I asked if the Fed has moved to the “time to crash the market mode” that I predicted was their only real course of action to solve the inflation issue without destroying the systems that keep those in power in power, states Jon Johnson of Investment House Daily.
Targets Hit
Many of the market leaders in the “hard thing” stocks—industrials, oil, metals—put in good moves and were nearing their next peaks. We like to take gains in those situations in Investment House Daily, then let them fade back to test near support. If the pattern remains solid, we can move back in.
Illinois Tool Works Inc. (ITW) is one of those. We initially entered on November seventh, as ITW broke higher from a nice fade to test the ten-day exponential moving average (EMA) after its breakout. We entered, ITW edged higher, then gapped upside on November 11, hitting our initial target.
We issued the alert to sell half the position, banking a 96% gain in the options. After that gap higher, ITW continued higher into this past week. On Monday, ITW surged but started to stall after hitting old resistance at $230.
That was the signal to take more gains, and we issued the alert to sell another half of the options for a 120% gain. Now, ITW is testing again, and indeed, we are looking at a new play as it breaks higher off the ten-day EMA test.
Valero Energy Corporation (VLO): In late October, VLO was setting up a handle to a larger five-month double-bottom-with-handle base. The stock was working laterally, with the ten-day EMA rising up below it. That lateral move formed the handle, and from there, we simply waited to see if the stock can show us the break higher to signal a buy-in Technical Trader Alert.
That signal came on November first. VLO had tested the ten-day EMA with a doji on Halloween, and after a pullback to a doji at the ten-day EMA, that often signals a move higher. During the next session, VLO made that move. We issued the alert to enter with January $130.00 call options asking $10.85 with the stock trading at $130.04.
From there, VLO worked steadily, albeit a bit slowly, up the ten-day EMA into this past week. On Monday, VLO caught a solid bid, and the stocks gapped and rallied to our initial target. We played the plan, issuing an alert to sell half the option position with the options bidding $15.50, to produce a 42.8% gain. VLO faded back to test the ten-day EMA again, and we anticipate the stock working higher once more up that near support to a new high.
We also banked gain in the following position:
Southern Copper Corp. (SCCO): 154% gain in the options.
Nordic American Tanker Ltd. (NAT): We are playing NAT on its moves off the tests of support. The stock tested the 50-day moving average (MA) in late October and bounced—that was a play. After a bounce, NAT came back to test the 50-day MA again in mid-November. That was our next play.
After a peak on the prior run and a four-session fade to the 50-day MA, NAT closed with a modest bounce. That was our signal—if NAT started higher the next session, we were in.
Sure enough, NAT bounced on November 14. We sent the alert to enter the stock at $3.34. In the following session, NAT jumped higher again, hitting our target. We issued the alert to sell, as the stock was bidding at $3.50, banking a 4.79% gain.
We also took a gain in the following position:
Permian Basin Royalty Trust (PBT): 7.11% gain in the stock.
Covered Call Options Play
Talos Energy, Inc. (TALO)—Talos Energy, Inc. is currently trading at $19.98. The December 16 $20 Calls (TALO20221216C00020000) are trading at $1.50. That provides a return of about 10% if TALO is above $20 by the expiration.
Learn more about Jon Johnson at InvestmentHouse.com.