• Daily Game Plan – Big Earnings on Deck

    by  • July 23, 2013 2:05 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Price action across the indexes today is extremely quiet, and the Summer doldrums continue.  Stocks are once again trading near flat on the session, with the Dow leading markets higher, up 0.3% on the session.  Much of its strength today can be attributed to UTX reporting better-than-expected earnings prior to the open, and it’s now trading up by over 3% today.  While the Dow leads, the Russell 2000 and S&P 500 are both trading near breakeven on the session with the Nasdaq lagging, down about 0.3% today.  Tech giant Apple Computer (AAPL) is set to report earnings tonight, along with a handful of other major companies.  Bonds are lower by about 0.6% today, while gold and gold miners are trading higher, albeit modest today after yesterday’s big up move.

     

    CHART OF THE DAY

    Nike (NKE) – The shoe and apparel maker has been very strong this year, higher by about 20% since January.  The shares recently tagged a new all-time high near 66 and has since consolidated lower.  Despite its strength, sentiment toward the equity remains skeptical.  In fact, over the past 10 days, puts have been bought at over a 2.5:1 clip versus calls, indicating near-extreme pessimism.  this creates the potential for an unwinding of these bearish bets, which could act as a tailwind going forward.  Also, analysts continue to maintain a skeptical stance, as there are currently 12 “hold” ratings versus 7 “buys.”  This creates upgrade potential going forward.

    I like a long entry here with a stop on a close below 62.50.  I would initially target a move back to 66, with 70 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    With a lack of a macro catalyst anytime in the near future and volumes remaining light, I’m looking for continued muted action in markets, with a slight downside bias.  It’s tough to take either side of an index trade here and now, but you can still find stocks and sectors that are moving.  Despite the lull in broad market indexes, there are a ton of companies set to report earnings this week.  Correlations and implied volatilies near multi-year lows continue to make this a great environment for option traders and stock pickers.

    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/

    Leave a Reply