Minggu, 22 November 2020

Weekend Wrap Up for 11/22/2020

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Investment House Wrap Up
IH Daily
Technical Traders Alert
Success Trading Group
About Jon

In This Issue:

  1. Market Summary
  2. Targets Hit
  3. Pick of the Week
  4. Covered Call Options Play

Weekend Wrap Up for 11/22/2020

by Jon Johnson
Editor,
Investment House Daily, Technical Traders Alert, & Success Trading Group

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1. Market Summary
Jon Johnson

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

Stocks Chop Again, Then Rally

– Stocks chop until the prospect of stimulus is mentioned. Then, they rally.
– The economics remain good enough, but the market is unimpressed.
– While there are no new highs, the PHLX Semiconductor Sector (SOX) is within a point of a new high. This is due to the fact that chips are leading and cloud stocks are showing resumed life.
– After-hours futures dropped, and the announcement of new state-mandated COVID-19-related closures were labeled as the cause. Or, was it because the Treasury is not renewing bailout programs?

In the premarket hours, I said that a weaker open was good, as it would allow stocks to possibly build into a session. Stocks and indices were still in good patterns, but were unable to find traction for a breakout. Something more was needed.

The economics were still decent, though. Jobless claims rose to 742,000, the first rise in six weeks, but the number of continuing claims fell to 6.372 million. The Philly Fed beat at 26.4 (25 was expected), but this figure was lower than the 32.3 reading from October. Existing home sales put in a record showing. This is nice, but judging from the reaction -- or lack thereof, it was nothing that the market did not really expect.

Perhaps the market got something on Thursday. Thoughts of stimulus were pretty much dead, forcing us to wait until the next administration for a new stimulus package. However, Senators Schumer and McConnell appeared to agree that there is need for more stimulus and may indeed work to pass a new stimulus bill sooner, rather than later.

Technical Analysis:

S&P 500: This was a very similar pattern to the NASDAQ, even though the S&P 500 did put in a new closing high on its Monday move. It then tested back below the 10-day exponential moving average (EMA) intraday on Thursday and reversed upside for a modest gain. While this was an excellent course of action to test the breakout from its three-month base, it still needs to resume the move.

NASDAQ: It opened at the 10-day EMA, faded a bit more and then reversed for a solid gain. There was no breakout, meaning that the NASDAQ is still below the Monday high, as well as the November and October highs. Currently, it is in a great position and has a higher low at its near support. While it received some leadership on the day, it still needs the big-cap tech stocks to throw their hats into the ring in order to get the next breakout from its current three-month pattern.

NOTE: The figures and information above are from the 11/19 report.

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NOTE: The video is from the 11/18 report.

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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:

Tesla Inc. (NASDAQ: TSLA): This is a position that we had picked up and banked gains on previously. However, we still had part of the position. Since the setup was good, we let TSLA work into expiration week. The good pattern was a portent of good things things to come. Eventually, it was announced that TSLA would be added to the S&P 500. After the stock gapped up, we sold the remaining options for $99 and banked a 45% gain.

Inmode Ltd. (NASDAQ: INMD): We entered INMD when it broke higher from a trading range on Oct. 8. At this point, we bought stock for $39.21 and some November $40 call options for $3.10. Then, INMD climbed and gapped upside on Oct. 13. After it made a quick run very early in the day, it reversed off of our target after just a few seconds. 

We figured that we would let it work, as it would rebound to the target. We even thought that it might move beyond the target. Instead, INMD formed a new base through October, and it was not until November that it rebounded. 

When it finally worked its way back to the target, we banked a 12% stock and a 35% option gain. 

While these gains were decent, the play shows that we got the move we needed. Even though it backed off from the target after just a few seconds, we should have banked some of the gains. There are always learning experiences in the market!

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Here are two completed trades from Technical Traders Alert, offering insights into our trading strategy and the targets that we have hit this week:

Roku Inc. (NASDAQ: ROKU): ROKU consistently wins for us, and after a run to mid-October that made us money, it took a needed break and consolidated into early November. ROKU surged on the Pfizer vaccine announcement and then faded again. While it faded, it did not fall hard. 

After it held the 20-day moving average (MA), we put a play on the report and began watching for a new break higher. On Nov. 12, ROKU did move higher off of the 20-day EMA support. So, we bought January $230 call options for $25 when the stock price was $235.98. 

ROKU worked laterally and up the 20-day MA and surged upside on Thursday. As it hit our initial target, we banked half of the gains by selling the options for $38.70. This produced a 54% gain.

Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM): Chip stocks are always important to the market. So, when many were testing their support in late August, we began looking for new plays. TSM was just one of the stocks we saw and played. It had come back to test the 50-day MA to close the month of August. We were watching for a move off of the 50-day MA and put a play on the list when TSM started to show signs of bouncing on Nov. 2. 

We entered on Nov. 3 and bought January $85 call options for $7.70. TSM rallied off of the 20-day EMA through that week and then tested the 20-day EMA the day after the Pfizer news. It then started back upside with a solid move. On Nov. 16, it gapped higher and hit our initial target -- largely due to more good vaccine news. We used that move to sell half of the position for $15.10. This enabled us to bank a 96% 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:

Cloudflare Inc. (NYSE: NET): While many cloud stocks struggled, even into the November rally, NET was one of the stocks that held its pattern through the struggles. Indeed, NET didn’t struggle. It rallied in early October, tested and then rallied into early November. It then tested again. 

On that November test, we saw a really nice doji tap of the 10-day EMA after a gap higher. This often indicates that the move is going to continue. When NET was up during the next session (Nov. 11), we bought stocks for $64.76. 

NET did move up, but the movement was back and forth. It also kept testing the 10-day EMA over the course of the week. This week, NET caught more of a bid, and even though its movement was still back and forth, NET hit our target on Friday. We then sold the position for $67.74 and banked a 4.6% gain.

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3. Pick of the Week

PCTY (Paylocity -- $191.69, +4.94)

EARNINGS: 02/04/2021

STATUS: We saw PCTY produce a nice run from late September to mid-October, followed by a three-week flag. It broke higher on Nov. 4, but it then turned extremely volatile. Indeed, it bounced up and down in big moves for the next three sessions. PCTY then calmed down and faded into Monday.

Soon, it tested near the 50-day EMA on the intraday low. After it rebounded, PCTY began moving higher on Wednesday. As the stock looks good, we want to move in if PCTY can make a solid break higher through the entry point. A move to the target will give us a 65% gain on the options.

VOLUME: 286.077K  Avg Volume: 346.901K

ENTRY POINT: $192.33 Volume=500K Target=$216.98 Stop=$184.31

POSITION: PCTY FEB 19 2021 190.00 Calls -- (54 delta)

To see the chart for PCTY, click here!

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4. Covered Call Options Play

Fulgent Genetics Inc. (NASDAQ: FLGT) -- Fulgent Genetics Inc. is currently trading at $41.66. The Dec. 19 $42.50 Calls (FLGT20201219C00042500) are trading at $3.70. That provides a return of about 13% if FLGT is above $42.50 by the expiration.

Learn more about our Covered Call Tables here!

About Investment House:


Investment HouseOnline Since 1999! Our investment newsletters are designed to reduce your research time and help you invest and trade profitably. Our strategies range in risk from rather conservative covered call writing, trading blue chip stocks, all the way to speculating with options to get quick triple-digit gains.

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