Invest and Trade Profitably with Jon Johnson

Weekender for 3/14

1. Market Summary

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

The European Central Bank Takes Its Turn

– Growth was up on Thursday, and recovery stocks were not bad.
– The European Central Bank (ECB) takes its turn at propping up markets, announcing a program of accelerated bond purchases.
– Growth is at resistance and at a key lick log point.
– Recovery stocks have tested somewhat. So, we will be looking at those, along with whichever way growth stocks end up breaking.

After Thursday’s gap higher and fail, the indices were ready to sell. The outlier and the wildcard were the world central banks. Before Thursday, Australia and China had already intervened. Last Friday, someone was buying in the United States bond market. On Thursday, the ECB was not yet buying bonds and injecting liquidity, but ECB President Christine Lagarde promised to accelerate bond purchases at a “significantly faster” pace. More liquidity and more stimulus mean higher stock prices.

Futures jumped higher, held the gains to the open and then rallied from the bell to midday. About three hours of lateral movement formed an intraday head-and-shoulders pattern on the SPDR S&P 500 ETF Trust (SPY), and during the penultimate hour, the NYSE indices broke lower from that pattern and faded off some gains into the close. The Nasdaq and PHLX Semiconductor Sector (SOX), on the other hand, held the line and retained most of their gains.

Monday saw growth stocks being hammered, while recovery stocks continued to prosper. Tuesday saw the resurgence of tech and growth stocks. As those stocks rallied, the recovery stocks struggled and faded. On Wednesday, growth stocks threw away a higher open and reversed, while recovery stocks posted a solid session. On Thursday, the process started over, even though recovery stocks did hold up well and growth recovered. Perhaps money is moving into the market, as some stocks rallied, others held the line and not many sold off.

Technical Summary

S&P 500: It got in on the action by moving to a new high. It then faded so that it just hung on to a new all-time closing high.

NASDAQ: It gapped up over the 50-day exponential moving average (EMA) and then rallied to overtake the 50-day simple moving average (SMA). After the three-day drop, the Nasdaq put in a day on, a day off pattern. However, it was moving higher in a solid relief bounce. As the Nasdaq was holding a close over the 50-day EMA, we closed out the ProShares UltraShort QQQ (QID) play. Frankly, however, we are ready to enter it again as its pattern is problematic. Several Nasdaq names rose, but many are still weak and just bounced after their patterns had been ripped up.

NOTE: The figures and information above are from the 3/11 report.

Watch the Investment House Video For This Week Here!

NOTE: The video is from the 3/10 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:

Patterson-UTI Energy, Inc. (NASDAQ: PTEN): Oil and gas are, of course, performing well, as oil has surged to around $60 a barrel. We are playing a few stocks, and one of our favorites, which we play rather frequently, is PTEN.

The stock set up a seven-week consolidation from the start of the year and broke higher in late February. PTEN put in a nice early March test of the breakout and tapped the 10-day EMA. On March 2, PTEN broke upside. That was our entry signal. We bought stock for $7.93 and May $8 call options for $1.20.

PTEN finished its quick test and then started higher on March 4. PTEN surged a day later, and moved up again on Monday. On that day, it hit our target right before the close. During the next session, PTEN opened flat. So, we banked our gains by selling the stock for $9.53. This generated a 20% gain. We also sold the options for $2.44 and banked a 100% gain.

Over the course of the week, we also took gains in the following positions:

BioCryst Pharmaceuticals, Inc. (NASDAQ: BCRX): 33% gain in the stock, 84% gain in the options.

The Walt Disney Company (NYSE: DIS): 25% gain in the options.

Eaton Corporation PLC (NYSE: ETN): 45% gain in the options.

Visa Inc. (NYSE: V): 47% gain in the options.

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Here are several completed trades from Technical Trader Alert, offering insights into our trading strategy and the targets that we have hit this week:

Mastercard Inc. (NYSE: MA): As Kincade, the caretaker of James Bond’s childhood home in the movie “Skyfall,” said, “Sometimes the old ways are the best.”

With growth stumbling — hard — recovery stocks stepped into the lead. The fact that interest rates were higher and states were ending their lockdowns and mask requirements had created a recipe for credit services to make money.

MA set up a short, inverted head-and-shoulders pattern from the early January peak to late February and broke higher just before the month ended. MA came back to test the 10-day EMA with a doji on Feb. 26 and gapped higher on March 1. We moved in with April $360 call options for $17.58.

MA moved higher and then had a bad day on March 4. It held the 20-day EMA, however, and bounced higher during the next session. MA moved up into Monday and arrived near our initial target on the high before it stalled. We opted to bank half of the gains by selling half of the calls for $25. This produced a 42% gain. Those options are now trading over $29.

We also took gains on some other positions.

Polaris Inc. (NYSE: PII): Recovery means snowmobiles, ATVs and personal watercrafts (PWC). Sure sounds fun. The play was, as it produced a 68% gain on the options.

Ternium SA (NYSE: TX): This was an energy stock that we entered on March 8. As it jumped up quickly, we took half of the gains on March 10. This play generated a 48% gain.

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Here are several completed trades from the Success Trading Group, offering insights into our trading strategy and the targets that we have hit this week:

Spirit Airlines Incorporated (NYSE: SAVE): Recovery stocks are leading after tech stocks and other growth stocks cracked and had to take a pretty sharp correction. An economic recovery means that people will be free to move about the country. I know, that is a line from Southwest Airlines’ commercial, but oh well.

SAVE rallied into late February and then started to test into March. After just over a week-long pullback, SAVE sold hard on March 5. It rebounded during that session, however, which put it in a position to gain more altitude after a brief period of touch and go.

On March 8, SAVE gapped upside. So, we moved in by buying stock for $35.34. SAVE rallied well and closed at $36.94. On Tuesday, SAVE gapped upside and rallied from there.

That hit our initial target, and when SAVE started to falter, we sold the position for $37.55. This generated a nice 5.94% gain.

We also took gains in the following positions:

Bed Bath & Beyond Inc. (NASDAQ: BBBY): We entered this position on March 8 at $30.67 and sold it on March 9 for $32.44. This produced a 5.77% gain.

Century Aluminum Co. (NASDAQ: CENX): We entered this position on March 9 at $17.43 and sold it on March 10 for $18.28. This produced a 4.88% gain.

Ternium SA (NYSE: TX): We entered this position on March 8 at $33.96 and sold it on March 9 for $35.39. This produced a 4.2% gain.

United States Steel Corporation (NYSE: X): We entered this position on March 10 at $21.12 and sold it on March 12 for $23.27. This produced a 10% gain.

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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X (U.S. Steel–$20.86, +0.23)

EARNINGS: 04/29/2021

STATUS: X broke over the December high on Monday and moved due to the presence of strong above-average volume. Tuesday was back and forth, but the upside won out. As a result, it is an easy run back to the January high. We want to move in as X continues the move higher. A move to the target will give us a 75% gain on the options.

ENTRY POINT: $20.96 Volume=25M Target=$24.98 Stop=$19.63

POSITION: X MAY 21 2021 21.00 Calls — (55 delta)

To see the chart for X, click here!

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4. Covered Call Options Play

Carlotz Inc. (NASDAQ: LOTZ) — Carlotz Inc. is currently trading at $9.13. The March 19 $10 Calls (LOTZ20210319C00010000) are trading at $0.50. That provides a return of about 16% if LOTZ is above $10 by the expiration.

Learn more about our Covered Call Tables here!

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