Weekender for 4/11
1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
All Indices Move Higher
– All indices move higher, and the Nasdaq and PHLX Semiconductor Sector (SOX) are once again in the lead. Meanwhile, the S&P 500 hit another new high.
– Recovery stocks are still working and are still in good patterns.
– We are in somewhat of a routine session now that the market has come to grips with the rise in interest rates.
– Some stocks are getting extended in the near term due to their recovery success. Others are looking ready to move up from solid tests.
On Wednesday, I opined that the market may just not be able to stand waiting for too many consolidation days before turning back up. It would appear that two days was all that market participants could stand. Futures were, for the most part, upside, and the Nasdaq was in the lead. By the time that the market closed, all indices closed positive. Also, the S&P 500 moved to yet another new high, and the Nasdaq cleared the 78% Fibonacci retracement of the February to March selloff.
The SOX almost notched a new high after its short test, while the DJ30 is in its third lateral session. It then rested after its new high. The mid-caps tapped the 10-day exponential moving average (EMA) on the low and then reversed to positive. This action put a very good spin in a mid-range pause and test after rallying off of the bottom of its channel.
All in all, this was not a massive new break higher. However, we saw very solid moves for the indices. Not all of them are at the same place in their moves, as some started to move higher while others were just starting to test. Even so, that is how it works in a market that is showing a virtuous rotation. They are all in different positions in their moves, but all are showing solid bullish action.
Technical Analysis:
S&P 500: This index was up seven of 10 sessions, putting it in the extended category in the near term. It is in its channel as it approaches the upper reaches.
NASDAQ: The Nasdaq is not terribly close to a new high — though it is much closer than it was 10 sessions ago. However, it is also a bit extended in the near term, as it has also put in a 1,000+ point move during those same 10 sessions. It did gap over the 78% Fibonacci retracement on Thursday and found buyers off of a two-day test after tapping that level.
NOTE: The figures and information above are from the 4/8 report.
Watch the Investment House Video For This Week Here!
NOTE: The video is from the 4/7 report.
2. Targets Hit
Here are two completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week.
Microsoft Corporation (NASDAQ: MSFT): MSFT was pinched somewhat during the late February to early March selling, but it held its key support at the top of the prior trading range and put in a pretty solid bottom there. We liked its resilience at the support, and we put the play on the report.
When MSFT bounced up to the 50-day moving average (MA), we entered with some May $235 call options for $11.20 when the stock traded at $238.36. MSFT traded along the 50-day MA to late March and then broke higher in April.
After it posted a new high this week, we sold half of the May options for $17.80 and banked a 57% gain. MSFT continued higher, and the options are currently bidding at $21.35. We will let MSFT work, and when it looks to be stalling somewhat, we will bank more of the gains.
Applied Materials, Inc. (NASDAQ: AMAT): Last week, we banked part of our AMAT option position by selling half of the calls for $15.55. This allowed us to obtain a 95% gain. AMAT continued higher this week but started to show signs of slowing in the form of a gap higher. As a result, we sold the rest of the options for $17.95 and banked a 127% gain.
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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:
MKS Instruments, Inc. (NASDAQ: MKSI): MKSI has performed as a very solid market leader and rallied to a new high in mid-January. From there, it formed a two-month double bottom with a handle base. This was a nice setup to consolidate the gains and set the stage for a new rally.
We put the play on the report on March 22, and after working on the handle some more, MKSI jumped higher on March 26. This triggered our entry. We bought May $180 call options for $13.50 when the stock was at $179.22.
MKSI stepped nicely higher on the breakout and moved to our initial target as it ran higher in the break. So, we sold half of the options for $24.50 and banked an 81% gain.
MKSI is in a nice flag test of the breakout, and we anticipate a new break higher. This will continue the breakout and ramp up more gains. We are also looking at a new position, as we love playing off of the first test of a breakout move.
We also banked gains this week in the following trades:
Honeywell International Inc. (NYSE: HON): 91% gain in the options
Facebook, Inc. (NASDAQ: FB): 61% gain in the options
Silicon Motion Technology Corp. (NASDAQ: SIMO): 66% gain in the options
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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:
Cleveland-Cliffs Inc. (NYSE: CLF): Sometimes, it takes a while longer to take the gains, but, if we let a good stock in a good sector work, it pays a bit more. CLF was moving higher in early February, and we picked up the play for $17.20 as the stock came off of a three-week test of its last rally.
After it bounced, we moved in. The stock continued upside for a couple of sessions. Then, it gapped lower during one session and immediately started to rebuild. So, we let it work. In late February, however, CLF was caught in that interest rate scare and put in a sharp downside session.
Fortunately, it rebounded quickly once again, put in a bottom and rallied — right back to where we bought it. It took another couple of weeks, but CLF finally made the break higher that we wanted. As a result, we let it work beyond our initial target. After it moved up nicely near $20, we sold the stock for $19.54 this week and banked a solid 13% 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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3. Pick of the Week
SLAB (Silicon Labs — $144.98, -2.34): Semiconductors
EARNINGS: 05/05/2021
STATUS: After hitting a new high in the last couple of weeks of February, SLAB sold back to the 50-day MA and formed the current pattern. You can call it a triangle or a double bottom with handle, but, either way, it works.
We want to see SLAB hold around the 50-day MA and then make the break higher. When SLAB makes that move, and makes it stick, we are ready to move in. A rally to the prior high (the initial target) will give us a gain of 55% in the options.
Volume: 188.142K Avg. Volume: 367.135K
ENTRY POINT: $147.71 Volume=500K Target=$161.89 Stop=$143.05
POSITION: SLAB JUL 16 2021 145.00 Calls — (54 delta)
To see the chart for SLAB, click here!
4. Covered Call Options Play
Bonanza Creek Energy Inc. (NYSE: BCEI) — Bonanza Creek Energy Inc. is currently trading at $34.92. The May 21 $35 Calls (BCEI20210521C00035000) are trading at $2.60. That provides a return of about 13% if BCEI is above $35 by the expiration.
