Monday, October 21, 2019

Weekender 10/20

1. Market Summary

Excerpted from Thursday's paid content of "Investment House Daily" by Jon Johnson.

Not A Major Revival, But Not A Terrible One

– There has been no surge by the large-cap indices.
– The good news from earnings and Brexit have been offset by news regarding Housing Starts, the Philly Fed and industrial production.
– The economic data are not that great, but the Fed is still there.
– Repurchase agreement (repo) action has been subscribed at $104.2 billion as the need for them has jumped.
– Small- and mid-caps have rallied nicely as the large-cap indices have paused at the prior highs.
– We have seen a bit of a large-cap test while the small- and mid-cap rally showed good market action.

The economic news was lacking. For instance, the Philly Fed posted 5.6, lower than the 6.0 expected and the 12 that it had posted back in September. Housing starts for September fell 9.4%, crushing the -3.2% that was expected and marking its lowest reading in years. Industrial production slipped to -0.4, more than the 0.3 that was expected and the 0.8 that was reported back in August. Capacity missed at 77.5 and was down from 77.9.

A reported breakthrough in the Brexit talks has been made, but questions are still circulating as to whether Parliament will approve it.

Surely the Fed can help. With the economic data smelling the place up, some sort of action would seem appropriate for a Fed that has a rate-cutting bias. Even so, a story has been circulating that the Fed may be inclined to pause its cuts at the next session. Really? And if so, would it matter?

I would just like to add another note regarding the repurchase agreements. After all, the Fed’s latest overnight repo action, one with a $75 billion limit, was oversubscribed at $104.2 billion. I am so glad the Fed is on the case -- the need for funds has declined dramatically. Not! It has suddenly ramped back up after we were told all was well and after it had stabilized at around $30 billion. Once the new facility was in place in October, all would be fine . . . Sure.

Something is wrong beyond just the structural changes in the system that the Fed is citing as the source of the need for repo operations.

Chart Analysis: In order to look past the gains, you also have to look at the action. The indices basically stalled for a second session after the Tuesday surge. That move left the S&P 500, the NASDAQ and the DJ30 (the large-cap indices) below their September peaks and thus below the all-time highs that they set back in July. The S&P400 and the smaller-cap indices posted solid moves that . . . leave them still well off their prior highs. At least they are now in the upper half of their trading ranges.

It was not the surge that the recent pattern suggested, e.g. big move, pause, big move, pause. It was a move higher and that was about it. One could argue that after a couple of weeks of upside to the penultimate highs for the NASDAQ and DJ30 and the highs for the S&P 500 and the PHLX Semiconductor Sector (SOX), the market needed more to push it. The large-caps, however, were not the center of the action. Instead, the S&P 400 mid-caps rallied 0.85% and moved higher in the range. Unlike the other indices, the S&P 400 did not give back its gains.

NOTE: The figures and information above are from the 10/17 report.

Watch the Investment House Videos For This Week Here!

NOTE: The videos are from the 10/16 report.

2. Targets Hit
Here are two completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week:

Endo International plc (NASDAQ:ENDP): We always watch for stocks that are "turning the corner," i.e. those that have been in long uptrends or downtrends and are breaking out of them. We saw some pharmaceutical companies in this status, one of them being ENDP. It broke over the 50-day moving average moving average in early September, rallied a bit and then spent a month testing the break over that key level. We put it on the report on Oct. 2 as it started to edge up off the 50-day moving average test. On the next day, it made a break and we entered by purchasing stock positions at $3.60.

ENDP continued to move higher into Oct. 7. Nice. Then, it faded during the next week and came back to the 50-day exponential moving average (EMA). It then tested on low volume and held that support. Then, it got interesting. After that second test and a higher low, ENDP shot higher on Oct. 16. While it touched our target, it was so strong that we left it to continue working.

ENDP faded into the close a bit. On Oct. 17, it rallied again to a higher high early on and then started to stall. We locked in a 28% gain because we started to sell at $4.61. While this was not bad, if we had sold just half of our shares, we would have had half to rally to $5.20 during that session and bank another 44%. While we usually do that, given the course of action during the prior session, we did not want to see that early high pushed back. While we are happy enough with the gain, we are disappointed we did not play the stock the way we really should have...

Health Insurance Innovations Inc. (NASDAQ:HIIQ): Now, this is one of the stocks that we played as we should have. We originally entered on Sept. 26 with some stock at $23.85 and November $25.00 calls for $2.80. HIIQ rallied right on up to the initial target on Oct. 3 and we banked half our position for a 9% stock and 28% option gain. While this is a decent gain, we wanted to get our money in the bank. Thus, we left half the position to work.

After that initial rally, HIIQ tested the 10-day EMA and the 20-day EMA on Oct. 8. It rebounded during the intraday period and could have spent more sessions at that level. Then, it shot higher over the course of the week to the 200-day simple moving average (SMA).

After it moved through the SMA, the stock failed. Then, it moved through the SMA again and started to fail again. The 200-day SMA was obviously acting as resistance. We decided to sell the rest, figuring that if it the stock ends up breaking the 200-day MA, we can move in with a new position. We then sold the rest of the stock for $26.85 and a 12% gain. We also sold the options for $4.20 and a 50% gain. In this back and forth market, this strategy worked.

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Here is a completed trade from the Success Trading Group, which offers insights into our trading strategy and the target that we have hit this week:

NASDAQ:FB (Facebook, Inc.)

We saw Facebook improving with a double bottom off the 200-day moving average before approaching the 60-day moving average. On Oct. 15, it broke over the 50-day moving average and we entered with a stock position at $186.92. Then, Facebook rose higher. On Thursday, Oct. 17, it gapped to a doji and hit our initial target at $190.66. Given the doji gap, we opted to go ahead and bank a quick and easy 2% gain.

This is an example of what you'll get by becoming a member of Success Trading Group. The system is geared towards bringing you consistent, short-term gains of 5-10% and you can expect four to six trades every month.

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3. Pick of the Week

NVDA (Nvidia Corp. -- $185.99; +2.96; optionable)

EARNINGS: 11/14/2019

STATUS: We started looking at NVDA again when it bumped the highs from both the prior week and from early September. Indeed, NVDA broke out of a large triangle in early September and then rallied by testin back to the 50-day moving average (MA) in late September and early October. It then made a move back up from there. While trading was choppy last week, the stock held the 20-day EMA and rebounded into Friday. If NVDA can continue this move, we can move in. A rally to the target will give us a gain of around 45% on the call options.

VOLUME: 11.272M Avg Volume: 8.48M

BUY POINT: $186.58 Volume=1.2M Target=$196.94 Stop=$183.21

POSITION: NVDA DEC 20 2019 185.00C -- (56 delta)

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4. Covered Call Options Play

Akoustis Techs. Inc. (NASDAQ:AKTS) -- Akoustis Techs. Inc. is currently trading at $8.22. The Dec. 21 $7.50 Calls (AKTS20191221C00007500) are trading at $1.10. That provides a return of about 16% if AKTS is above $7.50 by the expiration.

Learn more about our Covered Call Tables here!

Monday, October 14, 2019

Weekender 10/13

1. Market Summary

Excerpted from Thursday's paid content of "Investment House Daily" by Jon Johnson.

Positive Trade Talk News Leads Market Revival

- Positive trade vibes helped lift stocks after President Trump said that the trade negotiators would meet on Friday.
- Indices still backed off from their near resistance after the news regarding the trade war was revealed.
– After hours, we were told that the meetings were going "very well." Futures rose.
– On Friday, stocks were set to start near the session highs at the 50-day moving average (MA).
– Will the news be good enough for the market?

Call me a skeptic (you can), but the market move on Thursday left unanswered questions in its wake. Of course it would as the market moved on the trade headlines all Wednesday night and on Thursday as well.

President Trump also commented that he was meeting with the Vice-Premier of the State Council of the People's Republic of China on Friday. Since the meeting was not cancelled, stocks jumped. After trading hours were finished, President Trump commented that the trade talks were going very well. Dow futures jumped near 100 points.

Either there is a big setup in progress or the United States is going to concede to a partial deal which includes that currency pact. On the other hand, perhaps the United States will forgo the tariff increases and a few other make-nice elements in return. This will leave the hard parts for later, aka never. Either way is a setup because President Trump said that there would be no partial deal. Will he care? Probably not, but some of the individuals in his political base who had backed him when we could have had a milquetoast agreement early on will likely be very angry. For instance, the farmers who suffered but felt it was the right thing to do form one of these potentially angry groups.

The S&P 500, the DJ30 and the NASDAQ: These indices are lumped together because they are still the same. During the last trading session, all of them climbed back to resistance at the 50-day MA and all of them faded from that session high to close below their respective 50-day MA. After-hours Dow futures are up 30 points, S&P 500 futures are up by three points and NASDAQ futures are up 14 points. Even so, they are still down from where they were immediately after President Trump’s comments. That leaves them below the session highs and waiting for more news.

NOTE: The figures and information above are from the 10/10 report.

Watch Market Overview Video

Watch Technical Summary Video

Watch Next Session Video

NOTE: The videos are from the 10/9 report.

2. Targets Hit

Here is one completed trade from Investment House Daily, offering insights into our trading strategy and the target that we have hit this week:

Costco Wholesale Corporation (NASDAQ:COST): Costco is a market leader, and when market leaders are following a good trend that is testing the 50-day MA, you should take notice and play the moves. We saw this test and put COST on the report in late September so that we could be ready when COST made its move off the 50-day MA. While this took some time, COST made its move in early October. We picked up the position on Oct. 4 with some November $290 call options for $9.50. While the move started well, it soon slowed.

Although it eventually steadied, COST was only able to fill the downside gap from early September after more than a week of upside. While this was not a bad move under the given circumstances, big news broke on Friday about a possible partial trade deal.

Since COST did not move much on the news, we decided that the prudent thing to do was to bank some gains. We sold half the options for $13.20 and obtained a gain of 39%. While this was not the big gain we were seeking, we wanted to bank some profit and let the rest of the position continue to work higher if it can. Sometimes these types of stocks surge, sometimes they just move in a way that is slow and steady.

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Here is a completed trade from the Success Trading Group which offers insights into our trading strategy and the target that we have hit this week:

Nordstrom, Inc. (NYSE:JWN)

Our Success Trading Group members scored another winning trade when we closed out a position in Nordstrom, Inc. (NYSE: JWN). We bought this stock on Sept. 30 and sold it on Oct. 11 for a 2.39% gain. We are watching several other stocks and are looking forward to trading next week.

Success Trading Group's system is geared towards bringing you consistent, short-term gains and you can expect four to six trades every month.

To receive a risk-free trial and save 50%, click here now.

3. Pick of the Week

AMAT (Applied Materials--$50.84; +1.53; optionable)

EARNINGS: 11/14/2019

STATUS: Triangle. AMAT is showing very good action due to a three-month triangle that formed after a solid June through July move to a higher recovery. This is a solid pattern as it uses the 50-day MA as support for the lower trend line. This move is part of a larger 20-month base that formed off of the March 2018 high. The stock also was coming off of a test of the 50-day MA and showing good volume.

However, there was some resistance at just over $51.00. If AMAT clears that barrier on some good volume (the trading volume was up on Wednesday due to the upside move), we want to pick up a half position and see if it can break out over $52.50. A move to the target will give us a gain of 13% on the stock and a gain of 100% on the options.

VOLUME: 6.279M Avg Volume: 6.986M

BUY POINT: $51.21 Volume=9M Target=$57.97 Stop=$48.96

POSITION: AMAT NOV 15 2019 50.00C -- (55 delta) &/or Stock

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4. Covered Call Options Play

Arqule Inc.(NASDAQ:ARQL) -- Arqule Inc. is currently trading at $8.73. The Nov. 16 $8.00 Calls (ARQL20191116C00008000) are trading at $1.50. That provides a return of about 19% if ARQL is above $8.00 by the expiration.

Learn more about our Covered Call Tables here!

Tuesday, October 08, 2019

Weekender 10/6

1. Market Summary

Excerpted from Thursday's paid content of "Investment House Daily" by Jon Johnson.

Stocks Plunge Post Poor Manufacturing Report

- There was a soft start and then a plunge on the ISM Services led to a 200-day SMA (simple moving average) and a rebound.
- It is nice to see the market act as it should, i.e. without the Fed. At least we think without the Fed...
- ISM Services holds above 50, but misses expectations. Factory Orders and durables as expected but somewhat week and capital spending has dropped by 0.4%.
- Rebound internals are weak, suggesting a relief move. However, we can still make some money on the upside.
- We are swinging for singles and doubles on a bounce, not home runs.
- Will the Fed let the market work its cycle or will it mess things up again?
- We are playing the bounce in anticipation of more downside to come.

The session played out pretty much as expected, even though it took a rattling by a weaker than expected ISM Services to get the indices down to test that 200-day SMA. After that, an oversold bounce and a short covering rally ahead of the September jobs report soon ensued.

The rebound moved the indices from modestly lower to sharply lower with the Dow off 357 points on the low and undercutting the 200-day SMA. The NASDAQ found the 200-day SMA as well, dropping 185 points on the low.

That selling was enough for the market to get sufficiently oversold in the 2.5 session drop (that actually started during the prior week) to rebound. The jobs report was released before the markets opened on Friday, and as jobs tend to lag, there is the possibility that the report can provide no signal that the economy is slowing. It won’t be an accurate economic signal, but right now, the markets live in fantasy land and imbue data with certain meanings that they do not really have.

Index Discussion: Look at the S&P500, DJ30, NASDAQ and the XLK. They all failed to put in higher highs during the last rally, unlike the prior move. The S&P 500 put in a higher high from April to May and then again in July. However, it failed to do so in September and rolled over. The trajectory of the NASDAQ is even clearer.

The PHLX Semiconductor Sector (SOX) is the outlier, and it is important as it put in an intraday new high, reversed and tried to put in a higher low. Its uptrend is still intact even though it certainly looks as if it is setting up that same upward pointing wedge that the other indices broke down from. NOTE: The figures and information above are from the 10/3 report.

Watch Market Overview Video

Watch Next Session Video

NOTE: The videos are from the 10/2 report.

2. Targets Hit
With the market primed to sell, if the Fed will quit buying bonds and let it, most of the action was on the downside. We took some gain on Wednesday and again on early Thursday due to the selling as we anticipating an oversold bounce once the NASDAQ and DJ30 hit the 200-day SMA. It paid off.

Here are three completed trades from Investment House Daily, which offer insights into our trading strategy and the targets that we have hit this week:

Health Insurance Innovations Inc. (NASDAQ:HIIQ): There was an opportunity to make money even during the selling. HIIQ is a stock that set up a big triangle with a double bottom from August to early September. It broke higher, moving through the 50-day estimated moving average (EMA) and then tested the upper trend-line in the triangle. Then, it faded to the 50-day EMA inside the triangle and showed a doji. We really like that kind of entry, i.e. the higher low at a key support level in a triangle or trading range as that usually leads to a breakout.

So, when HIIQ gapped to the upside through the trend-line during the next session, we entered with some stock at $23.85 and some November $25.00 call options for $2.80. HIIQ paused the next session, which is not uncommon after a gap, and then started to rally. It even walked right up to near the 200-day SMA and was showing a doji in the last hour of trading. We opted to sell half the position. That is, we sold some stock for $26.02 and banked a 9% gain. We sold half the options for $3.60 and banked a 27%. While this is not huge, it was solid for a week in the stock.

Pinterest Inc. (NYSE:PINS): During the prior week, we took a nice 75% gain on half of our put options. Since PINS was selling hard, we left the other half to see if it dropped on down to that May low. It started heading that way Monday and then it reversed to flat. Dang. While the stock held its ground on Tuesday, on Wednesday, it gapped lower and sold. However, it also started to hold and climb. We then sold the rest of the options for $3.55 (bought at $2.00) and banked a a solid 77.5% gain.

Starbucks Inc. (NASDAQ:SBUX): We put SBUX on the report on 9/21 as it had broken the 50-day MA after a weak test of the July high failed. It sold through the 50-day MA and then worked laterally into the third week of September. It looked ready to move lower and continued sideways. This meant that it was literally up one day and down the next as the mood regarding the U.S.-China trade dispute changed each session. Finally, it made a meaningful break lower on 9/27 and we moved in with some November $90.00 put options for $4.45.

As is often the case, when a downside play finally makes its move, it makes it fast. SBUX had dived lower on the prior Friday, paused with a continuation doji on Monday and then moved towards the downside. On Wednesday, it was close to the target and when it broke lower on Friday, it hit the target. We sold the options for $7.40 and a 66% gain. Now, we plan let it bounce up to the 10-day EMA and play it towards the downside again as there is a lot of downside room to sell.

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3. Pick of the Week

URBN (Urban Outfitters--$27.49; -0.68; optionable): Apparel stores

EARNINGS: 11/19/2019

STATUS: URBN is one of those lagging retailers that just recently started coming off the lows. Firstly, it formed an inverted head and shoulders in August at the bottom of the base and broke higher through mid-September. It then broke over the 200-day SMA Monday with some strong volume. Now that it has cleared that resistance, there is some maneuvering room as the market makes its relief bounce. On Wednesday, URBN tested the 200-day SMA on lighter trade. We want to play the move back up through our buy point. A move to the target will give us a gain of around 14% on the stock and a gain of 90% on the options.

VOLUME: 2.907M Avg Volume: 3.535M

BUY POINT: $27.61 Volume=4M Target=$31.49 Stop=$26.39

POSITION: URBN NOV 15 2019 27.00C - (51 delta) &/or Stock

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4. Covered Call Options Play

Lattice Semiconductor Corp.(NASDAQ:LSCC) -- Lattice Semiconductor Corp. is currently trading at $18.70. The November 16 $17.50 Calls (LSCC20191116C00017500) are trading at $2.30. That provides a return of about 13% if LSCC is above $17.50 by the expiration.

Learn more about our Covered Call Tables here!