1) MARKET SUMMARY:
Excerpted from Thursday's paid content of "The Daily" by Jon Johnson at InvestmentHouse.com. To get his latest information and his daily content, click here now to receive a two-week trial and save $30/month. (You won't find this offer on the Investment House website. It is exclusively for The Weekender subscribers!)
Some Respite From the Trade War.
Market Summary (continued from above)
An agreement to meet to discuss the trade war in October -- one that Chinese insiders who are "in the know"
said could lead to a "breakthrough" -- led to a breakthrough of its own in the stock market.
The Fed should print up a "Mission Accomplished" banner. When the rate cuts did not stop the selling, or at least did not bounce the market back up,
the Fed was impelled to buy bonds again. That, along with the fact that buyers were able to blunt each selling attempt,
poured water over the selling. That set the stage for a favorable headline or two that
could then work to break stocks higher. On Tuesday, we saw the resilience of financial stocks. On Wednesday, the chips showed resilience and on Thursday, that favorable headline appeared.
The market was set to break higher and the headline triggered it.
This situation made it difficult to get into positions, but it did push current positions
such as Twitter (TWTR) and Nvidia (NVDA) higher. Moreover, a lot of stocks jumped higher and then either reversed
the moves or fell well off the highs. Some examples include Match Group Inc. (MTCH), Texas Instruments Incorporated (TXN), Reliance Steel & Aluminum Co. (RS), The Coca-Cola Co (KO), JinkoSolar Holding Co., Ltd. (JKS), Electronic Arts Inc. (EA) and Applied Materials, Inc. (AMAT). Others did
hold moves as they gapped and rallied, e.g. Google (GOOG), Amazon (AMZN), Facebook (FB), Urban Outfitters, Inc. (URBN) and Five Below Inc. (FIVE). While we were able to
get into some of these plays, we will have to wait for a test off of this good move.
S&P500, SOX and the DJ30: All gapped over the prior resistance. While the DJ30 and the PHLX Semiconductor Sector Index (SOX) faded off
the highs, there was nothing major in terms of the overall move. Basically, they moved strongly up to the
next resistance and then backed off just a bit. Meanwhile, both the S&P500 and SOX bumped the bottom of the
July range and stopped.
NASDAQ: Gapped over the 50-day simple moving average (SMA), tapped the bottom of the July range (which was a
new high) and stopped for the day. After some more upside on the jobs report, the NASDAQ may start to test the breakout over resistance.
NOTE: The figures and information above are from the 9/5 report.
Watch Market Overview Video
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NOTE: The videos are from the 9/5 report.
Here are two trades from "The Daily," offering insights into our trading strategy and the targets that we have hit this week:
It’s been four weeks at the 200-day SMA for AMZN, which mimics the indices’
range. For each test of the 200-day moving average (MA), AMZN has held well, particularly late August.
It then tested when the markets opened on Tuesday and then rebounded and gapped upside on Wednesday to the 20-day exponential moving average (EMA). If the S&P500 breaks
out, AMZN will be there. If so, we are ready to move in for a run at the 50-day SMA. That
move will give us a gain of around 55% on the call options.
FIVE (NYSE: Five Below)
Retail remains one of the hotter areas in the market and FIVE is setting up for
an entry. FIVE gapped higher on Thursday, gapping over the 200-day MA on big volume and
broke higher on a solid earnings report.
On Friday, FIVE tested back as the market was softer overall and coming back toward the 200-day SMA on lighter trade. Likely, FIVE will come
back to test the 200-day SMA and then make its move back upside to continue the
We have to be ready, however, if FIVE just decides to move higher from here. A continued rally to the initial target will give us
a 10% gain on the stock and a 65% gain on the call options.
Targets Hit This Week:
Procter & Gamble Co. (NYSE:PG): When we put PG on the report we received emails that used words like "boring," "stodgy" and "old economy." The fact that no one said "not sexy" may be a sign of the times -- not that PG is sexy. Anyways, I learned a long time ago a pattern is a pattern is a pattern, regardless of the stock. When you add on the market volatility at the time and that other groups were selling at a time that PG was steadily rising, all of these facts said what needed to be said regarding the play. On 8/7, we saw PG come off the 50-day EMA in a routine test. After we put it on the report, PG moved higher again during the next session. That triggered our entry and we bought some October $115.00 calls for $5.10.
Why did we only buy options? At $115 and since PG is admittedly not a stock that explodes with 20% gains, the options were a great way to get in and leverage our money. PG proceeded to perform as expected: a rise, a test of the 20-day EMA, a rise and a test of the 20-day EMA. This pattern then repeated itself again and again. On 9/4, PG hit our target. However, it was moving so well that we left it on. During the next day, PG started higher again . . . and then lost its bid. It was time to sell. We sold the options for $8.95 and banked the 75% gain. Yes, it was rather boring, but boring when things go as planned is the good kind of boring.
Iconix Brand Group (NASDAQ:ICON): This one was unusual for us in a way as it trades with a relatively low average daily volume (around 200K). However, we have played it before and the pattern was one we like. This was because the stock was coming off a long decline and the indicators were slowly turning positive. Then, they showed a meaningful break. ICON experienced that pattern with a move higher in August to the 200-day SMA and then a week-plus lateral move just below that resistance. We put it on the report on 8/20 and waited for the break higher. On 8/26, ICON broke higher on some volume and we picked up the stock for $1.68. A quick test during the next two sessions gave up virtually no ground and ICON resumed the upside. The stock marched higher going into Wednesday and then started to struggle near our initial target. As a result, we banked part of the stock for $1.98 and a 17.8% gain. ICON continued to rise on Thursday, touching $2.10 on the high and a solid 22% gain.
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2) IH ALERTS
NYSE:KEYS (Keysight Technologies--$94.29; -2.56; optionable): Software
STATUS: Pennant. KEYS gapped higher on 8/22 out of a four-month base. It then experienced a nice break higher and worked laterally while waiting for the 10-day EMA to catch
up. On Tuesday, KEYS tapped the 10-day EMA, rebounded decently off the low and held the
gap point above the highs in the prior base. As the stock has held up well in a weaker market,
when KEYS makes a new break higher through the buy point, we will move in. A rally to the
target will give us a gain of 8% on the stock and a gain of 70% on the options.
VOLUME: 1.103M Avg Volume: 1.689M
BUY POINT: $97.44 Volume=2.5M Target=$105.94 Stop=$94.71
POSITION: KEYS NOV 15 2019 95.00c -- (50 delta) &/or Stock
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3) SUCCESS TRADING GROUP
-- by the MarketFN STG Team
NYSE:JKS (JinkoSolar Holding Co. Ltd.)
Our Success Trading Group members scored another winning trade when we closed out a position in JinkoSolar Holding Co. Ltd. (NYSE:JKS). We are watching several other stocks and are looking forward to trading next week.
Our Success Trading Group closed seven years with zero losses on our Main Trade Table. In fact, we closed 100% winning trades for the calendar years 2016, 2015, 2013, 2012, 2011, 2010 and 2009. We still have one open position from 2017 (all others were winners) and one trade that we opened in 2014 but was closed as a losing trade.
All of these trades are posted on our Main Trade Table for your review during your free membership trial period.
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4) COVERED CALL PLAY
NASDAQ:CDMO -- Avid Bioservices is currently trading at $7.05. The October 19 $7.50 Calls (CDMO20191019C00007500) are trading at $0.60. That provides a return of about 9% if CDMO is above $7.50 by the time of the expiration.
Learn more about our Covered Call Tables
The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP., or Split Ventures, Ltd. This information is not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on the related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors. No one associated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites.
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Monday, September 09, 2019
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