Invest and Trade Profitably with Jon Johnson

Education Center

Occasionally you suggest making a ‘partial’ buy which I assume is about half a position. When do you make the rest of it? What does it depend on?

August 30, 2000

You are correct; typically partial positions comprise anywhere from one-third to one-half of what we plan to put into a position. The rest is taken at the next good buy point, e.g., on a move up after a lower-volume test of the breakout (if the initial buy was taken was on a breakout), or on […]

How can you tell the difference between a blow-off top and a good volume move, breakout?

August 30, 2000

A blow-off top is a ballistic run where a stock makes its final, ballistic move in a long run and then rolls over and gives most of the final run back and even more in some instances. It is thus a good thing to recognize when it occurs as it can cost you some big […]

Sometimes I miss the buy point on a stock and don’t want to chase it too far up. A day or so later, the stock will sometimes pull back close to the original buy point price wise, on light volume. Is it ok to step in and buy at that point, or should I wait until the volume rises again?

August 30, 2000

This is a great question. We have had many subscribers ask if they can “buy late” into a stock or option if the stock has moved beyond a designated buy point. We make the same point as you about chasing it too far up: we time our plays in order to jump in at the […]

What is a double bottom pattern?

August 30, 2000

The classic double bottom pattern is one that typically forms in choppy markets. It is a quickly-developed pattern at its best, and can result in explosive breakouts. It is an exciting pattern because of the extreme price swings and the speed at which it can sometimes form. The description of the pattern fits its name. […]

Is watching the Bid and Ask Size ie. 20 x 30 intraday helpful or not, and if it is please explain the best way to use it, if not, why.

August 30, 2000

Yes, you can make money in the stock market by learning what the important signposts are. Your question is a good one, and we will go into detail in more Subscriber Questions over the next few weeks. Basically what you are looking at is the amount of stock that is for sale versus that amount […]

Sometimes in your option plays you choose expirations that are several months out while others not so far. Why do you like to go so far out on some option plays?

August 30, 2000

Over the years, playing options has taught us that the trend and time are your friends, particularly when the market turns choppy as we have seen of late. With options, time is very important because options expire. Thus time works against you on options you buy, and you need time. Time to let the play […]

I have a question regarding some buy alerts. Sometimes there is an alert issued where the stock does not have the volume on that particular session, but it did have strong trade in the session(s) before. Do you buy on a lower volume session using that prior strong volume and price?

August 30, 2000

Excellent question. It is easy to get too focused on volume for a particular session. As with everything you have to fight to avoid getting tunnel vision, to avoid getting too focused on any one aspect regardless of its rank in importance. The key to a stock moving higher is big money, i.e., institutional money, […]

How does one determine that there is accumulation in a particular stock as opposed to distribution if the only indicators are price and volume? How does one know that there is strong cash flows or institutional buying?

August 30, 2000

One of the most important things to understand in the market is where the big money is moving whether that be into or out of a stock in particular of the indexes in general. The big money tries to accumulate shares quietly as in during a long price base, but there are times it moves […]

I have noticed several stocks pulling back toward their original buy points. How does one decide to ‘buy on the pullback’ or not?

August 30, 2000

Breakouts have about a 50-50 probability of coming back to test their breakout point after making the move. The stronger the breakout move, the less likely it will make a full test, but that is not always the case. In a weaker market there is more often a test. If you get a test you […]

My question is when a stock comes out of the gate first thing when the market opens, like some of them have done lately, and its already past the buy point but volume is not there should I just let it pass by? Like today ASPM opened up over $1.00 but the volume was not there; should one take partial position on pull back even if the volume is not there still late in the day?

August 30, 2000

Great question. We have stated more than once we do not like gaps higher as they are more of a crapshoot. Early enthusiasm tends to wear off, and a gap higher can come right back on you. Unless the market is still in good position to rally further and the stock is in a strong […]

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