1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
The NYSE Indices Show Leadership Again
– The NYSE indices show leadership again, but this time, the DJ30 steps back while small-cap stocks, mid-cap stocks and the S&P 500 lead.
– Growth stocks take a breather again, but leaders, including Facebook, start to lead once more.
– The economic data are solid, but they continue to show signs of slowing. Then again, perhaps this is just a pause.
– Lumber prices dropped by 40% in June. Is this transitory or crash territory? Meanwhile, some mega-tech stocks and some software stocks are setting up good patterns.
The NYSE indices led again from the premarket session to the close. Even the Nasdaq managed to turn positive after lagging — and some of the big names did not move higher. The PHLX Semiconductor Sector (SOX) was the dullard or the drag — you can choose your descriptor.
Why was the SOX a laggard? Micron Technology reported good earnings and said that automobiles are providing a growth area, as they are becoming “data centers on wheels.” That is comforting, given that so many people are now texting, and otherwise distracted from the job at hand — driving.
Oh, but no worries. You can use the autopilot that comes in the Tesla and other advanced cars — just like that TSLA that was seen rolling down the street on fire before it exploded. Okay, so someone is rolling down the road in his/her data center on wheels, distracted from driving and just before passing a cyclist, the car bursts into a fireball. Wow, everyone wins!
NOTE: The figures and information above are from the 7/1 report.
NOTE: The videos are from the 6/30 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:
Advanced Micro Devices, Inc. (NASDAQ: AMD): After the Xilinx, Inc. acquisition announcement, AMD struggled. Finally, it put together a good base, which took the form of a five-month, double-bottom-with-handle pattern into late June.
AMD broke higher from the handle, moved over the 200-day simple moving average (SMA) — an important move — and then tested. We put it on the report, and AMD broke higher again on June 28.
So, we moved in with September $85 call options by paying $7.35 when the stock price was at $87.24. AMD backed off from the high somewhat during that session, but it took off upside on Tuesday and Wednesday.
That move touched the initial target at the February interim peak. So, we stuck to the plan and sold half of the call options for $11.38. This allowed us to bank a 54% gain. We will see if the remaining position can rally to the January 2021 high near $100. If it does, we may be able to score a serious win.
Facebook, Inc. (NASDAQ:FB): We also banked half of the gains in our first FB play. This was the 43% gain in the August $335 options that we bought for $19.75 and sold for $28.40 when FB surged upside on the lawsuit news.
We are letting the other half work. Indeed, FB tested back to the 10-day exponential moving average (EMA) on Wednesday. After the market opened on Thursday, we picked up another position — September $350 call options for $19.50.
Since FB surged off of the 10-day EMA on Thursday, we will see if it can keep the upside break going.
Here are two completed trades from Technical Trader Alert, offering insights into our trading strategy and the targets that we have hit this week:
Chipotle Mexican Grill, Inc. (NYSE:CMG): This stock was kind of forgotten by many, as CMG went stale after its April peak. It even dropped over 250 points into mid-May. Since it is on our “eateries” watch list, we would frequently check in and watch for a base to develop.
Sure enough, CMG carved out something of a double-bottom-with-handle pattern into my birthday. As a present for me, CMG made the breakout on June 21 — along with a lot of other big name stocks. We bought September $1,430 calls for the low, low price of $81. For CMG, given its position, and given the pattern, that was a low price.
CMG posted a solid advance during that session, and it continued higher for four straight sessions. Indeed, it moved higher during seven of the eight sessions from that June 21 breakout.
On June 25, CMG hit the initial target. So, we sold half of the options for $115.40 and banked a 40% gain. CMG continued higher and, on July 1, it started to falter as it touched the April high. This was the high before the fall. So, we went ahead and sold the rest of the options for $134.50. We then banked a 66% gain.
Diamondback Energy Inc. (NASDAQ: FANG): A gain in FANG was a bit slippery this time, as it took some time to develop, even with the aid of a good breakout.
First, FANG cleared a three-month triangle with a big gap. After it tested in a lateral move, we put it on the report. On June 8, FANG started higher after that test.
We bought September $85 call options for $11.55. These were pretty far in the money, as FANG was trading for $89.14.
While this looked like a solid move, FANG was all over the map each day. Finally, on June 21 — an important day for the market — FANG broke higher and put together a steady move. On Thursday, it gapped higher again. It then moved up off of the 10-day EMA and hit our initial target.
So, we sold half of the options for $18.10 and banked a 56% gain. From here, we will see if FANG can strike (it is Diamondback Energy) or gush (it is in the oil business) to a serious gain.
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
FB (Facebook, Inc. — $347.71, -4.18)
STATUS: FB is testing the Monday “ding-dong, the lawsuit is dead” rally that capped the move from June 21. Before that, FB had moved laterally for four weeks along the 10-day EMA and tried to put in, and hold, a new high. It started higher that session alongside the other big names and led the tech mega-caps upside.
On Tuesday and Wednesday, FB tested on lower volume. It may want to come back to the 10-day EMA ($343.57), and it may do that intraday and then start back up. As a result, we will be watching for a further test. We are ready to move in when FB shows signs that it will hold.
A rally to the new target will give us a solid 50% gain in the options.
VOLUME: 15.108M Avg Volume: 16.345M
ENTRY POINT: $345.04 Volume=20M Target=$364.98 Stop=$338.48
POSITION: FB SEPT 17 2021 345.00 Calls — (56 delta)
4. Covered Call Options Play
First Majestic Silver Corp. (NYSE: AG) — First Majestic Silver Corp. is currently trading at $15.62. The July 16 $16 Calls (AG20210716C00016000) are trading at $0.72. That provides a return of about 7% if AG is above $16 by the expiration.