• Daily Game Plan – All is Quiet

    by  • March 28, 2013 1:29 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    After a fairly volatile overnight futures session, markets are quiet today ahead of the three-day weekend.  The one bit of news for the day was a slight miss on the Chicago PMI data, but equities shrugged off that bad news and rallied back near 52-week highs.  It appears many traders have taken the day off, as volumes are very light and price action is muted.  However, the beat goes on and we continue to grind higher.  Currently, the Dow and S&P 500 are leading markets, each up 0.2%, while the Nasdaq and Russell 2000 are both trading near breakeven.  Bonds are slightly lower on the day, while metals and miners are off about 1%.

     

    CHART OF THE DAY

    Bank of America (BAC) – The banking behemoth is setting up nicely here after filling its gap higher from 3/14.  After leading markets for some time, financials have taken a breather as of late.  However, it appears that they could be setting up for another leg higher.

    Despite its strength, sentiment in the options market has been extremely bearish as of late.  In fact, the Schaeffer’s Open Interest Put/Call Ratio (SOIR) is currently in the 98th percentile of all readings taken during the past 52 weeks, indicating extreme pessimism.  Should BAC continue its grind higher, this creates the potential for an unwinding of these bearish bets, which would drive the shares higher.  I like an entry here with a stop on a close below 12.  I would initially target a move to 13, with 15 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Muted markets into the close, and then the potential for a decent gap on Monday.  The lack of action tomorrow, coupled with a long weekend that could be newsworthy, leads me to believe we could see something big next week.  In trading this market, all you can do is take long and short setups that look appealing, and then manage risk.

    About

    Bryan Sapp is a Senior Trading Analyst at Schaeffer’s Investment Research, where he has specialized in volatility-based options trading since early 2010. With Bryan at the helm, Schaeffer’s Volatility Trader generated a 2012 portfolio return of 70% for subscribers. This real-time option recommendation service exclusively trades short-term straddles. Prior to joining the research team at Schaeffer’s, Bryan honed his skills as a speculator by trading his own account, and playing poker professionally to pay his way through college. Bryan attended the University of Louisville, where he received his Bachelors in Economics and an MBA with an Entrepreneurship focus.

    http://www.schaeffersresearch.com/

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