September 17, 2022 - The RightLine Report ********************************** NOTES FROM THE EDITOR **********************************
Healthy Trading Behavior
*********************************** "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 https://prorightline.com/index.php/rightline-report-quick-list/. In addition,always use the RightLine Risk Calculator before entering any position. For access to the Risk Calculator, go to https://prorightline.com/index.php/risk-calculator/. To learn more about controlling risk go to the RightLine Risk Control System at https://prorightline.com/index.php/rightline-risk-control-system/ For a glossary of terms unique to The RightLine Report go to: https://prorightline.com/index.php/glossary/ Questions? Send us an email using our contact form at: https://prorightline.com/index.php/contact-us/ ***************************** 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: https://prorightline.com/index.php/technical-analyst-section-rightline-report/ 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 https://www.prorightline.com/rlch/091622SPX.jpg--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 WEDNESDAY, SEPT. 21 10 am Existing home sales (SAAR) Aug 2 pm Federal Reserve statement 2:30 pm Fed Chair Jerome Powell news conference THURSDAY, SEPT. 22 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: https://prorightline.com/index.php/economic-indicator-effects/ *********************************** 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 *********************************** BASIC MATERIALS SECTOR 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. HEALTHCARE SECTOR 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. INDUSTRIALS SECTOR 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. Link: https://prorightline.com/index.php/rightline-risk-control-system/ Use "Gap Adjusted Entries" to reset the Entry Price for stocks that gap beyond recommended entry levels. Link: https://prorightline.com/index.php/gap-adjusted-entries-increase-profits/ *********************************** 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: https://prorightline.com/index.php/trading-stock-splits-stages/ ********************************** 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 - https://prorightline.com/rlr/TCnvda122003.gif 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 - https://prorightline.com/rlr/TCmro122003.gif 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 - https://prorightline.com/rlr/TCnwre122003.gif 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 - https://prorightline.com/rlr/TCover122003.gif 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 - https://prorightline.com/rlr/TCoverb122003.gif 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! ********** If you prefer to receive this report in html with color and graphics, or have any questions, send us an email using our contact form at:https://prorightline.com/index.php/contact-us/ ====================================================================== 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. 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