Invest and Trade Profitably with Jon Johnson

Education Center

We received several questions about Tuesday night’s (May 27, 2003) rather convoluted explanation of higher highs and higher lows regarding Nasdaq, SP500, and DJ30. In looking at what was written versus what was meant, we can see the confusion. Here is another stab at it.

August 30, 2000

During the downtrend there was a series of lower highs and lower lows. That is pretty much the definition of a downtrend. During a strong, entrenched decline, there are often sharp rallies, but they simply take the indexes up to the down trendline. As that trendline slopes down, when the index hits that down trendline […]

My question is when a stock starts to pull back from the target point but almost at it within say 75 cents, when do you know that it time to take profit or to let it go for another leg up? Do you look at the volume and as long as its pulling put is below the average volume, or do you focus more on the MVA and if so what’s the best MVA to watch.

August 30, 2000

Targets are best estimates of how far a stock can run on a particular move. Thus a stock can get close to a target but not quite reach it. What we look at is how well it has worked on the price and volume action on the way up. A strong volume move up on […]

There are times a stock in the report hits a buy point but you do not enter (designated ‘buy not issued’ in the table). I like to set a buy point and then not worry about it, but that does not always work in this market. What is your process for entering?

August 30, 2000

We try to pick buy points that once hit with the right volume coming in the play has a good probability of performing as we want. In this market, though we set a specific buy point we want to stick with as it clears resistance (upside) or support (downside), it is not always an automatic […]

Regarding option strike date selection. You are looking at PRX for a possible play and the pivot was hit but the volume was not there so the buy was not issued. Why select the Aug 30 call which is trading at 8.50-9.00 instead of the May 35 call which is 3.70-4.00. I do not understand the reason to purchase the call with that much intrinsic value or that far out in time.

August 30, 2000

You are correct in focusing on the right option to purchase as the price you pay versus the delta and and the time to expiration directly impact your return. You need to get enough movement to cover the spread (the bid versus ask spread is larger on options to take into account some of the […]

Could you please tell me if you take into consideration price gaps in your technical analysis and if you are of the opinion that gaps always have to fill on a certain period of time.

August 30, 2000

There is an old adage that all gaps have to be filled. In many cases they are filled shortly after the gap is made, e.g., after a gap to the upside and the initial surge there can be a test back to fill the gap and test the breakout (and to the downside as well). […]

Could you explain to me the BxA size? I see 67×5, 1×1 and 4×3 and I can’t figure it out.

August 30, 2000

What you are looking at are how many shares there are at a certain bid price that are willing to be bought and how many shares there are to be sold at a certain ask price. In other words, there are orders put in by brokers on behalf of their clients. A client wants to […]

Would you suggest buying as many stocks as possible that I can or limiting it to a few that I can follow better. In other words, is it better to own 200 or 300 shares of 12 or 15 stocks or 1000 shares of 5 or 6 stocks?

August 30, 2000

Great question. Position control is a very important and overlooked factor in investing. You turn on most financial stations and the mutual fund managers will tell you that you have to diversify in mutual funds or if you do your own investing you need to be a ‘mini’ mutual fund, i.e., won lots of different […]

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