1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
The Big-Name Tech Stocks Take Their Turn
– The big-name tech stocks take their turn at leading the next session, as the indices turned in a mixed performance that was skewed toward the large-cap stocks.
– We saw lots of news from many areas, but the number of jobless claims, existing home sales and earnings, of course, remain the key drivers.
– Small-cap and mid-cap stocks, as well as some big industrial stocks, struggle at their respective resistance. Meanwhile, 10-year Treasury bond yields have stabilized at just below 1.3%.
– Nonetheless, some seemingly less-than-sexy stocks look very interesting, while small-cap and mid-cap stocks may provide another downside opportunity.
In a lackluster session that lasted from the premarket session to the close, the large-cap indices scratched out a modest gain — thanks to an afternoon recovery — while the small-cap and mid-cap stocks, and even semiconductors, suffered a significant downside session.
There wasn’t a ton of news, but some news, nonetheless, impacted stocks.
The number of jobless claims was expected to fall. Instead, it rose by 59,000 to 419,000 from an upwardly revised 368,000. On the bright side, the number of those who were on some form of government assistance fell by 1.2 million, as the effect of some states ending enhanced unemployment benefits started to impact the numbers. Indeed, claims are down sharply in those states and remain flat in states that are maintaining the increased payments.
NOTE: The figures and information above are from the 7/22 report.
NOTE: The video is from the 7/21 report.
2. Targets Hit
Here are two completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week:
iShares Core S&P Mid-Cap ETF (NYSEARCA: IJH): The mid-cap stocks are locked in a four-month-long trading range. In late June, IJH bumped the 50-day moving averages (MAs) from below and tried to break through them. However, this course of action failed.
It then tested back near the bottom of the range, starting in the second week of July. It rebounded again to the 50-day MAs. As we were ready, we put it on the report as a downside play. We were looking at a break lower, as IJH was struggling to get through the 50-day MAs.
It had failed twice over the past few weeks, and if it did so again, we would play it downside.
On July 13, IJH did in fact fail at the 50-day MAs. That was our signal, and we moved in. We bought August $265 put options and paid $5.70 per option. Well, we knew that the market had had a rough week that week, which had culminated with the Monday gap lower.
IJH gapped lower as well and moved through our target. After it gapped, it stopped almost immediately. After five days lower — greatly lower — and with the stock gapping hard and showing signs of holding, we sold the options for $11.50 and banked a 101% gain.
We also took a gain this past week in the following position:
American Airlines Group Inc. (NASDAQ: AAL): This was a downside position that we entered on July 13 and sold on July 19 for a 32% gain.
Here are two completed trades from Technical Trader Alert, offering insights into our trading strategy and the targets that we have hit this week:
iShares Russell 2000 ETF (NYSEARCA: IWM): Like it or not, small-cap stocks have lagged. At least they managed a big trading range over the past six months, when compared to just a selloff. In any event, when the market looked ripe to fall, IWM was just coming off of the top of its trading range.
After an initial fall, it rebounded to the 50-day MA in mid-July. We were ready for it to roll back over. As IWM fell away from the 50-day MA on July 13, we bought September $223 put options for $9.40.
That was a rough week for stocks. Furthermore, since the small-cap stocks were laggards, they sold hard. On that Friday, they gapped higher to start and then reversed in a rather ugly fashion to close at the session low.
Thus, we left the play to work into the following week, as stock indices that sell hard into the weekend, often continue to do so early over the following week before bottoming. Sure enough, IWM gapped lower on Monday, but it also held its ground after the gap.
Since that was a good signal to sell, we sold our options for $15.30 and banked a 62% gain.
We also took a gain in the following position this week:
Facebook, Inc. (NASDAQ: FB): We bought September $345 options for $16.50 on July 21 and sold half of them on July 23 for $25.30. This produced a 51.9% gain.
Here is one completed trade from the Success Trading Group, offering insights into our trading strategy and the target that we have hit this week:
Pfizer Inc. (NYSE: PFE): This past week, we banked a gain in PFE. We purchased the position for $39.57, and the stock surged through our target on Wednesday. However, after it hit $41.71 on the high, the stock started to stall. Given the gains that were ahead of that move, we decided to sell the position. We sold the stock for $41.58 and banked a 5% gain in the trade.
Now is a good time to become a member of the Success Trading Group. The system is geared towards bringing you consistent, short-term gains of 5-10% and you can expect four to six trades every month.
3. Pick of the Week
COP (ConocoPhillips — $57.02, +2.55)
STATUS: COP put in a new 2021 high with a gap higher in early July. As it gapped to that high, the stock’s moving average convergence/divergence (MACD) put in a lower high. After the stock gapped higher, it paused and then tanked on July 6.
After it held the 50-day MA, it tried to bounce and failed. Instead, it broke lower into Monday with a big gap to a doji. After that, a rebound on Tuesday and Wednesday allowed the stock to move up to the 10-day exponential moving average (EMA), as of the Wednesday close. However, it failed to hold a move over that level.
A failure at the 10-day EMA shows the presence of a weak stock. If COP breaks down below the Wednesday gap point, we will move in for a downside play to $50. That move will give us a solid 75% gain in the options.
VOLUME: 9.378M Avg Volume: 8.71M
ENTRY POINT: $55.69 Volume=11M Target=$50.21 Stop=$57.35
POSITION: COP SEP 17 2021 $55.00 Puts — (-38 delta)
4. Covered Call Options Play
Atlanticus Holdings Corp. (NASDAQ: ATLC) — Atlanticus Holdings Corp. is currently trading at $44.60. The August 20 $45 Calls (ATLC20210820C00045000) are trading at $2.90. That provides a return of about 9% if ATLC is above $45 by the expiration.