Invest and Trade Profitably with Jon Johnson

Weekender for 1/8

1. Market Summary

Third Day is Lower

  • Third day is lower, market down overall for those days. That said, this was no 2022…
  • Stocks were decent until not — the data, Fed-speak torpedoed the hope for an upside session.
  • Bullard flaps his wings, coos a bit, bounces the market, but it does not hold.
  • Economic data outside suspect jobs data are poor.
  • Not expecting good things from 2023, as the issues facing food supplies are not being discussed or acknowledged.
  • Index charts break lower from resistance, but they do not break their recent ranges.
  • All is set for the jobs report — it could break the market lower, but it likely will not break it higher.

Stocks cut the chase Thursday, though it took a bit to convince them. Futures were higher. Then Automated Data Processing (ADP) came out stronger than expected. The Fed’s Esther George appeared puzzled that markets still believed the Fed would ease in 2023. Initial claims were 21,000 less than expected. The trade balance shrank precipitously with its largest decline (20%) since the 2008 financial crisis — imports were the catalyst, falling a stunning 6.4%. That will make gross domestic product (GDP stronger, but, as we know, that is a hollow gain, as U.S. consumers buy more imports when they are confident.

The Services Purchasing Managers’ Index (PMI) continued its string of months in contraction, now at six. All this along with more Fed-speak, political turmoil (no House speaker yet with Trump getting at least one vote), war escalation on both sides (Ukraine and Russia rejected a Russian proposed ceasefire for the Orthodox Christmas), Amazon laying off 18,000 workers, Bed, Bath and Beyond warning of bankruptcy — so many stories not healthy for the market, the country, the world.

NOTE: The figures and information above are from the 1/5 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 1/4 report.

2. Targets Hit

Technical Trader Alert:

This is a very interesting economy, with some areas prospering while other areas struggle with recession.  Some states are enjoying booming economies with an influx of new citizens, while others are slumping into recessions as citizens leave, driven away by poor economic policies, high taxes, souring business conditions and deteriorating metropolitan conditions.

The markets reflect these conditions, with some disparate sectors performing well, even when you would typically not expect them to do so. This past week, we closed trades that reflected that situation. One such “pair” was Newmont Corporation (gold miner) and Crocs (funky shoes). One is more defensive and performs in more recessionary and inflationary times, the other is a consumer discretionary stock that relies on consumer demand (though some say Crox shoes are a necessary element of survival!). With wages lower, inflation higher and economics questionable, consumer discretionary is typically weaker. Yet, both of these stocks jumped on the week.

Crocs, Inc. (NASDAQ: CROX): We entered CROX just before Christmas (Dec. 21), buying February $100.00 call options for $10.90 with the stock price at $101.22. CROX rallied through Christmas and into the new year, spiking again on Friday. We issued an alert to sell half the options for a 68% gain.

Newmont Corporation (NYSE: NEM): The day before the CROX trade, we entered NEM, a gold miner, buying February $45 call options for $4.49 with the stock trading at $47.62. NEM was breaking higher from a 50-day moving average (MA) test in a five-month cup-with-handle. The stock made a decisive break on Wednesday, hitting our initial target.

We issued the alert to sell half of the option position, banking a 55% gain. NEM is continuing the breakout move, surging over 3% on Friday after a Thursday pause. Taking partial profits locks in great gains at a logical point (in this case filling a gap lower from back in July 2022), but it also allows a good stock to continue its move. Given the solid base and the economic conditions, we definitely want to give NEM room to move.

Oh, we also banked gain in other areas such as oil and gas, selling half the potions on some Halliburton options for a 48% gain.

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Rapid Profits Alert:

This services is called Rapid Profits Alert because trades tend to happen rapidly. We wait for trades to set up just right before we enter, so we can capture that fast surge when a stock makes its break. Thus, plays and profits tend to come in fast spurts.

There is an old saying that “when the fish are running you have to have your line in the water.” Much of the rest of the time you can cast and cast and cast and not catch much. The seasoned fisherman will watch the weather, the water conditions, the fish movement, the forage and know when and where to fish. That is what we do in the markets: we look for everything to get just right, and when the moves are made, we make our moves. Again, that results in fast action and solid returns in short order.

Using this methodology, we banked the following gains this week:

Geron Corporation (NASDAQ: GERN):  22.3% gain in the stock

McEwen Mining Inc. (NYSE: MUX): 15.7% gain in the stock

Oil States International, Inc. (NYSE: OIS): 6.72% gain in the stock

Companhia Siderurgica Nacional SA (NYSE: SID): 10.5% gain in the stock

3. Covered Call Options Play

Urban Outfitters Inc. (NASDAQ: URBN) — Urban Outfitters Inc. is currently trading at $24.67. The Feb. 17 $25 Calls (URBN20230217C00025000) are trading at $1.45. That provides a return of about 8% if URBN is above $25 by the expiration.

Learn more about our Covered Call Tables here!

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