Invest and Trade Profitably with Jon Johnson

Weekender for 2/28

1. Market Summary

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

Stocks Start Sluggish

– Stocks start sluggish, try to start a recovery and roll over hard.
– A terrible seven-year bond auction ramps up bond fears and trumps the decent economic data.
– Growth sells, as it has done as of late, but even the protected groups in recovery areas sell.
– The DJ30 and S&P 400 reverse their new high breakouts from Wednesday.
– The put/call ratio barely budges, but the Chicago Board Options Exchange’s CBOE Volatility Index (VIX) still has room to climb. This indicates that more selling is ahead.
– Bounces will be used in order to lighten the upside and pick up downside until the market shows that it has the patterns and setups to try again.

Thus far, this week, the market has tested to important support, rebounded nicely intraday and then posted solid low-to-high gains midweek. Chips put in a one-two or a one-two-three test and shot higher on Wednesday, moving back into play. Stocks were setting up a similar picture on Thursday, but were unable to continue the upside move premarket. However, at the open, stocks jumped upside.

The short raiders were back in the market, sending GameStop and company higher. Meanwhile, the DJ30 was still sporting gains, along with the small-cap and mid-cap stocks. Techs were the whipping boy again, but the market had rebounded from these types of selling attempts.

The daily data were not bad. Durables beat expectations, gross domestic product (GDP) rose in line with expectations and jobless claims fell by 111,000. All of this marks a good turn for the positive.

Technical Summary

S&P 500: Very similar to the PHLX Semiconductor Sector (SOX), the S&P 500 came off of the 50-day moving average (MA) with an intraday test and a rally. Then, it fell back down to the 50-day MA. While it is still holding the trend at the 50-day MA, the sellers are definitely flexing their muscles.

NASDAQ: Although it broke the 50-day MA on Tuesday, it did not bounce. Indeed, it almost closed at the session low. Something of a weak right shoulder to a head-and-shoulders pattern formed over the past six weeks. 13,000 is the neckline, which is the point where a break suggests more downside — that is the theory, but this particular pattern is not nearly as solid in its track record as other patterns have been. In this instance, however, given the market’s move and the other issues confronting the Nasdaq, I would assign it more predictability than usual. If you look back at the run into September, it was of a similar caliber, and it took almost three months of forming a base to yield a new break higher.

NOTE: The figures and information above are from the 2/25 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 2/24 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:

JPMorgan Chase & Co. (NYSE: JPM): Interest rates were showing signs of rising and thus, we were looking for plays on stocks that would benefit from that rise. Of course, the banks were up at the top of the list, particularly due to tests of the 50-day MA.

We saw JPM put in a candlestick doji on the 50-day MA on Feb. 1. That got us ready to enter. During the next session, JPM gapped up from that doji. That was our entry signal. We moved in with March $135 call options for $5.20.

JPM performed very well off of that 50-day MA test. It stepped higher for a few sessions and then moved laterally below the prior high — a common move. It then gapped through that prior high on Feb. 16. That is always a sign of strength. JPM continued upside into this past week.

Then, a very solid move started showing signs of wear. It closed lower on Thursday. However, all stocks can have an off day. On Friday, however, it opened weak. So, it was time to bank our gains. We sold the March options for $14.40 and banked a 176% gain.

We also took gain on the following positions:

Century Aluminum Co. (NASDAQ: CENX): 13.4% gain on the stock, 53% gain on the options.

Schnitzer Steel Industries, Inc. (NASDAQ: SCHN): 35% gain on the call options.

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Here is one completed trade from Technical Trader Alert, offering insights into our trading strategy and the target that we have hit this week:

Goldman Sachs Group Inc. (NYSE: GS): Which came first, the chicken or the egg? We saw that bank stock prices were much firmer when compared to the last quarter of 2020, but interest rates were also stirring somewhat. The big moves in rates, however, did not start until 2021. Thus, I would give the nod to the bank stocks for showing that rates were ready to head higher.

GS was one of those “bank” stocks that tested the 50-day MA in late January. What an opportunity in that environment! In early February, the first day in fact, GS nudged up from the test. We then put the play on the report.

On Feb. 2, GS jumped off of the support, and we moved in. We bought April $290 calls for $15.40 when the stock price was at $287.71. GS performed beautifully. It rallied pretty much from the get go and moved methodically up the 10-day exponential moving average (EMA). So, GS hit our initial target in a week. We first sold half of the options for $23.80 and banked a 54% gain.

GS paused for a couple of sessions, gapped through the prior high from January and rallied straight into this week. It then spiked higher and started to falter. So, we decided that it was time to sell the rest. We sold the rest of the options for $39 and banked a solid 153% gain.

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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:

Companhia Siderurgica Nacional (NYSE: SID): Industrial metals and steel are hot — they all are at one point — and we were looking, of course, for opportunities. These stocks have made us money again and again in this rally.

In mid-February, SID was testing a bounce off of the 50-day MA. We were set to play a new bounce from the support, and on Feb. 19, SID made the bounce.

We moved in with a position at $6.47. SID sidestepped for a session and then stepped right up into Wednesday. That was the move we wanted, and we sold the position for $6.79. This allowed us to bank a 4.95% gain. That worked, as SID flopped on Thursday. But, we will look for a new position if it sets up again.

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

TSLA (Tesla, Inc. — $742.02, +43.18)

EARNINGS: 04/28/2021

STATUS: TSLA broke higher in mid-November after an 11-week triangle and rallied to a new high into mid-January. TSLA worked laterally for six weeks and then slid lower to the 50-day MA.

On Monday, it broke below the 50-day MA, gapped lower on Tuesday and then recovered. On Wednesday, TSLA was back up to near the 50-day EMA.

We are watching for a new rollover, as a move through the entry will allow us to move in. A drop to the target at the consolidation from December will give us a gain of 55% on the put options.

Volume: 36.767M Avg Volume: 31.853M

ENTRY POINT: $734.97 Volume=40M Target=$605.11 Stop=$752.67

POSITION: TSLA MAY 21 2021 735.00 Puts — (-42 delta)

To see the chart for TSLA, click here!

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4. Covered Call Options Play

Mesa Air Group Inc. (NASDAQ: MESA) — Mesa Air Group Inc. is currently trading at $12.47. The March 19 $12.50 Calls (MESA20210319C00012500) are trading at $1.25. That provides a return of about 13% if MESA is above $12.50 by the expiration.

Learn more about our Covered Call Tables here!


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