1. Market Summary
Excerpted from Thursday’s paid content of “Investment House Daily” by Jon Johnson.
More Trade Talk and a Jobs Report
– The trade talk has become more negative, but at least the markets blew it off ahead of Friday’s jobs report.
– The economic data continue to fade, but bond yields are on the rebound.
– Retail results continue to do well as the consumer remains confident.
– The index patterns are worrisome, but perhaps they were just waiting for the jobs report to confirm the economics.
Stocks continued upside for a second session off of the sharp decline into Tuesday, but the effort was unimpressive. The indices started higher with a gap, but they either finished off of the open or closed exactly where they had opened.
These actions did not alter the less-than-encouraging close on Wednesday and left the indices in a somewhat precarious near-term position. Of course, the jobs report came out before the market opened on Friday, and it could be true that the indices were just treading water after the weak Automatic Data Processing, Inc. (ADP) report to see if it had been a harbinger or just another report that could be blown off in terms of its predictive value.
Furthermore, you cannot forget the fact that the Fed is backing the market’s plays. If the market does encounter selling, the Fed will likely ratchet up the quantitative easing (QE) to blunt it. It is good to have that going in the background.
The index charts have all displayed the same pattern, i.e. a higher high, a selloff and a gap upside to fill the selloff gap. Some of the charts look better than others and they certainly could rather easily drop back again to test. That assumption, of course, presumes that the Fed will not feel like it needs to hold the line here and that it will be willing to let the market test a bit versus propping it up so close to the highs.
S&P 500 and the NASDAQ: These indices are similar, even though they might perhaps have a bit better look than some of the other ones. The S&P 500 is at the 10-day exponential moving average (EMA), is showing a doji and is also basically at the upper gap point. Meanwhile, the NASDAQ is showing a doji at the 10-day EMA as well.
NOTE: The figures and information above are from the 12/6 report.
NOTE: The videos are from the 12/5 report.
2. Targets Hit
Here is one current play from Investment House Daily, offering insights into our trading strategy and the target that we aim to hit next week:
Johnson & Johnson (NYSE:JNJ): After JNJ was slammed lower in July, it was just a matter of time until it started to rally again. It took a while (actually, more than four months), but JNJ carved out a base and put itself in a position to be bought in late November when it formed a handle on its cup base. We then put the play on the report and waited for JNJ to show us that the time was right to buy.
On Wednesday, JNJ gapped higher out of the handle. That was our entry signal and we picked up February $140.00 call options for $4.70 when the stock was at $138.51. Not only is JNJ moving upside, it put in another 1% upside on Friday. Since the options were being bid at $5.20 during this time, they were up by about 10%. As this was a solid breakout and a solid start, we now can let JNJ continue to run in its breakout move.
Here is one completed trade from the Success Trading Group, offering insights into our trading strategy and the target that we aim to hit next week:
NASDAQ: AMD (Advanced Micro Devices)
We went to the well again with AMD this week as it made us money on its last run. However, as it needed a breather after that move, the stock faded back from mid-November into Thanksgiving. Then, there was that big downside opening on the following Monday that eventually reversed. This move was followed by an auspicious sign which occurred when the sellers tried to break the reverse but failed.
When AMD moved higher on Tuesday, we moved in and picked up the stock for $39.62. Now, we will let AMD make a quick trip up for us near those prior highs and see if we can bank a nice 4% gain or so in short order.
This is an example of what you’ll get by becoming 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
LULU (Lululemon Athletica–$223.19; -2.34; optionable)
STATUS: It is true that LULU’s earnings are just a week away, but LULU is a leader that is primed for a run at the results. After all, LULU put in a classic one-two-three test of the 10-day EMA after it hit a new high on Wednesday. LULU also tested the 50-day EMA to start the month of November and then started its rally.
The first test of the 10-day EMA two weeks ago was followed by its most recent run to a new high. After this one-two-three pullback, we want to enter when LULU starts back upside. A rally to the target will give us a 55% gain on the call options. Will we hold the stock through earnings? That is a possibility, but LULU is a bit extended to surge on the results if it puts in a pre-earnings move.
VOLUME: 1.463M Avg Volume: 1.614M
BUY POINT: $224.03 Volume=1.8M Target=$238.97 Stop=$219.41
POSITION: LULU JAN 17 2020 220.00C — (57 delta)
4. Covered Call Options Play
Curo Group Holdings Corp. (NYSE: CURO) — Curo Group Holdings Corp. is currently trading at $13.19. The Jan. 18 $12.50 Calls (CURO20200118C00012500) are trading at $1.10. That provides a return of about 13% if CURO is above $12.50 by the expiration.