Invest and Trade Profitably with Jon Johnson

Alert Key

When Alerts are Sent:

Alerts are sent at any time during regular trading hours when a stock that we are following hits a buy point to the upside or (in the case of puts) to the downside. We base the alerts on price as that is the key indicator in our buying method, but we include volume as that is also an important component. Alerts could come at any time during the session. We typically avoid sending alerts right at the open as many times stocks surge only to pullback before making a more sustained move for the session. We try to let that first surge subside and then look at positions in earnest. On breakouts from solid patterns, however, we will send an alert when the breakout point is reached.

Alerts can also be sent mid-session when buy points are reached (giving us a better view of volume and the market overall). You will also frequently see several alerts in the last hour of trading. At that point we have seen where a stock is going on the session and how it is set up for the next session. We will send out alerts before we take any positions ourselves, and with the afternoon alerts we will tell you what our strategy is for these.

As an example of how we use the alerts, early morning plays often do not have the volume we are looking for, so we often wait and see if the move holds in the first half hour or so, then take a partial position (a partial position being maybe one-half of our total position we envision taking in the trade). We then look at the stock later toward the close, and if all is well with good volume, we take additional positions to complete the position.  On some occasions we will wait until a subsequent session to complete the buy, for example if a stock is bought, surges, then tests that move.

What is Included in Each Alert:

The alerts are not meant to replace the detailed descriptions of the plays that are contained in the reports. It is very important that you understand the market as contained in the Market Summary and the specifics of each play. That way you fully understand what we are looking at and why we are entering the play. That makes you a better investor should you decide to enter the trade as well.

The Alerts Contain:

  1. the price at the time the alert was sent
  2. the entry point. The entry may be different from the entry in the original play included in the report. A stock may quickly move past the entry during trading. When we issue the alert it will reflect the price at the time the alert is sent and we will be confident entering the position near that price. The entry point may be adjusted before entry day to day based upon the stock movement. Any change in the entry point before entering will already be reflected in the play table.
  3. the type of play
  4. the target volume (Tgt. Vol)
  5. target price on the move up or down (Tgt. $)
  6. initial stop loss point
  7. option position including bid and ask for Buys (Ops 4.1 x 4.5); we will try for the best price in the spread. The option delta is also included to reflect any changes since the play appeared in the report. A delta of 50 means for every dollar the stock rises or falls, the option rises or falls $.50.
  8. any other pertinent information we see regarding the play such as sector, good volume, etc.

The type of play tells the type of base the stock is in (e.g., flat base, cup with handle, double bottom) or if it is another type of play (put buy, pre-split run, moving average bounce, etc.)- -basically a very brief summary of what is discussed in detail in the report re buy and sell points. That is why it is very important to read and understand the plays you are interested in as they are contained in the actual report.

Some of the Shorthand We Use:

ABCD Dwn: An ABCD downside pattern used for downside plays.

ABCD:  ABCD upside pattern.

ASC Bse: Ascending base. A base that forms as the stock gradually rises in price.

Bear Flag: This is a rise after a break of support to the downside. Once the move higher runs its course the downside move resumes.

BO: Breakout

Bounce: A bounce play up from support such as the 50 day MVA

CC: Covered call

Cup w/handle: Cup with handle base

Dbl Btm, Double btm, Dbl Btm w/handle: Double bottom base, Double bottom with handle base

Dbl Top:  A double top pattern, a bearish pattern.

Flag: A test back to near support in a flag shape after a solid upside move.

HdShldr: Head and Shoulders, a bearish pattern.

Momentum: a momentum trade without necessarily a pattern

New High BO: Breakout to a new high

Pennant: Similar to a flag, forming after a surge straight up, pointed shape

Pre Ann: Pre-Announcement split play

Pre-split: Pre-split play

Put: Downside play using puts to buy

Rev HS: Reverse or Inverted Head and Shoulders. Opposite of the head and shoulders and a bullish pattern.

Rollover: A generic label for rounded or umbrella tops indicating a downside move.

Run to $100: Stock that is a momentum move up to $100

Test BO: A test of the breakout and we are catching the move back higher.

Test 50 day MA, 200 day MA: A play for a bounce off the 50 day or 200 day MA.

Test TL:  Testing a trendline. Can occur either in an upside play, i.e. a bounce up off a trendline, or downside, i.e. a stall below a trendline.

Triangle: Any of the various triangle patterns.

Wedge: Downward pointing or upward pointing. These tend to break the opposite direction of the point.

As you can see, these are all abbreviations or short hand for the plays described in the reports.

We put the stop loss point in so you can insert the stop order after the buy. Typically that is approximately 7% below the buy point, but it varies depending upon support levels that we want to utilize as well. That is the best insurance you can have; as the stock moves higher, you will want to adjust that stop point based upon your risk preferences. We typically use ‘soft’ stops as a support and resistance are ranges and a stock can move into that range intraday only to be turned away by the close.  Thus we make many exit decisions based upon how a stock is closing.

We hope you enjoy the Pro level of your service and utilize it to its fullest. It is a natural complement to our style of investing, and we are very excited and proud to bring it to you. As always, if you have any questions, please feel free to contact us!

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