Invest and Trade Profitably with Jon Johnson

Weekender for 1/26

1. Market Summary

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

Not Necessarily Great Economic Signs

– Stock action has improved with low to high gains and the stocks that stumbled on Wednesday have showed stronger action.
– There has been excellent action in response to good earnings both during the trading session and after-hours.
– Bonds have rallied, gold has risen and oil has fallen. These are not necessarily great economic signs.
– Despite mixed economic results, the market is still producing solid upside patterns.

The session was somewhat mushy and undecided from the premarket through midday. This is a similar course of action to how stocks have moved over the past week. Stocks started lower, bounced during the first hour and then faded back to the opening lows. This trajectory proved to be a double bottom. Indeed, the SPDR S&P 500 ETF Trust (SPY) even showed a handle on that pattern by completing the cup with handle pattern by 1:00 p.m. EST. Then, SPY broke out and stocks moved higher into the close.

This did not produce huge gains, but it did rally nicely off the session lows. This course of action also pushed the PHLX Semiconductor Sector (SOX) and the NASDAQ to new all-time closing highs. On the other hand, the S&P 500 didn’t quite make it and the DJ30 struggled — even though it left itself in a good position.

We also returned to a more bullish low to high action when compared to the Wednesday high to low trading pattern. This trajectory remained constant even with the spread of the coronavirus as well as more cases, deaths and a possible report of its appearance in a Texas county southeast of Houston.

Technical Analysis:

In general, we saw good intraday action as noted.

NASDAQ: We saw some action on most of the indices, then a reach to a lower intraday period near the 10-day exponential moving average (EMA) and then a rebound to a positive close. This was a good shakeout action that, despite the long and sustained uptrend, shows that buyers are still entering.

S&P 500: It tapped the 10-day EMA on the low and then rebounded to a nice gain on a good rise in volume to above average levels. The uptrend has continued.

NOTE: The figures and information above are from the 1/23 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 1/22 report.

2. Targets Hit

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

Nvidia Corporation (NASDAQ:NVDA): With large caps running, we are always, of course, keeping watch over the big names for opportunities. After a rally into late 2019, NVDA set up an opportunity in early 2020 as it tested that late 2019 run. Then, NVDA faded to the 20-day EMA early in the year before starting to break higher.

We put the play on the report and entered it on Jan. 8 with some March $235.00 call options at $18.25 when the stock was at $240.78. However, NVDA did not “rip” higher. Instead, NVDA rallied into the middle of the month and then faded to test the 10-day EMA this week.

NVDA started upside on Thursday before gapping upside on Friday due to positive semiconductor sector earnings. We sold half of the position for $29.20 and banked a 60% gain. Now we are going to see if this gap was the start of a leg higher that will help us build more value into the remaining position.

Home Depot Inc. (NYSE:HD): As both retailers and housing remain strong, that combination — along with a great pattern — leads to upside. Thus, we were looking at HD in mid-January as it broke higher from a two-month inverted head and shoulders pattern that had formed after a selloff from the October/November peaks. Then, the stock gapped higher on Jan. 16 and moved through our buy point. We entered with February $225.00 call options for $5.80 as we were looking to play a rally to HD’s earnings on Feb. 19.

HD certainly continued higher. On Jan. 21, it hit our initial target at the lower gap point from the November gap downward. Then, we sold half the options for $9.75 and banked a 68% gain. Since then, the stock has continued its rise and the options are now bidding near $11 as HD has begun to trade toward the upper gap point. We want to see if HD can fill that gap.

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

Euronet Worldwide, Inc. (NASDAQ: EEFT): We like playing EEFT even though its moves as of late have not been the surges of the past. Still, a steady move is a good move, and in December 2019, we saw EEFT consolidating the breakout from a four-month downward wedge and setting up its next attempt at a run higher. We put it on the report in the middle of the month. On Dec. 19, EEFT posted a nice break higher. As that was our entry signal, we entered with February $160.00 calls for $6.40 when the stock was at $158.08.

EEFT rallied for three sessions and then faded over a week to the 20-day EMA. The stock then put in a higher low after another consolidation and then started back upside on Jan. 9. From there, EEFT posted another steady move higher up the 10-day EMA and hit our initial target on Jan. 21. At this point, we sold half the options for $9.30 and banked a gain of 47%.

We let the other half work in order to see if EEFT could push higher toward earnings. Indeed, it has risen and the options are now trading a bit higher. If it continues along this trajectory, we will let it work.

Luckin Coffee Inc. — ADR (NASDAQ: LK): We initially entered this play on Dec. 3 as LK broke higher after testing a breakout from a four-month base during the last part of 2019. We entered with stock at $31.04 and March $30.00 call options for $6.20. After entering, LK sidestepped for a week, rose and then faded. However, it continued to hold onto the 10-day EMA while it did so.

After we let it consolidate, it started higher just before Christmas. On Dec. 27, LK hit the initial target and we sold some stock for $37.58 and banked a 21% gain. We also sold some options for $10.20 and banked a gain of 64%.

LK tested into the start of 2020 and held the 20-day EMA. Indeed, after that test, LK rocketed higher starting on Jan. 8 and then rallied to Jan. 17. It gapped lower during the next session and held a modest loss with a doji. On Jan. 22, LK gapped upside and then started to struggle and fade.

After the gap lower, its inability to hold the next move up told us that it was time to sell. We sold the rest of our stock for $46.29 and banked a gain of 49%. We also sold the rest of our options for $18.00 and banked a 190% gain.

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Here is one completed trade from the Success Trading Group, offering insights into our trading strategy and the target that we have hit this week:

Intel Corp. (NASDAQ:INTC)

We saw INTC break higher from a nice three week lateral consolidation and start an earnings run on Wednesday. On Thursday, INTC continued its move with a gap higher. As a result, we issued an alert and bought the stock for $61.26.

INTC’s performance was solid as the stock surged upward near the close and hit our initial target. Since all of this occurred during a pre-earnings run, we decided to bank a good gain in a day by selling the stock for $62.51 and banking a 2% gain. Of course, INTC surged due to strong earnings on Friday, but that is a different kind of play…

This is an example of what you’ll get by becoming 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

CRWD (CrowdStrike Holdings–$61.55; -1.02; optionable)

EARNINGS: 03/05/2020

STATUS: Double bottom with handle. We began to look at the possibility of a new position in CRWD when it tested over the past three sessions and worked on developing a handle to its base after a nice run in January.

After it started tapping the 10-day EMA and appeared to test a bit more, it looked like it was ready to move. Thus, we want to move in as it breaks higher. A rally to the target will give us a 15% gain on the stock and a 95% gain on the options.

VOLUME: 4.004M Avg Volume: 6.357M

BUY POINT: $62.63 Volume=8M Target=$72.35 Stop=$59.46

POSITION: CRWD MAR 20 2020 62.50C — (52 delta) or MAR 60C — (60 delta) &/or Stock

To see the CRWD chart image, click here!

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4. Covered Call Options Play

PG&E Corp. (NYSE:PCG) — PG&E Corp. is currently trading at $13.73. The March 21 $14.00 Calls (PCG20200321C00014000) are trading at $1.70. That provides a return of about 17% if PCG is above $14.00 by the expiration.

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