Invest and Trade Profitably with Jon Johnson

Weekender for 9/17

1. Market Summary

  • Almost all indices appear to shake off flirting with selling, post solid gains
  • Producer Price Index (PPI) similar to Consumer Price Index (CPI): cooler and not
  • Retail sales cheered for the gains, but energy and inflation play a huge role as consumers cut back on non-essentials
  • Government claims a surplus but admits in the release it is simple accounting: remove student loan repayments, then add them back in.
  • Move broadens nicely, but many of the moves were simple rebounds from drops.
  • Large-cap techs started the move, brought more stocks along, and they are still the leaders.
  •  PHLX Semiconductor Sector (SOX) still the black sheep and an important one.
  • September expiration, lots of data, Federal Open Market Committee (FOMC) decision next week, and a market that fears no Fed.

For a second time in three weeks the stock indices turned trouble into upside. S&P 500 gapped over the 50-day exponential moving average (EMA) again, this time with much more authority than on Tuesday when it gapped up then Wednesday gapped back down. DJ30 strong, S&P 400 strong. Nasdaq indices … up, but mediocre, DJ20 up but problematic.

NOTE: The figures and information above are from the 9/14 report.





NOTE: The videos are from the 9/13 report.

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2. Targets Hit

Investment House Daily:

Uranium Energy Corp. (NYSEAMERICAN: UEC): As you know, we entered UEC “way back” in early August (Aug. 4) as it broke higher from a six-week cup-with-handle base formed using the 50 day MA as support.  You also know we banked some of the gain along the way.

We did, but we also kept half of the play running. Why? We had our initial target in mind, but we also liked the much larger inverted head-and-shoulders base that started way back in December 2022. That build a very large foundation for UEC to rally and then rally some more.

Accordingly, we were very happy to let UEC rally as long as it would, then bank some more gain. UEC has been more than accommodating.  Indeed, UEC has rallied higher and higher, using the 10-day EMA as support for each test of the move. The stock logged an impressive 13 of 17 days upside since we banked our first gain.

This week, we did bank some more of the gain even though the stock was jumping. Why?

Three weeks upside along the 10 day EMA with hardly a pause.  That was on top of a rally from the early August break higher. This past week, even after all of that upside, the stock accelerated upside, with a crescendo toward the weekend with big moves Wednesday and Thursday.

That often precedes the next fade to test.  Thus, on Thursday 9/14 when the break higher for the day started to waffle, we issued the alert to sell half the position with the stock trading $5.27 on the bid — given we entered at $3.65, that banked a solid 44+% gain.

From the stock. In 30 days. You know what? After a test, thanks to that big base foundation, UEC still has strength to move higher, and that is why we did not take it all.  Partial profits allow you to let a stock run to reach its maximum potential gain for you, and the cool thing is, when it is running out of gas and starts to roll over into a new base, you are already lighter in the position and can bank the gains when it does falter, making some really big profits that frankly, you would have never made if you followed your gut (and that burning hole in the pocket you get when you have gains in a position) and took the gain too early.

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Technical Trader:

Oceaneering International Inc. (NYSE: OII): The initial breakout and rally is not the only time to buy a stock. Big gains are made after the initial move when a stock has put in the time to build a base and lay the foundation for that strong move. Doesn’t hurt that the product it sells is very much in demand … even if all the world says it is moving away from it. Watch the actions versus listening to the words.

OII is in oil and gas. This offshore service group set up good bases from spring into mid-summer. OII formed a double bottom-with-handle. We played that first breakout and rally in July. When it consolidated that move with a new base from late July into late August, we were ready to reload and play it again for more profits.

The first base was a three-month base — fairly good-sized. The second base was a shorter, five-week cup that faded to test and hold the 50-day MA, right on top of the prior base. Holding on top of the old base is a very good strength indication. Thus, we were ready to enter when OII showed the move.

On Aug. 29, OII gave us the signal. The stock had moved up off the 50-day MA starting four sessions earlier.  It slid laterally, along the 20-day EMA. When it broke higher on Aug. 29 and trading at $22.21, we issued the text and email alert to buy October $22.50 call options trading on the ask at $1.50. Not only did the price allow a sizeable position with relatively little out of pocket, the “numbers” were good as well, e.g. historical volatility levels, etc.

The timing was, as the base indicated, good. The next session OII gapped higher and rallied 3.7%. It paused, then on Sept. 1, gapped and rallied again, adding 5.4%. From there, OII rallied at a slower pace into this week.  On Tuesday Sept. 12, however, OII gapped and rallied sharply, just topping $26. That was the initial target price we had pegged based upon Fibonacci extensions.

Playing the plan, we issued the alert to sell half of the options trading at the bid side at $3.60. That banked a solid 140% in 10 trading days. The other half we are holding as OII makes a 10-day EMA test that likely reloads the upside for a new rally leg.

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3. Covered Call Options Play

Vita Coco Company Inc. (NASDAQ: COCO) — Vita Coco Company Inc. is currently trading at $28.78. The Oct. 20 $30 calls (COCO20231020C00030000) are currently trading at $1.15. That provides a return of about 9% if COCO is above $30 by the expiration.

Learn more about our Covered Call Tables here!

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