1. Market Summary
Excerpted from Tuesday’s paid content of Investment House Daily by Jon Johnson.
– Stimulus passes. As it is laden with pork and overseas gifts, stocks are not that impressed.
– Economic data are stronger, but confidence is flagging at the end of the year.
– The NASDAQ and Russell 2000 move to new highs. While this is decent enough, the other indices are showing the wear of the run. Meanwhile, the NASDAQ is hitting highs without much big-name help.
– Individual groups, mainly a lot of cloud computing stocks, are working very well.
Perhaps it was the fact that the recent stimulus package was really a pathetic excuse for stimulus. Billions are going overseas and to pet projects. New graduates and other young people who are now out on their own and no longer dependents were again zeroed out on stimulus. No one read it and no one could. Is it possible to read and analyze nearly 5,600 pages in six hours? That should have been the clue right there — why did it take so many pages to reissue the Paycheck Protection Program, extend unemployment-enhanced benefits and issue another round of payments? The answer is that there were 5,400 pages of other crap in the bill. Crap takes a lot of pages. Yet, only six senators voted against it on the grounds that it was way more pork than stimulus.
Then, there were some stellar economic data and some weak economic data.
The final gross domestic product (GDP) increase for the third quarter was a crazily high 33.4%, but the current quarter was, well, not so good. The stimulus, even if it had come out earlier, would not really have helped.
NASDAQ: It moved to a new high and closed at a high, as it continued moving higher from the Monday gap to open at the 10-day exponential moving average (EMA). While this was nice, it was not powerful. That is, we still need to get the big names to kick in and help the usual cadre of leaders, e.g. software and pretty much anything relating to cloud computing.
S&P 500 and the DJ30: They were not the picture of strength, as both faded off of the gap higher during the prior Thursday. Then, there was the Monday gap lower. All of this suggests that their moves may be done for now.
NOTE: The figures and information above are from the 12/22 report. There are no videos this week due to the Christmas 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:
JinkoSolar Holding Co., Ltd. (NYSE: JKS): We saw solar-related stocks setting up nice patterns again, and we always think of JKS because it can move so well. At the time, JKS was working on a nine-week base that was basically a trading range with some pretty steady rotations up and down. In mid-December, we saw a classic pattern. First, JKS moved to the bottom of the range. Then, it broke below both the range and the 50-day EMA.
That may have looked like trouble, but what often occurs in this market is the false break lower that forms an inverted triangle. This pattern is often followed by a surge back up. Sure enough, JKS showed that action.
When it broke clear of the 50-day moving average (MA) on Dec. 21, we moved in. We bought March $70 call options for $13.10. We could have bought stock, but this time, we opted for the leverage of options. The false break proved solid yet again, as JKS surged higher into Dec. 23 and hit our initial target. We then sold half of the options for $23 and banked a 75% gain.
We also banked solid gains in the following trades this week:
Apple Inc. (NASDAQ: AAPL): 85% gain in the options
Activision Blizzard, Inc. (NASDAQ: ATVI): 50% gain in the options
Chewy Inc. (NYSE: CHWY): 55% gain in the stock, 309% gain in the options
Halliburton Company (NYSE: HAL): 23.75% gain in the stock, 164% gain in the options
Jumia Technologies AG – ADR (NYSE: JMIA): 49.8% gain in the stock, 123% gain in the options
Here are several completed trades from Technical Traders Alert, offering insights into our trading strategy and the targets that we have hit this week:
Square Inc. (NYSE: SQ): We like SQ, because, when it sets up, it tends to make steady moves. That is exactly what this play yielded. We saw SQ hit a new high in late November and then test it into the first part of December. It tried to break higher on Dec. 9, but it faded.
As is often the case in this market, however, SQ gapped lower during the next session, held the 20-day EMA and then reversed. We were watching for that action and bought March $220 call options for $23.70. As expected, that reversal started the move up the 10-day EMA. SQ steadily marched up the 10-day EMA into this week and hit our target on the intraday surge higher on Dec. 21. We then sold half of the position for $36.60 and banked a 55% gain.
After another solid week, we saw gains in the following trades:
Electronic Arts Inc. (NASDAQ: EA): 61% gain in the options
First Solar, Inc. (NASDAQ: FSLR): 48% gain in the options
Patterson-UTI Energy, Inc. (NASDAQ: PTEN): 20% gain in the stock
Workday Inc. (NASDAQ: WDAY): 60% gain in the options
Zscaler Inc. (NASDAQ: ZS): 56% gain in the options
Here is one completed trade from the Success Trading Group, offering insights into our trading strategy and the target that we have hit this week:
Kirkland’s, Inc. (NASDAQ: KIRK): We like KIRK because it sets up multiple entries that we can use when it makes its breaks higher. The last one was a play off of an early December flag pattern test that consolidated a run higher from November.
KIRK faded to the 10-day EMA in a two-week flag, held and modestly bounced. On Dec. 17, it bounced in earnest. That was when we bought the stock for $19.67. KIRK was already participating in the year-end rally, and after this test, it was ready to renew the move. Sure enough, KIRK rallied up the 10-day EMA and hit our target on Dec. 22. We then sold the stock for $20.65 and banked a 4.25% gain from a steady mover.
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.
3. Pick of the Week
FATE (Fate Therapeutics — $93.27, +1.02)
VOLUME: 2.619M Avg Volume: 1.216M
ENTRY POINT: $84.76 Volume=1.4M Target=$109.91 Stop=$79.92
POSITION: FATE FEB 19 2021 120.00 Calls — (39 delta)
4. Covered Call Options Play
Renewable Energy Group Inc. (NASDAQ: REGI) — Renewable Energy Group Inc. is currently trading at $79.01. The Jan. 16 $80 Calls (REGI20210116C00080000) are trading at $5. That provides a return of about 8% if REGI is above $80 by the expiration.