1. Market Summary
Upside Break Continues
– Tuesday continued the upside break even though it was a bit hungover and the PHLX Semiconductor Sector (SOX) was down.
– The Fed and trade have pushed the upside.
– The gains of housing prices are slowing.
– There was a data dump on Wednesday.
While Tuesday was not the blowout session that Monday was, it was no slacker. At least, it was not much of one. The S&P 400 mid-caps led with a solid 0.41% move, but SOX was negative and the other indices were less than impressive. All the same, they advanced on top of Monday’s new break higher, which showed breadth and volume in addition to new highs.
More trade and Fed positives, or at least a lack of negatives, allowed the bids to continue. Really, there is no reason to pull them with the news flow that is still being underwritten by the Federal Reserve's decision to stop rate hikes and restart its liquidity pump.
Several housing-related reports were issued on Tuesday. Some were okay, some were not. The Case/Schiller Index indicated that prices rose in September. The Federal Housing Finance Agency (FHFA) housing report for the same month showed that prices rose 0.6% vs. 0.2% in the prior month. While the figures are positive overall, there are issues.
The large-cap indices all edged higher.
The S&P 400 mid-caps were quite decent and the index's 0.41% gain extended the breakout from the trading range.
SOX was disappointing. After a solid upside break on Monday, it experienced a bit of a stall. It then held the 10-day exponential moving average (EMA) on the close. This was neither death nor a huge negative, but it did lag the market. SOX will need to take the lead again.
NOTE: The figures and information above are from the 11/26 report. There are no videos this week due to the Thanksgiving holiday.
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:
Hilton Hotels Corporation Common Stock (NYSE:HLT):The hotel stocks set up some nice patterns from mid-summer to autumn. HLT, for instance, formed a nice cup with a handle base. After this excellent handle setup to start November, we saw it tap the 20-day EMA with a doji. Then, we put it on the report.
On Nov. 14, HLT jumped off the 20-day moving average (MA) on great volume. We moved in with January $100.00 call options at $2.95 when the stock was at $101.29. HLT jumped higher and tested the 20-day EMA into Nov. 21. On Friday, HLT surged and continued doing so into Monday and Tuesday. Then, it hit our initial target. We sold half the options for $5.40 and banked an 83% gain.
Since the stock rallied further, the options began to be bid at $6.60. This is a 120% increase in value. We will let the remaining half work as long as HLT puts in this kind of move. When it slows or gaps higher and starts to fade, we will bank the rest of our gains.
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Here is one completed trade from Technical Traders Alert, offering insights into our trading strategy and the target that we have hit this week:
Clovis Oncology Inc. (NASDAQ: CLVS): We already had banked some nice gains on CLVS on Nov. 20. We had picked up the stock for $6.27 on Nov. 14 and January $6.00 call options for $1.45. After CLVS's little test, it just kept on running higher into Thursday, Friday, Monday and Tuesday. However, CLVS surged and then started to stall on Tuesday. This was a huge move with nice gains.
Last week, we talked about how the options in low-priced stocks were not always commensurate with their moves in value as options in the higher priced stocks are. As a result, it would take a really big gain for us to get interested in buying options in low-priced stocks. Well, this time we got it.
As CLVS surged into Tuesday, we sold the rest of the stock for $9.97 and a 59% gain. We sold the remaining call options for $4.10 and banked a 180% gain. That is the kind of move it takes to pump up the options of lower-priced stocks. That said, this strategy was really sweet.
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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:
NYSE:SNAP (Snap, Inc.)
After SNAP peaked in late July and sold back, we kept an eye on it. We played it on the move up in late September. When it tumbled into October, we were still watching. It then double-bottomed off the 200-day SMA for the second time in the second half of November. When it broke over the 50-day MAs, that was the move we were looking for. On Nov. 20, SNAP continued on its trajectory and we picked up the stock for $15.33. SNAP then worked a bit higher and moved laterally.
On Monday, it gapped higher with the rest of the market. That took SNAP to our initial target. When we saw it start to stall, we took the gains. That is, we sold the stock for $15.83 and banked a gain of 3.26%.
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
MSFT (Microsoft--$151.23; +1.63; optionable)
STATUS: Flag. We are looking at a new position to add on to MSFT as it completed a three-session test of the 10-day EMA and then broke higher on a solid rise in volume on Monday. There is nothing fancy here. We are just looking to play a logical move for MSFT as it continues to climb higher. A move to the target will give us a gain of around 60% on the options.
VOLUME: 22.429M Avg Volume: 22.214M
BUY POINT: $151.38 Volume=23M Target=$156.49 Stop=$149.71
POSITION: MSFT JAN 17 2020 150.00C -- (59 delta)
To see the MSFT chart image, click here!
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4. Covered Call Options Play
Cara Therapeutics Inc. (NASDAQ:CARA) -- Cara Therapeutics Inc. is currently trading at $24.55. The Jan. 18 $22.50 Calls (CARA20200118C00022500) are trading at $4.30. That provides a return of about 18% if CARA is above $22.50 by the expiration.
Learn more about our Covered Call Tables here!