• Daily Game Plan – Gap and Chop

    by  • March 6, 2013 2:23 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments


    Markets are mixed today, after the opening gap higher on the heels of a strong ADP Employment report has been closed.  At 8:15 this morning, the ADP February employment metric of 198,000 new jobs was released.  This number surpassed expectations of 150,000, and markets spiked on that data.  Since then, however, stocks have slightly faded, and remain in a choppy range.  While the ADP number is somewhat important, everyone remains fixated on Friday’s upcoming Nonfarm Payrolls number.

    At present levels, markets are slightly higher, led by the Dow Industrials, up about 0.3%.  The S&P 500 and Russell 2000 are each up about 0.1%, while the Nasdaq is a relative laggard, down 0.2% on the day.  The recent strength in bonds is waning, as they’re down 0.8% despite a flat equity market.  Metals and miners are catching a bid today, bucking their recent trend.



    Coinstar (CSTR) – The movie rental and coin exchange company has struggled a bit lately,  near breakeven on the year while the broad market is rallying sharply.  However, there are some signs that CSTR could be setting up for a big rally.  CSTR has respect its 80-day moving average(blue trendline below) very well as of late, and the recent pullback could be a nice buying opportunity.  In addition to this, short interest has skyrocketed as of late, and currently sits at a record 55% of CSTR’s float.  Lastly, recent option activity on CSTR has been very bearish and is near an extreme.  This creates the potential for an unwinding of these bearish bets, which could act as a tailwind toward the equity.  Given the recent strength in NFLX, CSTR could be poised for a sympathy rally and likewise a sharp short squeeze.

    I like an entry here with a stop on a close below the 50 level.  Reward/risk is very high, as I would initially target its recent highs near 55, with 60 being a stretch target.

    courtesy of stockcharts.com



    Given yesterday’s big move, I wouldn’t expect much between now and Friday’s employment report.  I continue to view 1550 SPX as resistance and 1525 as support going forward.  I’d be surprised if we break this range ahead of the jobs number.  Once that data is released, however, all bets are off.




    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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