• Daily Game Plan – Expiration Week

    by  • March 11, 2013 2:05 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Today marks the beginning of options expiration for equities, and as we’ve seen many times in the recent past, this period can often times lead to very choppy, slow market action.  Today looks like it will hold true to form, as markets are grinding somewhat higher on the day.  After a weak open, equities were met with some buying, and currently sit near their highs of the day.  the S&P 500 and Dow are leading, each up about 0.2%, while the Russell 2000 and Nasdaq are both trading near breakeven on the day.  Volatility is getting crushed yet again, as the spot VIX is down about 7% and is making a new five-year low today.  Metals and bonds are both near flat on the day.

     

    CHART OF THE DAY

    Fastenal Co. (FAST) – FAST has been very strong as of late, up over 10% since the beginning of the year.  The shares recently broke higher on good volume and have since consolidated back near their 20-day moving average, a trendline that has guided FAST higher since early December.

    Despite its strength, short interest on FAST has grown by over 20% since bottoming in December.  Should FAST continue to grind higher, this creates an increased potential for a short-covering rally.  Additionally, analysts have yet to buy in to the rally, as 8 of the 10 total ratings sit at “hold” or worse.  This creates future upgrade potential.  I like an entry here with a stop on a close below 50.50.  I would initially target a move back to the April 2012 highs near 55, with a strech target of 60.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Given it’s expiration and there’s no significant economic data until Wednesday(retail sales), I’d look for  a gradual chop higher, and an attempt to take out the all-time highs of 1576 on the S&P 500.  After Wednesday morning, however, there are some significant data points and also two key bond auctions.  These could be the catalyst for the next round of volatility.  Markets have broken through key resistance at 1550 today, so that level should act as support going forward.  Below there, key on 1525.

     

     

    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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