Invest and Trade Profitably with Jon Johnson

Weekender for 3/29

1. Market Summary

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

A Light at the End of the Tunnel?

– While the number of jobless claims jumped to historic levels, the market took in the bad news and surged.
– The stimulus package has some good aspects that will help spark a rebound.
– While some experts are cautioning not to buy this move, others are saying that we should enter slowly and bank strong gains in what they see as just a relief rally.
– While there is still room to rally in the indices, we are looking for more upside and taking gains as we go along.
– The Chicago Board Options Exchange’s Volatility Index (VIX) is hanging around 60 and indicating that it is ready to jump higher again. This means that we should be ready for more selling once this move loses steam.
– The fact that the quarter is ending on the coming Tuesday will require rebalancing and an upside impetus, given all of the selling that has transpired.
As I suspected on Wednesday night, the late Wednesday selloff was just an overreaction — as it turned out to be. The fact that the selloff was not cut and dried continued to be salient in the overnight session due to the fact that stocks continued to lose ground after the weak close.

The market appeared to be waiting for the initial jobless claims report. As I noted on Wednesday night, the figures were going to be record-setting bad. Indeed, they were. 3.283 million people filed for their first jobless benefits. While this was a gut punch for sure, the market… rallied.

Futures bottomed on that report and rallied to the open. Stocks rallied from the open into the time that the European markets closed. Stocks then moved laterally for the balance of the session and surged in the last 10 minutes of trading. That last surge was the gravy or lagniappe, as they say in Louisiana. While we already had banked some gains on the session, that move allowed us to take some sweet gains on positions that we had entered on Wednesday.

Technical Analysis:

The action on Wednesday and Thursday showed a pause session with Wednesday serving as the pause after a Tuesday surge. Then, we saw movement resume. This fact will become more important when the indices reach their resistance levels.

S&P 500: The index gapped higher and surged to close just below the 20-day exponential moving average (EMA) on lower volume. During the past three sessions, the S&P 500 recovered the December 2018 low as well as the March 2009 trend line that it gapped above on Thursday. 2,700 (the index closed at 2,630) is our first level to watch. The fact that strong moves have appeared thus far makes 2,800 to 2,900 a more likely range, given the move’s strength.

NASDAQ: The NASDAQ surged to the 20-day EMA as well, a level that is coincident with the October low and the start of the run to February. While this fact makes this level an important one, I believe that the NASDAQ can still make it to the 8,200 level.

NOTE: The figures and information above are from the 3/26 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 3/25 report.

2. Targets Hit

Here are four completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week:

Citrix Systems, Inc. (NASDAQ:CTXS): CTXS is a virus stock that even our selfless leaders in Congress were buying right after their briefings on the Wuhan virus and before the information in them was made public. Nice. Well, we saw CTXS’s double bottom, the break higher and the test. When it was testing, we put it on the report over the weekend. On Wednesday, it hit the buy point.

Thus, we bought May $125.00 call options for $10.34 at the same time that the stock was at $127.67. On Thursday, CTXS shot higher and hit our initial target. Thus, we sold our options for $18.00 and banked a solid 74% gain in the bear market rally.

Schrodinger Inc. (NASDAQ: SDGR): This stock was a new issue in early February. What a time to come to the market! SDGR rallied to the second half of that month and then made its first real base. This base would span all of the market selling in February and early March. Soon, the stock also formed a downward pointing wedge — a great pattern for the upside. We then put SDGR on the report on March 14. Although it took SDGR a couple of days to move, it soon started higher.

We entered on March 18 by buying stock for $33.32 and April $40.00 call options for $3.80. SDGR stepped higher starting on March 19 and rallied nicely into Tuesday. On that Tuesday, SDGR gapped higher before starting to backpedal. We then sold half the stock for $42.18 and banked a gain of 26%. We also sold half the options for $6.80 and banked a 78% gain.

SPDR Gold Trust (NYSEARCA:GLD): Gold had to bounce off that massive tank during the first half of March — with so much monetary policy and trillions of dollars in fiscal stimulus to come, you knew that it would. Thus, when GLD was bouncing around the 200-day simple moving average (SMA) and the support from the November consolidation, we moved in, despite the volatility.

On March 17, GLD bounced and we bought May $145.00 call options for $8.35 when the GLD stock was trading at $145.28. GLD then fell for a couple of sessions, but it continued to hold its support. Thus, we knew that it would be volatile. As long as it held the range, we would let it work. Then, on March 23, GLD gapped back over the 200-day SMA and surged to the close. On Tuesday, March 24, GLD gapped over $153.00. As it could not push higher and showed a doji, we sold the position for $12.20 and banked a 46% gain.

Zoom Video Communications Inc. (NASDAQ:ZM): Yes, we had to go back to the well on this one. While we already had one position, ZM has continued to set up new buys and move higher. In fact, it was testing during the first half of March and riding out the market selling by consolidating its prior move higher. In general, a leader will use the market selling to consolidate and set up its next move. So, we put a new play on.

On March 16, ZM started up off of the 20-day EMA and its near support. We entered with May $115.00 call options when the stock was at $114.22. Since ZM was ready to move, it put in a series of steady gains to start. Then, it started gapping. This trajectory culminated with a huge upside gap and run on Monday. Since we knew that it would likely not get better in the near term, we sold our options for $49.40 and banked a gain of 190%.

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

Microsoft Corp. (NASDAQ:MSFT): This big name was working laterally at its support from the trading range through October 2019 — before the surge into February was wiped away in the harsh selloff. With that lateral move at the support and the market massively oversold, we were ready to play a rebound. On Tuesday, MSFT gapped higher.

Thus, we moved in with May $145.00 call options at $9.35. MSFT surged on Wednesday and then faded to a modest loss. After it shot higher on Thursday, it held its gains. It also hit our target just ahead of the close. We then sold our options for $17.00 and banked an 81% gain.

NVIDIA Corporation (NASDAQ:NVDA): NVDA took a while to produce an entry as it was in a downward pointing wedge during the February to early March period. However, that pattern broke down during the selling. Then, NVDA held the 200-day SMA and worked laterally for a week. Okay, since that pattern mimicked the index action on the NASDAQ and the S&P 500, we adjusted the entry point. We also noted NVDA’s staying power versus the rest of the market — down, but relatively light.

On Tuesday, NVDA gapped upside. So, we adjusted our buy position on the fly and issued the alert to enter. We then picked up May $240.00 calls for $23.80. On Wednesday, NVDA surged and then quickly gave back its gains. On Thursday, NVDA surged again and touched the initial target. As a result, we sold our options for $38.00 and banked a gain that was a fraction under 60%.

Twilio Inc. (NYSE:TWLO): TWLO is one of the stocks that anticipated the rally to come. Yes, it sold off in the plunge lower and was not immune from the selloff. On the other hand, it held the December 2018 low in mid-March. It also, unlike other stocks, started upside quickly. After we saw it bounce on March 19, we put it on the report.

When it continued higher on March 20, we moved in with April $85.00 call options for $9.35. Since TWLO was in the lead, it was already near the target when the rest of the market caught on. On Wednesday, it touched the 50-day EMA and hit the target. We then sold the options for $15.40 and banked a gain of 64%.

Receive a risk-free trial to Technical Trader and save 50% by clicking here now!

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

Advanced Micro Devices Inc. (NASDAQ:AMD)

AMD is a chip stock that held up better than most stocks in the market selloff. It even came back to the 200-day SMA in mid-March. After it held the support that matched up with a consolidation from February and December, it then moved laterally. We liked this course of action, and when it gapped higher on Tuesday, March 24, we moved in and bought the stock for $46.06. During the same session, AMD gapped higher and rallied to the 50-day SMA. Since this was a nice move and touched the resistance, we sold the stock for $47.72. This decision allowed us to bank a 3.6% gain.

Sunrun Inc. (NASDAQ:RUN)

We saw RUN putting in a lateral move after the February and March torching. It then worked laterally as it held its support just over $8.00. As RUN was primed for a… run, we placed it on the watchlist for a play. On March 20, RUN started its — run and we bought stock for $9.70. However, RUN’s share price had dropped down by the close. This was not great. On Monday, however, it rallied and then gapped and rallied again on Tuesday. Since this was a nice, strong move that filled the gap lower, we sold the position for $11.04 and banked a gain of 13.8%.

These are examples 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.

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3. Pick of the Week

TDOC (Teladoc Health, Inc. — $142.11; -19.91): Doctors Via The Internet

EARNINGS: 05/27/2020

STATUS: Remember the “Two and a Half Men” episodes where the pharmacist would have a doctor/movie announcer “examine” a person over a video conference and diagnose glaucoma? I suppose that TDOC’s products could be used in similar ways, but the last place you want to go during this epidemic is the doctor. Anyway, TDOC is similar to ZM in terms of its recent successes because TDOC tested the 50-day moving average (MA) in mid-March after a solid run that lasted from January to early March.

It bolted higher from that support over the past week, gapped to a new high on Tuesday and then faded to close lower. After it sold on Wednesday, it tapped the 20-day EMA on the low and bounced somewhat to close. While we may want it to test more before it sets up a move higher, we want to be ready to make the move in case it rallies off of this two-day test. A move to the target will give us a 70% gain on the options.

VOLUME: 12.076M Avg Volume: 3.557M

ENTRY POINT: $142.69 Volume=5M Target=$172.94 Stop=$132.91

POSITION: TDOC MAY 15 2020 145.00 Calls — (54 delta) &/or Stock

To see the chart for TDOC, click here!

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4. Covered Call Options Play

Iridium Communications Inc. (NASDAQ:IRDM) — Iridium Communications Inc. is currently trading at $23.15. The May 16 $24.00 Calls (IRDM20200516C00024000) are trading at $1.85. That provides a return of about 15% if IRDM is above $24.00 by the expiration.

Learn more about our Covered Call Tables here!

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