, and use the third-bar swing to find the best gap entry. This is a dependable reversal or expansion move on the five- minute chart, occurring 11 or 12 minutes into the new trading day. This phenomenon is a relic of the old 15-minute quote delay. In past years, painting the tape before retail investors could access stock prices ensured a few extra pennies for market insiders. Because retailers were the last "paper" in the door, natural forces would then take over and trigger reversals or breakouts. Although real-time market access has grown substantially, this third-bar swing still shows its face on many days.

See Chart -

Let the stock draw the first three five-minute bars, and then use the high and low of this "three-bar range" as support and resistance levels. A buy signal issues when price exceeds the high of the three- bar range after an up gap. A sell signal issues when price exceeds the low of the three-bar range after a down gap. It's a simple technique that works like a charm in many cases. If you use this technique, though, a few caveats are in order to avoid whipsaws and other market traps. The most common is a first swing that lasts longer than three bars. If an obvious range builds in four, five or even six bars, use those to define your support and resistance levels. Also consider the higher noise level in five-minute charts. A breakout that extends only a tick or two can be easily reversed and trap you in a sudden loss. So let others take the bait at these levels, while you find pullbacks and narrow range bars for trade execution.

See Chart -

Gap location is more important than the gap itself. Does the opening bar push price into longer-term support or resistance? A strong up gap may force a stock through several resistance levels and plant it firmly on top of new support. Or it can push it straight into an impenetrable barrier, from which the path of least resistance is straight down.

See Chart -

Three-bar range support and resistance often need to complete a testing pattern before they will yield to higher or lower prices. This comes in the form of a small cup and handle, or an inverse cup-and-handle pattern. Simply stated, price reverses the first time it tries to exceed an old high or low, but succeeds on the subsequent try.

Price gaps generate other action levels as well. The most obvious is the support line in an up gap (or resistance line in a down gap). We'll call these "reverse break" lines. Violation of the reverse break can trigger price acceleration toward the gap fill line. These market mechanics make perfect sense: everyone who entered a position in the direction of the gap is losing money once price moves past the reverse break line.

See Chart -

The gap fill line marks support in an up gap and resistance in a down gap. In other words, the odds favor a reversal when price reaches it. Paradoxically, this is a terrible place for swing traders to enter new positions. The reverse break line will resist price from re-entering the three-bar range. In fact, price bouncing like a pinball from the fill line to the reverse break line and back to the fill line sets off a powerful trading signal in the opposite direction. It predicts the demise of the gap and a significant reversal.

The flip side of this reversal is a failure of a failure signal. In other words, price overcomes resistance at the reverse break line and retests the high of an up gap (or low of a down gap). The ability of price to retest these levels issues a strong signal to take positions in the direction of the gap.


This special guest article was written by Alan Farley, trader and author of "The Master Swing Trader."
Best of luck and have a Great Week!
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