Invest and Trade Profitably with Jon Johnson

Weekender for 12/20

1. Market Summary

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

Still Waiting For Stimulus

– We are still waiting for stimulus but are perhaps anticipating a done deal.
– Stocks start well and close well, but the PHLX Semiconductor Sector (SOX) is lagging notably and the big NASDAQ stocks could not put in a second session on the moves. Meanwhile, cloud computing stocks and other areas modestly jump higher as recovery areas fade.
– Housing starts beat expectations and continue to remain strong.
– Sentiment continues to move higher, and the year-end rally continues to defy worries.

Stocks started the premarket session higher, overcame a hiccup on economic data that were less than robust, fought off a slump to the close of the European stock exchanges and then rallied for the last four hours of the session to a set of new highs for all the indices — except SOX. The chips languished for a second session after two gaps higher to start the week.

Actually, while the rest of the market continues in its year-end and holidays-to-come bacchanalia of a rally, the chips are quiet.

The semiconductors set themselves up perfectly to make a new run. Indeed, they started the run this week, but the bids have trailed off. Again, while the other indices have moved upside, the chips have stalled for now. Is their lack of interest another signal, along with high bullish readings, that the market is becoming overdone in the near-term? The SOX is a key market leader. We have seen that again and again. It last touched the 50-day moving average (MA) in late October, jumped higher and has since rallied up the 10-day exponential moving average (EMA). It put in three touches of the 10-day EMA, including last week, after it sold hard two Wednesdays back, but managed to catch itself with a doji on Friday. That launched the current move. However, after two decent upside sessions, it is still well below the prior week’s high and is slowing considerably.

Technical Analysis:

NASDAQ: It continued the same action that we saw over the past four sessions, i.e. a gap upside and a modest gain on top. The fact that it had higher volume and good breadth was not bad.

S&P 500: It gapped to a new high.

NOTE: The figures and information above are from the 12/17 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 12/16 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:

Peloton Interactive Inc. (NASDAQ: PTON): We did not think that PTON would come back anytime soon — the vaccines were announced, it was just a matter of time until they were distributed and the people who were spinning on PTON’s products could soon go back outside and ride the way nature intended. As we predicted, this has yet to happen. PTON recovered from the mid-November low and worked laterally along the 50-day MA. Then, it dropped hard toward the 50-day EMA and looked bleak.

During the next session, PTON gapped to the 50-day EMA. Then, it reversed to a nice gain intraday. After it tested the next session, we put it on the report during this past weekend. On Monday, PTON jumped upside. That was our signal to enter. We moved in with February $120 call options for $16.25 when the stock was selling for $122.04.

PTON was ready, as it rallied straight up to our target at the October high by Thursday. Per the plan, we sold half of the options for $25 and banked a 53% gain.

We also banked gains in the following positions this week:

Activision Blizzard, Inc. (NASDAQ: ATVI): 50% gain in the options

Floor & Decor Holdings Inc. (NYSE: FND): 51% gain in the options

Freeport-McMoRan Inc. (NYSE: FCX): 19% gain in the stock, 153% gain in the options

Jumia Technologies AG – ADR (NYSE: JMIA): 37% gain in the stock, 93% gain in the options

Riot Blockchain Inc. (NASDAQ: RIOT): 17% gain in the stock, 25% gain in the options

Ralph Lauren Corp. (NYSE: RL): 147% gain in 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:

Electronic Arts Inc. (NASDAQ: EA): In late November, we saw EA break higher on very, very strong volume. It then broke through both the 50-day MA and a downtrend from early August. The downtrend had kept EA in check below the 50-day MA — that is why the break through that level on such strong volume piqued our interest.

As is often the case, EA moved up a bit more and then tested. It gapped lower to the 50-day MA on Dec. 4 and then reversed intraday to slightly positive — an attempt to break lower failed and served as a powerful indicator.

We then put it on the report. On Dec. 7, the next session, EA gapped upside. We moved in and bought March $130 call options for $9.60. As we expected, after the trend break, test and turn back up, EA continued upside straight into Wednesday, Dec. 16. After EA surged higher during that session and started to fade, we sold half of the position for $16.60 and banked a 72% gain.

We also banked gains in these other positions during this week:

American Well Corp. (NYSE: AMWL): 23% gain in the stock, 71% gain in the options.

Match Group Inc. (NASDAQ: MTCH): 51% gain in the options

QUALCOMM, Inc. (NASDAQ: QCOM): 121% gain in the options

Spotify Technology SA (NYSE: SPOT): 104% gain in the options

Twilio Inc. (NYSE: TWLO): 45% gain in the options

Zillow Group Inc Class C (NASDAQ: Z): 169% gain in the options

Receive a risk-free trial to Technical Trader and save 50% by clicking here now!

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:

Silicon Motion Technology Corp. (NASDAQ: SIMO): We saw SIMO testing the breakout from early December and then coming back to test both the 10-day EMA and the prior high during the second week of the month. Thus, we were ready when SIMO broke higher on Dec. 14. We bought the stock for $44.98 as SIMO posted a nice move. During the next session, SIMO gapped higher and rallied. We then sold the position for $46.89 and banked a solid 4.25% gain.

Riot Blockchain Inc. (NASDAQ: RIOT): We saw RIOT setting up a pattern which was very similar to SIMO’s. On Dec. 14, RIOT broke higher as well. So, we bought the stock for $9.74. RIOT then backed off that session somewhat, but during the next one, it surged higher again. That took RIOT to our target, and we sold the stock for $10.14. This enabled us to bank a 4.11% gain.

American Well Corp. (NYSE: AMWL): Although it was a newer issue, AMWL set up an inverted head-and-shoulders base and jumped over the 50-day MA during the second week of December. It tested into Dec. 10, and then jumped upward. We bought the stock for $31.61 on Dec. 11. AMWL surged during the next session and rallied to our target. So, we sold the stock for $32.91 and banked a 4.18% gain.

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

RUN (Sunrun, Inc. — $61.80, -1.37)

EARNINGS: 02/11/2021

STATUS: After trying to start a move off of the 50-day MA in early December, RUN sold hard after gapping up to the 50-day simple moving average (SMA) and then reversing intraday. It even broke to a new low on the pullback off of the late-November high. That did not break RUN’s stride, however, and it recovered into this week by breaking nicely higher on a good shot of volume on Tuesday. It then moved up through the 50-day MA.

It looks as if RUN has set up a cup-with-handle pattern off of the October high. On Wednesday, it dipped to the 50-day EMA and then rebounded to a modest loss on surging volume — buyers stepped in on the dip. The attempt to break a stock that fails is a good upside indication. Thus, we are looking to play RUN as it breaks higher once more. Our initial target is somewhat modest, as it is located midway back up the way to the October peak. That move will give us a 60% gain on the options. However, we could get even more upside on a new run.

VOLUME: 7.933M  Avg. Volume: 5.205M

ENTRY POINT: $63.21 Volume=6.5M Target=$73.49 Stop=$59.97

POSITION: RUN MAR 19 2021 60.00 Calls — (63 delta)

To see the chart for RUN, click here!

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4. Covered Call Options Play

Lincoln Educational Services Corp. (NASDAQ: LINC) — Lincoln Educational Services Corp. is currently trading at $6.86. The Jan. 16 $7.50 Calls (LINC20210116C00007500) are trading at $0.20. That provides a return of about 18% if LINC is above $7.50 by the expiration.

Learn more about our Covered Call Tables here!

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