Weekender for 12/18
1. Market Summary
Stocks Squander Descent Positioning
- Stocks squander decent positioning for the upside, sell through near support.
- Federal Open Market Committee (FOMC) hangover does not lead to a bounce.
- Retail sales fall as inflation cannot inflate sales levels enough.
- Philly Fed, Empire PMI miss downside.
- Industrial production, capacity fall.
- Philly region Fed calculates BLS data is 1.1 million jobs over. Who would have thought?
- Some areas testing, some holding up as more areas start to break.
From good positioning to bounce post-FOMC to a tail kicking. Stocks did not rebound in the session following the FOMC. Instead, an old-fashioned tail kicking. Futures were lower and turned even lower before the bell. Stocks gapped lower and sold into the early afternoon. A rebound into the last hour failed, and stocks slid back to close just barely over the session lows.
NOTE: The figures and information above are from the 12/15 report.
Watch the Investment House Video For This Week Here!
NOTE: The video is from the 12/14 report.
2. Targets Hit
Box Inc. (NYSE: BOX): Sometimes even with a good setup, it takes a stock a longer time to unbox the gains. That was the case with BOX in Investment House Daily. In late October, it broke higher from an inverted head-and-shoulders pattern, signaling the entry. We issued the alert to buy some stock and some December $28 calls. The stock was asking $28.82, the call options $2.32.
BOX moved higher into November as anticipated. The market hiccuped at that point, however, dropping for a few sessions. BOX did the same, but managed to hold the 50-day moving average (MA). The stock rebounded with a nice move back up to the recent peak, but again faltered with the market. Finally, as BOX moved into December, it caught new bids. After another 50-day MA test, BO surged with a gap that took it past the October and November peaks. BOX continued higher into this past week, touching an older high at $32.
That was our initial target from back in October, and with December options, we were not going to wait around, particularly with the FOMC rate decision on tap. Accordingly, we issued the alert to sell, with the stock bidding for $31.57 (9.5% gain) and the options bidding for $3.40 (46.5% gain).
We also banked the following gain:
Freeport-McMoRan Inc. (NYSE: FCX): 19.3% gain in the stock, 88% gain in the options
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With the FOMC on deck and the market throwing back two good news items, i.e. Chairman Powell saying the Fed would consider a 50 base point hike and the Consumer Price Index (CPI) coming in cooler, the probabilities were higher for some upset in the markets. Given that, we buttoned up some gains in Technical Trader Alert ahead of time, anticipating a post-Fed depression. Below are some gains we banked.
Southern Copper Corp. (NYSE: SCCO): 167% gain in the options
Nucor Corporation (NYSE: NUE): 34% gain in the options
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Western Copper and Gold Corp. (NYSEAMERICAN: WRN): Industrial metals have helped lead the market in the Q4 rally. We have seen some of the leaders start to struggle and sell, e.g. oil and gas stocks. Some metals were starting to show signs of fatigue after strong runs, but others were bent on playing catch up nonetheless.
We saw WRN, a lower-priced copper stock, working on completion of a nine-month cup base. After a volatile end to November, it managed to hold its pattern and continue its work. On Dec. 8, after a nice short pullback to the 10-day exponential moving average (EMA) after hitting a new recovery high on the move higher in the base, WRN jumped higher.
That was our entry signal, and we issued the alert to buy shares of WRN in Rapid Profits Stock Trader with a asking price at $1.74. WRN held the gains that session and was looking very good to start a new bounce. The next session, WRN tried higher but closed flat. Then, on Monday, Dec. 12, WRN stormed higher. On Tuesday, the stock ripped higher, coming close to the May peak. It started to backpedal just a bit as it tickled our target. We opted to issue the sell alert with the stock bidding for $1.96, banking a solid 12.6%.
We’re lad we did. WRN faded to a modest gain that session, then Wednesday and Thursday faded to test that last rally leg. If WRN sets up a new entry here, we will consider a new play if the dynamics in the copper stocks remain positive.
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3. Covered Call Options Play
Aehr Test Systems (NASDAQ: AEHR) — Aehr Test Systems is currently trading at $23.46. The Dec. 16 $45 Calls (AEHR20230120C00025000) are trading at $2.10. That provides a return of about 12% if AEHR is above $45 by the expiration.
