Invest and Trade Profitably with Jon Johnson

Education Center

PLEASE….could you give me the current numbers for these supposed “downtrend” lines everyone is watching for a break to the upside??? Nasdaq . . . SPX . . . INDU.

August 30, 2000

You have probably been watching CNBC where one of the floor traders was supposedly scratching his head Friday wondering what the Dow was going to do as it failed to ‘breakout’ of its channel and was supposedly right up against that level. Channels are trendlines that often define a range an index or stock trades […]

Please define target volume. I assume once a price crosses a pivot point at target volume a buy alert is issued?

August 30, 2000

Target volume is the volume we look for on the move we are anticipating. It is not always automatic, that is, stock hits buy point, volume is at target, buy order put in. It is great if the stock is at, close to, or above the target volume when the stock hits the buy price. […]

Please can you help me regarding your BWA stock analysis? You had a stop set at 55.25, and the stock went through this intraday on the 29th July. You appear not to have exited the position at this time, as the position is still current in your 30th newsletter. Can you explain why you ignored the stop?

August 30, 2000

One thing to remember about stop points is that by nature they are somewhat arbitrary. Not in the sense that we put them right above resistance or right below support levels; those levels are fairly clearly defined as a moving average or prior price high or low. What is arbitrary is how a stock moves […]

What are “buy on close orders” and why are they significant?

August 30, 2000

Buy on close orders are orders that state you want to buy a stock at the price it trades at the close. Mutual funds often buy this way, particularly index funds when they are adding to their portfolios. Tha tis why many times ou ses stocks that are being moved into a particular index run […]

A question regarding projected value of an option contract when a stock hits the Target If we purchase the option when the Alert is issued, can we project the option value by multiplying the dollar move by the delta and adding that total to the original option price?

August 30, 2000

We love using options for several reasons, but some key points are the leverage it gives us to enter positions on higher priced stocks without putting up the farm as well as a clearly defined risk. Those can provide tremendous returns. You also need to understand your targets well because options are time and price […]

Is there a way to enter stop orders that will ensure they will reliably execute when necessary to limit my losses, so that I may actually get up to go to the bathroom or eat lunch with minimal worry?

August 30, 2000

No, you just have to hold it and not eat until the bull market becomes well-established or the downtrend resumes with force. Think of it as great mind over matter exercises and a weight loss program. Stop losses and stop limits (sell only at this price) provide some but not nearly total safety. First, they […]

When a target is hit, can we protect our gain with a tight stop or must we sell?

August 30, 2000

There are not absolutes in any position or with most things in life. A target is a projected point to where a stock will rise or fall based on the pattern, support, resistance, the overall market, etc. When it is hit there could be other factors that warrant letting a position ride. With that said, […]

I have limited online access during exchange hours (I work!). I am considering using stock contingency orders for options. What is your opinion of this?

August 30, 2000

Stock contingency orders with respect ot options means that you place an order to sell your options when the underlying stock hits a certain price. This is opposed to setting s top on the option itself. There are advantages. First, in thinly traded options (less than 100 open interests is our usualy cutoff point, but […]

There are a lot of stocks hitting the 9-11 lows (i.e. BRCM, GNSS, RIMM etc). Could this act as support and spike a short term rally even in this downtrending market? How do you approach these “double bottom” patterns?

August 30, 2000

One thing to consider: trends tend to stay in force until broken. Many of the stocks that were frontrunners to the downside did not find support these levels (e.g., QCOM). The indexes themselves are having a hard time finding support at these levels. There was a bounce, but now they are seeking them again. The […]

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