• Daily Game Plan – Eyes on 1600

    by  • April 11, 2013 2:15 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Surprise, surprise – we’re rallying again.  The market just seems unstoppable for now, as the S&P 500 continues to press northward toward the 1600 level.  Despite weak shipments data from tech bellwether Hewlett Packard (HPQ), the sector is holding up fairly well.  Presently, the S&P 500 is leading markets, up about 0.4% for the day, while the Russell 2000 is about 0.3% higher and the Nasdaq is near flat on the day.  After weakness yesterday, bonds are seeing a slight bid, up 0.2% on the day, with gold and silver each up about 0.3%.

     

    CHART OF THE DAY

    Tesoro (TSO) – Refiners have been extremely strong for some time, but they are now experiencing some macro headwinds that could affect their profitability.  Two of the primary metrics that drive profitability within the space are the Brent/WTI spread and also crack spreads.  Simply put, when these spreads are high, refiners earn big profits.  These, in fact, have been pulling in over the past few months, and that could hit their bottom line going forward.

    Technically, TSO is in a bear flag pattern below the 50-day moving average, a trendline that acted as support multiple times over the past six months.  This could now act as resistance going forward.  I like a short entry here with a stop on a close above 55.  I would initially target a move to 50, with 45 being a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    The S&P 500 got within a stone’s throw of 1600 today and rolled over.  Seemingly everyone in the market is watching this level, and you’d obviously expect some profit taking if and when we hit it.  The risk/reward here at this juncture resides with the bears, despite the incredibly strong tape.  If adding new long positions, focus on those that have lagged during this recent run toward new record highs.  From a directional perspective on the indexes, I wouldn’t be surprised to see anything here and now, and continue to run a balanced long/short stock portfolio.

     

    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