Invest and Trade Profitably with Jon Johnson

Weekender for 9/3

1. Market Summary

  • August ends with a mixed note and a weak month. Will September be worse or is the damage done?
  • Personal Consumption Expenditures (PCE) stronger year/year core and overall, but market handles it decently
  • Personal spending not bad, but disposable income turns negative
  • Chicago Purchasing Managers’ Index (PMI) better than feared, but still well in contraction
  • Bond yields continue to tail off after that big gap higher in bonds magically killed the yield rally
  • Most indices rise then fade off those moves, as some testing begins after a solid break higher
  • Looks as if the test of the triumvirate of prior resistance starts
  • Jobs report Friday, and while it only bears faint resemblance to reality, the Fed uses it
  • New month and a reputation month — September likely does not show its fangs for another week

The July PCE was stronger year/year overall and on the core (3.3% and 4.2%, respectively), and while that knocked futures back some, stocks still managed to rally positive in the regular session. That move, however, failed as well. SPDR S&P 500 ETF Trust (NYSEARCA: SPY) peaked at 10:30 a.m. EST, falling into early afternoon. A rebound to mid-afternoon, then some sharp steps lower into the close left the indices mixed with most of the upside indices peeling back from intraday highs as well.

NOTE: The figures and information above are from the 8/31 report.





NOTE: The videos are from the 8/30 report.

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2. Targets Hit

Investment House Daily:

Fastly Inc. (NYSE: FSLY): A stock we play whenever it sets up as it makes good moves and its price is certainly right. We were watching FSLY for a new play as it tested back toward the 20-day exponential moving average (EMA) and 50-day EMA after an early August break higher from a triangle pattern. That triangle used the 50 day moving averages (MAs) as support for the last month of the base — a good level to launch a new move.

FSLY was testing into mid-month, working laterally along the 20-day EMA. The range tightened, and we put FSLY on the report, ready to play a new break upside as the rebound from the first test of a breakout is one of our favorite entry points. Why? Because even after the breakout, when it starts back upside, that shows you the buyers still want it even at a bit higher price.

On Aug. 23 FSLY showed the move, breaking upside with a solid push of volume. We issued the alert via text and email to enter with the stock trading $21.05 at the ask. We also included the December $20 calls in the play, and they were trading for $3.72 at the ask.

The play was spot on as FSLY, outside of one session, marched higher into this past week. On Wednesday afternoon, before the PCE on Thursday, we had five of six sessions to the upside. Given the variable of the PCE, we opted to bank half the gain.

Accordingly, we issued the alert to sell half the stock trading at $23.36 on the bid and half the options trading at $5.2 on the bid (10.9% gain and 39% gain, respectively). Turns out, the market handled the PCE just fine, so we have our remaining half to continue working for us.

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Technical Trader:

TJX Companies Inc. (NYSE: TJX): Even with the consumer highly questionable right now, when a chart shows you a bulletproof pattern, you trust the chart. TJX had gapped higher on Aug. 16 on its earnings, clearing a three-week consolidation.  We did not play the earnings and we typically do not — too much risk associated.  Instead, we let the earnings produce the move, and then we let the stock set up the post-earnings play — I call this counterpunching.

After TJX’s gap, it worked laterally for three sessions in a fairly tight range. On Aug. 23, after a tight doji at the 10-day EMA, TJX started back upside. We issued the alert to enter with October $90 call options trading for $2.91 on the ask. TJX closed out at the high that session, looking positive.

Next day the entire market sold off after the NVDA earnings gapped stocks upside.  TJX sold as well, but it declined on light trade and closed very near the 10 day EMA – no major damage.  The next session TJX showed a doji at the 10 day EMA, and this Monday it was off to the upside again.  TJX marched up each session into Thursday.

Five sessions higher, jobs report Friday, 3-day Labor Day weekend.  Could be some profit taking post-jobs.  We decided to bank half the gain.  We issued the text and email alert to sell half the options trading at $4.20 on the ask, a solid 44% gain. Now TJX may pause a bit before resuming upside, but the pattern is very solid and we have a good initial gain in the bank.

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3. Covered Call Options Play

Hostess Brands Inc. (NASDAQ: TWNK) — Hostess Brands Inc. is currently trading at $28.48. The Oct. 20 $29 calls (TWNK20231020C00029000) are currently trading at $1.35. That provides a return of about 7% if TWNK is above $29 by the expiration.

Learn more about our Covered Call Tables here!


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