Invest and Trade Profitably with Jon Johnson

Weekender for 9/11

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1. Market Summary

Powell reiterates his Jackson Hole ‘fight inflation first’ plan

  • Stocks start lower on equity capital market (ECM), Powell actions and comments, but recover.
  • Indices moving toward the 50-day simple moving average (SMA) as volume remains low, breadth contracts, most shorted again rally sharply.
  • Powell reiterates his Jackson Hole ‘fight inflation first’ plan.
  • Initial jobless claims fall, continuing claims rise again.
  • Consumer Credit plunges as auto loans start tanking.
  • Some say a new bear market rally is starting; history, technicals say not likely.

Okay, markets did not sell from the prior Friday gap-and-reversal and indeed the Tuesday upside-gap and reversal. It took the other route, the ‘bounce-to-test-a key-level’ route after six to seven days of selling. The two upside sessions Wednesday and Thursday are now testing that key level the indices broke late August during that leg lower.

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NOTE: The figures and information above are from the 9/4 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 9/7 report.

2. Targets Hit

Louisiana-Pacific Corporation (NYSE:LPX): Housing has shown problems the past several months, but the homebuilders and materials stocks have hung in, at least not bombing lower. That said, a break was likely to come. Thus, we watched several stocks related to the group. LPX is a lumber giant, and we watched it form a head-and-shoulders pattern from July into August. It broke sharply lower on 8/9 in the initial break lower. But, often, you get a quick test of that break lower. That is exactly what happened.

LPX rebounded back up to the 50-day moving average (MA) over the next five sessions, moving up to touch the 50-day exponential moving average (EMA) and then slid laterally just below that barrier. The fact that LPX was not punching back through the 50-day MA had us watching for a downside play.

On 8/22, LPX gapped lower. We were ready for it and issued an alert to buy November $57.50 strike put options that were trading on the asking price at $4.90.

LPX traded lower, then moved laterally at a lower level, just below the 50-day simple moving average (SMA). After three sessions, LPX dropped again with a sharp move. The stock continued to ride lower for seven sessions — slow but steady. On 9/6 LPX reached lower toward the June lows — our target — then started to rebound. After the run lower, the tap at the prior lows and then rebounding from that support, it was time to bank gain. We issued the alert to sell with the options bidding $7.30 and a 48% gain.

We also banked gains on the following position:

Geron Corporation (NASDAQ:GERN): 21% gain in the stock.

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Alphabet Inc. (NASDAQ: GOOG): GOOG enjoyed a run from late July into mid-August with most of the market. It topped out the move at the 180-day moving average (MA) and faded to test. It held the 50-day simple moving average (SMA), as is usual for a rallying stock. It bounced on 8/25 and looked good to resume the move. The next session, however, GOOG reversed the bounce, gapping lower and selling through the 50-day SMA. These types of reversals are statements: the buyers tried to resume the upside, but the sellers came in and completely reversed the upside.

This was a signal that GOOG was heading lower in the near term, and we had a play ready for this. We issued an alert to buy October $112.50 strike put options trading at $5.15 on the ask side.

GOOG finished the session sharply lower and continued to trend lower. However, it did not dive lower over the next five sessions. Then, on 9/6, GOOG broke lower again, undercutting the lows of the prior week, looking as if it would continue the selling. The stock finished the day with a doji, however, and we noted in GOOG’s writeup that if it moved up off this doji, we would bank a gain. Well, sure enough, GOOG did move higher that next session (9/7) and we issued the alert to sell at $7.60 for a 37% gain.

We also took a gain on the following position:

Silicon Laboratories Inc. (NASDAQ: SLAB): 81% gain in the options.

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Nordic American Tankers Limited (NYSE: NAT): Shipping stocks cruised through some nice bases, which formed May to July, and in August, started to show signs of breaking out. We saw NAT set up a nice handle — a lateral consolidation — to its cup base and were very interested.

On 8/8, NAT launched a move higher, breaking out from the handle. We issued the alert to buy the breakout with the stock trading $2.66 at the asking price.

After entering, NAT continued higher — ahead quarter speed then back to dead in the water. It continued this into late August and then tested. The test was normal, at least until a fast dip to the 50-day SMA late-month. NAT popped right back up, however, rallying for four straight sessions to a new closing high. That was our target, so we issued the alert to sell with NAT, which was selling at $3.02 on the bid. That gives us a decent 13.5% gain, though taking a bit longer on the cruise than anticipated.

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3. Covered Call Options Play

Ranger Oil Corporation (NASDAQ: ROCC) — Ranger Oil Corp. is currently trading at $38.07. The Oct. 21 $40 Calls (ROCC221021C00040000) are trading at $2.23. That provides a return of about 10% if SMCI is above $40 by the expiration.

Learn more about our Covered Call Tables here!

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