Invest and Trade Profitably with Jon Johnson

Weekender for 7/3

1. Market Summary

Market Closes Lower

– Market closes lower, but it is well off the lows in a back-and-forth, end-of-quarter-type session.
– Personal Consumption Expenditures (PCE) core is a gnat’s rear better, and again, the “inflation has peaked” theme appears. The PCE core may be a tad better, but the trend — in all reports — is down.
– Spending misses, income is better but still negative in real terms and the Chicago Purchasing Managers’ Index (PMI) is lower again.
– It was a first half for the bulls to forget. The markets must be wrong this time (no comment needed). Stocks struggle. Many, however, are holding the May or June lows.
– After the new money for the new quarter is put to work, this downside leg will likely continue. Friday is the start of Q2, but with a three-day Independence Day weekend, the money may not be put to work until Tuesday.

The session was the last of Q2, and there was the typical quarter-end back and forth action. Stocks started lower pre-market and recovered after the morning data for core PCE was a bit better than expected. The indices then tumbled lower at the open and into the first half hour. After that, a recovery into mid-afternoon was followed by a fade in the back half of the session.  That closed the indices negative, but they were significantly off their lows. The indices were all showing dojis on the candlestick chart as they recovered from the early weakness. This is a classic quarter’s end back and forth, as positions are pared and added for the prospectuses that follow.

NOTE: The figures and information above are from the 6/30 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 6/29 report.

2. Targets Hit

Nordstrom, Inc. (NYSE: JWN): The market continues showing classic downside setups. So, we can continue to play them in Investment House Daily. “Take what the market gives” is my motto, and these are the easiest plays the market can give.

We saw JWN put in a lower high early June and then crash through the 50-day exponential moving average (EMA) with a gap. A recovery move tried to retake lost support, but another gap from that short rebound took JWN back below the 50-day and 200-day simple moving averages (SMAs).

With that, we were ready to enter on further weakness.  JWN bounced to test the break and then started to roll back over on June 21. Since that was what we were looking for, we sent out the alert to buy August $25 put options for $2.82.

As anticipated, JWN sold from this failed test and fell into June 23. During the next session, however, JWN rebounded as the market began to hope the Fed might not hike interest rates as much — basically the same notion it had had in the May rally. JWN bounced back to test the 20-day exponential moving average (EMA), but after that initial move and a bit more upside, JWN rolled over.

JWN sold steadily from Tuesday through Thursday –not bad given that the end of the quarter usually brings in quite a bit of volatility.  JWN hit our initial profit expectations on Thursday but was still falling. With the end of the quarter and the arrival of a new quarter where money can be put to work, we issued an alert to sell half the position for $4.50 in order to book half of the 59% gain.

We left the rest to work lower, and on Friday, JWN was down again and had hit the next target. We issued an alert to sell another half of the position for $5.25 in order to bank an 86% gain.

We also took gain in the following play:

Applied Materials, Inc. (NASDAQ: AMAT): We banked a 59% gain in the put options that we entered on June 28. We sold another half of the position on July 1.

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Williams-Sonoma, Inc. (NYSE: WSM): Higher-end retail is typically the last to sell when things slow.  WSM had nonetheless trended lower below the 50-day moving average (MA) for all of 2022 and more. After a lower low in late May, WSM rebounded. Where did it rebound? The 50-day MA.

WSM hit that resistance and slid laterally for over a week as it and the market attempted to consolidate that late May rebound rally. As we know, that consolidation ultimately failed for the market and WSM as well.

WSM fell away from the 50-day EMA with a gap, and so we were looking for a test to enter for Technical Traders Alert. It did indeed rebound. It then came back to the 20-day EMA and showed a doji. With that, we were ready to enter on a drop, and on June 21, WSM started down from the 50-day MA. We issued the alert to buy August $120 put options for $9.94.

WSM faded during that session and the next and was looking good to drop. Instead, the stock took a bit of a detour: a quick bounce in one day up to the 50-day MA. As it did not pierce the 50 day, we let the position work.

Sure enough, during the next session, WSM dropped away from the 50-day. It then proceeded to sell on four consecutive days with a big gap downside on Thursday. After the gap, we watched WSM but it was holding the line. Accordingly, we issued an alert to sell half of the options for $16.50 in order to bank a 66% gain.

We also took a gain in the following position:

Trade Desk Inc. (NASDAQ: TTD): 46.5% gain in the put options.

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3. Covered Call Options Play

Corrections Corp. Of America (NYSE: CXW) — Corrections Corp. Of America is currently trading at $11.11. The Aug. 19 $12 Calls (CXW20220810C00012000) are trading at $0.45. That provides a return of about 13% if CXW is above $12 by the expiration.

Learn more about our Covered Call Tables here!

P.S. Mark your calendar now and join us for Eagle Financial’s FREE Online Trading Event: How the World’s Most Trusted Experts are Trading the Second Half of 2022.”  (July 27, from Noon to 5PM Eastern). The event is 100% FREE, and you’ll get to hear firsthand how our 5 Expert Analysts (plus one special guest) explain how they are structuring their portfolios for profit for the rest of 2022 and beyond. Stay tuned for more information on the Big Event. 

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