Invest and Trade Profitably with Jon Johnson

Weekender for 3/5

1. Market Summary

Pathetic Productivity and Surging Labor Costs

  • Pathetic productivity and surging labor costs flop stocks.
  • S&P 500, Nasdaq take out support, but some peculiar Fed-speak helps bring them back.
  • Volatility remains, but stocks recover low to high, maintaining the larger bullish index patterns.
  • “Hard” sector stocks post another session of solid gains, but quality tech stocks and other sectors rally as well.
  • Bond yields continue their run, unphased by the softer Fed-speak.

Stocks were in some serious trouble Thursday with the S&P 500 and Nasdaq 100 breaking the 200 day simple moving average (SMA).  Productivity was revised miserably lower (1.7% vs 3% 1st read) while unit labor costs jumped (3.2% from 1.1%  first read) — part of that stagflation discussed Wednesday. European Union inflation rose on the core (ignored by most of the media).

Stocks were mixed with DJ30 positive on Salesforce Inc.’s strong earnings. The Nasdaq, however, was off over 100 points, and the other indices were lower. Stocks wandered around on the session, though some areas, e.g. the “hard” sectors, performed quite well. Overall, however, the action was sloppy.

NOTE: The figures and information above are from the 3/2 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 3/1 report.

2. Targets Hit

Technical Trader Alert:

It was a busy week in technical trading land, as the market produced a lot of technical setups in many areas. We were banking partial profits in many positions that set up well and then surged to the buy and initial targets. If the bigger bullish patterns in the Nasdaq, S&P 400 and DJ20 deliver upside breaks, those positions in which we took partial gains will deliver even grander returns. Given that, we took profits on the following positions:

Century Aluminum Co. (NASDAQ: CENX): 57.8% gain in the options

First Solar Inc. (NASDAQ: FSLR): 179% gain in the options

Mosaic Co. (NYSE: MOS): 40% gain in the options

Nucor Corporation (NYSE: NUE): 45% gain in the options

Terex Corporation (NYSE: TEX): 52% gain in the options

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Oil States International, Inc. (NYSE: OIS): While many oil and gas sector stocks struggled prior to this past week, OIS continued its trend higher. Indeed, during the selling two weeks back, OIS used that to test off a new high punched out in its rally. We love stocks that defy the market and use the market’s woes to set up new moves.

When we saw OIS fading to the 20-day exponential moving average (EMA) late February, we were ready to make a play on yet another bounce higher. On Friday, Feb. 24, OIS fell just below the 20-day EMA on the open, then rallied to close above that level with a modest gain. It looked ready. On Monday, Feb. 27, OIS continued that Friday rebound. That was our signal. We issued the alert to enter with the stock asking $9.16.

OIS held the move that day, paused on Tuesday, then surged Wednesday. On Thursday, OIS surged again, matching the highs from the prior rally. That was our target, and we issued the sell alert with the stock bidding $9.98, a solid 8.95% in short order.  It was a tough call — could have taken half and let OIS continue climbing — as it continued that session to $10.17.

With the market volatility, we opted to take the gain, as we have seen early gains flipped on their head in this recent market action.

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3. Covered Call Options Play

Progyny Inc. (NASDAQ: PGNY) — Progyny Inc. is currently trading at $38.23. The April 21 $40 Calls (PGNY20230421C00040000) are trading at $1.95. That provides a return of about 10% if PGNY is above $40 by the expiration.

Learn more about our Covered Call Tables here!

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