1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
Stocks Are ‘Triggered’ and Dive Lower at the Open
– Stocks are “triggered” and dive lower at the open.
– Bids return and push stocks up from the lows, as the “buy the dip” mentality is strong.
– The causes of all this include issues with China, a fall in bond yields and the technical need for a pullback.
– There were some good recoveries off the selling, but some more selling would ideally help.
After weak credit readings, its manufacturing sector almost falling into a contraction and gross domestic product (GDP) forecast cuts of two to three percentage points, China decided it was time to act. So, it tweaked its reverse repurchase market in order to inject more liquidity in the system.
This is typically a good thing — the more stimulus the better — but this time, U.S. stocks were in no mood to see the silver lining. This was the first time in quite some time that the market took a negative view. Futures had tanked. Indeed, the Dow fell by 500 points at one point. Was all of this due to China?
As noted in the past reports this week, the Nasdaq was set to at least test the recent leg higher. This would have been the third leg in the move up from the May low. Thus, a drop was expected and viewed as normal.
P.S.: A presentation I recently did is being broadcast on the Global Financial Network. Click here now to watch it for free!
NOTE: The figures and information above are from the 7/8 report.
NOTE: The videos are from the 7/7 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:
Apple Inc. (NASDAQ: AAPL): When the market gets choppy, and when the buyers and the sellers are fighting and trying to determine if the recovery will occur, money tends to seek the mega-cap tech stocks.
Thus, when AAPL looked to be ready to move higher off of the lows of a base that started in late April, we wanted to be ready to get in. AAPL had come off the 200-day simple moving average (SMA) in early June, and then worked laterally below the 50-day moving average (MA) into the middle of the month.
After that short consolidation, AAPL broke higher on June 14 and moved up through the 50-day MAs. That was the entry signal, and we purchased August $130 calls for $5.18.
While that was a strong break higher, the action after that was more like a move, a pause for a couple of days, a move and then a couple of pauses.
At the end of June, however, AAPL caught a steady bid. As a result, it moved higher day after day, climbing toward that January peak near $145.
On July 6, AAPL hit our initial target. So, we sold half of the options for $12.70 and banked a 145% gain. During the next session, AAPL gapped higher again and rallied to that January peak.
As a result, we sold another half of the position for $14.05 and banked a 171% gain. Now, we will see if AAPL tests back somewhat and gives us a new entry.
We also banked gains in the following positions this week:
Advanced Micro Devices, Inc. (NASDAQ: AMD): 52% gain in the options.
Snap Inc. (NYSE: SNAP): 59% gain in the options.
Here is one completed trade from Technical Trader Alert, offering insights into our trading strategy and the target that we have hit this week:
Amazon.com, Inc. (NASDAQ: AMZN): In a market that is, despite the uptrends, very choppy, there are some constants. As is often the case when there is volatility in many areas, the mega-cap tech stocks tend to receive the more sustained bids. Thus, we were looking for those stocks to give us good entries.
AMZN fit the bill perfectly, as it was not only presenting an entry, the entry was a great one. It even had a nice nine-week cup-with-handle pattern.
We saw it in a nice tight handle at the 20-day exponential moving average (EMA) just ahead of the Independence Day holiday. On July 2, AMZN broke higher off of the 20-day EMA. That was our entry signal. We bought September $3,450 call options for $165.50.
On the next trading day, July 6, AMZN moved higher in a massive breakout. That surge actually hit our initial target. So, we sold half of the position for $270 and banked a 63% gain.
On July 7, AMZN gapped higher again and cleared $3,700. It then started to stall. Given the strong move, we decided to bank a bit more of our gains. As a result, we sold another half of the options for $360 and banked a 117% gain.
Since AMZN is still trying to work higher, we will see if we get a test for a new entry.
There were no trades in the Success Trading Group this week.
Still, 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
NOW (ServiceNow — $551.83, +6.66)
STATUS: We are somewhat annoyed with ourselves that we did not play NOW on its move in June. At that time, it put in a second bottom in May in a five-month double bottom base pattern.
It then surged from there into late June and rallied back to the April peak. This was the hump in the double bottom.
During this past week, NOW tested and then came back to the 10-day EMA with a doji on Thursday. You could say that a handle was forming.
We also noted that the moving average convergence divergence (MACD) moved to a higher high even though the price was not even past the mid-April peak. This is a positive divergence, which indicates that pressure is building to push NOW higher once again after this test.
We set a run at the February peak ($600) as the initial target. That move will give us a 60% in the options.
VOLUME: 679.738K Avg Volume: 1.444M
ENTRY POINT: $552.24 Volume=2.2M Target=$599.97 Stop=$541.24
POSITION: NOW NOV 19 2021 550.00 Calls — (55 delta)
4. Covered Call Options Play
Vishay Precision Group Inc. (NYSE: VPG) — Vishay Precision Group Inc. is currently trading at $34.36. The August 20 $35 Calls (VPG20210820C00035000) are trading at $1.15. That provides a return of about 11% if VPG is above $35 by the expiration.