• Daily Game Plan – Gap and Fade

    by  • May 28, 2013 2:20 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 1 Comment

    MARKET CHECK

    Markets were soaring this morning after the long weekend, on the heels of Yen and global equity market strength.  However, after the open, sellers stepped in and stocks are currently trading near their lows of the session.  Despite the sharp intraday move lower, stocks are still significantly higher than levels seen at Friday’s close.  Currently, equities are being led higher by the Russell 2000, which is up  about 0.8% for the day.  The S&P 500, Nasdaq, and Dow are each about 0.5% higher.  Bonds are getting hit, and are off by about 1.5%, while metals are trading in a volatile fashion today.  After a big spike this morning, gold and silver have pulled back slightly, and are near breakeven for the session.

     

    CHART OF THE DAY

    Intel Corp. (INTC) – The chip maker is off to a good start so far in 2013, but the stock has reached a crossroads here at the 24 level.  Going back many years, this area has been a key inflection point for the stock.  Short interest on INTC has soared with the stock’s price, and currently sits only slightly off all-time highs.  Lastly, options on INTC are priced in the bottom eighth of all readings taken during the past 52 weeks, indicating that now could be a good time to play a volatility strategy.  If you’ll notice below, the Bollinger Bands are about as wide as they’ve been in the past, when the stock made big moves, and this width could be predictive of pending volatility.

    I like a long straddle play here – the June 24 straddle currently costs about $1, so your profit zone is above 25 and below 23.  Given that there’s still four weeks left in the June expiration cycle, I believe this to be a high-probability setup for a nondirectional option play.

     

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Lower prices from these levels.  The previous environment of morning dips being bough has been flip flopped, as we’ve seen a few recent mornings of equity strength fading sharply into the close.  I maintain my bearish bias until we can break back above 1675 on the SPX.

     

     

    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/

    One Response to Daily Game Plan – Gap and Fade

    1. keahou
      May 29, 2013 12:16 am at 12:16 am

      Bryan,

      Hope this pans out short term. I averaged into the sqqq1331q3025 at .95

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