• Daily Game Plan – European Fears Linger

    by  • March 27, 2013 2:02 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    While equities have rallied significantly off their opening lows, the remain lower on the day.  Overnight, there were numerous pieces of bad data released out of Europe, including multiple bond auctions that were met with very weak demand.  As a result, U.S. Bonds are significantly higher today, up over 1%.  Much of this rally could be viewed as international money entering “safer” fixed-income markets.  While bonds are soaring, equities are currently only modestly lower.  The Nasdaq is the relative leader, trading near flat on the day, while the S&P 500 and Russell 2000 are each about 0.2%.  Metals are miners are each slightly higher, as the lingering fear is driving money into the perceived “safety” sectors.

     

    CHART OF THE DAY

    Apollo Group (APOL) – The eduction company has been very weak as of late, down about 20% year-to-date and about 60% over the past 52 weeks.  However, despite this weakness, there are signs that it could be setting up for a sharp bounce.  Just last week, APOL reported blowout earnings, and the stock gapped significantly higher.  However, this short-term strength was met by a handful of downgrades and analysts lowering their price targets a few days after this report, and the stock dove on those unfavorable outlooks.  As a contrarian, this is exactly what you want to see — skepticism despite very strong numbers and price action.

    In addition to the recent downgrades, bears continue to pile on.  Currently, short interest is over 17% of APOL’s float, an all-time high.  Now that the gap higher from earnings has been filled, it could be time for these bears to cover their positions.  I like a long entry here with a stop on a close below 17, the current site of the 20-day moving average.  I would initially target a move to 20, with 22 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    A continuation of the headline-driven market.  Keep a short leash on all of your positions and don’t get over-exposed to one side of the market.

     

     

    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