Invest and Trade Profitably with Jon Johnson

Weekender for 1/17


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1. Market Summary

Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.

Small-Cap Stocks Scream Higher

– Small-cap stocks scream higher on a near-$2 trillion stimulus proposal and the Johnson & Johnson (NYSE: JNJ) vaccine. Indicators, sentiment and internals are all getting extreme.
– Leader action is still solid, but the indicators are telling us to be aware.
– Nice setups are shaping up in the market’s recent leaders, and perhaps some new areas, such as airlines, will join other transportation stocks in good moves.
– This Friday was Expiration Friday, but more to the point, earnings are getting ready to kick off after a very good rally — for most of the market.

It was just another day of rotation, and on Thursday, it was the Russell 2000’s turn to lead the market again. The small-cap stocks are on a tear. Indeed, they have been on a tear since Halloween. They surged through November, most of December and stumbled from Christmas Eve to the first trading day of 2021. Then, they surged through the penultimate hour of trading on Thursday.

Any fears we had about pulling the January Effect too far forward to have any small-cap upside to start 2021 were misplaced, for now.

Chips, including the Lam Research Corporation, Ultra Clean Holdings and Applied Materials, were stellar. The Taiwan Semiconductor Mfg. Co. said it was going to dump a ton of money into equipment, and those chip stocks surged on that news.

NOTE: The figures and information above are from the 1/14 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 1/13 report.

2. Targets Hit

Here are several completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week:

Schrodinger Inc. (NASDAQ: SDGR): Sometimes, the gains come fast. Sometimes, they take longer. Sometimes, they come fast, and then, if you wait and hold some of your position, the gains turn quite impressive. With regard to SDGR, we took a bit early, we took a bit late and we made a lot of good money.

Way back in November 2020, we saw a stock we like to play set up a double bottom after a four-month slide off a high that had made us good money before. Anyway, we saw this double bottom set up, and when SDGR broke higher on Nov. 16, we moved in by buying stock for $58.71 and March 2021 $65 options for $9.80. Since it was a longer-term base, we bought longer-term options with the idea that we would let SDGR work for us. 

It did not take long to work, as it was a good setup. SDGR rallied into Thanksgiving, and just after the holiday, SDGR surged higher and hit our initial target. Per our plan, we sold half of the stock for $70.40 and banked a 19.9% gain. We also sold half of the options for $16 and banked a solid 63% gain. After that, we just let SDGR work its break higher from its base.

It spent almost two weeks consolidating that post-Thanksgiving surge. Then, in mid-December, it broke to a new recovery high and was off and running. SDGR ran until Christmas, and then paused and faded into the new year. However, we remained patient. Then, it took off again, rallied into this week and approached the July 2020 prior high.

At this point, stocks were getting extended, and small- and mid-caps were getting stretched. Bullish sentiment had been over 60% for weeks, and that level of sentiment has marked past corrections. The put/call ratio was staying in the 60s a lot, while the number of new highs on the Nasdaq had surged to over 600. Stocks still looked good, but they surged ahead of the stimulus announcement.

Now, earnings are coming with stocks already having run a long way. When many leaders started to fade on Friday, we decided to bank more gains on this position. We sold more stock for $89.10 and banked a 51.7% gain. We also sold another half of the March options for $30.50 and banked a 211% gain. Now, we will see what SDGR does from here. As we have already banked good gains, we are ready to bank the rest of them if the market starts to deteriorate.

We also banked gains on these positions:

Applied Materials, Inc. (NASDAQ: AMAT): 132% gain in the options

Chewy Inc. (NYSE: CHWY): 83% gain in the options

Cleveland-Cliffs Inc. (NYSE: CLF): 20% gain in the stock, 98% gain in the options

Lowe’s Companies Inc. (NYSE: LOW): 30% gain in the options

Peloton Interactive Inc. (NASDAQ: PTON): 38% gain in the options

Ultra Clean Holdings Inc. (NASDAQ: UCTT): 19% gain in the stock, 138% gain in the options

United States Steel Corporation (NYSE: X): 27.8% gain in the stock, 103% gain in the options

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Here are several completed trades from Technical Traders Alert, offering insights into our trading strategy and the targets that we have hit this week:

Etsy Inc. (NASDAQ: ETSY): The new group of online retailers, along with the older retailers who put in strong online systems during the pandemic — while small businesses were forced to close — are dominating the retail sector. Thus, we are always interested in picking them up when they set up.

ETSY put in a strong move from November to late December but started to fade before Christmas. It sold into the new year, but after coming back to the 38% Fibonacci retracement in early January, it looked ready to move back up. We put it on the report, and on Nov. 11, ETSY broke higher.

We picked up March $180 call options by paying $20.70 for each option when the stock was trading for $182.89. ETSY wasted no time. During the next session, it shot to a new high and hit our initial target. As a result, we sold half of the options for $39.50 and banked a 90% gain.

ETSY was slow during the next session, but on Thursday, it moved higher to yet another new high. It reversed rather quickly, however. As a result, we sold more options for $40.55 and banked a 95% gain.

We also took gains on the following positions:

Chewy Inc. (NYSE: CHWY): 86% gain in the options

Floor & Decor Holdings Inc. (NYSE: FND): 93% gain in the options

Lam Research Corporation (NASDAQ: LRCX): 117% gain in the options

Sunrun Inc. (NASDAQ: RUN): 193% gain in the options

Rambus Inc. (NASDAQ: RMBS): 145% gain in the options

Simon Property Group Inc. (NYSE: SPG): 48% gain in the options

Tilray Inc. (NASDAQ: TLRY): 57% gain in the stock

Receive a risk-free trial to Technical Trader and save 50% by clicking here now!

Here are several completed trades from the Success Trading Group, offering insights into our trading strategy and the targets that we have hit this week:

Cemex SAB de CV ADR (NYSE: CX): Basic industrial stocks, such as metals and materials, are performing very well. By doing so, they provide periodic, excellent setups. CX is one of those stocks. This past week, we saw it completing a nice test at the 10-day exponential moving average (EMA) following a break to a new high during the prior week.

On Tuesday, CX started upside over the 10-day EMA. Not long afterward, we moved in by buying the stock for $5.83. CX pretty much performed as expected, though it did take Wednesday off. After that, however, it jumped higher on Thursday. On Friday, it punched to a higher high and touched our target. As a result, we sold the position for $6.26 and banked a gain that was over 7%.

We also took gains on the following plays during the week:

United Microelectronics Corp. (NYSE: UMC): 6.04% gain in the stock

Halliburton Company (NYSE: HAL): 4.8% gain in the stock

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.

To receive a risk-free trial and save 50%, click here now!

3. Pick of the Week

CENX (Century Aluminum Co. — $13.30, +0.03): Aluminum

EARNINGS: 02/18/2021

STATUS: CENX had already made us fine money on its first run. Okay, it generated more than just coins, as it generated gold coins from aluminum. Anyway, after that run, CENX tested and put in a one-two-three pullback. It gapped lower on Monday and then recovered to break positive on rising volume. Since CENX is ready to go at any time, we will move in as it continues up through our entry point. A rally to the initial target will give us a 15% gain on the stock and a 60% gain on the options.

VOLUME: 714.851K  Avg. Volume: 974.661K

ENTRY POINT: $13.49 Volume=1.2M Target=$15.49 Stop=$12.83

POSITION: CENX MAR 19 2021 $13.00 Calls — (59 delta) &/or Stock

To see the chart for CENX, click here!

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4. Covered Call Options Play

Huya Inc. (NYSE: HUYA) — Huya Inc. is currently trading at $22.40. The Feb. 20 $22.50 Calls (HUYA20210220C00022500) are trading at $0.50. That provides a return of about 15% if HUYA is above $22.50 by the expiration.

Learn more about our Covered Call Tables here!

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