Invest and Trade Profitably with Jon Johnson

Weekender for 7/18

1. Market Summary

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

Chairman Powell speaks to the Senate

– Chairman Powell speaks to the Senate, endures hours of questions and reveals both that the Fed is indeed talking about taper and that he doesn’t care about the cost of living.
– Talk regarding tapering gives the market a bit of a slap back into reality.
– The Nasdaq big names and the Nasdaq itself are testing near support, as they are both testing the last leg higher.
– The slap of reality regarding the Federal Open Market Committee’s (FOMC) thoughts may be the thing that sets up new entries.

Chairman Powell missed a step when he danced before the Senate and spent a day testifying in front of the Senate Banking Committee. Under some blistering questions (yes, that is somewhat sarcastic) Chairman  Powell uttered a few headline-type sentences.

Rather early in the course of the testimony, Chairman Powell stated that he is not that concerned about the rising cost of living for U.S.citizens. Why not? Because rising prices have been limited to a small group of sectors (e.g. used autos).

Now, if larger price increases fan out across the economy, he would be concerned. Whew, I feel better! Chairman Powell also comforted Congress, noting that if inflation expectations rise too far, the Fed will certainly “react.” However, he did not elaborate as to how the Fed would do this. One commentator suggested that the Fed’s reaction would be to simply remove those areas from the formula that calculates the Personal Consumption Expenditures (PCE) and Consumer Price Index (CPI). Hey, it’s worked in the past.

NOTE: The figures and information above are from the 7/15 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 7/14 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:

Visa Inc. (NYSE: V): We were watching V in late June and early July, as it was creeping up toward its April high. With the reopening of the economy taking place and the consequent spending binge, it made sense that consumers would use their credit cards more often.

Of course, what appears to make sense to us does not always make sense to the market. As it worked out, that surmise turned out correct.

V broke higher this week and cleared the prior highs. We were ready and moved in by purchasing September $240 call options for $10.55 when the stock price was at $244.46. V then stepped nicely higher, rising on Tuesday, Wednesday and Thursday. On Friday, it gapped higher to near $250.

As a result of the solid breakout momentum, we are letting this position work higher.

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

iShares Russell 2000 ETF (NYSEARCA: IWM): For over five months now, the small-cap index has been range-bound, as it has been trading from $210 on the low end to just over $230 on the high end. Starting in July, the index started to drop.

While we nixed the initial move, it rebounded back near the upper part of the range after that first fade. Then it ran into the 10 and 20-day exponential moving averages (EMAs) that had more or less dropped to the 50-day moving average (MA).

There, it stalled, and when it turned downward, we moved in.

On July 13, we picked up September $223 put options for $9.40 when the index was trading at $222.65.  From there, IWM dropped hard into Thursday.

It found some interim support and recovered off of the lows. As a precaution after three hard days lower, we sold half of the position for $11.05 and banked a 17.5% gain. While this was not huge, it paid us back. It also allowed us to let the rest of the position work toward the bottom of the range.

On Friday, IWM bounced with a gap higher, but we stuck with the position. Sure enough, that early move rolled over, and IWM is trading lower again.

We are looking for a move down to near $213 before we take more gains.

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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:

MaxLinear, Inc. (NYSE: MXL): At one point during this past week, we banked our gains in MXL. We purchased the position for $41.16, and the stock moved through our target on Wednesday. As it then started to stall, we sold the position for $42.94. This enabled us to bank a 4.3% gain.

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.

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3. Pick of the Week

MSFT (Microsoft — $277.94, +0.51)

EARNINGS: 07/21/2021

STATUS: We  are looking for MSFT to make us some more money on its next move. It formed an eight-week cup-with-handle base from late April to the third week of June, before breaking out and rallying from the last week of June to the first week of July.

It peaked on Wednesday with a gap to a doji. Then, it faded on Thursday toward the 10-day EMA, gapped lower on Friday and then reversed upside.

MSFT might want to test the 10-day EMA more to start the week, or it might not. Either way, we plan to play it either a bit lower from here or at the entry point if MSFT continues upside from the Friday close. A move to the close will give us a 60% gain in the options.

VOLUME: 23.917M  Avg. Volume: 22.887M

ENTRY POINT: 278.11 Volume=28M Target=$289.98 Stop=$273.93

POSITION: MSFT SEP 17 2021 275.00 Calls — (58 delta)

To see the chart for MSFT, click here!

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4. Covered Call Options Play

Apollo Medical Holdings Inc. (NASDAQ: AMEH) — Apollo Medical Holdings Inc. is currently trading at $78.05. The August 20 $80 Calls (AMEH20210820C00080000) are trading at $6.50. That provides a return of about 15% if AMEH is above $80 by the expiration.

Learn more about our Covered Call Tables here!

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