Invest and Trade Profitably with Jon Johnson

Weekender for 7/12

1. Market Summary

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

NASDAQ Leaders Are In Control

– Recovery stocks didn’t even try as NASDAQ leaders are in control, even if they are a bit extended on this leg.
– Other stocks are setting up quite nicely, even though few non-tech stocks are among them.
– Will we have a W-shaped or a V-shaped economic recovery? The people are ready to make it a V-shaped one, but they are being held back.
– After a good rally, Friday featured some profit taking. Even so, some new stocks were breaking out.

Perhaps what is weighing on the NYSE indices is worry about, as a pundit on one of the financial stations called it, a W-shaped recovery instead of a V-shaped recovery. Well, if there is a W-shaped trajectory over a V-shaped one, you can thank the people in charge who have tossed the facts out the window and have succumbed to the media groupthink that has pushed perceptions of this virus to the level of the bubonic plague or the Spanish flu. What is the politically correct name for the Spanish flu anyway?

The death rate from COVID-19 is minute when compared to the death rate of the Black Death or similar pandemics. In fact, the Centers for Disease Control and Prevention (CDC) are ready to stop labeling COVID-19 as an epidemic. You can bet that the CDC received a flood of calls from people in DC to not do that as they need a high level of fear to accomplish whatever their nefarious goals may be. But, I digress.

The citizenry is ready, willing and able to make this a V-shaped recovery. Indeed, as more and more news stations have reported, the citizenry is seething with rage at the way that state officials are handling this crisis. If you think that the people who are rioting in the streets and tearing down monuments are angry, you should go talk to people in the hinterland about how they feel regarding what is going on. No, they won’t just open up to a stranger and say what they feel right off the bat — too many people out there will use what other people say against them. If you take the time to get to know them, however, they will give you an earful, and it will not be about how great our local, state and federal leaders are. From what I have heard, Governor Andrew Cuomo better self-isolate in New York. If he sets foot anywhere in the rest of the country, he will likely lose that foot, given his comments about other states after he led thousands of elderly New Yorkers to the slaughter with his nursing home fiasco.

Technical Analysis:

NASDAQ:  The NASDAQ put in its fourth new high in five sessions. As with Wednesday, its volume faded as the move lost some of its punch. Even so, its overall trajectory is impressive.

S&P 500:  The S&P 500 continued the super steady lateral move that looks to be forming a handle. With the presence of good action, and with stocks such as Costco (COST) and Microsoft (MSFT) moving up, the large-cap index has some backing behind it.

NOTE: The figures and information above are from the 7/9 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 7/8 report.

2. Targets Hit

Here are two completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week:

This was an active week of upside gains as good positions surged higher. So, we banked gains on Docusign (119%), Netflix (76%), Cloudflare (68%), Stitch Fix and Zscaler, to name a few.

Netflix, Inc. (NASDAQ:NFLX): This was a pre-earnings run play, which means that we planned on exiting before earnings were announced and after NFLX put in a good move. On July 1, we saw Facebook’s, Amazon’s, Apple’s, Google’s and Netflix’s stocks suddenly receive a strong bid to start the new quarter. As a result, we immediately put NFLX on the report — the number of COVID-19 cases were spiking, and we anticipated that this fact might impel more tube watching. On that Friday, NFLX tested back just a bit after the breakout. We used that move to enter.

On Monday, NFLX was back up with a solid move and continued to rise during the rest of the week with a steady climb up the 10-day exponential moving average (EMA). On Friday, NFLX was upgraded, gapped higher and moved up a bit. Soon, it started to stall. As it was at our target and was somewhat waffling, we sold the position for $57.80 and banked a 78% gain. This play is one that we should have kept half of, like what we usually do. After all, NFLX continued to rally after the dip and its options began to be traded at around $76. This could have produced a 130% gain. Argh! Lesson learned again — partial profits!!

Zscaler Inc. (NASDAQ: ZS): ZS kind of followed a tortuous route, but after we entered this play on June 8, it did pay off. When it bounced during the second week of June after a breakout test, we moved in with September $100 call options for $13.55. Although ZS initially bounced, it faded in the middle of the month. It then began a rather tortuous path upside, even though it always held the 10-day EMA.

As with many stocks, it was rejuvenated with the new quarter. ZS started higher this week and surged to our initial target on July 9. At this time, we sold half the position for $29 and banked a 114% gain.

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Here are several completed trades from Technical Traders Alert, offering insights into our trading strategy and the targets that we have hit this week:

This was a busy week with tons of action. We banked gains on Docusign (170%), Okta (158%), Square (261%), Teladoc Health (58%), Trade Desk (58%), Twilio (40%) and others. The details on some of these trades can be found below.

Docusign Inc. (NASDAQ:DOCU): DOCU has been a constant leader in the rally thus far. First, we saw DOCU setting up for a new entry in the second half of June. It then broke higher from a four-session flag test on June 22. Since that was our signal to enter, we purchased September $165 calls for $18.96.

Soon, DOCU tested for a couple more sessions and then started to climb again. While it was not off like a rocket, DOCU steadily climbed up the 10-day EMA. This week, the action turned hotter, and DOCU surged upside over the course of the entire week. On Friday, we banked some gains by selling our options for $51.20 and generating a 170% gain.

Trade Desk Inc. (NASDAQ:TTD): We saw this leader in a nice week-long flag pattern in late June and noticed that it was moving laterally along the 10-day EMA. We put it on the report and resolved to pick it up as it made the break higher. This move started when moved and bought August $410 call options for $48.10 on June 30.

TTD made a quick move higher into this week and hit our initial target on Monday. So, we sold half of the options for $76 and banked a 58% gain. While the stock is still moving higher, its movement has slowed. After pausing to end the week, we are looking for a new move higher.

Okta Inc. (NASDAQ:OKTA): This is another leader that tested back in mid-June. After we saw OKTA start back upside off of the 20-day EMA, we put it on the report. When it jumped upside on good volume on June 15, we bought August $95 calls when the stock was at $94.77.

OKTA then produced a good move into late June. Subsequently, it slowed down around the late May high. It then stretched laterally and formed a short cup with handle. This was a nice bullish pattern. After OKTA broke out to start July, it immediately put in a one-two-three test. After that, it was on the move upside and hit our target on July 9. So, we sold half of the position for $28.70 and banked a 155% gain.

Square Inc. (NYSE: SQ): This was another leader which showed that it was time to buy in mid-June. SQ tested a breakout and put in a 20-day EMA test. When it broke higher on June 16, we moved in and purchased August $95 call options for $9.40.

Then, SQ rallied, but did not blow up. Instead, it produced solid and steady moves. On June 22, it hit our initial target. So, we sold half the position for $14.25 and banked a 51% gain.

SQ leveled off for a week and let the 10-day EMA catch up to the stock. Once it did, as is often the case with strong stocks, the 10-day EMA set off the next move higher. Indeed, SQ surged during the week and powered to a new high. As it started to fade to end the week, we sold another half of the position for $34.05. This allowed us to bank a solid 262% gain.

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Here are two completed trades from the Success Trading Group, offering insights into our trading strategy and the targets that we have hit this week:

Fastly Inc. (NYSE: FSLY): Since this is still a hot stock, why not go back to it yet again? After all, it does move, as we noted before, “fastly.” FSLY rallied to a new high in late June and then worked laterally and a bit lower. It then formed a nice flag pattern and tested the rising 10-day EMA. On July 7, FSLY started higher off of a week-long test of the last run.

As that was the entry signal we were watching for, and we bought the stock for $89.11. After experiencing a decent move during that session, FSLY reached our target just before the close. It then backed off very quickly. Okay, if it moved like this again, we would be there. A day later, FSLY gapped higher and rallied past our target. It then started to back off again. Okay, we decided to go ahead and lock in our gains by selling the stock for $92.15 and banking a 3.4% gain.

Snap Inc. (NYSE: SNAP): It has been awhile since we had an opportunity to play this staple. Actually, since there were other stocks that were moving with more pop, we chose to focus on them. SNAP, however, did set up a textbook pennant pattern from June to early July. To paraphrase Yogi Berra, when the easy money is there, well, take it!

On July 7, SNAP jumped higher from its nine-session pennant. Since that was our entry signal, we moved in and bought the stock for $24.63. Although SNAP surged and then faded off of the high to close, most stocks did the same thing over the course of the day. During the next session, SNAP gapped higher — most stocks did so that day as well.

After we let SNAP run a bit, we pulled the trigger and sold the stock for $25.90. This enabled us to bank a solid 5.1% gain. Now, SNAP is testing again. When it sets up a new break higher, we likely will participate one more time.

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

CRWD (CrowdStrike Holdings–$114.55; +8.13)

EARNINGS: 09/01/2020

STATUS: CRWD produced a break higher on Wednesday due to rising and above-average volume as it cleared a five-week range. We saw strong volume on Friday’s move higher, a two-day fade and then strong volume again on Wednesday as CRWD surged. We want to move in as CRWD continues the break. A move to the target will give us a 65% gain on the options.

VOLUME: 6.954M  Avg. Volume: 7.899M

ENTRY POINT: $114.68 Volume=9M Target=$129.87 Stop=$109.74

POSITION: CRWD SEPT 18 2020 115.00 Calls — (56 delta)

To see the chart for CRWD, click here!

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4. Covered Call Options Play

Jinkosolar Holding Co. Ltd. (NYSE:JKS) Jinkosolar Holding Co. Ltd. is currently trading at $21.94. The August 22 $22 Calls (JKS20200822C00022000) are trading at $2.05. That provides a return of about 11% if JKS is above $22 by the expiration.

Learn more about our Covered Call Tables here!

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