Weekender for 1/2
1. Market Summary
Third Time is the Charm
- Third time is the charm as upside futures hold, stocks rally.
- S&P 400, Russell 2000 Index broke hard downside Wednesday, surged back upside Thursday.
- S&P 500, Nasdaq, DJ30 move higher as expected after Nasdaq fell to the October low on Thursday.
- New year will see some new money, but we want to see how the market reacts once that money is put to work.
- We are looking at upside and downside plays as 2022 ends, 2023 begins.
As anticipated, the Nasdaq’s touch of the October low produced a bounce. The oversold techs led a market rebound, matched by the small caps’ advance. Finally, a rally, but with just one more day in the month, quarter and year. Of course, the market showed a strong upside surge two Wednesdays back, but that move reversed in one session. Thus, for now we take this for what it is: an oversold bounce after techs touched a key support level. A good bounce, but just an oversold bounce.
NOTE: The figures and information above are from the 12/29 report.
Watch the Investment House Videos For This Week Here!
NOTE: The videos are from the 12/28 report.
2. Targets Hit
Century Aluminum Co. (NASDAQ: CENX): As the techs continue their struggle and the “hard stuff” stocks (metals, minerals, etc.) continue to improve, we continue looking for good entries on these stocks to position Technical Trader Alert for early 2023. CENX (aluminum) was working on such a good entry.
Over the past seven weeks, CENX faded off the November high. That action turned some off the sector, but the reality is that CENX was forming a right shoulder to a five-month inverted head-and-shoulders pattern as part of a much larger 10-month base. Refining the pattern a bit more, the past month, during the formation of the right shoulder, a smaller inverted head-and-shoulders formed using the 50-day moving average as support. That had us on watch for a break higher and an entry.
That move occurred on Thursday, as CENX surged up off the 50-day MA on a shot of the best volume in two weeks. That was our entry signal, and we issued the alert to enter with March $8 call options trading on the ask at $1.46. The stock was trading at $8.32.
Our initial target was $10.25 near the mid-November peak. That move gained roughly 70% on the options. Now we let the play work into Q1 2023, as we anticipate metals and the other “hard” asset stocks to outperform as the world continues to change.
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3. Covered Call Options Play
Allegro Microsystems Inc. (NASDAQ: ALGM) — Allegro Microsystems Inc. is currently trading at $29.98. The Feb. 17 $30 Calls (ALGM20230217C00030000) are trading at $1.95. That provides a return of about 8% if ALGM is above $30 by the expiration.
