Invest and Trade Profitably with Jon Johnson

Weekender for 5/12

1. Market Summary

  • Slow start energized by higher jobless claims
  • NYSE indices lead the upside, playing catch-up to the tech side
  • Precious metals surge, industrial stocks perform quite well
  • Jobless claims post highest weekly rise since 2021, stocks applaud the weakness
  • Bank Term Funding Program (BTFP) facility is still in play despite what some experts claim
  • BNPL (“Buy Now, Pay Later”) loans called the Phantom Debt
  • Solid week higher, and more upside early on could turn to some pre-weekend profit taking

From a pensive start to solid gains on the NYSE indices. Techs lagged with modest Nasdaq twins gains and PHLX Semiconductor Sector (SOX) actually turning in a downside session. Some really solid upside breaks on the NYSE stocks, catching up to the Nasdaq indices and their trade near the prior all-time highs.

NOTE: The figures and facts above are from the 5/9 report.



Click here to watch!

NOTE: The video is from the 5/8 report.

2. Targets Hit

Investment House Daily:

Semtech Corp. (NASDAQ: SMTC): Some stocks, not many, can run contrary to the market. At the time we were looking to enter SMTC, we did not know that. All we knew was SMTC set up a very nice three-month triangle from December 2023 into early March 2024. It tightened into the point, and we were ready to move if it broke higher, and it did.

On March 6, SMTC made its upside break, moving up through the simple moving average (SMA). We issued the alert to enter with the stock trading at $23.18. Nice break higher, and SMTC continued that move … until a few sessions later, when it faded to test the 200-day SMA.

SMTC tested the 200-day, and tested some more. It traded in a very tight range at the 200-day SMA on very light volume, so we let the pattern continue to work.

It paid off, because on March 26, SMTC surged, and as it did, volume took off.  SMTC and heavy volume worked hand in hand through the first two weeks of April.  Interesting, because the market turned down hard at this time but SMTC ignored it.

The stock hit our initial target on that move, and we issued an alert to sell half the position with the stock bidding $32.02, a 38% Fibonacci retracement gain.

SMTC then faded slowly and on lower volume, testing that strong break higher and rally. SMTC tested into the third week of April, coming back to and holding the 20-day exponential moving average (EMA). From there, SMTC started higher again. Not a lot of volume, not a surge, just a steady, day in, day out move up the 10-day EMA.

SMTC punched out a new high on the move, climbing into May. As it moved higher, volume was lower and lower. Wednesday, SMTC jumped higher in a solid move — it looked as if a new break could be starting though volume remained well below average.

Thursday, SMTC reversed that move. That is the first volatility of that nature SMTC has shown on this move.  With that, we decided it was time to sell.  We issued an alert to sell the last of the position with the stock bidding $38.52 for a 66% gain.

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Technical Trader:

Dominion Energy Inc. (NYSE: D): We always watch for stocks and sectors that have trended lower and have lost favor. They become almost forgotten. We watch them, not in depth, just a quick look to see if any change is taking shape.

We do this because we know that at some point these stocks “turn the corner” as I call it, i.e., they end the downtrend, form some kind of transitional pattern, then break higher, starting a trend upside versus downside.

D was one of many energy stocks showing this action, though its setup was very nice. D surged early November 2023, rallying to the 200-day SMA off the downtrend low.  The then went to work on building a pattern, moving laterally below the 200-day SMA as it held that surge off the lows. That action worked to break the downtrend.  It was not a sharp single move, just slow, steady accumulation that moved the stock laterally through January, into February and on into March.

D edged over the 200-day SMA early March, then spent several weeks in a lateral range.  We watched it weekly, monitoring the progression. In early April, D made a sharp move back over the 200-day SMA on strong volume.  It held a very tight lateral move over the 200-day SMA. Then it broke higher — that was our entry signal.

We issued an alert to buy June $50.00 strike call options that were trading at $2.00 on the ask. Beautiful price for a stock trading at $49.46. D, along with other energy stocks, hit an air pocket mid-April, but after just a couple of sessions, D surged upside.

D rallied to April’s end, paused to start May, then broke higher this past week. That took D to our initial target and we issued an alert to sell half the position with the options trading at $3.40 on the bid.  That move gained a solid 70%, and D looks great to continue the move, and as it does the option value, which will ramp nicely.

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Rapid Profits Stock Trader:

ZIM Integrated Shipping Services Ltd. (NYSE: ZIM): With the presence of choke points around the globe due to hostilities, e.g. the Houthis taking more than pot shots at any Western-flagged vessel within reach, more ships are needed to ship goods due to the longer routes taking more time to get the goods to the destination ports. That means more costs. That means higher shipping prices.

Thus, we were on the lookout for shippers demonstrating good patterns and returns. ZIM was perfect, fitting our formula of “turning the corner” stocks, i.e., coming off a long downtrend, breaking the downtrend, forming up an upside pattern, breaking higher.

ZIM bounced in December, moving through the 200-day SMA early January. That was a tough, draining move to get through that resistance, and the stock worked laterally for a month then faded, starting to form a base.  It never went back to the old trendline, instead forming an inverted head-and-shoulders pattern into late April.  ZIM broke higher late April, then tested for a week after a one-day break. That breakout test had us ready to enter, as that is one of our favorite entry points. When a stock resumes the move, that shows the buyers still want the stock even after it broke higher.

ZIM made the next move early May and we issued the alert to buy the stock that was trading at $13.47 on the ask.  After a quick test of the 10-day EMA, ZIM steamed higher, rallying on some very strong volume shots as it moved up the 10-day EMA. It hit our target late week, and we issued the alert to sell with the stock trading on the bid at $17.12, banking a nice 26.9% gain.

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3. Covered Call Options Play

Digitalocean Holdings Inc. (NYSE: DOCN) — Digitalocean Holdings Inc. is currently trading at $33.67. The May 19 $35 calls (DOCN20240519C00035000) are currently trading at $1.90. That provides a return of about 10% if DOCN is above $35 by the expiration.

Learn more about our Covered Call Tables here!

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