Weekender for 5/16
1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
Stocks Stem Their Losses and Bounce
– Stocks stem their losses and bounce but growth remains problematic. Even so, the bounce is starting to work some downside setups on growth stocks.
– The S&P 500 and DJ30 bounce up from their 50-day moving averages (MAs) while the S&P 400 recovers to that level.
– The producer price index (PPI) mirrors the consumer price index’s (CPI) big, month-over-month beat and a big, year-over-year spike. Existing home sales surge. However, lumber is now falling — has the move peaked?
Stocks finally had enough near-term selling and bounced. Even before the market opened, stocks were positive, albeit skewed heavily toward the Nasdaq and growth stocks. A hot CPI cooled the upside, but only for a little while. Soon, bids returned and stocks managed, in the end, to post some fairly solid upside gains.
Stocks were up, but they were all over the map during the session. The Nasdaq gapped upside and rallied through 10:00 a.m. EST. Then, it turned down and gave all the move back to a flat position.
Then, in the last two hours, it turned back up and made it back to about the halfway mark by the closing bell. The other indices followed a similar path, though they were not as exaggerated as the Nasdaq’s.
NOTE: The figures and information above are from the 5/13 report.
Watch the Investment House Videos For This Week Here!
NOTE: The videos are from the 5/12 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:
Micron Technology, Inc. (NASDAQ: MU): Not every play involves the upside, particularly when the market is telling you that some sectors are under selling pressure.
The chips, an important market leader, stumbled in April. This set up some great downside opportunities in May. Indeed, we saw MU break its support in late April. When it came back up to test that support and started to roll back lower, we moved in for a downside play. On April 29, we bought June $85 put options for $4.40 when the stock was trading at $85.91.
MU fell into May 4, but then rebounded somewhat to test that last break lower. Then, MU moved up to the 10-day exponential moving average (EMA) last Friday and showed a hangman doji there. From there, it collapsed just as the pattern indicated.
MU broke lower on Monday and gapped sharply lower on Tuesday, May 11. On that gap, we saw a lot of Nasdaq stocks move lower, but they started to hold from the opening gap. The move took our play to the initial target. With the other Nasdaq stocks starting to hold, we sold the options for $9.29 and banked a 111% gain.
We took gains in some other positions during the week:
Johnson & Johnson (NYSE: JNJ): 106% gain in the options
Exxon Mobil Corporation (NYSE: XOM): 128% gain in the options
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Here are four completed trades from Technical Trader Alert, offering insights into our trading strategy and the targets that we have hit this week:
Chevron Corporation (NYSE: CVX): Sometimes the old ways can be the best ways. Oil seems pretty old, right? Heck, when I first got out of school, I worked in the oil business. It MUST be old.
With great patterns setting up in the big integrated companies, we were on the lookout for those that were ready to break higher and make us money in the near term. CVX rallied from February to mid-March, came back to set up a seven-week base along the 50-day MA and was starting to move higher.
On April 28, CVX broke higher off of the 50-day MA. So, we bought June $105 call options for $3.90. After paying multiples of that figure for tech stock options, this was pleasant. The overall price was low, as was the historical volatility. As a result, we had a better probability of making very good money going into the play.
CVX gapped higher during the next session and then gapped lower on April 30. Since it held its support, we left it alone during that session. Sure enough, that was a one-session dip. Then, CVX gapped back upside and rallied during each session into Monday, May 10. After it hit our target during that session, we sold our options for $7.60 and banked a 94% gain.
Other plays we banked gains in during the week include:
Broadcom Inc. (NASDAQ: AVGO): 67% gain in the put options
Lowe’s Companies Inc. (NYSE: LOW): 67% gain in the call options
Microchip Technology Inc. (NASDAQ: MCHP): 48% gain in the put 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): CLF is in one of the “recovery stock” groups, and we are watching those as they continue to set up and move up. It is not always like clockwork — this market is no longer that way — but we can find plenty of stocks that make strong moves from good setups.
CLF made one of those strong moves at the beginning of May. First, we saw the stock make a quick test of the 10-day EMA intraday and recover. When it continued higher on May 7, we bought the stock for $20.89. We held it over the weekend. Then, CLF surged upside on Monday. We then sold the position for $22.20 and banked a 6.27% gain.
During that session, CLF peaked out and sold back to the 20-day EMA in a very nice fade. Of course, we will be looking at another play on a new sharp move off of this test in what is still a very good pattern.
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
GS (Goldman Sachs — $354.40, -5.52)
EARNINGS: 07/14/2021
STATUS: We saw a very nice test of the early May breakout from a nicely formed seven-week cup-with-handle base. Then, GS had a nice rally from February to mid-March, allowing the cup-with-handle pattern to consolidate.
After a breakout last week, and a test back to the top of the base this week, the stock is holding at just over the 20-day EMA. While we might want to test a bit more, we also want to be ready to move in as GS turns back upside. A rally to the target will give us a 60% gain in the options.
Volume: 3.31M Avg Volume: 3.009M
ENTRY POINT: $360.01 Volume=4.2M Target=$379.98 Stop=$353.34
POSITION: GS JUL 16 2021 $360.00 Calls — (49 delta)
To see the chart for GS, click here!
4. Covered Call Options Play
First Majestic Silver Corp. (NYSE: AG) — First Majestic Silver Corp. is currently trading at $15.40. The June 18 $15.50 Calls (AG20210618C00015500) are trading at $0.96. That provides a return of about 8% if AG is above $15.50 by the expiration.
