• Daily Game Plan – Markets Breaking Out

    by  • January 17, 2013 2:15 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 2 Comments

    MARKET CHECK

    Prior to this morning’s open, futures rallied sharply into the weekly jobless claims number.  It seems that this was smart money, in that the data we received at 8:30 was very favorable — jobless claims of 335,000 versus a consensus estimate of 370,000.  As you would expect, futures continued to rally, and markets opened strongly.  Since then, we’ve seen more buying, as the S&P 500 is currently at the highs of the day.  These highs also represent new five-year highs on the index.  The Russell 2000 is leading markets higher, currently up 1.1%, while the Nasdaq is the relative laggard, up 0.8%.  Risk appears to be “on” across the complex, as bonds are selling off sharply, currently down about 1.2%, with metals up about 1%.

     

    CHART OF THE DAY

    Avis Budget Group (CAR) – The rental car concern has been strong lately, up about 7% so far this year and nearly 70% over the past 52 weeks.  Despite its strength, short interest remains elevated at 12% of the company’s float.  In fact, based upon recent volume trends, it would take over 9 days to unwind current outstanding short interest.  Should CAR continue to trek higher, some short covering could be expected, which would act as a tailwind.

    The recent low-volume pullback offers a nice long entry.  I’d key off the 2o-day moving average(currently 20.71) as a guide for position management.  An entry here with a target of 24(the highs from October 2007), and a stop with a close below the 20-day moving average makes sense.  CAR is slated to report quarterly earnings on 2/13, so be sure to manage risk into that event.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    The old market mantra “The trend is your friend” seems to come to mind.  As a trader, you’re in the business of making money, not being right.  Calling tops is a fools game, so continue to ride this wave higher until it stalls.  That said, you now have well-defined levels to trade against and manage risk.  The 1474 highs on the S&P 500 that we just broke through should now act as support, so new longs can target that area for a bailout point.  Above here, 1500 appears to be the next stop.

     

     

     

    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/

    2 Responses to Daily Game Plan – Markets Breaking Out

    1. akabeachguy
      January 17, 2013 5:27 pm at 5:27 pm

      Going to play the fool’s game and call today’s SPY high of 148.42 as a top for the short term. Financials were weak relative and end of day closed on a down note which is a switch from the blasts higher we have been getting.

      INTC earnings putting a spotlight on how beating is not all there is. Just because I can clear a two foot high jump doesn’t mean I am a good high jumper! Also gives me another reason to think today SPY saw its high.

      I will still be buying opening pullbacks to support (at least down to S1) on TNA and be out in last hour after the 99 times out 100 times the markets lift intraday.

      • Brysapp
        January 18, 2013 1:32 pm at 1:32 pm

        Haha fair enough. I just think we need some sort of capitulative event to cause panic buying before we see a true top. SPX tested the previous highs of 1475ish and bounced today, so definitely will be an area to watch going forward.

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