1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
What’s a COIN?
– What’s a COIN? The market has forgotten about Coinbase Global Inc.’s (NASDAQ:COIN) disappointing initial public offering (IPO) action.
– The data are very solid overall, but the production data are something of a warning of possible trouble.
– We saw new highs on the NYSE indices due to methodical moves, and the Nasdaq 100 hit a new high as well.
– Bonds are breaking higher, and yields are making a significant decline. We are still looking for semiconductors and recovery stocks to make breaks higher.
A day after COIN’s (-1.68%) “failed” IPO, where it broke its opening price and the market sold as it did, stocks said, “What is a COIN?”
Futures opened higher, and stocks rallied from wire to wire. We also saw fresh new highs on the S&P 500, DJ30, Nasdaq 100 and even the mid-cap S&P 400.
The Nasdaq, despite all the help from the mega-cap stocks, still has not hit a fresh high over the February peak. Meanwhile, the PHLX Semiconductor Sector (SOX) continues to look good. It just continues to not make good moves on the setup.
S&P 500: It rallied, tested, rallied and tested in its uptrend channel. Indeed, the S&P 500 is now at the upper trend line, as it moved to its new high. After three weeks of upside at the upper channel line, the odds are that it will struggle a bit here. Overall, it is still in a solid uptrend.
NASDAQ: It is closing in on its own new highs at the February all-time high. This has occurred just as the big Nasdaq names that led it here appear to be slowing the moves a bit. Of course, the Nasdaq has shot down each resistance level on its way back up. The prior high, or around that area, is a good place for it to pause in order to consolidate and reset the move.
NOTE: The figures and information above are from the 4/15 report.
NOTE: The videos are from the 4/14 report.
2. Targets Hit
Here are three completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week.
Starbucks Corporation (NASDAQ: SBUX): This is an old one, but it is still a good one, particularly when the setup is there. We noticed that SBUX tried a breakout from a range that it started in December 2020 and moved higher off of the 50-day moving average (MA) on March 25. Then, it bounced and tested the move. So, we put a play on the report as it tested.
SBUX broke higher at the dawn of the new month, which is when we moved in to play the run up off of the 50-day MA. We purchased May $110 call options for $4.60. This was not bad in terms of historical volatility. Let’s face it, SBUX is not a cloud software stock. So, the premiums are lower.
Well, it was not a dramatic move in terms of what some parts of the market have shown, but it was a solid advance up the 10-day exponential moving average (EMA). On April 13, SBUX hit our initial target. So, we sold half of the options for $6.69 and banked a 45% gain.
Then, SBUX continued its advance into Friday. It had a good run, and we decided to take the rest of the gains. We sold the rest of the options for $8.80 and banked a 91% gain.
Companhia Siderurgica Nacional (NYSE: SID): We entered this play on April 6 and sold both the stock and the options on April 14 for a 15.2% stock gain and a 50% options gain.
Microsoft Corporation (NASDAQ: MSFT): We sold the remaining options position for a 118% gain.
Here are several completed trades from Technical Trader Alert, offering insights into our trading strategy and the targets that we have hit this week:
HubSpot Inc. (NYSE: HUBS): While much of the cloud software world was sold and somewhat despised, patterns were setting up if you cared to take note. One pattern was forming with regard to HUBS. After gapping upside during the second week of February and moving to a new high, HUBS was done.
It sold off in the February and March tech selling and came back to fill the entire gap. It held at that point, however. Over the next four weeks, it finished the work on a nice downward-pointing wedge.
Those are interesting patterns as they are opposites that tend to break in the opposite direction that the wedge is pointing in. HUBS did just that. When it started to test the breakout, we put it on the report.
HUBS tested, and when it moved back up, we bought June $490 call options for $44. HUBS moved right up the 10-day EMA as it recovered the ground that it had lost from that February gap and rally. On April 14, HUBS hit our initial target. At this time, we sold half of the options for $70 and banked a 59% gain. Now, we will let HUBS pause at the prior high in order to see if it can deliver a new breakout to a new high.
We also banked gains on the following positions:
Polaris Inc. (NYSE: PII): 80% gain on the options.
Yum! Brands, Inc. (NYSE: YUM): 60% gain on the options.
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:
Freeport-McMoRan Inc. (NYSE: FCX): In March, FCX was one of the recovery stocks that was on the cusp of breaking higher after a nice test of the late January to February run. After it set up and started higher, we moved in and bought stock for $36.69.
Then, recovery trading stalled in mid-March as the selling that hit other areas, such as growth stocks, started to drag down the recovery areas. FCX slid into late March but found support near the 50-day MA. That level acted as support for the stock and bounced it back upside.
FCX continued to improve and buyers rediscovered that they liked copper this past week. So, the stock jumped upside with a big gap on Wednesday and then moved higher again on Thursday, where it hit our target.
We sold the position for $38 and banked a 3.5% gain. Now, we will let FCX test the prior high. If it puts in a higher low and starts back up, we will likely reload the position for a breakout move.
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.
3. Pick of the Week
TXN (Texas Instruments — $190.33, -0.90)
STATUS: The stock saw a big surge higher on March 26, as it cleared a six-week inverted head-and-shoulders pattern that formed on both sides of the 50-day MA. TXN rallied to $197.58 on that breakout and week-long rally. It peaked on April 5 and then tested back into Wednesday, showing a nice doji with the Wednesday low just over the 38% Fibonacci retracement of that last run higher.
That is a nice test of the breakout, and it puts TXN in an excellent position to break higher for the next run after that breakout and rally. TXN looks ready for a pre-earnings run, and a move to the target will give us a gain of 65% on the options.
Volume: 3.48M Avg .Volume: 4.938M
ENTRY POINT: $191.52 Volume=6M Target=$201.91 Stop=$188.19
POSITION: TXN JUN 18 2021 190.00 Calls — (52 delta)
4. Covered Call Options Play
Veritiv Corp. (NYSE: VRTV) — Veritiv Corp. is currently trading at $44.21. The May 21 $45 Calls (VRTV20210521C00045000) are trading at $3.40. That provides a return of about 12% if VRTV is above $45 by the expiration.