Invest and Trade Profitably with Jon Johnson

Weekender for 6/14

1. Market Summary

Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.

The Coronavirus Rides Again

– Stocks did indeed continue testing, testing, testing and testing…
– Massive sell programs hit as a downbeat Fed and a second wave of COVID-19 outbreaks were cited as signs of trouble ahead.
– Indices that hit new highs have given them up. Others are selling sharply. The graphs of the PHLX Semiconductor Sector (SOX), the S&P 500 and others show island reversals, suggesting that more selling is ahead.
– We saw terrible action with breakouts suffering reversals and incredibly bad internals. However, not all leaders have sold off. Many are testing normally for now, and not all recovery stocks are as destroyed as you have been told.
– Can one really, really bad session flush out the market when it is 100% backed by the Fed? This is not really the time to be a hero with regards to positions and swing trades, even though great day trades are showing up.
– Futures are flat, and we will be wary of a higher open.

On Thursday, after the Federal Open Market Committee (FOMC) meeting saw stocks slide into the close and continue lower in the afterhours, I mused that perhaps a lower open would be enough to set a one-two-three pullback on the NYSE indices. This could have perhaps even led to a rebound. The market just missed doing that.

Futures were indeed lower and kept moving lower and lower toward the open. Then, after the regular session was rung in, they dove lower. However, they managed to rebound and rally beautifully through the first hour. All of this looked promising, and it looked as if that initial downside was the flush out, even with the sharp losses on down futures.

In reality, that was just the warm-up flush. That bounce died, and stocks rolled over into midday. They then bounced for half an hour in order to set up the afternoon drop. Then, stocks resumed their ride lower. As a couple of obligatory bounce attempts near the last hour of trading failed, the indices closed at session lows.

Technical Analysis:

NASDAQ, NASDAQ 100 and SOX: These indices, the same ones that forged new highs over the past week, reversed that move in grand fashion. Indeed, the NASDAQ 100 swept away four sessions of upside with no effort. The NASDAQ did the same.

S&P 500: The S&P 500 gapped higher on the prior Friday as well and managed to clear 3,100 points. It then moved higher on Monday, but incurred modest losses on Tuesday and Wednesday. Then, it hit a gap lower through that same gap point on Thursday and formed an island reversal here as well. At the same time, the S&P 500 did hold at over 3,000 points at the close. Furthermore, while it can perhaps find a bounce there, this was a serious drop lower.

NOTE: The figures and information above are from the 6/11 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 6/10 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:

Beyond Meat Inc. (NASDAQ:BYND): After a nice surge to start May, BYND started to test the move. We then put it on the list and began to watch for a setup that would break higher for the next leg upside. As the stock looked ready in mid-May, we put it on the report.

BYND then broke higher on May 19, and we moved in with some August $140 call options for $22.75 when the stock was trading at $138.39. BYND then moved higher for a couple of sessions and then dropped back to the 20-day exponential moving average (EMA). It held there, worked laterally for a couple of days and then bounced back to the same range where we had bought it. Indeed, BYND formed a short four-week inverted head-and-shoulders pattern. Then, on Monday, June 8, we saw the big breakout on volume. As it looked super, we let the position work even though it had hit our initial target.

The next day, BYND gapped lower. It did bounce off of the low and came back to near the Monday close. While this was solid, it soon stalled and started to backtrack. We then went ahead and sold half the position for $32.10 in order to bank a 41% gain. While this was not huge, it was money in the bank.

On Wednesday, BYND tested and held the move. It then gapped to the 10-day EMA on Thursday. We will see if it can hold and rebound. Indeed, we will look at adding some positions if BYND makes another break higher.

We also banked the rest of the “recovery stock” plays that we initiated over the course of the prior week. After all, they had started to test and we did not want to ride them lower. Thus, we sold the rest of the JPMorgan Chase & Co. (NYSE: JPM) calls for a 75% gain, sold the other half of the Terex Corp. (NYSE: TEX) calls for a 78% gain, sold the rest of the Spirit Airlines Inc. (NYSE: SAVE) calls for a 127% gain and sold the rest of the Simon Property Group Inc. (NYSE: SPG) calls for a 140% gain.

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Here is one completed trade from Technical Traders Alert, offering insights into our trading strategy and the target that we have hit this week:

Tesla Inc. (NASDAQ:TSLA): We entered this play in late April as TSLA was breaking higher from a nice cup-with-handle pattern. We then bought July $800 call options for $120.80 when the stock was trading at $794.38. TSLA then broke higher and looked great. However, I suppose that it needed more of a charge than the base had given it.

As a result, TSLA fell into a tight four-week lateral move along the 10-day EMA and moved laterally all the way until late May. I am glad that we went out and bought the July options, as it is never a bad idea to go about three months out. In late May, TSLA showed some life and broke higher out of the range. Then, we saw another week of low-volume lateral movement in yet another tight range.

Ah, but the ice was broken. On June 8, TSLA gapped higher, paused for a session and then gapped upside on June 10. Now, TSLA had already hit our target. However, due to all of that slow action, the options were deflated. When the gaps started, however, the volatility component started pumping itself up.

On June 10, due to the presence of a strong move and some questionable actions in some of the big names, we decided to bank our gains. In other words, we issued the alert to sell the options when they were trading at $233.20. This enabled us to bank a nice 90% gain.

We also sold the rest of our Citigroup Inc. (NYSE: C) position (one of the growth stock trades) and banked an 89% gain on the 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:

Fastly Inc. (NYSE:FSLY): This is a market leader that put in a new high to start the month of June and then made a rather perfect, and textbook, one-two-three pullback to the 10-day EMA. The stock then showed a star doji on June 5. After we prepared ourselves for Monday’s session, we moved in and bought stock for $46.96 when FSLY moved “fastly” and bounced off of that doji.

Then, FSLY continued to move “fastly” during that session and surged to over $48. It then started to back off. That great single-day surge was enough for us. So, we issued the target hit alert, sold the position for $48.60 and banked a 3.5% gain. This was enough of a gain for a solid intraday trade.

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

ZM (Zoom Video–$207.60; -2.75)

EARNINGS: 09/01/2020

STATUS: While ZM had stupendous earnings, the stock had already zoomed into its earnings results as it surged out of a six-week triangle pattern. Thus, there was not a huge surge on the results. Indeed, the stock faded back to test the 10-day EMA and the 38% Fibonacci retracement of the recent move that had been launched off of a 50-day moving average (MA) test.

On Friday, ZM gapped lower, held that key support on the low and rebounded. Since this was a nice setup, we decided to enter when ZM continues higher through the entry point. A rally to the initial target at the 127% Fibonacci extension will give us a 75% gain on the options.

VOLUME: 16.299M Avg Volume: 13.641M

ENTRY POINT: $210.44 Volume=20M Target=$244.97 Stop=$199.77

POSITION: ZM AUG. 21 2020 210.00 Calls — (54 delta)

To see the chart for ZM, click here!

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4. Covered Call Options Play

Yeti Holdings Inc. (NYSE:YETI) Yeti Holdings Inc. is currently trading at $35.67. The July 18 $36 Calls (YETI20200718C00036000) are trading at $2.30. That provides a return of about 9% if YETI is above $36 by the expiration.

Learn more about our Covered Call Tables here!

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