1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
Big Results From Facebook et al.
– Big results from Facebook et al. propel the Nasdaq to a new high.
– Data are solid enough and earnings are strong enough, but the market still shows back-and-forth action as it trends higher.
– Q1 gross domestic product (GDP) is strong but misses expectations and hopes. With those kind of comparisons, it should be huge.
– Amazon blew out results and is getting good treatment thus far. So, it will give the Nasdaq another shot at a new high.
On Wednesday, I noted that the reaction to the positive earnings reports from Facebook, Apple and Qualcomm would be instructive. They were, but then again, they were not dispositive. The Nasdaq gapped to a new high on the news, and then reversed below the 10-day exponential moving average (EMA) and last Friday’s close.
That was definitive, or, at least, it would have been if it had lasted. After touching the session’s lows at 12:00 p.m. EST, however, the Nasdaq started a steady recovery climb and managed to recover 130 points off of the low to scratch out a 0.22% gain.
The S&P 500 put in a new high that showed its own gap, test and recover move. Meanwhile, the other indices showed the same high-to-low-to-recovery action, and all of them managed an upside close outside of the Russell 2000 Index.
NOTE: The figures and information above are from the 4/27 report.
NOTE: The video is from the 4/26 report.
2. Targets Hit
Here are several completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week:
Ferrari NV (NYSE: RACE): With the recovery, and all of the stimulus money in the world, you would figure that some high-end products would do well. You could assume that, but you also have to see the patterns supporting that reasoning.
RACE supported that theory. It had formed an inverted head-and-shoulders pattern after a selloff from the peak in December 2020. That pattern has consistently led to breaks higher, and RACE did break higher in late March. After clearing the lower part of its base, it then worked laterally to start April in a test of the breakout. That is when we put it on the report.
We love to play off of the first test of a breakout, because, if a stock moves up from the test, this shows that the buyers still want the stock at a higher price.
On April 12, RACE revved higher. That was our green flag, and we entered with May $210 calls for $8.50 when the stock was trading at $211.38. Since earnings were scheduled for May 4, we wanted to catch the race to the results. RACE took off, but then faded to the 20-day EMA. From there, however, it found traction and rallied into this past week. On Tuesday, RACE gapped higher and touched the target.
We then sold our options for $12.40 and banked a 45% gain. Since then, RACE has tested back to the 10-day EMA in a nice one-two-three test of the run. So, we are considering a new play as it rebounds back upside.
We also banked gains on the following positions over the past week:
Brooks Automation, Inc. (NASDAQ: BRKS): 43.5% gain in the options.
Companhia Siderurgica Nacional (NYSE: SID): 32% gain in the stock, 187% gain in the options.
Teradata Corporation (NYSE: TDC): 61% gain in the options.
Here are several completed trades from Technical Trader Alert, offering insights into our trading strategy and the targets that we have hit this week:
Novavax, Inc. (NASDAQ: NVAX): This stock showed us a beautiful setup that makes us consistent money. After a gap and rally from late January to very early in the month of February, NVAX faded and formed a new base.
There were so many things to like about the setup, including the good move that led to the base, the hold over the prior base, the use of the base as support as the stock consolidated and the higher lows pinching off against lower and lower highs. This is known as the watermelon seed effect, as it is like when you squeeze a watermelon seed between two fingers. This builds up pressure until the juice squirts out.
Well, in mid-April, NVAX moved up to the upper trend line of the triangle and then held just over the 50-day EMA in a tighter and tighter range. We loved the setup and put it on the report for the April 24 weekend. On that Monday, NVAX started to break higher out of the triangle. This was our entry signal. We bought June $220 calls for $34.85 when the stock was at $222.68.
While the options were a bit pricey, the stock was in a great pattern. During the next session, NVAX shot higher — via the watermelon seed effect — and hit our initial target. We sold half of the options for $51.33 and banked a 47% gain.
As NVAX tested from Wednesday into Friday, it looks great for a new move higher. This new move could really make us some money with a run at $300.
We also took gains in the following positions over the past week:
Goldman Sachs Group Inc. (NYSE: GS): 32% gain in the options.
Cloudflare Inc. (NYSE: NET): 62% and 42% gains in the options.
Polaris Inc. (NYSE: PII): 58% gain in the options.
Yum! Brands, Inc. (NYSE: YUM): 71% gain in 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:
Cemex SAB de CV ADR (NYSE: CX): One of the materials stocks, which is a group of industrial-side stocks that we have played frequently this year, set up for a new entry in mid-April. CX tested the 50-day moving average )MA) after a break higher in early April. When the stock bounced up off of that level, we bought the stock for $7.40.
CX continued upside and then conducted an abrupt test of the 10-day EMA. After CX held that near support, it started back upside into this week. After CX touched the target on April 26, we sold the stock for $7.74 and banked a 4.59% gain.
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
WGO (Winnebago — $82.16, -0.85)
STATUS: WGO broke out from a nine-month base in early March and surged higher until mid-March. We then saw a full test back to the breakout point by the end of the month. It then formed a triangle through last week. Currently, it is sitting right on top of the prior base.
On Monday, WGO saw a break higher on strong, above-average volume. It then tested back on Tuesday and Wednesday. This allowed it to show a nice doji-with-tail pattern.
We might want to let it test a bit more and let the 10-day EMA catch up to the breakout move. After we let this stock show us the move, we will buy it. A rally to the target will give us a 14% gain in the stock and a 50% gain in the options.
Volume: 495.224K Avg Volume: 722.777K
ENTRY POINT: $83.01 Volume=1M Target=$94.98 Stop=$79.09
POSITION: WGO JUL 16 2021 $80.00 Calls — (60 delta) &/or Stock
4. Covered Call Options Play
Tupperware Corp. (NYSE: TUP) — Tupperware Corp. is currently trading at $25.21. The May 21 $26 Calls (TUP20210521C00026000) are trading at $1.70. That provides a return of about 11% if TUP is above $26 by the expiration.