1. Market Summary
Excerpted from Thursday’s paid content of Investment House Daily by Jon Johnson.
Jobless Claims Provide Hope
– After a sluggish start, the NASDAQ resumed its lead, followed by the other large-cap indices.
– Jobless claims provided hope after the weak Automatic Data Processing (ADP) report — along with President Trump’s hints about the Friday jobs number.
– As expected, the Facebook, Apple, Amazon, Netflix and Google (FAANG) stocks have stepped up as the NASDAQ’s leaders have decided to take a break.
– Some leaders sell harder, but overall, the action is mostly good.
While ADP’s figures were massively weak, jobless claims were much better than expected. So, Friday’s jobs report served as the rubber match, and the president predicted a strong number. Okay, he didn’t predict. He pretty much said so.
Even in the face of that report, and indeed perhaps because the better jobless claims were released ahead of it, stocks turned from a negative open to a positive close — for the large-cap indices. The small-cap and mid-cap stocks lagged, as did the PHLX Semiconductor Sector (SOX), but not by much.
Surely these results warranted a rally ahead of the jobs report. Surely. Maybe?
NASDAQ: After its eight-session run higher, the NASDAQ acted as though it was tired during the last premarket session. After the first hour saw it drop hard after a rally attempt, the bids returned and held all the way to the close. Apple was downgraded and upgraded before it caught itself after a slightly lower open and rallied by 3.5%. Facebook started slightly lower and then caught fire, surging by 6.5%.
You really don’t need to go further to see why the NASDAQ rallied by 1%, but you can note that Google posted a solid 1.8% bounce off of the 50-day moving average (MA) and that Microsoft rose by 1.6%. This was enough firepower to push the NASDAQ upside. Indeed, we said that if the FAANG stocks moved, they could rally the NASDAQ further on their own, even if the other leaders tested. That is precisely what happened, as the 1.1:1 breadth, coupled with a 1% move, indicates.
S&P 500: The S&P 500 cracked the same January 2020 peak that it hit just before its February all-time high. It is currently just 45 points from that all-time high.
NOTE: The figures and information above are from the 8/6 report
NOTE: The videos are from the 8/5 report.
2. Targets Hit
Here are several completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week:
The onset of earnings season means that a lot of action is inevitable. We also often see stocks make pre-earnings runs before the arrival of the ups and downs of post-earnings action. We had several solid trades that produced strong gains this week. So, we are highlighting a few below and then listing the results of the rest.
Livongo Health Inc. (NASDAQ:LVGO): We entered this play as LVGO broke higher from a three-week triangle on April 30. Earnings were set for Aug. 6, and we were looking at a pre-earnings run. So, we purchased September $120 call options for $16.80.
LVGO moved as anticipated and surged into earnings. Then, we sold half of the position on Tuesday evening for $27.60. This produced a nice 64% gain. We let the other half work into earnings.
Then, a Teladoc/LVGO merger was announced overnight. As a result, LVGO gapped up. Due to our experience with similar plays in the past, we sold the rest of the options for $28.50 (a 69% gain). Indeed, LVGO reversed after that initial gap to start the day.
Facebook, Inc. (NASDAQ:FB): This one was fun because a lot happened over the course of a single session. First, we saw FB in a beautiful and textbook setup when it tested the earnings gap higher. FB then gapped over the two-month range on results and big volume. It then formed a breakaway gap. When this happens, stocks tend to rally in the direction of the gap either immediately or after a lateral test. After FB put in the latter, we put it on the report and waited. We didn’t have to wait long.
On Thursday, FB started higher. We wasted no time in buying October $255 call options for $14.55. FB then surged during that session. While our target is still considerably higher, a 50% move in one day is worth at least a partial sell. So, we sold half of the position for $22.25 and banked a 52% gain. We then left the rest to run.
On Friday morning, FB was up another 12 points and had hit our target. As a result, we sold another half of the options for $31.45 and banked a 116% gain.
Other targets that we hit this week include Etsy Inc. (79% and 82%), Fastly, Inc. (60%), Square Inc. (230%), NVIDIA Corp. (54%) and Wix.Com Ltd. (43%).
Here are several completed trades from Technical Traders Alert, offering insights into our trading strategy and the targets that we have hit this week:
Costco Wholesale Corporation (NASDAQ:COST): With all of the tech leaders surging, we went to Costco. As it had set up a great pattern over the past six months, we were waiting for it to make a move. It did so when it blasted higher on Tuesday. As a result, we bought some September $330 call options for $11.30 when the stock was at $333.55.
COST put in a great move during that session and rose over 10 points. On Wednesday, COST gapped higher and rallied to our initial target. We then stuck to the plan, sold half of the options for $17.65 and banked a solid 55% gain. We are letting the other half of the play work a bit more in order to see what life remains in this move.
Match Group Inc. (NASDAQ: MTCH): We found this one ironic due to the resurgence of the COVID-19 virus — a dating/hookup platform? I suppose that people are more than ready to meet some new people after the lockdown. In any event, the pattern is what the pattern is. In this case, the pattern was a nice downward-pointing wedge from late June to late July. On July 28, MTCH made its move when it broke higher from the wedge. So, we bought September $97.50 calls for $9.25. We were looking for a run into earnings after the markets closed on Aug. 4.
MTCH put out a good move and rallied nicely through Monday. As it hit our initial target on that day, we sold half of the options for $14.80 and banked a 60% gain. Given the strong move, we left the rest for another day as MTCH had a day before earnings were due to be released. On Tuesday, MTCH opened a bit higher and then stalled. So, we sold the rest for $15.45 and banked a 67% gain.
Then, earnings came out, and MTCH was very solid. As the stock gapped upside to $120, we could have made more. However, our play was pre-earnings, and we chose to stick to it in order to obtain a solid enough gain.
Other gains that we banked this week include Monster Beverage Corp. (80%), Twilio Inc. (32%), Docusign Inc. (60%), Etsy Inc. (160%), Lam Research Corporation (85%), NVIDIA Corp. (54%), Square Inc. (232%), Fastly, Inc. (60%), Roku Inc. (109%) and Wix.Com Ltd. (52%).
Here is one completed trade from the Success Trading Group, offering insights into our trading strategy and the target that we have hit this week:
Sunrun Inc. (NASDAQ: RUN): We like playing RUN because when it sets up to run, it runs. We saw this play taking shape a week ago as RUN tested a prior… run… from early July. The stock then tested back to the 20-day exponential moving average (EMA) through the prior week and showed a tight doji on Friday. When this occurs after a pullback, it generally serves as a signal of a change in direction.
Thus, we were ready when we saw RUN break higher off of the 20-day moving average (MA) on Monday. We bought some stock for $37.95 just before 10 a.m. CST. RUN ran well and hit our initial target around 2:20 p.m. CST that afternoon. So, we sold the position for $39.86 and banked a gain of 5%.
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
SHOP (Shopify — $1083.05; +59.05)
STATUS: SHOP gapped higher on earnings last Wednesday. However, the stock faded the move after hitting $1,100. Earnings were solid, but the market was not ready to move higher just yet. SHOP tested and filled the gap on Thursday and held the 10-day EMA through the weekend. That action formed a short, four-week double-bottom-with-handle pattern.
On Monday, SHOP posted a nice break upside on rising trade. Since this is a nice path to move higher, we want to move in as SHOP moves through the entry point. A run to the target will generate a 60% gain on the options.
VOLUME: 2.6M Avg Volume: 3.1M
ENTRY POINT: $1090.43 Volume=3.2M Target=$1224.89 Stop=$1046.95
POSITION: SHOP OCT 16 2020 $1,100.00 Calls — (53 delta)
4. Covered Call Options Play
Fortuna Silver Mines Inc. (NYSE:FSM) — Fortuna Silver Mines Inc. is currently trading at $6.93. The Sept. 19 $7 Calls (FSM20200919C00007000) are trading at $0.70. That provides a return of about 14% if FSM is above $7.00 by the expiration.