Weekender for 4/21/2024
1. Market Summary
- Stocks blow another higher start as DJ30 again plays odd man out
- Fed-speak helps blow the upside as interest rate hikes are broached
- Jobless claims defy reality as denial appears to work, at least for now
- Philly Fed surges overall as the sub-indices show carnage — hanging your hat on hope as there is not much else to hang it on
- Small-cap indices show indications of a bounce, large caps are close to gap fills — a bit more downside and some short covering?
- Short covering sounds plausible, but then it is reported Israel has attacked or retaliated or something against Iran. Hard to cover given a weekend ahead.
A mixed session if you can call a 0.06% DJ30 gain enough for a mixed session. That said, almost all indices traded around the flat line outside of PHLX Semiconductor Sector (SOX), and it always trades with more of a delta. The important point, however, is that, once again, the indices managed to blow a lead and close negative.
NOTE: The figures and facts above are from the 4/18 report.
MARKET VIDEO
NOTE: The video is from the 4/17 report.
2. Targets Hit
Investment House Daily:
ProShares UltraShort QQQ (NYSEARCA: QID): We don’t often day trade, and this play was not designed as a day trade. That said, if we have a good bird in hand after entering a position, we will take some of that gain. The Nasdaq-100 (NDX) had struggled for two months with selloffs of new highs and reversals to the downside off solid upside gaps — classic topping signals. Thus, when we saw NDX flirting with the 50-day moving averages (MAs), we were ready to play a downside break if those support levels failed.
I like playing NDX declines with QID. It is an inverse instrument, i.e., it tracks the opposite direction of the index. Thus, if NDX falls, QID rises –many people prefer playing upside to downside as it is more comfortable. Thus, they can “see” the move clearer using QID. Plus, it is very liquid in the stock and the options. Perfect vehicle.
After cracking the 50-day MAs Tuesday and pausing Wednesday, NDX was primed to sell. QID showed that opposite action, looking primed to rally off that doji pause. It did. On April 17, QID broke higher, and we issued the alert to buy May $47 call options that were bidding for $2.70.
The plan was to let QID rally to the early February peak, the point where NDX bottomed and bounced some into mid-February. On the day, however, QID moved well. With the indices still somewhat problematic in that they could pull one of the false break reversals off the break of the 50-day MAs, the thought of banking some gain made in a day was alluring. The options were bidding $3.20, a solid 18+% gain for the day. We issued the alert to sell half the position and bank the gains. If it bounced, we could add more after the bounce stalled. Instead, QID sold further as the pattern suggested.
No worries; we still have half the position building in more gains — indeed, more than doubling the initial gain. NDX is getting close to a bounce and we anticipated a relief move after some more downside early Friday. So, we issued the alert to sell another half with the options bidding at $4.20 and a 55% gain.
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Rapid Profits Stock Trader:
Century Aluminum Co. (NASDAQ: CENX): Metals, precious and industrial, have performed quite well for several weeks. We watched their patterns develop and caught many as they “turned the corner” from long declines to uptrends. We have made bank on many industrial and precious metals plays since that turn.
CENX is a stock we like in aluminum — nice price, good volume. After a run higher from mid-March to early April that was the result of the breakout from a 12-week cup-with-handle base, CENX began consolidating, setting up the next move in the run. We like playing breakouts, we really like playing the first test of a breakout move because when the test turns into a new break higher, it shows the buyers still want the stock even at this higher price — a very powerful indication.
Of course, then, we were watching CENX as it consolidated that move with a short lateral slide. In a strong stock, often a short lateral move will consolidate a surge with the stock breaking higher from there. Thus, when CENX broke higher on April 8, we issued the alert to move into the stock that was asking for $17.06.
CENX moved higher that session and the next, but then slumped a bit to the 10-day exponential moving average (EMA), gapping to that level as the market overall gapped lower. CENX, however, bounced right back up that session and continued higher into mid-month.
On April 15, CENX gapped upside and rallied to a new high — then started to stall. We opted to issue an alert to sell half the position bidding $18.10, banking half of the 6.1% gain. Not huge, but CENX slid back that session and the stock still has plenty of room up to the next target at over $19 — this is how we play it: catch a new break in the stock, take a solid early gain, let the play move to the higher target.
Indeed, CENX, even as the market has sold this week, continues to work slowly up the 10-day EMA, and we anticipate that move will pick up speed when the overall market produces a relief bounce off this selling.
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3. Covered Call Options Play
Ero Copper Corp. (NYSE: ERO) — Ero Copper Corp. is currently trading at $19.94. The May 19 $20 calls (ERO20240519C00020000) are currently trading at $1.05. That provides a return of about 7% if ERO is above $20 by the expiration.
