Invest and Trade Profitably with Jon Johnson

Education Center

Some stocks have many entry points on your list. When the market sells off it is good time to look again . Which entry point shall I use the original [buy point] or the new one?

August 30, 2000

This is a new one and a good one and we will look at it in the context of a stock that has made the move we wanted and is pulling back. There are quite a few report plays in that position right now. The primary consideration on a pullback from a good move is […]

The idea of a dividend service you talked about sounds interesting. Wouldn’t this service still be good for IRA accounts even if the tax cut is not passed?

August 30, 2000

Yes it would be good for any non-tax account, and that is just one reason we like the idea of the tax-free investment accounts also proposed by Bush in addition to the elimination of the dividend double tax.

In your discussion of dividends you seem to say that you can buy and sell a stock on the dividend date of record and collect the dividend. Could you clarify the timing of the buy and sell?

August 30, 2000

There is a 3-day float with a stock transaction. Option transactions clear in a day, stock transactions in 3 days. Thus you can use the ‘float’ to buy a stock that is going to pay a dividend three sessions ahead of the record date, sell it the next session, be locked in for the dividend […]

When you give a buy signal for a stock and/or options, do you also write covered calls when the stock hits its target in anticipation that the stock will begin retracement/consolidation on upward bound stocks? How about when a stock hits a buy point, yet underperforms as some have done recently, will you write in the money calls; say 1-2 weeks out before you decide to take your money off the table?

August 30, 2000

Much depends on the type of market we are in as well as the strength of the stock. While some stocks have continued to move higher after brief respites, the majority of stocks continue to struggle in the ongoing bear market. When they get to the target we tend to take the gain and then […]

You provide a volume figure next to your buy points. Do you recommend extrapolating volume, or wait till volume reaches suggested level even though buy point is surpassed?

August 30, 2000

We always like to see strong volume on any move as that shows there is a lot of support for it. That gives it more likelihood it will hold. As you have pointed out, what happens if the price is hit and the volume is not there? Extrapolating is necessary. If it is a strong […]

Why do you publish stops if you don’t use them?

August 30, 2000

We use them, we just don’t apply them in a vacuum. We debated and debated putting in stops in the reports because each person’s investment goals are different. For example, on a stock play in a stock that is performing solidly over a period of time but then suffers some selling pressure we might be […]

I have a question on options. If the strike price for the call is $12.50 does this mean the options price at the expiration date has to be $12.50 or does this mean the price of stock has to be at $12.50 or greater. And what does delta mean?

August 30, 2000

Good questions. The strike price determines if you make money or lose money at expiration. If the strike is $12.50 on a call, if the stock price is greater than 12.50 on expiration the option’s value will roughly be the difference between the stock price and the strike price. For example, if the stock is […]

Could you tell me how you come up with your target price on a stock.

August 30, 2000

We look at several factors going into a play to determine the target price. Primary are support and resistance levels if any, but we also look at the type of pattern and the type of market we are in. We always like to have a play that we can enter (upside or downside) and be […]

We have received several questions about continuing downtrends and how to move into and out of plays. Below is a synopsis of what we are looking at in many of these plays.

August 30, 2000

A continuing downtrend is one where a stock has broken an upward or lateral move, tested that breach, and is typically moving down the short term MVA (10 and 18 day MVA). Remember how stocks that breakout and move up in an uptrend tend to use the 10 and 18 day MVA as near support? […]

When you indicate a “buy” point in your report that is identified as a “downside” play, does this refer to short selling the stock at that “buy” point? Since you have a buy and sell point, I was under the understanding that it was a buy point to short-sell the stock and buy it later at the lower price target. Is that correct?

August 30, 2000

We usually are buying puts when we play the downside as we like to trade options on many plays as our total risk is defined going into the trade. Thus on a downside play that has a ‘buy point’ that is referring to buying the put option. We have looked at changing the ‘buy’ point […]

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