Invest and Trade Profitably with Jon Johnson

Education Center

I’ve heard that it’s not a good idea to short stocks with small floats, but don’t really understand how this works. What exactly is the “float” of a stock and what should we be looking for in terms of shorting a stock relative to its float?

August 30, 2000

A stock’s float refers to a company’s shares that are freely bought and sold without restrictions in the public, i.e., the number of shares held by the public and available for trading. As the largest proportion of stocks trading on the exchanges, the float consists of regular shares that many of us will hear or […]

A number of your recommendations lately involve stocks with very low average volumes. I would assume you guys buy and sell a lot more shares than an average investor like me. How do you decide on how many shares to buy with a stock [with average volume 100K or less?]. Do you have to buy in pieces so that you don’t drive the price way up with a large order? Do you have to do the same when you decide to sell?

August 30, 2000

It is harder to trade stocks with below average volume and we like to keep those to a minimum because of the lower liquidity. The primary consideration on liquidity is the ability to get out of a position if things start to fall. If volume is less than 100,000 shares on a 50 day average, […]

Under new tax rules, is it still profitable to buy a dividend in assets held in an IRA?

August 30, 2000

It is still profitable, but the relative adantage over buying in a non-tax exempt account has diminished. The new tax rules create an advantage, but then take away one of the best advantages of capturing dividends in a taxable account. The tax rate has been reduced from the taxpayer’s bracket to 15%. Depending upon your […]

In attempting to determine support via the moving average or exponential moving average what time frame is used by most fund managers? One year, six months, three months etc. How should the individual investor determine which MVA to use?

August 30, 2000

What moving averages fund managers use can change over time and from stock to stock. As we like to move with the big money and anticipate its moves as well, we observe when they move into stocks and adapt accordingly. You are on the right track in wanting to know what the big money is […]

How do you calculate accumulation?

August 30, 2000

Accumulation is based on a pretty straightforward premise. During a stock’s life it will rally and rest, rally and rest. Sometimes it rallies a long time with just a few short rests, and then slips into a deeper sleep (some would say coma). You see this all the time: a stock breaks out from one […]

Who is the “market”? The market as you say is expecting this or that. As a trader, I expect and think the market should be reacting far more positively to economic conditions. I think you feel the same way. So who are the “they” that seem to be so schizophrenic about entering and exiting the market. Is it some small group of mega investors that want to control the market for their own purposes? And if so, are there warring factions in this group?

August 30, 2000

Market is a generic term we use to describe the major indexes in general, and more specifically the major investors that move the market. We use the term to describe the overall movement of the averages and the big money that is responsible for the major moves. It is not always an accurate characterization with […]

Could you please explain how you know about the quantity of put and call options on the QQQ and why the market makers want to stave off rally attempts?

August 30, 2000

You can find the open interest of puts and calls on the QQQ, OEX, and any stock or other index at several places on the web. One is You can get a quote on options and it will show you the open interst as well for each strike and for each month. When looking […]

When you talk about the semiconductors showing leadership, is there some site or place where a person can go to see the group of stocks that comprise the semiconductor group? In other words, if we are trying to hitch our wagon on the semiconductor move up, where should we focus to locate the individual stocks within this group?

August 30, 2000

The SOX is made up of 16 semiconductor stocks representing all facets of the semiconductor sector (e.g., chip equipment, memory chips). Current stocks included in the index are a ‘whose who’ of the semiconductor world: KLACMXIMNSMNVLSLLTCXLNXBRCMINTCTXNSTMALTRTERAMATAMDMOTMUTSMLSI Even though it is an index, it is a narrow index made up of the largest semiconductor stocks. Thus […]

That was a good question about the SOX and I really liked your reply listing the individual stocks which comprise the index. I have owned many of the stocks from time to time although presently I do not own any of them. Do you know of an ETF which is made up of the SOX? Rather than betting on individual stocks, it may be good to bet on the overall index (when the time is right).

August 30, 2000

We like to play options on the SOX. It is volatile and the options are pretty expensive. There is the SMH (Semiconductor Holders Trust) that covers the semiconductors and is traded on the AMEX much like the QQQ. You can buy the shares and/or options on them.

Could you please describe in more detail what you mean by “money flow” in your part 3 recommendations and where one can see this. Is this the technical indicator like “Chaikin Money Flow” that one sees on various charting programs?

August 30, 2000

The money flow indicator is a measurement of the net positive or negative level of money moving into or out of a stock, calculated using various proprietary methods of measuring the relationships between price and volume. Basically it is a way of determining whether there is, overall, money going into or out of a stock. […]

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