Invest and Trade Profitably with Jon Johnson

Weekender for 6/26

1. Market Summary

Stocks Refuse to Give In

– Stocks refuse to give in but are still moving toward near resistance.
– The notion the Fed cannot get too aggressive and will indeed be forced to loosen monetary policy attracts some bids.
– Continued weak economic data foster the “bad news is good news” notion.
– The Nasdaq moved to the 38% retracement. The S&P 500 and DJ30 are close to the 10-day exponential moving average (EMA). Defensive sectors show bids as the upside money takes shelter.
– Indices are still below near resistance as they fight to recover ground. They still have much to prove.

Tech and small-caps led the session as stocks, for the most part, added another session of upside, moving closer to that initial resistance on the relief move. The Nasdaq moved over the 10-day EMA to the 38% Fibonacci retracement of the June selloff, while the S&P 500, DJ30 and even the Russell 2000 approached the 10-day EMA. All are still in the relief bounce from that ugly, sharp June selloff and are now getting to, or very near, a test of resistance in the downtrend.

NOTE: The figures and information above are from the 6/23 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 6/22 report.

2. Targets Hit

Nike Inc. (NYSE: NKE): NKE set up a classic downside play in June. The stock rallied from late May to the second week in June, moving up to the 50-day moving average (MA) as the stock recovered along with the overall market. Indeed, the action consolidating at the 50-day MA was exactly like the indices.

Then, it broke lower, falling away from the 50-day MA. It sold until June 13 and then recovered, moving up to tap the 10-day EMA on June 15, a two-session bounce. It tapped the 10-day EMA and faded off of the high — that was the signal we were looking for to play another leg lower in Investment House Daily.

We issued the alert to buy September $115 put options for $9.53. During the next session, NKE gapped lower, selling to near the May low. Then, NKE gapped lower again, a day later, touching the May lows. After the gap, however, NKE firmed and was looking as if it would bounce.

We issued the alert to sell the position for $13.30 in order to bank a 39% gain. That works for a short hit.  As it turns out, NKE has held the May lows for now. We will see if it tries higher again and whether it stalls again at the 10-day EMA for a new play.

We also took a gain in a downside play on Macy’s Inc. (NYSE: M) that showed very much the same pattern as NKE. We banked a 34.9% gain in the M play.

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3. Covered Call Options Play

Silverbow Resources Inc. (NYSE: SBOW) — Silverbow Resources Inc. is currently trading at $33.75. The July 15 $35 Calls (SBOW20220715C00035000) are trading at $1.30. That provides a return of about 9% if SBOW is above $35 by the expiration.

Learn more about our Covered Call Tables here!

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