• Daily Game Plan – Downside Break

    by  • August 15, 2013 1:59 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    After what seemed like a never-ending range for markets over the past couple weeks, stocks have finally broken this area to the downside.  At 8:30 this morning, markets were met with a good deal of economic data, much of which was better-than-expected, and stocks moved sharply lower from that point.  Makes sense, right?  Given that seemingly every market move these days hinges on the “taper or no taper” argument, perhaps many were interpreting today’s strong numbers as a signal that the Fed is ready to take its foot off the gas with regard to asset purchases going forward.  Regardless of the cause, today’s move lower is significant and must be respected.  Stocks are being weighed heavily upon, with the Russell 2000 as today’s relative laggard, lower by 1.6% on the session.  All other major indexes are significantly lower in unison, each down between 1.3 and 1.5% for the day.  Yields have broken higher from their recent range, which is weighing on bonds, down about 1% on the session.  The recent strength in gold and miners continues, as initial weakness was met with aggressive buying.  Gold is up over 2% today, while silver and miners are each up by about 5%.

     

    CHART OF THE DAY

    Tesla Motors (TSLA) – The electric auto maker has been extremely strong this year, higher by over 300% since January.  However, despite this sharp move higher bears continue to pile on and bet against the name.  Currently, 25% of the equity’s float is sold short, and this creates the potential for short-covering rallies going forward.   TSLA recently reported blowout earnings, which pushed the stock to new all-time highs.  Since then, the shares have pulled back to their 20-day moving average, a trendline that has guided it higher for most of the year.  This offers a nice entry from the long side.

    I like a bullish entry here with a stop on a close below 135.  I would initially target a move to 150, with 160 and above as stretch targets.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Some support near these levels.  Markets broke down in spectacular fashion today, as the move lower was fast and furious.  Sentiment seems to have shifted bearishly in a hurry, but we’re near key levels on many indexes.  Immediately beneath current prices are former highs of about 1655 on the SPX, which happens to coincide with its 50-day moving average.  Because of this, I’m looking for some buyers to step in here and provide some support for the time being.  That said, I would not get overly bullish until the index can retake the 1675 level and hold there for a while.  There remain pockets of strength in certain sectors, namely agriculture, some technology, and materials.  Names that have been beaten down for much of this year could see an outsized move to the upside should markets find some footing here.

     

     

    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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