Weekender for 1/21/2024
1. Market Summary
- The rebound setup received a trigger with some better corporate data as interest rate cut disappointment shelved for a session
- Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) helps spark the chips back upside, Nasdaq mega-caps bounce from good setups
- Housing starts drop, Philly Fed contracts a fifth month
- S&P reports an 80% increase in 2023 corporate defaults
- Geopolitics versus the real economies in the West … and the East
- Will the bounce show staying power and follow through PHLX Semiconductor Sector (SOX) could not show after its Tuesday break higher?
The large-cap indices were set to try a bounce, and that is what drove Thursday. The disappointment regarding near-term interest rate cuts was shelved for a bit, with market participants focusing on Taiwan Semi’s earnings beat as well as China state-owned funds stepping in (doing as they are told) to buy equities. Didn’t hurt that housing starts fell 4.3% in December, and the Philly Fed scored another scintillating negative performance (though -8.0 was better than -10.5 in December; wow), keeping the very real narrative that, outside the government data, the economics, while already down, are tailing off here in January.
NOTE: The figures and facts above are from the 1/18 report.
MARKET VIDEOS
MARKET SUMMARY
TECHNICAL SUMMARY
NEXT SESSION
NOTE: The videos are from the 1/17 report.
2. Targets Hit
Investment House Daily:
With the market showing many potential leaders but few willing to step up, we had to cast a wide net to find stocks that could make us money while the rest of the market worked on patterns and otherwise set itself up to move higher. Of course, when the market is hesitant, even good patterns can be rabbit holes, i.e., if a stock breaks higher only to fizzle the move, unable to demonstrate any follow through.
Boston Scientific Corporation (NYSE: BSX): We were watching medical/drug/healthcare areas, as they were showing some good action even as the market struggled in late 2023. BSX caught our attention as it broke higher from a four-month range to end 2023. It started to move laterally, and we put it on the report — ready to buy if it continued its breakout move.
Right after the start of 2024, BSX did extend its breakout. And we were ready to move in. I issued the alert to buy February $57.50 call options that were trading on the ask side at $2.35. From there, BSX moved higher, albeit slowly at first, but picking up speed as it climbed the 10-day exponential moving average (EMA). Not exciting, but steady, and in the market to start 2024, steady upside action is rare action.
Thursday, Jan. 18, BSX moved right up to our target, then started to back off just pennies from the initial target point we projected. That was close enough, and I issued the alert to sell half of the option position with the options trading at $3.70 on the bid side, a very solid 57% gain. We are letting the other half work to see if, after a short pause, BSX can continue the break higher.
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3. Covered Call Options Play
Potbelly Corp. (NYSE: PBPB) — Potbelly Corp. is currently trading at $12.90. The Feb. 16 $13 calls (PBPB20240200C00013000) are currently trading at $0.50. That provides a return of about 7% if PBPB is above $13 by the expiration.
