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.
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3. Pick of the Week
AMAT (Applied Materials--$50.84; +1.53; optionable)
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!