Weekender for 8/20
1. Market Summary
- Stocks fail an early bounce, rebound solidly, but then get hammered
- All but DJ20 now below the 50-day moving averages (MAs)
- Late June pullback lows are the next key level, as various indices may use that to bounce and form head-and-shoulders patterns
- With BRICS confab approaching, the players are making deals with one another to show the rest of the world how “great” BRICS is
- 10-year bond hits 4.3%
- Bitcoin flash crashes $2,000 afterhours
- Put/call ratio a bit overdone upside near term
- Several scenarios for expiration and into next week regarding the selling, near term bottoms, bounces, seasonal issues
Some more downside into the European close led to a bounce. Aha. A break of the 50-day MAs by some indices, DJ30 and DJ20 testing that level. Perfect place for a bounce, and stocks did just that. Nice rebound into midday to early afternoon off intraday double bottoms for PHLX Semiconductor Sector (SOX), Nasdaq and Nasdaq 100. Very positive.
NOTE: The figures and information above are from the 8/17 report.
MARKET VIDEOS
MARKET SUMMARY
TECHNICAL SUMMARY/NEXT SESSION
NOTE: The videos are from the 8/16 report.
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2. Targets Hit
Investment House Daily:
Cemex SAB de CV ADR (NYSE: CX): CX has given us numerous plays since it turned the corner in late 2022, forming a double bottom-with-handle pattern after a year long decline. We really love catching stocks that turn from downtrends to uptrends, particularly when the set up a well-defined bottoming pattern. After CX did this, we played the move in late 2022 and then started a whole new group of plays from January 2023.
That breakout started CX on a rally that remains ongoing today — though it may be getting a bit winded. CX utilized the 50-day MA again and again as support to launch new moves. Some of them yielded fast initial results and then added even more gains on our remaining play positions as it steadily marched higher.
One of those plays started in June. CX faded to test the 50-day MAs and started to work laterally, hugging the support. A tepid move started higher, but had no strength; nonetheless, we were ready to move in when it did makes its move.
Right after, CX put in a stronger move on June 6, and that was our entry signal. We issued an alert to buy stock that was asking $6.72 as well as some October 2023 $6.00 strike call options trading at $1.10 on the ask.
CX put in some nice upside from there for the following week, but it was a steady move, not racing higher. With CX performing well all year, we were content to let it work. Well, after that initial move CX tested the 20-day exponential moving average (EMA); totally normal. It worked laterally a week, started upside, but then the stock was hit with a day of selling that dropped it to the 50-day MAs. Not great, but CX did what a good stock should do: it held the line and continued upside again.
Another steady rally into late July. Moving higher, but very, very slowly. Well, CX continued to wend its way up the 10- and 20-day EMAs into August. It bumped at the target for over a week, and we were just about to pull the trigger on the gain when it made a break higher this past week. That pushed CX to the target, and just as it traded in that range, the sellers started to come in.
CX tried for over a week to get through — obviously there was resistance. Then, when it did break through, there was no new launch higher — the sellers hit it. That was a clear sign the run was getting stale. We issued the alert to sell, with the stock trading at $8.09 on the bid and the options trading at $2.17 on the bid. That locked in some solid 20.3% stock and 95% option gains. Now, we let CX test back to the 50-day MA and see if it can set up a new rally from there.
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3. Covered Call Options Play
Zymeworks Inc. (NASDAQ: ZYME) — Zymeworks Inc. is currently trading at $7.27. The Sept. 15 $7.50 calls (ZYME20230915C00007500) are currently trading at $0.35. That provides a return of about 10% if ZYME is above $7.50 by the expiration.
