Invest and Trade Profitably with Jon Johnson

Weekender for 11/29

1. Market Summary

Due to the Thanksgiving holiday, excerpted from Tuesday’s paid content of Investment House Daily by Jon Johnson.

The Mood Shifts and the Market Rallies

– Janet Yellen, transition and vaccines — the mood shifts and the market rallies.
– The Russell 2000 (RUT) and the S&P 400 still lead, but the DJ30 has broken out. The NASDAQ is trying to join in as Alphabet rebounds and Facebook and Microsoft try their hand as well.
– Most news and data are solid, but consumer confidence has dropped post-election. Breadth is strong again, and volume is very strong. While we see new kinds of highs, the put/call ratio is somewhat low.
– We have a couple of sessions left in what has been a very good Thanksgiving week.

There was no choppy trading on this past Tuesday, as stocks surged in the wake of a third consecutive round of good news on the vaccine front on Monday. Of course, most of the upside action leaned into the NYSE indices, and all of those increased by 1.5% or better. The DJ30 posted its first-ever 30,000 close and the S&P 500 posted a new all-time closing high. Meanwhile, the RUT and S&P 400 rose to yet another solid new high on a solid upside session.

While the NYSE indices were once again in the lead, the NASDAQ was not the anticipated slouch. Indeed, it put in a healthy 1.31% gain. Moreover, in an “oh my goodness moment,” Alphabet, Facebook and Microsoft put up solid moves. The rest of the big NASDAQ names were rewarmed roadkill, but that is hardly surprising, given their recent perfection of underperformance. Still, it is possible, if perhaps implausible, that the NASDAQ’s champions can cajole them to the upside. Even so, stocks such as Nvidia, Apple and Amazon look less than chipper. But then again, Facebook looked exactly like them before suddenly coming to life on Tuesday.

The most frustrating aspect of the day was that some of the new good plays that we are looking at gapped sharply higher. This made it harder for the numbers to work on the plays. Sometimes that happens. However, the silver lining is that we did get some buys, and we were able to bank some more gains on the recovery stock positions, just as we did on Monday. Okay, we got more than just a silver lining.

Technical Analysis:

S&P 500: It gapped higher and rallied past the prior Monday closing high. However, it just missed the intraday high from the Pfizer (NYSE: PFE) vaccine announcement.

NASDAQ: It is still 20 points off of the September closing high. Of course, if the other big names join Microsoft, Facebook and Google, the NASDAQ could crack that new high in short order. However, I am not counting on it.

NOTE: The figures and information above are from the 11/24 report. There were no videos this week due to the Thanksgiving holiday.

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:

Freeport-McMoRan Inc. (NYSE: FCX): The basics were starting to perform, and when they put in tests, we were ready to move in. FCX rallied from late October to early November and jumped on the PFE news. It immediately tested, however, and came back to the 10-day exponential moving average (EMA) in a one-two-three test.

On Nov. 12, FCX started back upside, and we moved in by buying stock for $19.99 and January $20 call options for $1.60. FCX bounced right off of the 10-day EMA and resumed its move, pausing after another good Monday move (due to Moderna’s vaccine announcement). Then, it broke higher this week. On Tuesday, FCX hit our initial target. So, we sold some stock for $22.94 and banked a 14.7% gain. We also sold half of the options for $3.45 and banked a 115% gain.

Halliburton Company (NYSE: HAL): Energy found life in some good bottoming patterns. Indeed, we saw HAL gap over the 200-day simple moving average (SMA) with a big move during the second week of November. HAL put in a classic flag test of that move, then gapped upside on Nov. 16. We felt it was worth chasing and bought stock for $15.45 and January $15 call options for $1.59.

HAL continued higher and was a bit jagged at first. Then, it caught its stride again with a gap higher on Monday on the AstraZeneca vaccine news. Then, it added more upside on Wednesday and hit our initial target. We sold half of the stock for $18.04 and banked a 16.7% gain. We also sold half of the options for $3.40 and banked a 113% gain.

We also banked gains on:

Snap Inc. (NYSE: SNAP): 16.6% gain on the stock, 90% gain on the options

Cleveland-Cliffs Inc. (NYSE: CLF): 17.9% gain on the stock, 68% gain on the options

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

Simon Property Group Inc. (NYSE: SPG): Recovery stocks were on the move due to the weekly Monday vaccine news. SPG had made us money during its June run, so we were looking for another shot at it now that it was breaking out from its four-month trading range. After gapping off of the 200-day SMA on the Moderna vaccine news, SPG tested into Wednesday.

It opened at the 10-day EMA on Thursday and then started higher. That was our entry cue. We bought March $75 call options for $9.55 when the stock was trading at $77.86. SPG, as it does when it is on the move, wasted no time. It surged during that session, paused on Friday, gapped higher on Monday and gapped higher again on Tuesday. After it hit our initial target, we sold half of the options for $17.25 and banked an 80% gain.

United States Steel Corporation (NYSE: X): Metal stocks are hot. On the first vaccine news, X gapped up and finished a rally that was already in progress. It tested back to the 10-day EMA and then started higher on Friday. Yes, it was Friday the thirteenth, but the stock was on a good trajectory. We bought some stock for $10.61 and January $10 call options for $1.39. We love these prices when compared with the tech stocks!

X gapped higher on the following Monday on the next vaccine news and worked laterally through the week. This week, there was more vaccine news and X was up again. On Tuesday, X really shot higher and hit our target. We may have been too quick on the draw, as we sold half of the stock for $12.74 and banked a 20% gain. We also sold half of the options for $2.91 and banked a 109% gain. The stock, however, closed at $14.25 at the end of that session. On Wednesday, we took another half of that additional gain.

We also banked gains on:

Alphabet Inc Class C (NASDAQ: GOOG): 52% gain on the options

Roku Inc. (NASDAQ: ROKU): 109% gain on the options

Zillow Group Inc Class C (NASDAQ: Z): 48% gain on the options

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Here are several completed trades from the Success Trading Group, offering insights into our trading strategy and the targets that we have hit this week:

Lemonade Inc. (NYSE: LMND): We like new issues, and LMND went public in July. It didn’t take long to sell back and form its first base, but things did not get interesting (in terms of a pattern) until October and November. It formed a pretty decent cup-with-handle pattern, and just ahead of Thanksgiving, it was working on a really tight handle.

We saw that action and prepped to get in if it made the move. Sure enough, on Nov. 24, LMND jumped off of the 10-day EMA test, and we bought stocks for $68.41. The stock rallied decently after we moved in that day, but the money move for us was on Wednesday. On that day, LMND shot higher to match the mid-October intraday high. Since that was the target, we sold the position for $72.52 and banked a 6% gain.

Sunrun Inc. (NASDAQ: RUN): We saw RUN forming a nice cup base as it came off of the 50-day EMA after mid-November. RUN is a stock we like to play as it gives us good runs. On Nov. 23, RUN broke over the 50-day moving average (MA). That was our signal to move in. We bought stock for $63.46. During the next session, RUN rallied to the next level of resistance from mid-October. As a result, we sold the position for $66.29 and banked a 4.4% gain.

Cloudflare Inc. (NYSE: NET): After gapping higher in early November, NET consolidated in a tight lateral range over the 10-day EMA. Then, on Nov. 11, NET broke higher and triggered our entry. We bought stocks for $67.74.

However, NET was just not ready to run higher. It moved laterally for another three sessions before resuming the upside. NET crept up the 10-day EMA, but it was not showing a big burst higher. When it jumped up to the target on Nov. 20, we went ahead and sold the stock for $67.74. This enabled us to bank a 4.6% gain.

We also banked gains on Walt Disney Co. (NYSE: DIS) (2.4%) and Workhorse Group Inc. (NASDAQ: WKHS) (8%) over the course of the week.

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

GOOG (Alphabet — $1734.86, -7.33)

EARNINGS: 01/28/2021

STATUS: We took the last gains off of the table as GOOG sold toward the 20-day EMA. Given that they were December options, we did not want GOOG to fall and lose a gain vis a vis the rest of the position. If so, it would have to recover. I also said that we would move right back in if GOOG set up.

Well, it tested near the 20-day EMA on the low and rebounded to cut its losses. As this was not a bad course of action in a pretty orderly fade, we wanted to be ready. GOOG broke to a new high in early November and has tested that break and run. Since then, it has come back to hold right at the old high. This was a great technical course of action, and we are ready to move in as GOOG makes the break higher. A move to the target will give us a 75% gain on the options.

We are being conservative. GOOG faded to test the 38% Fibonacci retracement, and the target is typically the 127% Fibonacci extension ($1,898). If GOOG is moving well, and there is still time on the options, we will let part of it run to see if it can make that level.

VOLUME: 2.162M  Avg Volume: 1.831M

ENTRY POINT: $1,754.08 Volume=2.5M Target=$1,854.94 Stop=$1,721.31

POSITION: GOOG Jan. 15, 2021, 1,750.00 Calls — (51 delta)

To see the chart for GOOG, click here!

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4. Covered Call Options Play

Canadian Solar Inc. (NASDAQ: CSIQ) — Canadian Solar Inc. is currently trading at $40.62. The Dec. 19 $41 Calls (CSIQ20201219C00041000) are trading at $2.70. That provides a return of about 9% if CSIQ is above $41 by the expiration.

Learn more about our Covered Call Tables here!

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