Invest and Trade Profitably with Jon Johnson

Weekender for 10/2

1. Market Summary

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

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Just a Continuation Doji

– Wednesday was just a continuation doji, as the NYSE plunged.
– The tech side of the market shows a bit of a backbone as those stocks may be preparing for a bounce of some type. Certain areas have set up well and have produced short pullbacks, even as other sectors plunge.
– The put/call ratio tops 1.0 for the fourth recent session. Combined with some decent patterns, tech stocks are looking a bit oversold. As we are entering a new quarter, some stocks could bounce.

We saw another up premarket and then another plunge. Stock futures, like hope, rallied again during the next  premarket session. Once more, they fell into the open. Then the gains were lost again, but this time, the stocks moved downward to major losses. They sold off to midday, bounced up to the last hour and then plunged to a new session low.

At least it was not the Nasdaq leading the way lower this session. No, there was “rotation” to the NYSE for the downside leadership. There were impressive plunges on DJ30, S&P 500 and the S&P 400, as they led the way downside. It would appear that the Wednesday doji was indeed a continuation doji.

NOTE: The figures and information above are from the 9/30 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 9/29 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:

Twilio Inc. (NYSE: TWLO): TWLO has generated great gains to the upside, but when the ship turns, it turns. TWLO was showing signs of peaking and needing to base. In August,  TWLO broke through the convergence of the major support moving averages (MAs) (the 50-day and 200-day), and we were  looking for a test to give us an entry opportunity.  TWLO rebounded to test the former support in the first two weeks of September.  It stalled, and we put it on the report. When it fell, we moved in.

On Sept. 10, we issued the alert for October $350 put options (yes, somewhat close to expiration, but the pattern and the numbers worked) for $18.40.  TWLO sold but then it bounced modestly to test the 20-day exponential moving average (EMA) that had turned decidedly lower. It was twiddling its thumbs, so to speak.

The 20-day EMA arrested the move, and TWLO started lower again. However, it was somewhat volatile.  This past week, the bottom finally gave out. As a result, TWLO dropped into the middle of the week. On Tuesday, TWLO hit our initial target. So, we sold half of the options for $26.70 and generated a 45% gain.

On Wednesday, TWLO dropped again. So, we sent an alert to sell the options for $36.85 in order to produce a solid 100% gain.

We also took gains this past week in the following positions:

Docusign Inc. (NASDAQ: DOCU): 52.9% gain in the put options.

JPMorgan Chase & Co. (NYSE: JPM): 57.8% gain in the call options.

Paypal Holdings Inc. (NASDAQ: PYPL): 55.9% gain in the put options.

Yum! Brands, Inc. (NYSE: YUM): 140% gain in the put options.

SPDR S&P 500 ETF Trust (NYSEARCA: SPY): 25% gain in the put options.

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

Workday Inc. (NASDAQ: WDAY): Typically, upside success with a breakaway gap means more upside success. Indeed, after WDAY gapped higher on earnings in late August, it did indeed rally into early September.  The market overall, however, was getting sloppy and was starting to deteriorate in terms of patterns and internals.

We saw WDAY surge on Sept. 3 to a new breakout high just below the February 2021 all-time high. It also looked like it was going to try for a new high. During the next session, WDAY reversed. That is, it shifted from a strong move to a reverse.

That kind of anomaly caught our attention and it went on “the list.” Then, WDAY faded to near support, held decently and bounced. It faltered, however, at a lower high.

With the market eroding, and with software stocks not doing well, we sent an alert on Sept. 17 to buy November $270 put options for the price of $12.50.  WDAY fell, made one last attempt at bouncing and stalled.

WDAY slipped lower for a couple of sessions, and on Sept. 28, it gapped through the upper gap point from earnings and other support from peaks in the base — both very important technical levels.  WDAY continued selling after opening higher on Sept. 29.  That higher open followed by a reversal is a strong indication that selling is about to happen.

We let WDAY sell down. On that day, it hit our initial target. So, we alerted our subscribers to sell half of the options for $23.40 and bank an 87% gain.  WDAY has now filled the upside gap. So, we are waiting to see if it will go on to test, and perhaps break, the 200-day simple moving average (SMA).

We also banked gains this past week in the following positions:

Adobe Inc. (NASDAQ: ADBE): 159% gain in the put options.

SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA: DIA): 39.7% gain in the put options.

Eaton Corporation PLC (NYSE: ETN): 63% gain in the put options.

Synopsys, Inc. (NASDAQ: SNPS): 64% gain in the put options.

Target Corporation (NYSE: TGT): 31% gain in the put options.

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3. Pick of the Week

HFC (Holly Frontier — $32.70, -0.43)

EARNINGS: 11/02/2021

STATUS: HFC is testing the 200-day SMA and is coming back to fill the Monday gap higher that took it over the late August high. This is part of a big base off of the March 2021 peak.

After a nice turn off of the lows with a surge higher in late August, we saw the presence of a four-week cup base with the gap higher on Monday.

After this test is complete, we are ready to move in for a run at the consolidations from April to June. That move to the initial target will give us a 65% gain in the options.

VOLUME: 855.724K  Avg Volume: 1.738M

ENTRY POINT: $32.84 Volume=2M Target=$35.98 Stop=$31.85

POSITION: HFC DEC 17 2021 $33.00 Calls — (60 delta)

To see the chart for HFC, click here!

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4. Covered Call Options Play

AerSale Corp. (NASDAQ: ASLE) — AerSale Corp. is currently trading at $17.00. The Oct. 15 $17.50 Calls (ASLE2021115C00017500) are trading at $0.60. That provides a return of about 8% if ASLE is above $17.50 by the expiration.

Learn more about our Covered Call Tables here!

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