• Daily Game Plan – Earnings Season Upon Us

    by  • January 8, 2013 2:24 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    This morning, Monsanto (MON) kicked off earnings season, and Alcoa (AA) is set to report after the close tonight.  As we lead into the reports, fear has once again surfaced that expectations are too high and many companies will fail to impress with their quarterly numbers.  Resulting from this growing fear, markets are sliding again today.  Presently, the S&P 500 is leading markets lower, down about 0.5%.  Commodities have a bid across most markets despite U.S. Dollar strength.  Additionally, bonds are bid up about 0.5% today.

    What’s surprising about today’s action is the lack of interest in the VIX.  Given that we’re currently near the bottom of the range of volatility, you’d expect a bid in “hedging” products into earnings season, and as markets slide back toward their 2013 lows.  Monitor this metric closely going forward.

     

    CHART OF THE DAY

    Western Refining (WNR) – This stock has been on a tear over the past year, up about 100 percent.  It recently peaked in mid-December when it paid a $1 special dividend, and has since pulled back to the 27-28 area, an important resistance are from August/September of 2012.  What’s surprising about this name is the bearish sentiment surrounding it, despite huge outperformance over the past few years.  Currently, 20% of the stock’s float is sold short.  Additionally, the recent option activity on WNR is in the 92nd percentile of all put/call ratios over the past year.  This shows continues skepticism amid a very strong uptrend, and leads me to believe that this rally is far from over.  I like an entry here with a stop below 26.  The recent highs near 31 would be an initial target, with a move to 35 being an extended goal.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    I still think the path of least resistance is higher.  There are numerous support levels below, and so long as the pullbacks remain shallow, dips should be bought until something changes.  A few important levels I’m watching are 120 on TLT, 1450 and 1425 on SPX, and 500 on AAPL.  Use these as guidelines for overall market trend.

     

    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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