Weekender for 8/21
1. Market Summary
Oil Stocks Take the Lead Upside
– Modest, but another move higher ahead of expiration.
– Same action we have seen before, a brief test, a rebound.
– Philly Fed better but not good, continuing claims continue to rise, existing homes -20.2% year/year.
– Fed speakers hawkish in two of three out talking Thursday.
– China announces $230 billion fiscal package in the face of 2% economic growth.
– Oil stocks take the lead upside, ready again to lead the market as they did to start the year.
Wednesday, the PHLX Semiconductor Sector (SOX) dipped 2.48%. Thursday SOX rallied 2.28%. Wednesday all indices were lower. Thursday they all closed higher. Yes, more of the same. A bit of a pullback, just a couple of days, then a bounce. Very similar to other very modest tests during other parts of this rally. Moreover, it again occurred on what at the very best was mediocre economic data and indeed some very weak data in housing.
NOTE: The figures and information above are from the 8/18 report.
Watch the Investment House Videos For This Week Here!
NOTE: The videos are from the 8/17 report.
2. Targets Hit
Microsoft Corporation (NASDAQ: MSFT): Sometimes, Investment House Daily is as easy as following the big names. After that strong break higher in late July after MSFT posted an earnings miss, it looked as if MSFT was just going to be bulletproof. Thus, when the stock showed a two-day dip to a doji just over the 10-day exponential moving average (EMA), we put it on the report. That doji at the 10-day EMA after a surge higher suggested MSFT was going to continue the upside run.
Sure enough, the next session on Aug. 3, the stock gapped higher, and we issued the alert to enter. The play utilized September $280 call options trading at $10.55. A bit pricey, but all the big-name NASDAQ stock options were a bit higher after that surge.
MSFT edged higher then tested for three sessions, but each day it put in some low to high action, showing the buyers still picking it up. Then, as expected, though it took a couple of extra days, MSFT took off, gapping upside on Aug. 10 and rallying to the 200-day simple moving average (SMA) on Monday, Aug. 15. The 200-day SMA was our logical target, and we issued the alert to sell at $17.00 and a 61% gain.
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Sociedad Quimica y Minera de Chile (NYSE: SQM): After a great rally into late June, SQM faded to work on a base. It is a stock we keep on the watchlist for Technical Trader Alert, as it is a good representative of the lithium, iodine and related minerals market. We saw it in the pullback bottom in late July and bounce, using the May levels as support.
On that bounce SQM failed at the 50-day moving average (MA); pretty normal. It faded a second time then bounced again, this time managing to clear the 50-day MA. Nice double bottom, a bounce up over key resistance. We were ready to enter if SQM could make the move.
On July 20, SQM bounced then faded modestly, closing over the 50-day EMA with a doji. We saw that setting up and moved in, issuing the alert to buy September $95 call options at $7.50. The stock was trading at $95.19 at the time.
Though SQM finished a bit lower that day, the next session it jumped up off the 50-day EMA and closed over the 50-day SMA. SQM then rallied into late July, tapping at $100. That level often acts as resistance, and we were tempted to take some gain at that point, but we felt there was more here.
Well, $100 did act as some resistance, and over the next week, SQM moved laterally and then lower to the 50-day EMA, but it showed a really nice doji with tail when it tested that key level, a level that had risen up below the stock as its price improved.
That doji was a good indication because it tested lower to support and then snapped back upside as the buyers came in at support.
Right after that doji, SQM gapped upside. It gapped higher five consecutive sessions. On Aug. 15, SQM gapped lower but then rallied to match the late May peak. It started to back off that session as it hit that resistance. After a series of gaps followed by a gap lower and reversal to resistance, it was time to bank some gains. That was our target anyway, so we issued the alert to sell the options at $15.90 and a 112% gain.
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Comstock Resources Inc. (NYSE: CRK): This oil and gas stock performed as so many others: nice rally early year with a last solid run into June. Then, they all topped. It was time, as they were hyped on the Ukraine war, inflation, etc.
CRK fell into a base that dropped to the 200-day SMA in early July. The 200-day acted as support as you would anticipate, and after a lateral move, CRK climbed higher to build a cup base. Late July, it cleared the 50-day MA and started to work laterally, forming a handle to the cup to make … you got it, a cup with handle base.
That had us interested in playing the breakout move, as they can be explosive and deliver some rapid returns. As it should, the stock broke higher, jumping from the handle on Aug. 3.
We issued the alert to enter with stock at $16.69. Then … CRK gave it up, fading the next three sessions to the 50-day EMA. Modest loss and it held the 50-day, so we let it work. CRK gapped up off the 50-day MA, and that started the breakout climb we wanted to see originally.
CRK moved up the 10-day EMA, gapping nicely higher Tuesday Aug. 16. That took CRK to our target, and we issued the alert to sell at $17.92 and a 7.37% stock gain.
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3. Covered Call Options Play
Arhaus Inc. (NASDAQ: ARHS) — Arhaus Inc. is currently trading at $9.52. The Sept. 16 $10 Calls (ARHS20220916C00010000) are trading at $0.40. That provides a return of about 11% if ARHS is above $10 by the expiration.
Learn more about our Covered Call Tables here!
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