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1. Market Summary
Stock Started Lower
– Stocks started lower, got ugly, managing an afternoon recovery.
– Short covering finally comes after the downside hit day five.
– Where is the market now and what do we do about it?
It took a bit of time, took some more downside, but stocks did finally turn back upside ahead of the Friday jobs report. They turned back upside, though not all made it positive. Indeed, even those that did were not posting big gains. That said, they turned back upside and logged strong low to close gains: S&P 500 63 points, DJ30 435 points, Nasdaq 239 points — you get the idea, i.e. big moves off a serious fifth straight session downside.
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NOTE: The figures and information above are from the 9/1 report.
NOTE: The videos are from the 8/31 report.
2. Targets Hit
ConocoPhillips (NYSE: COP): Even in bear markets, energy can perform just as it did in the early 1970s. In the early part of the bear market, when tech stocks were rolling over but energy stocks were building upside bases, we saw the same kind of action from June to August: energy building bases as tech topped out runs. The bear market was renewing itself, and energy was the one we chose for the upside in Investment House Daily.
COP is a large-cap oil stock that was building a good base. We have played COP a few times in this bear market, as it consistently delivers.
On Aug. 18, after a short, lateral consolidation of a break higher, COP started upside again, building the right side of its base. That is the move we looked for, so we issued the entry alert to buy November $105 call options that were trading at $7.56 with the stock at $103.78.
COP did just as we thought, renewing its move upside over the 10-day exponential moving average (EMA). We let the stock work up that support and toward our target. It came close on Aug. 29 after a solid run, but it closed off the high. The next session, COP started to fade, and we decided to sell.
We issued the alert to sell at $11.00, banking 45%. Not as much as we wanted, but we decided to let COP fade to test the last move, then move in after COP tested the 10- or 20-day EMA and started to bounce again.
We also banked gains in the following positions:
Comstock Resources Inc. (NYSE: CRK): 48% gain in the options.
EQT Corporation (NYSE: EQT): 43% gain in the options.
Silicon Laboratories Inc. (NASDAQ: SLAB): In this bear market, of course, you are looking for good downside setups in stocks that post significant moves — up and down. During the past three months, SLAB has traded in a 40-point range up and down; plenty of movement.
In mid-August, we saw SLAB gap below the 50-day simple moving average (SMA), part of a weeklong move lower. With that move lower and the break of support, SLAB was primed to rebound to test the old support to see if it acted as resistance. If the old support blocked it, then a great downside entry would follow for Technical Trader Alert.
We watched SLAB, and on Aug. 25 the stock gapped upside and rallied through the 50-day SMA up to the 50-day EMA. It stalled at the 50-day EMA then slid lower, back below the 50-day SMA. That reversal was our entry signal.
We issued the entry alert to buy December $135 put options that were trading at $11.29. The stock was trading at $136.61. SLAB closed just below the 50-day SMA, and the next session, the stock rolled over, falling to $130.
It then proceeded to fade each of the following four sessions before gapping lower on Sept. 1. That took SLAB to our initial target and beyond, so we issued the alert to sell half the position for $20.50 and a solid 81% gain. Now, we will see if SLAB continues the drop to break the July lows.
We also took a gain in the following position:
Archer-Daniels-Midland Co. (NYSE: ADM): 83% gain in the options.
Geron Corporation (NASDAQ: GERN): We have not played any drugs or biotech stocks recently, but we could not resist the excellent pattern GERN presented. After a four-week tight lateral range in July, GERN shot higher in early August. That move pretty much shot its ammo in the first leg higher and proceeded to base over 2.5 weeks, forming a very nice triangle consolidation.
We were ready, and on Aug. 23, GERN broke higher again, moving up from the triangle. That was our entry signal, and we issued the alert to buy GERN stock at $2.29. Despite the low price, GERN trades with a solid average volume of over three million shares, so there is plenty of liquidity.
As the prior move, GERN jumped higher, then worked laterally. It held a very tight range over the 10-day EMA, however, so we gave it a bit of time to work. On Aug. 31, it did just that, once again shooting higher with a big move. Given GERN’s track record of a big surge then blah, we issued the alert to sell the stock at $2.51 for a 9.1% gain.
We also took a profit in the following position:
Uranium Energy Corp. (NYSEAMERICAN: UEC): 7.16% gain.
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3. Covered Call Options Play
Super Micro Computer Inc. (NASDAQ: SMCI) — Super Micro Computer Inc. is currently trading at $63.30. The Oct. 21 $65 Calls (SMCI20221021C00065000) are trading at $3.70. That provides a return of about 10% if SMCI is above $65 by the expiration.