• Daily Game Plan – Apple Swoon, Markets Mixed

    by  • January 24, 2013 2:13 pm • Breaking News, Bryan Sapp’s Daily Game Plan, Charts to Watch • 3 Comments

    MARKET CHECK

    While indexes are currently pulling back significantly after the S&P 500 briefly hit the 1500 level intraday, today’s resilience despite a major selloff in Apple Computer (AAPL) is noteworthy.  Last night, AAPL reported worse-than-expected earnings, and the equity is currently off nearly 12%.  Had this event transpired at some point in the past, that surely would’ve led to a major market swoon.  However, indexes have decoupled from AAPL, as new market leaders have emerged over the past few months.

    At current levels, the Russell 2000 and S&P 500 are near flat on the day, while the Nasdaq is off nearly 1%.  Bonds are slightly lower, while metals are off over 1%.  After a seemingly endless selloff, volatility products are spiking today, as the VIX is up 8% and the VXX, everyone’s favorite short, is up about 5%.  Spikes in these vehicles near the top of the range  today were a signal that we could see some weakness in the near term.  This was no surprise, as many eyes have been fixated on the 1500 level for some time.

     

    CHART OF THE DAY

    Infinera Corporation (INFN) – The digital networking company is off to a great start in 2013, up 16% since the beginning of the year.  The equity is strong today on the heels of sector giant F5 Networks (FFIV) reporting better-than-expected earnings.  INFN recently gapped higher, and has since filled that gap and bounced, indicating potential support going forward.  Despite its recent strength, sentiment toward INFN remains sour, as its short interest ratio currently sits at 21.  This means that based upon recent volume trends, it would take 21 days for existing shorts to cover their positions.  This massive number indicates pent up buying power that could appear, should INFN strength continue.  I like an entry here with a stop on a close below the 20-day moving average(currently at  6.41).  I’d look for a move to the 8 level, with 10 being a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Given today’s action and sharp reversal at the 1500 level, a market pause could be expected.  Markets have been on a tear for some time, and some profit taking is definitely in order.  I’d look for some consolidation between 1474 and 1500 on the S&P 500, but am still looking for an upside breach of the 1500 level going forward.  Should markets either retreat significantly below 1474 and/or have some sort of news-related shock, it would be time to start looking at the short side.  Until then, buy dips and don’t get greedy with your positions.

     

     

    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/

    3 Responses to Daily Game Plan – Apple Swoon, Markets Mixed

    1. akabeachguy
      January 24, 2013 5:06 pm at 5:06 pm

      Curious as to which stocks/companies you view as the “new market leaders?” Thanks.

      • Brysapp
        January 25, 2013 8:18 am at 8:18 am

        There are many from many different groups, many of which are highly-shorted names. However, if you’re looking for one particular sector, it would have to be financials.

        • akabeachguy
          January 25, 2013 9:20 am at 9:20 am

          Thanks….

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