September 5, 2023 - The RightLine Report
Notes From The Editor
Using Charts To Boost Your Trading Skills
A respected stock trading buddy once told me, "Everything you need to know is in the charts." While I'm certain that I'll never fully grasp the illusive behavior of buyers and sellers, it's easy to understand the wisdom beneath his statement.
When you think about it, the most important aspect of the stock market is the price action that takes place every session. This constant ebb and flow of money leaves a trail of patterns on the screen. When reviewed in the light of similar historical data, these communicative images can be predictive - at least to the extent that we gain a significant edge over those who don't follow the "art of the charts".
Major stock exchanges record every transaction that takes place between buyers and sellers. As you know, these records are updated instantly and made available to traders. Computers display the price, number of shares, and the time component on software generated charts in a way that can be visually observed. These simple accounting figures are converted into graphic displays divided into sections of time.
Whether we choose to view the records in minutes, days, months or years, previous price action takes on meaning when we see consistent patterns appear in all time frames. As skilled traders go through their daily routine of taking money away from the unskilled, the price movement etches readable configurations on the charts.
This repetitive routine gives anyone who is willing to spend some time in front of a computer screen plenty of opportunity to learn how smart money operates. Even more, with guidance it provides a relatively low- cost way to gain valuable trading experience while learning to transform stock market risk into bankable reward.
On the flip side, many investors spend years in the quietly deceptive bliss of ignorance, never taking the time to learn how the stock market really operates. That's no surprise, for we all know how crowds often behave primitively, as if each person in the group was in a trance.
This group phenomenon explains why the majority of investors don't see the significance of technical trading. It rarely shows up in their field of vision, and when it does they are usually unable to understand what a great tool it is. Unfortunately this lack of insight comes at a very high price.
Bottom Line: Trading with charts gives us an objective way to break the hypnotic spell that immobilizes most of the crowd. Remember that more than 80% of all investors lose money in stocks. To be among the 20% who consistently win requires us to use methods that most folks don't use.
As the patterns presented on the charts become more familiar to us over time, we gain a deeper sense of awareness. We begin to see the stock market more clearly, and the forces that move it. We become more conscious of how to make money in this emotionally charged atmosphere.
We realize that a chart is simply a lens we can use to focus on and select specific trading opportunities to yield profits. We become better traders, and hopefully better people. We then use what we learn to build a better life, and a better world. Sound like a plan?
Trade well!
- Thomas Sutton, Editor
Stocks Covered Today Stock Splits
Quick List
Stock 09/05 09/05 Buy Short Trailing Stops Gain
Symbol Price +/- Entry Entry Initial/Tighten Amount
------ -------- -------- -------- -------- --------------- --------
TRU 80.18 -0.95 82.1 77.4 4.7/2.35 2.76
TSAT 20.01 0.55 20.46 18.72 1.74/0.87 2.82
AFRM 21.93 0.06 22.79 20.95 1.84/0.92 1.72
FSLY 24.01 -0.09 24.47 22.88 1.59/0.8 2.48
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.
Stocks Covered Today Stock Splits
Market Summary
US stocks, after a 2.5% gain last week, closed lower today, while bond yields and the dollar saw increases. There were no major market catalysts, but attention was drawn to weaker economic data from overseas. China's services Purchasing Managers' Index (PMI) for August fell below expectations, indicating that stimulus efforts haven't yet led to a consumption rebound. Similarly, the final releases of eurozone PMIs were revised lower, suggesting downward pressure on growth. The energy sector led the way as oil prices climbed, with Saudi Arabia announcing an extension of its voluntary production cuts until year-end. WTI prices settled at a ten-month high of $87.
The relative resilience of the US economy is bolstering the dollar. Over the past three months, the economic data has pleasantly surprised, in contrast to the weakening trend in China and much of Europe. Consequently, the US dollar index has appreciated by approximately 5% since mid-July, while US equities have continued to outperform year-to-date despite having slightly lagged since the market bottom in October 2022.
Implications from the labor market's loosening are worth noting. Job security and income gains have been pivotal for this year's robust economy. However, the tight labor market and substantial wage growth have raised concerns for the Fed in its effort to rein in inflation. Recent data indicate a gradual cooling of the labor market, consistent with a soft-landing scenario. Job openings have declined in six of the past seven months, narrowing the gap with the number of unemployed. We believe this loss in momentum will help moderate wage growth and solidify expectations that the Fed will refrain from further rate hikes.
Sep 4, 2023 Sep 5, 2023
-------------------- --------------------
Dow Closed 0 34,641.97 -195.74
Nasdaq Closed 0 14,020.95 -10.86
S&P 500 Closed 0 4,496.83 -18.94
NYSE Volume 0 3.53B
NYSE Advancers 0 645
NYSE Decliners 0 2,294
Nasdaq Volume 0 4.39B
Nasdaq Advancers 0 1,337
Nasdaq Decliners 0 3,001
New Highs/Lows
08/29 08/30 08/31 09/01 09/04 09/05
--------------------------------------------
NYSE New Highs 65 98 78 116 0 64
NYSE New Lows 25 18 20 29 0 86
Nasdaq New Highs 69 83 90 101 0 77
Nasdaq New Lows 130 81 104 95 0 157
Stocks Covered Today Stock Splits
TRADER'S TIP: "Trading the Adrenaline Rush"
Every trader knows how exciting "live" trading can be. We've all felt that surge of adrenaline when entering or exiting a position - it comes with the territory. Just remember that too much excitement can cloud judgment, and therefore increase risk. It pays to stay relaxed and follow your trading plan to the "T". If you get stopped out, so what? It's all part of the job. When you include Risk Control tactics into your strategy, you intelligently protect your capital. Risk management is essential to success.
All professional traders take small losses on a regular basis, but they never let a small loss turn into a large one. On the other hand, amateurs usually ignore Risk Control and resort to wishful thinking instead. In doing so, they damage their odds of winning over the long haul. Trading requires a certain amount of discipline and a repetitive routine, just like any other job. It can be extremely gratifying and profitable for those who control their emotions, but thrill seekers usually watch their accounts quickly evaporate.
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 - 4496.83 September 5, 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 - 14020.95 September 5, 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 - 34641.97 September 5, 2023
52-Week High: 35679.13
52-Week Low: 28660.94
Daily Trend: DOWN
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
Stocks Covered Today Stock Splits
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
Stocks Covered Today Stock Splits
TRADER'S TIP: "Planning Entries"
Typically when our analysts determine entry points, they evaluate setups from more than one perspective. They usually look at a relatively longer-term chart when determining the underlying trend, then use shorter-term analysis to figure out where in that longer trend the stock currently is. For example, if a stock sits mired in a downtrend, but is nearing the lower edge of the trading range, we anticipate a potential long bounce entry yet use a relatively tight stop since the prevailing winds are pressuring prices downward. It's a matter of integrating BOTH perspectives when formulating a plan.
Stocks Covered in This Issue
INDUSTRIALS SECTOR
TransUnion (TRU: Industrials/Consulting Services) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in TRU'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 82.1 and a SELL order at 77.4. Regardless of which order is triggered, cancel the other one and follow your entry with a 4.7 trailing stop. Tighten the stop to 2.35 once you have a 2.76 gain. TRU closed Tuesday at 80.18. Earnings Report Date: Oct 23, 2023. Beta: 1.36. Market-Cap: 15.499B. Optionable.
TECHNOLOGY SECTOR
Telesat Corporation (TSAT: Technology/Communication Equipment) - SQUEEZE PLAY. When a stock's daily price range contracts to an unusually low point, you can safely assume that in most cases a breakout from that range will result in a nice price move. To capture a portion of this potential movement we have set both a long and a short entry into TSAT. A move to the upside will trigger our BUY entry at 20.46, while a drop to 18.72 will trigger our SELL short entry. Follow your position with a 1.74 trailing stop. Tighten the stop to 0.87 once you have a 2.82 gain. TSAT closed Tuesday at 20.01. Earnings Report Date: N/A. Beta: N/A. Market-Cap: 1.007B. Optionable.
Affirm Holdings, Inc. (AFRM: Technology/Software-Infrastructure) - SQUEEZE PLAY. One interesting trait of price volatility is that it cycles back and forth through periods of expansion and contraction. Stocks that have recently seen their daily price range shift from an average or wide range to an extremely contracted state are ideal candidates for expansive price moves. In many cases the next move is relatively fast and covers a sizable amount of territory. To take advantage of these trades we use both a BUY and a SELL entry. This allows us to enter in whichever direction the breakout takes. In AFRM's case we will enter a BUY should it reach the 22.79 level, or a SELL short trade if it drops to 20.95. As usual a trailing stop is essential, 1.84 which should be tightened to 0.92 on a 1.72 gain. AFRM closed Tuesday at 21.93. Earnings Report Date: Nov 06, 2023. Beta: 3.12. Market-Cap: 6.564B. Optionable.
Fastly, Inc. (FSLY: Technology/Software-Application) - SQUEEZE PLAY. Trader indecision has put FSLY 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 24.47 and a SELL short entry at 22.88. Now it's up to FSLY to show us which entry will be filled. Once the trade is underway place a 1.59 trailing stop, which can be tightened to 0.8 after you achieve a 2.48 profit. FSLY closed on Tuesday at 24.01. Earnings Report Date: Oct 31, 2023. Beta: 1.26. Market-Cap: 3.102B. 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
---------------- ------- -------- ------- ------ -------
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.
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
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