Invest and Trade Profitably with Jon Johnson

Weekender for 1/24


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1. Market Summary

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

Solid Futures Rattled By Stronger Economic Data

– Solid futures were rattled by stronger economic data.
– Stocks were mixed when the market closed, as stronger data cut into “go big” stimulus desires. Some have already called for scaling back the $1.9 trillion stimulus package.
– The Nasdaq 100 has continued to move higher and chips have jumped right back to the upside.
– Intel’s earnings resulted in a surge and purge afterhours. Is the market already at max pleasure for this earnings season?

On Thursday, the rally frayed a bit, as the big Nasdaq stocks continued their lead. They were augmented by the PHLX Semiconductor Sector (SOX), as it returned after just one day of rest. However, the other indices struggled. The Russell 2000 was off the most, followed by the S&P 400 mid-caps. The large-cap NYSE indices closed basically flat.

Stocks were cruising along during the premarket session until the morning data dump hit. Jobless claims were worse than expected, but they were better than they had been the week before (900,000 vs. 962,000 during the prior month), the Philly Fed posted strong results (26.5 vs. 10.5 expected vs. 9.1 during the prior month) and housing starts jumped by 5.8%, with single family homes up by 12% month over month and up by 27.8% year over year.

While this seems like good news, this market is sensing that things are not great economically, and that the flood of President Biden’s executive orders is going to limit growth and jobs further (e.g. banning drilling on federal lands for six months). Thus, investors reacted to the good news as if it was bad news. They know that the uptick in economic reports won’t last. However, this uptick has also blunted some calls for “go big” stimulus. Indeed, I have seen news stories citing the fact that members of Congress are already calling for President Biden to scale back the $1.9 trillion stimulus/pork/liberal Christmas wish list spending bill. Less stimulus means less joy for markets and an explanation for a sloppy market session.

NOTE: The figures and information above are from the 1/21 report.

Watch the Investment House Video For This Week Here!

NOTE: The video is from the 1/20 report.

2. Targets Hit

Here is one completed trade from Investment House Daily, offering insights into our trading strategy and the target that we have hit this week:

Ultra Clean Holdings Inc. (NASDAQ: UCTT): As anticipated, the market started to struggle after adding some more upside early in the week. It is extended in the near term, and we had banked a lot of gains leading up to this past week. We let some positions work, however, and UCTT was one of them.

We bought UCTT shares on Jan. 4, when the stock shot higher off of a three-week test of the 50-day moving average (MA). Many chips set themselves up perfectly to rally at the start of the year, and when we saw UCTT jump off of the 50-day MA, we moved in with stock at $32.82 and March $35 call options for $2.60.

It was almost too easy with this kind of stock. UCTT ran higher for three sessions and paused for two, as it had to test the 10-day MA. However, even that test resulted in a rocket shot higher intraday.

Finally, UCTT started to show signs that it was peaking during this strong three-week rally. On Tuesday, it shot higher and stalled to a hangman doji on Wednesday.

We figured that we shouldn’t wait any longer, as that would risk a gap lower. So, we sold the stock for $41.90 and the options for $8.50, banking a 27% and a 225% gain, respectively. Now, we will let UCTT test this move. It will then likely move back to the 10-day exponential moving average (EMA). Then, we will let it set up again. Finally, we will see if we can catch another good run.

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Here is one completed trade from Technical Traders Alert, offering insights into our trading strategy and the target that we have hit this week:

Netflix Inc. (NASDAQ: NFLX): Sometimes, even we need a bailout. Thus, we are not adverse to taking one. We entered NFLX when it was breaking higher in its range and coming off of a 50-day MA test on Dec. 16. At this time, we picked up some February $520 calls for $39.45. After range-trading in this pattern since July, NFLX looked good for another rotation back up in the range. It did so — for a bit.

It tested that initial move, held near its support and then rallied nicely to a higher high to end 2020. That left NFLX in great shape for a sprint to the top of the range at the start of the new year.

While this was a great setup, it didn’t take. NFLX started 2021 with a gap down to the 50-day MA. While the stock was still well above the bottom of the range, it was closer to where we had bought it. NFLX remained there for almost two weeks. Earnings were coming up, and last time, NFLX was hit because the number of subscribers was lower. This time, we figured it would be higher due to the appearance of new lockdowns.

With that, we opted to wait for earnings. Fortunately, NFLX did post a big subscriber surge. As a result, the stock gapped out of its range on Wednesday.

We used that move to sell half of our options for $53.30 and bank a 35% gain. While this was not the big surge we were looking for, it worked. We did leave some on the table to see if NFLX would continue higher.


Because stocks tend to continue to move in the direction of a breakaway gap, such as the one NFLX showed on Wednesday.

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There were no trades in the Success Trading Group this week.

Still, 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.

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3. Pick of the Week

LMND (Lemonade Inc. — $145.21, +2.57)

EARNINGS: 02/09/2021

STATUS: Flag. Over this past week, LMND has faded on lower and lower trading and tested the strong surge from the prior week. This was at the same time that LMND surged from a two-week pennant pattern. These are moves that took place after LMND broke higher from its five-and-a-half-month cup-with-handle base — the first base that it formed since its initial public offering (IPO).

The breakout in December led to a new high. Then, the stock faded into a pennant into early January. A new break upside was followed by this test. The doji that appeared over the 20-day EMA on Monday suggests that the pullback is over. So, we are looking for a new break higher to give us an entry. A move to the target will give us a 70% gain on the options.

Volume: 4.136M Avg. Volume: 5.086M

ENTRY POINT: $149.34 Volume=7M Target=$179.48 Stop=$140.98

POSITION: LMND MAR 19 2021 150.00 Calls — (56 delta)

To see the chart for LMND, click here!

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4. Covered Call Options Play

Danaos Corp. (NYSE: DAC) — Danaos Corp. is currently trading at $28.36. The Feb. 20 $30 Calls (DAC20210220C00030000) are trading at $2.40. That provides a return of about 17% if DAC is above $30 by the expiration.

Learn more about our Covered Call Tables here!

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