Invest and Trade Profitably with Jon Johnson

Weekender for 11/1

1. Market Summary

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

Stocks Lay the Foundation For a Rebound

– The economic data were solid, market indicators hit extremes and stocks started a rebound.
– The rebound was mediocre, and while the big after-hours earnings reports were good, reactions were mixed. Meanwhile, futures moved lower.
– Leaders are still solid overall, and the big name earnings are both strong and in the bank. The extremes are only in the indicators. While we are getting closer to being set for a move at the end of the year, the election still needs to be checked off of the list.

We saw a rebound, but it was no reversal. I have seen reversals, and I know reversals. This was not one. Now, perhaps it could have worked its way into a reversal over the next few sessions. Gross domestic product (GDP) was stronger than expected, and the growth rate was the strongest ever at 33.1% — consumption, inventories and investment were all strong.

So were imports. While they subtract from GDP, they are another indication of how strong demand is. Jobless claims fell to 751,000 and continuing claims dropped to 7.75 million from 8.465 million. The data are laying the foundation and showing that the recovery is strong enough to weather a jump in the number of coronavirus cases. It might even endure a “black winter” brought on by the risk of near-certain survival for the vast majority of people who come down with the virus. Hey, a bit of humor is appropriate at these times. You have to laugh or cry.

The big names produced big results, but the reactions were not commensurate. The foundation has been laid, but the big after-hours earnings, while big, were not going to drive the NASDAQ and S&P 500 sharply higher on the day before Halloween. Google’s results were monstrously strong, and its stock is holding a big gain. Facebook crushed, but its Q4 guidance was sort of weak. After a 10-point drop, it moved back to flat and then faded again. Amazon crushed earnings and blasted higher to over $3,300 — only to roll over and fall to around $3,165. Apple missed on iPhones as people are waiting for the iPhone 12, but that excuse is not enough to avoid the investors who were angered by getting a trick versus a treat. Apple was off five-to-six points afterhours. Twitter missed on user growth and is getting a rock in its treat bag. It was off eight points, or 15%, after-hours. Conference calls are still to come, so we will see if things improve or worsen. As of the early evening, Dow futures were -200, the S&P 500’s were -32 and the NASDAQ’s were -148 in the aftermath of the Amazon and Apple weakness.

Technical Analysis:

NASDAQ: It gapped a bit higher, rallied up through the 50-day exponential moving average (EMA) and then slid into the close, fading just below that resistance. Since it had lower volume, it could not move through its resistance. A large part of the problem is that, since the big names across the board are not moving through their respective resistance after-hours outside of Google, the NASDAQ will be hard-pressed to avoid a further test lower. The next support is at 10,750 (given that the index closed at 11,185).

S&P 500: It rallied, but only made it to the Wednesday lower gap point and then faded to a modest gain. It did not quite test the September low on Wednesday, and with futures, it looks as if the S&P 500 is going to take a look toward that level again.

NOTE: The figures and information above are from the 10/29 report.

Watch the Investment House Video For This Week Here!

NOTE: The video is from the 10/28 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:

Match Group Inc. (NASDAQ: MTCH): Sometimes you have to let a position work a bit to make it work. MTCH was one such case. After the September selling, MTCH set up a short double-bottom-with-handle base through early October.

It broke higher to start October, made a quick test and then started back upside. We put it on the report as it made that test. On Oct. 5, MTCH broke upside. At this point, we moved in and picked up December $115 call options for $10.70 when the stock price was at $113.93.

MTCH moved higher into Oct. 8, opened well before that session and then lost its momentum. It faded over the next week to test the 50-day moving average (MA) and bounced off of that level twice intraday. With that action at the 50-day MA, we left it to work. Sure enough, MTCH resumed the upside by the middle of the month.

MTCH posted seven of nine upside sessions and hit our target with a nice strong surge upside on Tuesday. We then sold our options for $16.35 and banked a gain that was just over 50%. It needed a bit of time to work, but it showed good action at its level of support. As a result, the buying at the support ultimately sent MTCH upside.

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There were no targets hit in Technical Traders Alert this week as the market is testing back ahead of the election.

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There were no targets hit in 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

CLF (Cliffs Natural Resources–$7.98, -0.37)

EARNINGS: 01/22/2021

STATUS: Flag. CLF is testing the second leg higher from a late September jump up off of the 200-day simple moving average (SMA). It is coming back to near the 20-day EMA, where it held at the same time that it was making the test of the first leg higher during the middle of the month.

As it has shown three dojis on the way down, CLF may want to test a bit more before it puts in leg number three. However, it is also near the top of that first leg higher.

This means that we want to be ready to move in when CLF makes a new break upside. We want to move in on a break upside through the entry that holds the move. A rally to the target will give us a 20% gain on the stock and an 85% gain on the options.

VOLUME: 10.158M Avg Volume: 11.171M

ENTRY POINT: $8.08 Volume=12M Target=$9.69 Stop=$7.59

POSITION: CLF JAN 15 2021 8.00 Calls — (59 delta) &/or Stock

To see the chart for CLF, click here!

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4. Covered Call Options Play

Niu Technologies (NASDAQ:NIU) — Niu Technologies is currently trading at $27.95. The Dec. 19 $30 Calls (NIU20201219C00030000) are trading at $2.35. That provides a return of about 18% if NIU is above $30 by the expiration.

Learn more about our Covered Call Tables here!

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