• Daily Game Plan – Deal in Place

    by  • October 16, 2013 1:56 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch

    MARKET CHECK

    It appears that the debt ceiling situation is contained — at least for now.  Legislators announced today that the House and Senate have given the “ok” to a compromise that will allow the debt ceiling to be raised and will allow the U.S. to avoid defaulting.  However, this is only a temporary solution, as this issue will once again rear its ugly head early next year.  Stocks rallied sharply into the announcement, but have faded a bit since that news.  The consensus heading into today was that a deal would definitely get done, and price action seems to reflect that.  All major market indexes are higher today, as the S&P 500, Russell 2000, and Dow are each about 1.3% higher.  Bonds are also higher on this news, as fear of default has waned and yields are sliding lower.  Metals are also slightly higher, as gold and silver are each up by less than 0.3%.

     

    CHART OF THE DAY

    LinkedIn Corp. (LNKD) – Shares of the professional social media concern have been on fire this year, but the recent weakness could be a sign that the momentum is fading.  The 240 level was a site of former support in August and September, but LNKD broke that level and is now bouncing into it.  This could now serve as resistance.  Additionally, LKND rode its 20-day moving average higher from early Summer, but the trendline is now turning lower, indicating a potential change in trend.  Lastly, sentiment on LNKD has grown very bullish.  In fact, short interest currently sits near multi-year lows.  This could be a sign that most bears have capitulated, and opens the door for new bearish positions on the stock.

    I like a bearish entry here with a stop on a close above 247.  I would initially look for a move down to 220, with 200 as a stretch target.

    WHAT I’M EXPECTING

    I would look for some selling now that the news has been released regarding the debt ceiling, but I think the dip will be shallow and markets will eventually take out their recent highs.  Levels of interest on the S&P 500 are 1730, 1700, and 1680.

    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/