Monday, November 11, 2019

Weekender 11/10

1. Market Summary

Trade Issues Remain Salient

– Trade giveth, trade taketh away. Kind of.
– An early gap higher led to new highs on the S&P 500 and the DJ30. The NASDAQ slipped in the afternoon and gave up an earlier new high.
– We saw some more churn on the NASDAQ as all indices found some resistance -- outside the DJ30.
– Some leaders stalled, some did not. Others tried to become leaders.

We saw new highs on the large-cap indices again as positive trade headlines yet again provided a reason for investors to continue buying the rally. The rally was sparked by China's overnight announcement that the United States and China had agreed to cancel existing tariffs as part of signing the Phase 1 Agreement.

However, there was a question as to whether the United States would affirm the statement. Nonetheless, stocks started higher. Would the other shoe fall, i.e. would the Trump administration refute the tariff rollback? Later in the session, reports stated that the United States had confirmed China’s statements. Then, there was a great deal of rejoicing.

The good will hit a wall mid-afternoon as Reuters questioned whether the confirmation was really a confirmation. Stocks sold from mid-afternoon to the last hour before bouncing back somewhat at the end.

Chart Analysis:

S&P 500: It gapped out of the one-to-two day pullback and rallied to near 3100 before fading by 13 points. While the S&P 500 would end the day with a 8.40% gain, it lost most of the move during the session and showed a tombstone doji.

Should it move over? Not based on this. The S&P 500 broke higher on Monday, tested nicely and broke higher again on Thursday. While this is not a great finish on the session, it still saw a break higher and a new high.

NASDAQ: It gapped, rallied to a new high and then faded. While it did not reach a new high on the close, it held a nice gain nonetheless. Was there a peak? Yes, there was churn, given the higher volume and the third straight session of high stock turnover. This kind of churn suggests a pullback, but not a reversal.

NOTE: The figures and information above are from the 11/7 report.

Watch the Investment House Video For This Week Here!

NOTE: The video is from the 11/6 report. There was only one video this week.

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:

Broadcom Inc. (NASDAQ:AVGO): AVGO moved back and forth as it tried to break out from a longer triangle in early September. However, it failed to do so. Over the next six weeks, however, it set up a short inverted head and shoulders pattern and put in a pattern consolidation. We liked the development and put it on the report on Oct. 31.

On Nov. 1, AVGO broke higher. As a result, we entered with some December $290.00 call options for $15.90. AVGO wasted no time on this breakout, gapping higher on Monday and rallying again on Tuesday. When it hit our buy point, we sold the options for $30.70 and banked a nice gain of 90%.

Nvidia Corp. (NASDAQ:NVDA): NVDA broke higher in mid-October. As we wanted to move in again, we were looking for an opportunity. It took just three days as NVDA put in a one-two-three test of that break and tapped the 10-day exponential moving average (EMA) on day three. After we put it on the report, NVDA broke higher on the following Monday.

Since that was the signal, we moved in with some December $195.00 calls that we bought for $12.90 when the stock was at $195.83. NVDA then put in a stair-step move up the 10-day EMA into this week and sported a strong upside break on Monday.

On Tuesday, it continued upside and then started to stall.

We opted to go ahead and bank half the gain by selling our calls for $21.55 for a solid 65% gain. We are still holding half the position in case NVDA can continue the run for us toward the year's end.

PVH Corp. (NYSE:PVH): We saw PVH setting up an inverted head and shoulders pattern from mid-summer through mid-October. Indeed, the right shoulder was a smaller inverted head and shoulders pattern in itself. As it looked ready to break higher in the shoulder, we put it on the report.

On Oct. 21, PVH broke higher off the shoulder. As a result, we moved in with December $90.00 calls at $6.00 when the stock was at $89.38.

PVH continued higher with a strong move during the next session, tested and made another strong move . . . and then pulled back during the last few sessions in October. It held the support, however, and shot higher to a new recovery high by Tuesday. On Thursday, PVH gapped higher and broke through the 200-day simple moving average (SMA).

As it then started to falter, we took the gain by selling the options for $11.75 and banking a nice 95% gain.

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

NASDAQ:PTEN (Patterson-UTI Energy, Inc.)

We were watching oil stocks as many have formed good patterns and were starting to break upside. PTEN looked great as it had plenty of momentum in late October. It broke through the 50-day moving average (MA) on Oct. 25 and kept going on Oct. 28.

We moved in with some stock at $9.36 -- just in time to see PTEN fade that move and continue to fade into Halloween. After the gremlins left, it jumped higher on Nov. 2 and surged again on Monday. As this move took PTEN to our target, we sold the stock for $9.56 and a 2% gain.

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.

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

3. Pick of the Week

COST (Costco--$299.18; +2.36; optionable)

EARNINGS: 01/02/2020

STATUS: Cup w/handle. As it tested the 50-day MA in August during that selling, COST formed a cup base and then jumped higher late in the month. It then rallied to a new high in early September. After that run, COST peaked and needed a break to rest and base out. Although it fell back to the 50-day MA in early October, it had started higher. Thus, we played that move up and banked some decent gains.

After another peak in late October just below the September high, COST has faded over the past two weeks and held at the 20-day EMA and the rising 50-day MA. Since then, a nice handle has formed on low volume. On Thursday, COST showed a doji with tail, tested near the 50-day SMA and rebounded on a shot of solid volume. Indeed, there was some buying off of that test. On Tuesday, there was a nice upside move on rising trade.

We want to play a breakout from this pattern for the initial run and perhaps further. Unlike many current leaders, COST has put in a nice base and has not rallied or become extended. That gives us the confidence to make the play. We want to move in on a break upside through the entry that holds the move. A rally to the target will give us a gain of 65% on the call options.

VOLUME: 1.761M Avg Volume: 2.051M

BUY POINT: $300.27 Volume=2.2M Target=$314.98 Stop=$295.24

POSITION: COST JAN 17 2020 300.00C - (52 delta)

To see the COST chart, click here!

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4. Covered Call Options Play

Compugen Ltd.(NASDAQ:CGEN) -- Compugen Ltd. is currently trading at $5.29. The Dec. 21 $5.00 Calls (CGEN20191221C00005000) are trading at $0.65. That provides a return of about 14% if CGEN is above $5.00 by the expiration.

Learn more about our Covered Call Tables here!

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