• Daily Game Plan – Fiscal Hope

    by  • December 17, 2012 2:00 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments


    Markets opened flat this morning, but were met with aggressive buying from the get go.  Rumors have been circulating that President Obama and Speaker Boehner are getting closer to a compromise regarding the fiscal cliff negotiations, and this could be one reason why we’re seeing equities lift today.  At present levels, the Russell 2000 is leading other indexes, and is up about 1% on the day.  The S&P 500 and Nasdaq are slightly lagging, both currently up about 0.8%.  Bonds are experiencing a serious selloff today, currently down about 1%, while commodities are largely flat to weak.

    Price action in Apple Computer (AAPL) has been sporadic today.  Prior to the open, AAPL was downgraded by Citigroup and the the stock dipped below the $500 level in premarket trading.  However, that weakness was short-lived, as the equity has rallied back above 510.  Going forward, the $500 level could be a key battleground for bulls and bears, and given AAPL’s heavy weighting in the S&P 500 and Nasdaq, its price action has major implications for the market as a whole.



    Molycorp (MCP) – MCP is a company that explores for and mines rare-earth minerals used in many technology components.  After  a very strong rally since its IPO, the equity experienced a dramatic selloff as bullish sentiment toward the sector waned, and in fact, has become outright bearish.  However, at the present juncture, MCP looks ready to make a strong move higher.

    The company recently retook its declining 50-day moving average, which has guided it lower since this Spring.  Going forward, this trendline could act as support.  In addition to the technical rebound, MCP has seen a dramatic increase in short interest.  Currently, about 38% of the equity’s float is sold short.  In fact, the current level of shares sold short is an all-time high for the equity.  Should any positive news surface and/or MCP continue its bounce higher, this creates the potential for strong short-covering rallies.  I would look to buy MCP here and target the 12.50 level, with 15 being an extended target.  A close below the 50-day moving average(currently at 9.48) would be a signal to exit the position.

    courtesy of stockcharts.com



    Choppy price action with an upward bias.  This time of year is historically slow, as many major players in the market are either on vacation or disinterested.  That said, volumes should be low from now until 2013.  Should any major news surface between now and then, intraday price action could be very volatile as a result of this low volume.  I continue to prefer stock picking over index trading.  Key levels to watch going foward are 1385, 1400, 1425, 1440 and 1460 on the S&P 500.  Additionally, keep an eye on the 1000 level for the S&P midcap index.  This psychological price level has been key for the past few months.


    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.


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