Weekender for 4/9
1. Market Summary
Data Continues the Weakening
- Data continues the weakening with labor starting to crack.
- ADP misses, Institute of Supply Management (ISM) Services misses significantly, but is still above 50.
- Despite the data, the indices, for the most part, are testing normally.
- The Fed’s Mester changes her views literally from one day to the next.
- Nasdaq 100, Nasdaq test normally while Russell 2000 struggles worsen.
- Is Russell 2000 the leading market indicator or Nasdaq 100 and its mega cap names?
- It is not just small caps: machinery and large cap industrials bomb lower.
- The three-month/10-year bond inversion moves back over 150 basis points again — are bonds that wrong?
- Big Nasdaq names still steady, oil stocks ready to stage a comeback, but other sectors are diving while semiconductors do not look so bulletproof.
Stocks were down, most of them for a second and for some a third session. Another dose of jobs data (ADP misses) is showing that labor may be cracking and ready to join the litany of other economic reports showing flagging activity. Indeed, ISM Services released Wednesday showed a rather impressive miss (51.2 vs 54.4 exp vs 55.1 February); still expanding, but just barely. This weaker data was credited with the market lethargy, and indeed, it will be interesting Friday to see just what the Jobs Report shows from Never Never Land, aka Washington, D.C.
NOTE: The figures and information above are from the 4/5 report.
Watch the Investment House Videos For This Week Here!
NOTE: The videos are from the 4/5 report due to the Good Friday holiday.
2. Targets Hit
Investment House Daily:
C3.ai Inc. (NYSE: AI): We are always on the watch for newer issues setting up good patterns as the breakouts can be explosive as more people “discover” the stock. We were watching AI in a triangle formation from February into early March, wanting to get in. Then, the stock gapped sharply higher on March 3, too far to follow. So, we waited.
Patience often is one of your best tools in trading the market. Let the bid come to you is a very true maxim — one I always knew but didn’t know how to phrase it until I saw the movie “Mickey Blue Eyes” with Hugh Grant where he was an art dealer/auctioneer who used the phrase “let the bid come to you.”
So, we let the bid come to us, and over the next week AI did test the breakout, coming all the way back to the 50-day moving average (MA). After another week moving laterally along the 50-day MAs (yes, patience), AI started upside on March 21. We issued the alert to enter stock asking $23.35 as well as July $22.50 call options trading at $4.51 on the ask.
It was a solid entry. AI rallied higher that session and into March 24. It tested in a classic one-two-three pullback to the 10-day exponential moving average (EMA), then started back up on March 29. It rallied that day, the next and on March 31 shot higher, hitting our initial target. We issued the alert to sell half the position with the stock trading $29.49 at the bid, and the options were $8.90 (26.3%, 97%, respectively).
That session, AI continued to surge. Toward the close, it had added another $3. Huge move in very short order. We opted to take another half of the position, issuing the alert to sell half the stock with the bid trading at $32.87 (44%) and the options bidding at $12.20 (170%).
The following session, AI opened flat, then started higher. It did not get far before it stalled. Now, this could be a pause that refreshes or a bigger test. Based upon the three-day surge we issued the alert to sell the rest of the position. The stock was bidding $30.74 (31.6% gain), the options $10.50 (132.8% gain).
As it turned out, it was a stall. Tuesday, AI gapped a bit lower then plunged, giving up all the move we just profited from. It continued lower Thursday, and now we are watching to see if AI holds near the 180-day MA and sets up a new upside play.
We also banked gain on the following positions:
Apple Inc (NASDAQ: AAPL): 47.7% gain in the options.
Fastly Inc. (NYSE: FSLY): 9.79% gain in the stock, 26% gain in the options.
Procter & Gamble Co. (NYSE: PG): 39.3% gain in the options.
Rambus Inc. (NASDAQ: RMBS): 48.5% gain in the options.
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Technical Trader:
Louisiana-Pacific Corp. (NYSE: LPX): LPX set up a classic, classic downside entry. After a higher high on a rally and a normal pullback to the 50-day MA, LPX gapped sharply lower through the 200-day simple moving average (SMA). Then it held, and over the next eight sessions moved back up to the 200-day, testing that break. On Friday, March 3, LPX closed right at the lower gap point with a tight doji — that indicates the relief bounce to test the gap is ending, and we put the play on the report that weekend.
The following Monday, LPX started back downside. That was our signal, and we issued the entry alert for May $57.50 put options trading at the ask for $3.10 with the stock trading at $58.81.
From there, the action was typical trend lower with LPX falling five sessions along the falling 10-day EMA, rebounding to test the 10-day, then falling again as the downtrend pushed it down once more.
On April 4, LPX broke hard lower, hitting our initial target. We issued the alert to sell half the put options with the bid trading at $5.80, a solid 87% gain. Now, we let the trend continue to work, looking for a test and then next fade to a lower low to bank some more gain.
We also took gain on the following position:
Apple Inc (NASDAQ: AAPL): 78.2% gain in the options
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Rapid Profits Stock Trader:Harmony Gold Mining Co. (NYSE: HMY): There is gold in them thar miners. When the economy sinks and inflation climbs, miners start to glitter. Thus, we were watching our favorite miners — those with good patterns that can move fast. HMY is one of those.
From mid-January, HMY had faded to form a two-month base. A nice gap up over the 50-day MAs showed the turn, and that was followed by a three-day fade to test the break. Then, HMY started the move again on March 17. That was the signal to enter.
We issued the buy alert with HMY trading at $3.85 on the ask. Nice base, good breakout, good test, new bounce starting. All we had to do from here was let it move.
HMY made the move, albeit a bit slower than anticipated. In typical rally fashion, HMY moved up the 10-day EMA with three-session gains followed by one-two session pauses. On April 4 HMY hit our target. We thought about letting part of it ride, but as the stock started to ease back from an early surge we issued the alert to sell with the bid trading at $4.24, banking a solid 10.13% gain.
Yes, HMY gapped a bit higher Thursday, but we anticipate a pullback off that move and that pullback will be a possible new entry for another 10%ish run.
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3. Covered Call Options Play
Bausch & Lomb Corp. (NYSE: BLCO) — Bausch & Lomb Corp. is currently trading at $17.28. The May 19 $17.50 Calls (BLCO20230519C00017500) are trading at $0.60. That provides a return of about 10% if BLCO is above $17.50 by the expiration.
