1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
Geopolitics Prompt a Test
– There has been lots of Fed talk, but geopolitics prompt a test.
– Q2 gross domestic product (GDP) is right on the mark, but inflation surges.
– There are still good leadership groups, but retail stocks show an old problem: breakouts that break
– Fed speakers talk taper and set the stage for Chairman Powell to confirm the news at Jackson Hole… virtually. Perhaps he will finish the test, and we will see if some leaders start to bounce.
After momentum from the initial surge from the 50-day moving average (MA), stocks started to wane on Wednesday. On Thursday, the wane turned into a downside that was a bit stronger.
Interestingly, the Russell 2000 and S&P 400 led higher this week with strong percentage moves. On Thursday, they led the way downside with strong percentage moves (-1.13% and -0.90% respectively).
Even so, the small-cap and mid-cap stocks were not demonstrating bad patterns. They were just testing after four sessions of upside. When we factor in the same for the large-cap indices, since they sold at a fairly even pace in terms of percentages, we find that the PHLX Semiconductor Sector (SOX) performed the best. It closed flat with a second doji and held the gains off of the lows.
P.S. Las Vegas Money Show, September 12-14, Bally’s Hotel & Resort: Join me and many other speakers. For more information, go to Johnson.MoneyShow.com. A special registration code of 053412 is embedded in the link to help my readers secure early bird pricing and a seat at the event.
NOTE: The figures and information above are from the 8/26 report.
NOTE: The video is from the 8/25 report.
2. Targets Hit
Here is one completed trade from Investment House Daily, offering insights into our trading strategy and the target that we have hit this week:
Etsy Inc. (NASDAQ: ETSY): This week, we banked some more of the gains on our ETSY play. ETSY had put in a consolidation, which was then followed by a nice trend higher. On Aug. 26, ETSY surged to a new recovery high, and then started to back off somewhat. As a result, we sold another half of our position, September $190 calls, for $23.70 and banked a 52% gain.
Over the course of the week, we also picked up a new position in Facebook (NASDAQ: FB). Specifically, we bought October $360 call options when the stock was at $362.05. On Friday, FB had rocketed to over $370.
Here is one completed trade from Technical Trader Alert, offering insights into our trading strategy and the target that we have hit this week:
Lowe’s Companies Inc. (NYSE: LOW): LOW had to have had some intestinal fortitude to ride through one bad session. Sometimes, you have a pattern that is working, and then there is an outlier move. That happened to LOW on Aug. 17.
At the time, it was looking good, as it was working laterally along the 50-day exponential moving average (EMA) into earnings. It was not overbought, and it was still in a good consolidation to move higher. Then, it gapped lower and closed at the low just ahead of earnings.
Then, LOW announced great results and exploded higher on the close. After it added more upside into Aug. 20, we sold half of the position for $26.20 and banked a 67.9% gain on the September $190 call options.
Currently, LOW is working laterally and is consolidating the move higher. So, we anticipate a new break higher once the 10-day EMA catches up to it. Indeed, we will be watching to see if LOW is set for a new entry as well.
3. Pick of the Week
PLTR (Palantir Technologies — $24.82, +0.80)
STATUS: PLTR is working in a larger base that started off of a rally in late January and then peaked during that month. Since then, it has sold back into a seven-month base. Over the past two months, it has formed a cup-with-handle pattern. After developing a lateral handle over the past seven sessions, the stock has remained over the 50-day simple moving average (SMA), as it puts the handle in place.
Since this is a nice setup, we are ready to play a new break higher through the entry point. A rally to the target will give us an 18% gain in the stock and a 100% gain in the options.
VOLUME: 35.705M Avg Volume: 35.94M
ENTRY POINT: $25.31 Volume=42M Target=$29.98 Stop=$21.98
POSITION: PLTR NOV 19 2021 $25.00 Calls — (55 delta) &/or Stock
4. Covered Call Options Play
Magnachip Semiconductor Corp. (NYSE: MX) — Magnachip Semiconductor Corp. is currently trading at $18.92. The Sept. 17 $20 Calls (MX20210917C00020000) are trading at $0.80. That provides a return of about 11% if MX is above $20 by the expiration.