Invest and Trade Profitably with Jon Johnson

Weekender for 2/19

1. Market Summary

Stocks Move Higher Again

  • Retail sales top expectations so the economy is obviously strong — if you don’t factor inflation’s impact on prices.
  • Industrial production, capacity, Empire Purchasing Managers’ Index (PMI) terrible.
  • Stocks move higher again, some solid moves, but overall the action on the rebound is sluggish.
  • Bond yields, dollar continue rallying on the “higher for longer” Fed assumption.
  • Would like to see more power on the move back to the February high, but there are still good stocks posting solid breaks higher.

Continued Consumer Price Index (CPI) inflation, but at an expected pace, did not stop a resilient market. Stocks came back that day and the did the same Wednesday. Thursday a hotter Producer Price Index (PPI) looked to be a page from the same story: stocks stated lower, dropping sharply post-PPI, but the bids returned. Stocks started the recovery a half hour into the session, rallying into late afternoon. They had not made it back to positive when the selling hit. Stocks spent the last hour giving back all the recovery work with the indices undercutting the early lows.

NOTE: The figures and information above are from the 2/16 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 2/15 report.

2. Targets Hit

Investment House Daily:

Oil States International, Inc. (NYSE: OIS):  This is an example of how letting a play work can pay off even in volatile markets. OIS is an oil stock that carved out a nice cup with handle base starting in June 2022 and working into November. We saw the base, saw the lateral handle forming the first week of November and put it on the report. When OIS broke higher on Nov. 8, we were ready, issuing the alert to enter with the stock trading at $6.99.

Great move, just a bit early — OIS had some more work on the handle. After a short spurt higher, OIS faded to test, taking its time with a late November intraday tap at the 200-day simple moving average (SMA), a bounce, then an early December test of the same level. Never got out of hand, but not what we wanted in terms of a quicker play. Well, the play turned out to be longer than expected, but that was a good thing.

After that double bottom at the 200-day moving average (MA) that completed the handle, OIS started a steady rise up the 10-day and 20-day exponential moving average (EMA) — that often happens after the breakout from a solid upside base.  Very steady move through three weeks in December and into mid-January. Indeed, OIS spiked upside after seven upside sessions, gapped upside again, but then started to reverse. That was near our initial target so we issued the alert to sell half the position bidding $8.52 and a solid 21.9% stock gain.

OIS flattened out after that, holding the 20-day EMA as it worked laterally into February. Then, it started higher again.  The day before Valentine’s Day, OIS jumped sharply. We issued the alert to bank another half position at $8.97 for a 28% gain.  OIS faded after that move but then found support at the 10-day EMA and started higher again. Indeed, on Friday, OIS spiked another 10% intraday on its earnings released Thursday after the close.

That is why we left part of the position on, taking partial profits at earlier price peaks. Now we have to decide if we want to take the rest with a 45+% gain or hold on — those are good choices to have.

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Technical Trader Alert:

Southern Copper Corp. (NYSE: SCCO):  This is a play we started in early 2023 as metals, particularly copper, found big bids to start the year.  We issued the alert on January 4 for March $60 call options asking $5.83. SCCO had just put in a six-week lateral consolidation after a November 2022 rally, and the stock was primed to run. It certainly did.

By Jan. 9, SCCO hit our initial target, and we issued the alert to sell half the position with options bidding $10.20, just under a 75% gain.  Two sessions later, SCCO had added two more solid gains. On Jan. 11, however, SCCO gapped to a tight doji.  That stock was up seven straight sessions in a rocket shot from the start of the year. We issued the alert to sell another half with the options bidding $14.20, a solid 140% gain.

SCCO edged a bit higher, but we would let it continue to work with the last position. We figured SCCO would fade to test the move, likely coming back to the 10-day EMA, then breaking higher again. Around mid-January, SCCO did start to fade, and it found the 10-day EMA, showing a doji on the chart. Looked prime to rally. We waited. SCCO moved laterally for a week, holding the 10-day EMA.

To start February, SCCO surged upside — looked as if the next leg was on. Then, nothing. The stock lost its bid, faded back tot eh 10 day EMA, struggling to hold it.  The stock slid lower, falling through the 20-day EMA.  It rebounded, and when it stalled again, we opted to take the last gain, issuing the alert as the options bid $12.80 for a gain just under 120% on that last part of the position.

We could have waited, given the March options — after all, this is the same setup as back in December.  Perhaps, but if it is, we will start over with new options and an expiration out past March, giving us time to again let SCCO rally for us.

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Nordic American Tanker Ltd. (NYSE: NAT): We always keep an eye on NAT, because when NAT moves, it moves well.  While the end of 2022 was volatile, for NAT so was January 2023. That action did, however, set up a really nice little double bottom with handle using the 200-day SMA as support. Loved the pattern, so when NAT broke higher we issued the alert to buy stock with an ask at $3.43.

NAT closed well that session and proceeded to rally the following session, though it was up and down, positive to negative and back. The next session, NAT was up again, but once more it was up, down, repeat. Fortunately, NAT hit our target and we issued the alert to sell with the stock bidding $3.71, banking a solid 8% gain in less than 2 days.

We will wait for NAT to test this breakout move, and when it sets up again, we will be looking for another solid pop from the stock.

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3. Covered Call Options Play

Cambium Networks Corp. (NYSE: CMBM) — Cambium Networks Corp. is currently trading at $21.47. The March 17 $22.50 Calls (CMBM20230317C00022500) are trading at $1.05. That provides a return of about 11% if CMBM is above $22.50 by the expiration.

Learn more about our Covered Call Tables here!

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