MARKET CHECK

Markets are trading near flat yet again, as choppy intraday price action is frustrating many active traders.  After a flat open then morning fade, indexes have rallied and are currently near the middle of today’s range.  The Nasdaq is lagging both the Russell 2000 and S&P 500, largely a result of the news that Apple (AAPL) has cut some component orders for the iPhone 5.  AAPL is trading lower by about 3% today, while the Nasdaq Index is off by about 0.6%.  Bonds are slightly lower for the day, while commodities are slightly higher.

CHART OF THE DAY

Take-Two Interactive Software (TTWO) – After an ugly start to 2012, the video game maker has seen a sharp bounce since last August, up about 50% over that time frame.  The shares took out the key 12 level to the upside, and are now pulling back to that area.  Looking at a weekly chart, you’ll notice that 12 acted as both support and resistance multiple times between 2009 and 2012.  Now that TTWO is above this region, it could act as support going forward.

TTWO is a very highly-shorted name, with over 30% of its float currently sold short.  Any positive news or price momentum could spark a short-covering rally, which could cause a quick spike in TTWO’s price.  TTWO is currently being guided higher by its 50-day moving average, which has been a good indication of trend since the beginning of 2012.  A long entry here with a stop below 11.50 tilts the risk/reward tradeoff in your favor.  A quick move back above 13(and potentially to 14) seems like a good possibility.  TTWO is slated to report earnings on 2/5, so be sure to mind your risk should you still be in the position at that time.  Should TTWO rally into its quarterly report and there is desire to hold the stock into the event, you could always use your profits to buy put protection ahead of the numbers.

courtesy of stockcharts.com

WHAT I’M EXPECTING

Given that tomorrow will mark the release of retail sales numbers for the Christmas shopping season, and major bank earnings start on Wednesday, I’m looking for a significant market move into Friday’s options expiration.  The recent chop has allowed many names to work off their overbought conditions, and should this week’s data prove favorable, I’d expect a rally toward 1500 on the S&P 500.  If the data disappoints, a pullback to 1450 and then 1425 should be expected.  As we remain in the recent range, however, try to not get overly involved on either side of the market, and take only your best setups.