Notes From The Editor

Successful traders know that instead of spending a lot of time trying to figure out WHY the market is going up or down, it's much more productive to decide WHAT to do WHEN the market does go up or down. The advantage of this approach is that it sets aside deceptive bull-bear bias and lets the market price action tell us what to do.

Few traders understood this better than Jesse Livermore, who began working in Paine Webber's brokerage office at the age of fifteen. By the time he reached his twenties he was known in New York City as the "Boy Wonder" for his successful exploits in the stock market.

Jesse wrote ... "They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation."

- A Lesson From History

Were you in the market in the year 2000? At that time very few investors believed bulls would ever give up control of the market. Though it wasn't apparent back then, a general lack of regard for risk control and money management would soon cause huge problems for investors.

The bear market conditions that followed Y2K for several years caused extremely painful losses for most investors. As a result, a large number had to postpone or abandon their plans for early retirement. And while some learned valuable lessons about "what to do next time," many faced the fact that it would be extremely difficult to make up for the losses.

This is one reason why more and more mature investors are investigating short-term trading strategies. The appeal of intelligently trading the markets and the potential for accelerated profits is certainly attractive. But sometimes there's reluctance among older investors who just don't feel like they would fit in "at their age."

Fortunately the common misconception that active trading and investing is only for young alpha-males has given way to the reality that there is a much larger and quite diverse community of serious traders at work.

You can find successful traders in virtually all age groups, from every race, both male and female. In fact, anyone who can understand the simple basics of how the stock market operates and is willing to patiently work through the learning curve can do it. The secret is out .. short-term trading isn't just for day traders any more!

Trade well,

- Thomas Sutton

Quick List

    
Stock     09/02     09/02      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

RCUS      21.20      0.70     21.62                  1.48/0.74      1.38
NVCR      22.29      0.23     22.68     21.09         1.59/0.8      2.98
KRNT      22.35      0.09               21.55        1.46/0.73      2.96
SPR       21.37      0.05               20.48         1.5/0.75       3.2
ASAN      21.63      0.13     22.33     20.92        1.41/0.71      1.98

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

Indications of a more relaxed job market brought a boost to the major USA stock indices this week. Investors are increasingly optimistic that the Federal Reserve could soon conclude its historically aggressive campaign of raising interest rates. The S&P 500 Index (SPX) reached a four-week intraday high early on Friday, though it pulled back slightly, still closing the week with a gain of 2.5%.

On Friday, the Labor Department reported the addition of 187,000 nonfarm jobs to the economy in August. This figure exceeded the expectations of 170,000 but was accompanied by a revision that subtracted 110,000 jobs from the June and July counts. Unexpectedly, the unemployment rate rose to 3.8%. In summary, the report seemed to raise minimal concerns about inflation and led investors to reduce their expectations for another Fed rate hike later this year.

The job numbers appear to be a fairly positive mix in line with the Fed's criteria. This mix includes slower job growth and wage increases, as well as a slight uptick in the unemployment rate. An optimistic perspective on the rising unemployment rate suggests that it largely reflects a growing labor supply.The cyclical sectors such as financials, energy, and materials, which typically align with economic cycles, outperformed on Friday. This alignment is consistent with relatively robust economic growth indicated by the jobs report.

The impending jobs report and the prospect of a three-day weekend could be driving some investors to adopt a slightly more cautious stance. The late August rebound in stocks and their relatively strong performance over the summer - marked by the S&P 500 Index's nearly 8% gain from June through August - suggest that the market is currently on relatively stable ground. Unless the payroll numbers exceed expectations and prompt concerns about Fed tightening, it's likely that the market's upward momentum will continue.

                      Friday                 On The Week      
                  --------------------   --------------------
Dow                 34,837.71   115.80      +490.81     1.43%
Nasdaq              14,031.81    -3.15      +441.16     3.25%
S&P 500              4,515.77     8.11      +110.06      2.5%

NYSE Volume                      3.25B                       
NYSE Advancers                   1,864                       
NYSE Decliners                   1,021                       

Nasdaq Volume                    4.04B                       
Nasdaq Advancers                 2,695                       
Nasdaq Decliners                 1,567                       

                                 New Highs/Lows

                   08/25  08/28  08/29  08/30  08/31  09/01
                 --------------------------------------------
NYSE New Highs        25     50     65     98     78    116
NYSE New Lows         66     22     25     18     20     29
Nasdaq New Highs      33     69     69     83     90    101
Nasdaq New Lows      212    176    130     81    104     95
   

TRADER'S TIP: "Nay-Sayers and Hay-Makers"

It seems that practically every market turn comes draped in commentary and analysis from all angles of pundits and prophets. For every pullback there's the requisite reasoning for a "golden buying opportunity," which comes equally weighted with the seemingly sound logic of numerous warning signs signaling impending doom. Enough already! Once in a while try turning down the volume and simply observing the charts and figures that come across without the rhetoric. It can be so much more informative.

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 - 4515.77 September 1, 2023

52-Week High: 4607.07
52-Week Low: 3491.58
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 4743.20
Resistance 2: 4616.93
Resistance 1: 4566.35
Pivot: 4490.66
Support 1: 4440.08
Support 2: 4364.39
Support 3: 4238.12

NASDAQ Composite - 14031.81 September 1, 2023

52-Week High: 14446.55
52-Week Low: 10088.83
Daily Trend: UP
Weekly trend: DOWN
Weekly Pivot Levels
Resistance 3: 14981.98
Resistance 2: 14459.00
Resistance 1: 14245.40
Pivot: 13936.02
Support 1: 13722.42
Support 2: 13413.04
Support 3: 12890.06
        
Dow Industrials - 34837.71 September 1, 2023

52-Week High: 35679.13
52-Week Low: 28660.94
Daily Trend: UP
Weekly trend: UP
Weekly Pivot Levels
Resistance 3: 36040.32
Resistance 2: 35411.75
Resistance 1: 35124.73
Pivot: 34783.18
Support 1: 34496.16
Support 2: 34154.61
Support 3: 33526.04
 

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

Monday, September 04, 2023:
04-Sep          Labor Day holiday

Tuesday, September 05, 2023:
05-Sep  10:00 am   Factory orders

Wednesday, September 06, 2023:
06-Sep  8:30 am   U.S. trade deficit
06-Sep  10:00 am   ISM services
06-Sep  2:00 pm   Fed Beige Book

Thursday, September 07, 2023:
07-Sep  8:30 am   Initial jobless claims
07-Sep  8:30 am   U.S. productivity (revision)

Friday, September 08, 2023:
08-Sep  10:00 am   Wholesale inventories
08-Sep  3:00 pm   Consumer credit


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

TRADER'S TIP: "A Trader's Mind: Beliefs"

"You experience what you believe, unless you believe you won't, in which case you don't, which means you did."

- Harry Palmer

Stocks Covered in This Issue

HEALTHCARE SECTOR

Arcus Biosciences, Inc. (RCUS: Healthcare/Biotechnology) - BULLISH BOUNCE. Looking a bit frayed after sliding downhill in recent sessions, on Friday RCUS seemed intent on initiating a rebound. With moving average support nearby, RCUS 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 21.62. Manage risk with a 1.48 stop. Tighten your stop to 0.74 when you have a 1.38 profit. RCUS ended the day at 21.20. Earnings Report Date: Oct 31, 2023. Beta: 0.84. Market-Cap: 1.579B. Optionable.

NovoCure Limited (NVCR: Healthcare/Medical Devices) - SQUEEZE PLAY. NVCR is caught in a dilemma. The stock's compressed price range on Friday has resulted in a condition comparable to a wound up rubber band. We anticipate that this undecided equity will take off soon, but with the direction still in question we'll let upcoming market action tell us whether to buy shares or sell short. NVCR is now at 22.29. We can capture price action either way by placing a BUY trigger at 22.68 and a SELL short trigger at 21.09. Once NVCR reveals its direction, enter your triggered order and disregard the other one. As soon as your position is in place, follow up with a trailing stop of 1.59. When you acquire a 2.98 profit, tighten the stop to 0.8. Earnings Report Date: Oct 25, 2023. Beta: 0.60. Market-Cap: 2.376B. Optionable.

INDUSTRIALS SECTOR

Kornit Digital Ltd. (KRNT: Industrials/Specialty Industrial Machinery) - BEARISH U-TURN. A quick look at the charts for KRNT show that despite the upward pressure caused by recent buying, the weekly downtrend is still in place. Friday's chart shows a potential return to that downtrend is in the works. This Bearish U-Turn set-up offers a potential entry point for a SHORT play. Set your trigger to SELL shares at 21.55, and follow your entry with a trailing stop of 1.46. Tighten the stop to 0.73 after reaching a 2.96 profit. KRNT ended the latest session at 22.35. Earnings Report Date: Nov 07, 2023. Beta: 1.73. Market-Cap: 1.099B. Optionable.

Spirit AeroSystems Holdings, Inc. (SPR: Industrials/Aerospace & Defense) - BEARISH U-TURN. This short setup turns common stock behavior into profits. Grounded in the tendency for down-trending stocks to bounce briefly and then return to the familiar down-trend, the Bearish U-Turn points traders to weak stocks when conditions are calling for more downward price action. SPR's behavior on Friday near moving average support signals a potential SELL short entry at 20.48, followed by a 1.5 trailing stop which can be tightened to 0.75 upon earning 3.2. SPR closed Friday at 21.37. Earnings Report Date: Nov 01, 2023. Beta: 1.64. Market-Cap: 2.25B. Optionable.

TECHNOLOGY SECTOR

Asana, Inc. (ASAN: Technology/Software-Application) - SQUEEZE PLAY. Friday's trading action forced ASAN'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 ASAN 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 22.33 if ASAN moves higher, and place your order to SELL short at 20.92 if price declines to that level. As usual follow your entry with a trailing stop, 1.41 should be sufficient. Reduce your stop to 0.71 on a 1.98 gain. ASAN closed Friday at 21.63. Earnings Report Date: Sep 05, 2023. Beta: 1.21. Market-Cap: 4.69B. 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  
---------------- -------     --------    -------     ------  -------   

NOTE: The number of stock split announcments goes up during Bull markets, 
and goes down during Bear market cycles. There are currently no upcoming 
stock splits that meet RightLine's proprietary criteria for split ratio, 
trading volume and price action.      

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

Tactics For Short-Term Traders - Trading The News

Everyone wants to trade the news, but it's often a fruitless exercise. In most cases, the big money has already acted upon the news by the time you read or hear it. So how can at-home traders take advantage of news-related opportunities without becoming the ultimate bag-holders?

News events generally fall into three categories: economic, company and institutional releases. Economic releases are scheduled well in advance, with most of them hitting the airwaves at 6:30 a.m., 9:45 a.m. or 10 a.m. EST. Company releases can come at any time, but they surge in the weeks following the end of a quarter. Institutional releases spike on Monday mornings but continue throughout the week.

Of the three categories, economic news reaches traders with the shortest delay from the source. Earnings reports comes in second, because full-disclosure rules force companies to distribute news through a wide variety of sources at the same time. Institutional releases are the slowest of the three by a wide margin. Traders should assume that preferred clients hear about analyst upgrades and downgrades well in advance of the public.

Realize that your real-time news feed doesn't get you most of the news in real time. Even with government releases, institutions and funds will be at the point of release and acting upon the news before you receive it. They will typically initiate program trades that act instantly to remove perceived inefficiencies triggered by the data.

Traders face a bigger obstacle trying to decipher cause-and-effect relationships between news and price movement. Often they'll assume that good news is good, and buy a stock that's already risen for a few days. But smarter money has already bought the rumor and is now selling the news. The trader is left holding a loss that may persist for weeks or months.

Trading earnings news requires considerable discipline and patience. Start by standing aside through most releases, or exiting positions minutes before the news hits the airwaves. Save your capital for releases that fall well outside current expectations for future revenue and per-share results. It's best to avoid all positions based on prior performance, because that performance is measured by managed numbers that are highly manipulated.

It's still dangerous to play extreme releases, because after-hours trading can be very thin. Reduce your size and place a limit order only when you've done your homework and know the exact price you want to own or sell short. This is typically a few cents above major resistance or below major support. Selling short during extended hours can be quite rewarding, because the Nasdaq has no uptick rule during this time of day.

The best entry often comes during the afternoon following the earnings release, or two to three days later. Here's the theory: Everyone who wants to buy or sell the news takes action within the first few hours after the release. Once they have come off the sidelines, there's no one left to take the side of the market that pushed the stock in its initial direction. A strong shakeout then begins, and it's your time to get to work.



Pull up a 60-minute chart and pick out the most obvious support and resistance levels. Assume a selloff will get a ride back to the 50-period exponential moving average before there's a substantial recovery. Be ready to hold positions at a loss until the underlying trend reasserts itself or your stops get hit. Place tiered limit orders and enter the trade one small piece at a time. This way you'll be positioned if the market turns ahead of schedule.

When there's a sharp pullback following an early rally, conservative traders should stand aside and wait a few days. This price action suggests that the smart money is selling the news into the hands of an overeager public. This type of reversal often lasts two or three days before profit-taking runs its course and lets the stock move back to the highs. Be patient during this initial selloff and wait for a low-risk entry.



Selling pressure often will end with a breakout from a simple pullback pattern, such as a bull flag. Although you're making the trade a few days after the earnings release, the intraday chart still generates the feedback needed to find your entry. Once you get in, watch the highs of the earnings day very closely. If a double-top pattern starts to form, exit the position immediately.

These techniques should give you enough courage to jump in the next time your favorite company blows away earnings expectations. But what about those government releases that move the markets every day? How can at-home traders turn a profit at the same time the big boys are firing their biggest guns? Let's start by looking at the market clock.

Many government reports, including monthly unemployment numbers, get released one hour before the market opens at 9:30 a.m. ET. It's vital that you're awake and focused at this important time. Better yet, watch the index futures for at least an hour before the release. This premarket price action reflects an important bias that will get supported or faded, depending on the news.

Don't trade the release directly. Instead, take note of price boundaries hit by the futures after the release, but before the open. The key observation is whether they trade into or through obvious support-resistance barriers. Trading into a "line in the sand" suggests the broad market will reverse shortly after the open. Trading through a barrier can trigger an equity breakout or breakdown within the first 45 minutes of the regular session.

The strongest trend days appear when there's synergy between the prerelease bias and subsequent news. The broad market can gap up and hold above the opening price easily when these two forces work together. But watch out for a shakeout day when the unemployment numbers give neither side an advantage.

These choppy sessions often present good opportunities to build swing positions for the following week. Pick your prices early and step in slowly as the shakeout pulls the market into your numbers. Then hold tight through the weekend and look for follow-through on Monday or Tuesday.

Don't try to interpret the news on a fundamental basis -- just stick to the charts and play the numbers. When you second-guess yourself because a release looks bullish or bearish, you'll hesitate just as the best trade is being offered to you. The bottom line is, we're not smart enough to understand the news and what it suggests about the economy. But we can see how everyone else is interpreting it and then take appropriate action.

Remember that you're a trader, not a gambler. Never buy or sell before economic numbers just to play the release. These are lottery tickets that have no place in a sound trading discipline. It's even worse if you make money by doing it because the profit reinforces a horse race mentality that leads to disaster.

Many lesser economic reports are issued at 6:30 a.m., 9:45 a.m. and 10 a.m. ET. Some news is even released during the lunch hour. Keep in mind most of these reports are not market movers and will be traded as excuses rather than responses. In other words, focus your attention on the periods when the reports hit the airwaves, but don't get hung up on the data.

This strategy becomes very important when releases take place 15 or 30 minutes into the new trading day. The big boys often paint the numbers into the news and then fade that direction. Beneath the surface, they're using the release to find better prices to sell short or shake the public out of long positions.

You can often predict this reversal through a simple convergence-divergence analysis. Consider where the market closed the prior day and the sentiment at that time. A common scenario is a selloff day that closes near the lows. You wake up the next morning expecting a red screen and a gap down. To your surprise, the index futures are up a few ticks and look ready to rally.

Then you recall there's an economic release coming out at 10 a.m. A rally continues into the report, and then the market sells off on relatively good news. It turns out a bid was being kept under the index futures so big money could sell short at higher prices.

This is typically done with reports the public thinks are market movers, but institutions recognize as old, flawed or inconsequential data. Gross domestic product reports, like the one released last week, fit perfectly into this category. Durable goods numbers, regional manufacturing data and even inflation indices such as the producer price index and consumer price index also fit into this category.

Traders can still take advantage of real surprises on these secondary reports. Watch for economic numbers that fall well outside standard deviation. Earlier this year there was a massive rally following the relatively obscure Empire State Manufacturing Survey. The number was so far above expectations that everyone had to stop and take notice.

All bets are off when the market spits out one of these unexpected events. The good news is you're standing on equal footing with the big boys when this happens, because they're just as surprised as everyone else. It's a perfect time to keep it simple and trade the trend.

This special guest article was written by Alan Farley, author of "The Master Swing Trader."

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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