Invest and Trade Profitably with Jon Johnson

Education Center

How long do we hold a stock?

August 30, 2000

We will hold stocks as long as they are making money or are continuing the pattern/move that made us inclined to buy into it. Even for solid, well-performing stocks, the market can throw you a fast one when you least expect it, so our basic rule is that if the stock fails to make or […]

Could you please give me a clue as to what an “ascending or descending triangle” refers to?

August 30, 2000

An ascending triangle forms when prices, in tracing their daily or monthly pattern, move up and down between support and resistance to form a “shape” that looks like a triangle or a pie wedge. The point or tip of this shape is on the right side of the pattern, as prices become compressed between support […]

I have heard that it is best to look for stocks with an average volume of 500K before investing in them. I often see stocks on the report with a lower average volume. Is there a reason?

August 30, 2000

There is an idea circulating that a stocks has to have 500K average volume in order to ‘safely’ invest in the stock. The idea stems from a desire to avoid getting whipsawed if selling starts; it takes fewer sellers to change the direction of a stocks with lower daily average volume. We basically use a […]

Is there a way to measure the health of NASDAQ, exclusive of semis? Are semis always the leader?

August 30, 2000

Looking at the current rally you can see that semiconductors and NASDAQ are not always linked. NASDAQ has put together and maintained its upside move even as SOX modestly bounced and then spent the past three weeks selling back down. NASDAQ itself is not just tech laden anymore. Other issues are benefiting from the decline […]

With relationship to charts could you tell me your thoughts on “GAPS”. Do gaps have to be filled?

August 30, 2000

There is an old adage that all gaps must be filled. We know that a stock can’t run up (or even sell) without having to come back and test some support (or resistance). Often when this happens a stock or index will work to fill a gap on a normal consolidation of the gains. Ultimately […]

Do options deal with overhead supply in a similar way stocks do?

August 30, 2000

There are two points to the answer. Options are derivatives, meaning they derive their value from the underlying security. Thus their value in the most general sense is tied to the movement of the underlying security. There are other factors that come into play such as volatility, time until expiration, the security price in relation […]

In response to [a prior statement], it seems you and media commentators think money from one stock sale can immediately be moved into another stock investment. Why do you and others say this? Don’t investors have to wait three days for funds to clear before reinvesting proceeds from a broker?

August 30, 2000

You don’t have to wait to reinvest due to trades taking three days to clear. You can sell a stock and immediately buy another one using the ‘float’ to do it. This is a three day float on a stock transaction; option transactions clear in a day. As long as you don’t exceed your cash […]

Isn’t it better to recommend a stock when it just starts to resume it’s trend after a consolidation than on the breakout. Seems like most of the move is over when you buy after a breakout.

August 30, 2000

Assuming that what you refer to is when a stock, while basing, moves up from the ‘bottom’ (consolidation) and begins to trend higher, forming the right side of the base. This occurs in patterns like a cup with handle, saucer, reverse head and shoulders, and even flat base when initially a stock reaches a high, […]

How do I calculate the volume and price point to buy into a cup with handle base breakout?

August 30, 2000

A cup with handle base roughly looks like a half circle open to the upside (the cup) and then a lateral and slightly lower ‘handle’ where the stock fades from the right lip of the cup (the fade is measured by the intraday lows). In rising markets this pattern has produced a lot of winners […]

When you are talking about number of weeks on up volume vs. down volume what is normally period of time you are looking at 4 – 8 weeks or longer?

August 30, 2000

The measure of up weeks to down weeks is basically tallying the number of weeks a stock or index rose on rising volume and the number it fell on rising volume. The idea is to get a rough idea of whether money is moving into a stock or out of a stock. Often when stocks […]

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