1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
The Nasdaq and the SOX Continue Their Rebounds
– The Nasdaq and the PHLX Semiconductor Sector (SOX) continue their rebounds in their ranges.
– The NYSE indices are holding up and bouncing. However, they are lagging and looking heavy overall.
– The Fed and federal stimulus are still on tap, but both are having their own issues.
– Since this Friday was Expiration Friday, we want to see growth stocks put in nice consolidations.
Stocks continued the Wednesday reversal off of the sharp early selloff during that session, with the big growth stocks posting the best gains. The rest of the indices were no shrinking violets, but they took their time to get going from a slow start. Even after the market closed following a session that was almost all upside, we could still see weaker patterns. There is a definite bifurcation in terms of strength on the move, and during these four months, five for some stocks, of choppier trading, the bifurcation has been the market’s Achilles heel.
That bifurcation has helped lead to some more volatile action as the market continues to rotate between groups. During this time of greater uncertainty, the rotation has been more zero-sum. So, when a new area rallies, money is pulled from another area and the latter group drops.
That said, sectors are not cracking and rolling over. Well, they are in some cases, but then the rotation jumps right back in to push those higher and drop others.
NOTE: The figures and information above are from the 5/20 report.
NOTE: The video is from the 5/19 report.
2. Targets Hit
Here is one completed trade from Investment House Daily, offering insights into our trading strategy and the target that we have hit this week:
JPMorgan Chase & Co. (NYSE: JPM): After a test of the 50-day moving average (MA) during the second half of April, JPM moved higher in its two-month range. After that initial move, JPM started to slide laterally and moved to just over the 50-day simple moving average (SMA) after the break higher from the 50-day exponential moving average (EMA).
That left JPM near the top of its range. We wanted to play JPM for a break higher and a potential breakout from its range. On May 5, JPM jumped higher and started the breakout move from its range.
Since that was our entry signal, we bought July $155 call options for $7.95. JPM rallied nicely into May 10 and moved to a new high. A short test of the 10-day EMA was followed by a return to the upside through Monday.
On Tuesday, JPM gapped higher once more. Then, it started to backtrack and closed lower on the session. Before that happened, however, JPM hit our initial target. At this time, we sold the options for $12.75 and banked a 60% gain.
Here is one completed trade from Technical Trader Alert, offering insights into our trading strategy and the target that we have hit this week:
Hecla Mining Company (NYSE: HL): We only play options on Technical Trader Alert, and there are reasons for doing so, including affordability, defined risk and leverage. HL’s play shows all of them.
HL was set up to break higher after clearing a five-month trading range. It broke out, tested laterally and prepped for the next move. When it broke higher on May 14, we bought September $7.00 call options for $1.25.
During the next session, HL surged higher with a strong price move. This sent the options shooting higher. After that kind of move, we wanted to see if HL could post some more upside during the next session and perhaps possibly duplicate this 18% move.
During the next session, HL opened higher, rallied a bit more and then stalled. We waited to see if it was out of ammo. Then, we sold the options for $2.15 and banked a 72% gain, four times what we would have made on the stock alone.
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:
Hecla Mining Company (NYSE: HL): Copper is glowing hot, particularly HL. HL also was in a good position to be bought, and it paid. We saw HL break higher from its five-month range to start May. From there, HL worked laterally into the prior Thursday and showed a nice, tight doji on the candlestick chart right on top of the old range.
After a breakout and a four-session-long consolidation period, that signal told us to be ready for a break higher. We saw the move higher from that doji during the next session.
Since that was our entry signal, we bought the stock for $7.42. Then, we waited for the weekend. On Monday, HL gapped again and surged to our initial target. It paused and started to stall. So, we sold the stock for $7.82 and banked a 4.8% gain. I wish we had held the stock a bit longer on the day — HL rallied to over $8 during that session.
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
JNJ (Johnson & Johnson–$170.08, -0.36)
STATUS: We were shaken out of JNJ on Wednesday and took the last half of the gains off of the table. This was when the stock reached down toward the 20-day EMA, and recovery stocks, growth stocks and more defensive stocks began to sell off. Since we did not want to take any chances, we closed the position.
Then, JNJ rebounded and came back to easily close over the 10-day EMA, just below last January’s prior high. In the end, this was not a bad test of the breakout from a three-month base that formed off of that January high. The sellers took a shot on Wednesday and were successful early on, but they could not hold this stock down.
The ability to shake off the sellers and continue the move is an attribute we want when we put our money to work. Thus, as JNJ makes a new break higher, we want to put some money back to work on this stock. The move to the initial target will give us a 70% gain on the options.
VOLUME: 5.531M AVG. VOLUME: 7.398M
ENTRY POINT: $170.41 Volume=10M Target=$176.89 Stop=$168.39
POSITION: JNJ JULY 16 2021 $170.00 Calls — (51 delta)
4. Covered Call Options Play
Hibbett Sports Inc. (NASDAQ: HIBB) — Hibbett Sports Inc. is currently trading at $75.67. The June 18 $80 Calls (HIBB20210618C00080000) are trading at $4.10. That provides a return of about 13% if HIBB is above $80 by the expiration.