************ Special Replay *************
I had the pleasure of being on a call with many paid Eagle subscribers this past week. In it, we discussed what is going to drive the market in the fourth quarter and how to profit for the remainder of the year. As a valued reader of this e-letter, I wanted to give you access to a replay of this event. Click here now to listen to it.
1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
Stimulus On, Stimulus Off, Market Rallies
– The pattern seems to be stimulus on and stimulus off. However, even when there is no stimulus, the market rallies. Not much was scheduled for Friday, but when the president said that he wanted a “big deal” in the new stimulus package, futures jumped.
– Tech stocks and other leaders close at session highs while some back off.
– The recovery into the early September resistance continues as small- and mid-cap stocks continue to lead.
– The PHLX Semiconductor Sector (SOX) is closing in on the September high and is just a Thursday’s gain away. Good breadth remains as small- and mid-cap stocks rise.
The financial stations are continuing to talk about the fact that stimulus is the driver of this rally. Indeed, after the markets closed, one anchor was mystified as to why the market rose, even as Speaker Pelosi rejected piecemeal stimulus for areas of the economy that were in dire need. Perhaps, just perhaps, stimulus is not driving the action. As I have noted several times in response to shrugging shoulders and stumped expressions, the market was rallying higher when everyone believed that there were no ongoing negotiations.
It was only after it was revealed that there were stimulus talks going on that the market turned volatile. Actually, it hung on every headline, whether there were talks or not and whether any progress was made or not. The fact that stocks rallied across the board, on a day that stimulus hopes were dashed once more, speaks to stocks not necessarily rallying because of the stimulus bill. Similarly, they rallied a week ago until news broke that President Trump had tested positive for COVID-19. When you think about all of this, this fact is a hugely good thing to have in a rally, i.e. the market rallying regardless of whether more stimulus is coming or not.
That said, after-hours, President Trump came out and said he now wanted a “big deal” for stimulus. Futures are, like Pavlov’s dogs, salivating.
NASDAQ: The NASDAQ continued higher after filling that third downside gap and is currently moving up toward filling that second gap. Recently, it came within 10 points and backed off some. When it moved higher, we saw good enough breadth, but the slowing volume implied that the move was losing some momentum. I would like to see a lot more power as it breaks higher from that inverted head-and-shoulders pattern. That said, many areas inside the NASDAQ are working well and are moving higher.
S&P 500: Thanks to IBM jumping 6%, the S&P 500 gapped over the Sept. 8 upper gap point and is taking on the Sept. 3 closing level. This nice move was a bit short on volume but had good breadth. Indeed, it was better than Wednesday’s move.
NOTE: The figures and information above are from the 10/8 report.
NOTE: The video is from the 10/7 report.
2. Targets Hit
Here are several completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week.
We have some great positions on leaders that are making great moves. With October options expiring next week, and some good gains already logged in the indices and leaders, it was a good time to bank some gains. Here are some of the plays we closed during a busy week:
Snap Inc. (NYSE: SNAP): 13% gain on the stock, 100% gain on the options
NVIDIA Corporation (NASDAQ: NVDA): 47% gain on the options
Fastly Inc. (NYSE: FSLY): 129% gain on the options
Etsy Inc. (NASDAQ: ETSY): 60% gain on the options
Zscaler Inc. (NASDAQ: ZS): 39% gain on the options
Stitch Fix Inc. (NASDAQ: SFIX): 33% gain on the options
Zendesk Inc. (NYSE: ZEN): 106% gain on the options
ServiceNow Inc. (NYSE: NOW): 93% gain on the options
QUALCOMM, Inc. (NASDAQ: QCOM): 50% gain on the options
Broadcom Inc. (NASDAQ: AVGO): 141% gain on the options
Buckle Inc. (NYSE: BKE): 16% gain on the stock, 47% gain on the options
Marvell Technology Group Ltd. (NASDAQ: MRVL): 11% gain on the stock, 92% gain on the options
Here are several completed trades from Technical Traders Alert, offering insights into our trading strategy and the targets that we hit this week.
We took a lot of gains this week, because the leaders that we saw setting up immediately after the initial September selloff posted excellent moves. With the indices starting to hit those early September levels, it was a good time to bank some gains. Here are some of the trades we closed:
Texas Instruments Incorporated (NASDAQ: TXN): 55% gain on the options
NXP Semiconductors NV (NASDAQ: NXPI): 77% gain on the options
Fate Therapeutics Inc. (NASDAQ: FATE): 13% gain on the stock, 53% gain on the options
Atlassian Corporation PLC (NASDAQ: TEAM): 40% gain on the options
Roku Inc. (NASDAQ: ROKU): 50% gain on the options
Paylocity Holding Corp. (NASDAQ: PCTY): 59% gain on the options
Fastly Inc. (NYSE: FSLY): 170% gain on the options
Sunrun Inc. (NASDAQ: RUN): 160% gain on the options
Vulcan Materials Company (NYSE: VMC): 37% gain on the options
Zillow Group Inc Class C (NASDAQ: Z): 145% gain on the options
NVIDIA Corporation (NASDAQ: NVDA): 47% gain on the options
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:
Kirkland’s, Inc. (NASDAQ: KIRK): We noticed that retail was a survivor of the September selloff. While many retail stocks faded during the selling, they used this event to form good patterns that enabled them to eventually rally. KIRK was one of those stocks.
Indeed, it started its base before September, and by mid-September, it was done selling and started to move back up to form the right side of its base. We like playing that move.
On Sept. 18, KIRK started upside, and we moved in by buying stocks for $8.34. KIRK moved up just a bit and made another test of its support.
With the start of October, KIRK started higher. It then rallied into this week and hit our target. After we let it run a bit more, we sold the position on Oct. 5 for $9.24. This enabled us to bank a nice, solid 10.7% gain off of a good pattern with low risk.
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.
3. Pick of the Week
AMZN (Amazon.com–$3,199.20, +74.19)
STATUS: Of course AMZN sold during the September selloff. As a member of the Facebook, Apple, Amazon, Netflix and Google (FAANG) group, it continued to sell after that initial drop. It then tried to hold the 50-day exponential moving average (EMA) with a lateral move, but it gapped lower again on Sept. 17. After it spent three days at the bottom of the July base, it then gapped back upside on Sept. 22.
It worked higher into last week and then moved back up to, and just over, the 50-day EMA. From there, it moved laterally into Monday.
AMZN has worked itself into an inverted head-and-shoulders pattern after that initial selloff. So, we will let AMZN show us if it can make the move higher and show a solid upside break with a bit of volume. If so, we want to play a run up to the $3,400 level, as that is the last resistance below the September high. That move will give us a 45% gain on the options.
VOLUME: 3.775M Avg Volume: 5.027M
ENTRY POINT: $3,203.09 Volume=6M Target=$3,398.48 Stop=$3,138.39
POSITION: AMZN NOV 20 2020 3,205.00 Calls — (51 delta)
4. Covered Call Options Play
Bluelinx Holdings Inc. (NYSE:BXC) — Bluelinx Holdings Inc. is currently trading at $27.61. The Nov. 21 $30 Calls (BXC20201121C00030000) are trading at $2.50. That provides a return of about 21% if BXC is above $30 by the expiration.