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1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
Stocks Go From Low to High Again
– Stocks go from low to high again, but a late round of volatility derails good moves.
– Jobless claims are better, but the Automatic Data Processing, Inc. (ADP) specter hung over stocks ahead of the jobs report.
– A stimulus deal is “within reach,” just as it was several weeks ago.
– Overall, the action and leadership are good, but stocks are unable to put in some really strong moves. Still, this scenario is something to watch.
– Is the weak jobs report bad? Perhaps weak is good in terms of stimulus.
Stocks turned in a mixed session on Thursday, but it was perhaps not that bad for the upside. After all, stocks were sluggish to start the session for the second day in a row. That said, stocks rallied early, overcame a fade into the early afternoon and rallied hard into the last hour. They then pushed to new session highs. Then, a drop lower in the last hour took away the gains, or, at least, most of the gains.
Jobless claims fell to a post-March low of 712,000, down from 787,000 the prior week. The number of continuing claims fell to 5.52 million versus 6.089 million. There was much rejoicing.
Stimulus talks are said to be ongoing between Senator Mitch McConnell and Speaker Nancy Pelosi. Senator McConnell went as far as to say that a stimulus bill was “within reach.” Sure it is. It was a week away at one point before the election. Will there be a deal? As the situation is currently $900 billion versus $470 billion, there will likely be no deal.
The NASDAQ, S&P 500 and PHLX Semiconductor Sector (SOX) put in new highs. However, all of them slid back from their respective highs. Only the NASDAQ hung on and reached a new all-time closing high.
NOTE: The figures and information above are from the 12/3 report.
NOTE: The videos are from the 12/2 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:
Advanced Micro Devices, Inc. (NASDAQ: AMD): An old standby in the chip sector, AMD was working on a nice base and breaking higher when the Xilinx deal leaked. Then, AMD dropped through the 50-day moving average (MA) in early November and immediately popped back over it. While the sellers tried to take it down, they could not hold it down. AMD recovered its support, slid sideways and looked ready to finish its base.
We put it on the report, and right after that, on Nov. 16, AMD jumped higher. That was our signal, and we bought January $85 call options for $6.30 when the stock was priced at $85.18. AMD slid laterally for three sessions and waited for the 10-day exponential moving average (EMA) to catch up.
On Nov. 24, it did. During the next session, AMD started upside again. It rallied to end November and then hit our initial target on Dec. 2. We sold half of the position for $11.40 and banked an 80% gain on the options. Now, AMD is testing the 10-day EMA. Not only do we anticipate that our current position will enjoy some solid gains, but we may just drop another play on top of it.
Other positions where we banked gains this past week include:
Chewy Inc. (NYSE: CHWY): 15% gain in the stock, 55% gain in the options
Cleveland-Cliffs Inc. (NYSE: CLF): 45% gain in the stock, 258% gain in the options
Halliburton Company (NYSE: HAL): 23% gain in the stock, 164% gain in the options
Patterson-UTI Energy, Inc. (NASDAQ: PTEN): 18% gain in the stock
Spotify Technology SA (NYSE: SPOT): 105% 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:
Broadcom Inc. (NASDAQ: AVGO): Some of our chip plays, including the Lam Research Corporation, had already rocketed higher, while others took the more leisurely route. While they did not feature that fast of an upside, their movement was very steady. AVGO was one such play. We saw AVGO set up a five-week base after a break higher in early October fizzled in the middle of the month.
AVGO then faded and gapped below the 50-day MA — not great. After a four-session lateral move, however, AVGO gapped back over the 50-day MA — the sellers could not keep it down. Even so, we waited for AVGO to finish the base. On Nov. 16, it broke higher off of the 10-day EMA and cleared the recovery closing high.
We moved in with January $380 call options for $22. AVGO continued higher, but as noted, it was not explosive. Instead, it put in a steady move up the 10-day EMA. While this was somewhat frustrating, it was very steady. So, we let the gains add up.
On Dec. 4, AVGO jumped off of a 10-day EMA test and hit the initial target. While we felt there was more upside to come, it was Friday, and chips had rallied a long way. So, we stuck to the plan and banked some gains by selling half of the options for $35.80. This produced a 60% gain. Now, we can sit back and see if the new break higher has legs. If so, we can let the gains grow.
We also banked gains in the following positions this week:
Lam Research Corporation (NASDAQ: LRCX): 281% gain in the options
Roku Inc. (NASDAQ: ROKU): 112% gain in the options
Spotify Technology SA (NYSE: SPOT): 105% gain in the options
Simon Property Group Inc. (NYSE: SPG): 104% gain in the options
Trade Desk Inc. (NASDAQ: TTD): 95% 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:
Snap Inc. (NYSE: SNAP): We play SNAP quite a bit because it provides good bursts of strength after rather predictable consolidations. Since SNAP was showing one of those consolidations at the end of November, we were ready to move in when it made its bounce. Sure enough, on Dec. 2, after a five-session lateral consolidation of the last break higher, SNAP snapped upside. As we were ready, we stepped in and bought some stock for $46.06.
Since the stock closed at $47.49 at the end of that session, this was a good burst higher. During the next session, SNAP hit our target — the power of picking it as it broke upside from a consolidation. We then sold the position for $48.14 and banked a 4.5% gain in very short order.
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
AMWL (Amwell–$26.10, +0.29)
STATUS: Perhaps this setup is the one where AMWL delivers the good move higher. Although it was a new issue in September, AMWL rallied well into mid-October and peaked near $42. It has since faded and has been trying a break higher since early November. However, it faded to a lower low in mid-November.
Over the past two weeks, AMWL slowly worked higher to the 50-day MA on Monday and then faded into the Wednesday open. AMWL then reversed upside off of that weaker open. This indicates that it is getting ready to move back up. Since there was no volume, we want to see the move show us some for us to enter. A rally to the target will give us a 20% gain on the stock and a 60% gain on the options.
VOLUME: 1.543M Avg. Volume: 3.129M
ENTRY POINT: $26.64 Volume=4.5M Target=$32.77 Stop=$24.68
POSITION: AMWL MAR 19 2020 $25.00 Calls — (62 delta) &/or Stock
4. Covered Call Options Play
Fulgent Genetics Inc. (NASDAQ: FLGT) — Fulgent Genetics Inc. is currently trading at $42.66. The Dec. 19 $45 Calls (FLGT20201219C00045000) are trading at $2.30. That provides a return of about 12% if FLGT is above $45 by the expiration.