Excerpted from Thursday's paid content of "Investment House Daily" by Jon Johnson.
Tech Day Has Come!
– Earnings and Fed liquidity were able to overcome the weak economic data.
– Durable goods capital expenditures are the lowest they've been since 2016.
– Repurchase agreements injected $134 billion into the system on Thursday as the Fed has continued to provide huge amounts of liquidity.
– Large-cap indices are back up to their prior highs with a gap to a doji.
– Amazon reported a miss on earnings that drove the stock down 120 points.
– We are still awaiting the break to show the next direction that the market will take. The Fed liquidity says it should happen, but we still have to see it.
Thursday was tech day. However, even though the other areas of the market did not roll over (though retail looks ready for a pullback), they mostly took a pause. Machinery, financial, manufacturing and materials were all softer after solid upside moves.
Money took a breather from moving to those areas and moved into tech-related areas instead. Software (Microsoft beat forecasts), chips (Lam Research Corporation beat expectations while Applied Materials just surged) and some miscellaneous NASDAQ stocks had good -- and bad -- days. For instance, while Tesla and PayPal had a good day, Twitter had a bad day. After hours, while Intel had a good day, Amazon had a bad one.
The earnings reports from Microsoft (MSFT), Intel (INTC) and the Lam Research Corporation (LRCX) were solid enough and the PHLX Semiconductor Sector (SOX) was able to gap back over the April closing high and rally back upward. It is definitely not dead yet. After Texas Instruments' (TXN) destruction due to its earnings, LRCX and Intel more than filled the void.
Chart Analysis:
S&P 500: It gapped upside to test near the September and July highs and then faded a bit off the intraday high. While it is up for sure, this fact does not change anything as the S&P 500 is still below its prior highs and has yet to make the next definitive move.
NASDAQ: It gapped, tested and rebounded to close at the recent highs. However, it is still below the August-September high and the July all-time high. AMZN likely won't help much and INTC, while jumping at first, faded during much of the NASDAQ's movement. Will this be a gap higher that is met with a gap lower? We will see.
AMZN can rebound when those who are dying to get in see an opportunity. While this may be a play that we want to make, the options will still be extremely high in volatility. Thus, we will need to see the implied volatility back off in order make money through buying shares. While selling the premium is a possibility, since the stock price is what it is, this strategy would only be possible with a spread where an investor sold some strikes and bought others.
NOTE: The figures and information above are from the 10/24 report.
Watch the Investment House Videos For This Week Here!
NOTE: The videos are from the 10/23 report.
2. Targets Hit
Here are three completed trades from Investment House Daily, offering insights into our trading strategy and the targets that we have hit this week:
Cummins Inc. (NASDAQ:CMI): As machinery saw money rotating its way, some of the industrial stocks rallied as other areas were being sold. While we didn’t catch CMI on day one of the move, we did catch it as it broke out over its resistance in mid-October. The stock gapped higher on Oct. 11 and tested on Oct. 14. Then, we put it on the report. On Oct. 15, the stock cleared the September high. Thus, we moved in with some November $165 call options at $5.30. Subsequently, CMI rallied straight up to the July peak and hit our target on Oct. 21.
We then sold half the options for $9.00 and banked a 69.8% gain. We also were willing to let CMI show if it was able to move higher. While it rallied a bit more through Wednesday, it threw a doji on Thursday. After 12 sessions of upside in a straight run to the prior highs, we still had our November options. As earnings were scheduled for Oct. 29, the situation was not likely going to get much better. Thus, we took the benefits from the move by selling the rest of the options for $11.90 and banking a gain of 125%.
Inmode Ltd. (NASDAQ:INMD): We saw INMD forming its first base after rallying to an initial peak in September. INMD then rallied off the lows and made a nice low volume test of the 10-day exponential moving average (EMA). After it showed a doji on Oct. 18, we put it on the report that weekend. On Monday, it broke higher and we bought stock (but no options) for $27.54. Then, INMD stepped right up to the target and hit it on Oct. 23. We sold half of the position for $31.85 and banked a 15.6% gain. We then left half of the position to work because this was a new issue that was showing a great course of action after its first base. This type of stock can produce very strong continuing rallies.
U.S. Concrete, Inc. (NASDAQ:USCR): While materials are not that sexy in terms of what they do, when they make you money, they take on a whole new light. We saw USCR setting up a short double bottom at the 50-day EMA after a surge in September. We put it on the report on Oct. 16 as it showed some buying off of that EMA. During the next session, the stock jumped and we entered by buying stock at $51.21 and some November $50 calls for $4.10. USCR posted a very solid four-session rally right up to our target (the prior rally's high) and hit it on Oct. 22. We sold our stock for $54.92 and banked a gain of 7.2%. Concurrently, we also sold our options for $5.50 and banked a gain of 34%. While this is not a huge return, it was a simple play that earned easy money.
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Here are two completed trades from the Success Trading Group, offering insights into our trading strategy and the targets that we have hit this week:
NASDAQ:NVDA (Nvidia Corp.)
We entered this position on Oct. 21 for $195.83 as NVDA started higher off a 10-day EMA one-two-three test of the breakout that occurred during the middle of the month. This trajectory looked super. Indeed, on Oct. 22, NVDA surged and hit our target. We sold our shares for $202.45 and a 3.38% gain. Since NVDA reversed that gain during that very session and tested back to the 10-day EMA, we are watching to see if we can run this play once again.
NASDAQ:AMAT (Applied Materials, Inc.)
We entered this play on Oct. 15 at $52.83 and sold our shares on Oct. 24 for $53.91. This is a 2.04% gain. That is, we entered our AMAT position when it broke higher during the middle of the month. Then, the chip volatility hit. The stock made a quick test of the 50-day moving average (MA) and then gapped upside and to the target.
These are examples 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
EXPE (Expedia--$138.31; +1.66; optionable)
EARNINGS: 11/06/2019
STATUS: EXPE peaked from June through July and then faded into early August to start the current cup with handle base. Two weeks ago, the stock used the 50-day MA as support to break higher with a rally and gap. Then, a nice lateral handle formed along the 10-day EMA to fill that upside gap. On Wednesday, EXPE moved higher on a rising average volume. Now, it looks as if EXPE is ready to make the break from the handle. We want to play a continued move up through the buy point on Thursday as a move to the target will provide a solid 80% gain on the call options.
VOLUME: 1.106M Avg Volume: 1.261M
BUY POINT: $138.54 Volume=1.5M Target=$146.98 Stop=$135.71
POSITION: EXPE DEC 20 2019 140.00C -- (49 delta)
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4. Covered Call Options Play
Star Bulk Carriers Corp.(NASDAQ:SBLK) -- Star Bulk Carriers Corp. is currently trading at $11.23. The Dec. 21 $10.00 Calls (SBLK20191221C00010000) are trading at $1.40. That provides a return of about 18% if SBLK is above $10.00 by the expiration.
Learn more about our Covered Call Tables here!
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