• Daily Game Plan – More Highs

    by  • January 29, 2013 2:08 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments


    The beat goes on.  Just when you thought markets might pull back, they break to new multi-year highs once again.  The intraday action is getting comical, in that every day seems the same — weakness on the open, stabilize late morning, rally into the close.  That said, being aware of this seemingly endless repeating pattern is offering a great deal of opportunity on a short-term basis.

    At current levels, markets are slightly higher, with the S&P 500 leading, up 0.3% for the day.  The Russell 2000 and Nasdaq are both currently trading near breakeven.  Bonds are lower yet again, down 0.5% on the day, while metals have seen a slight bid today.



    Diamond Foods (DMND) – The packaged food company, specializing in retail sales of nuts, has seen a strong bid over the last two days.  DMND is currently in the midst of an SEC investigation regarding its accounting processes, and as you can imagine, short sellers have been pounding this name for some time.  At present levels, nearly 39% of DMND’s float is sold short.  However, there are signs that some of these shorts have begun covering their positions, and a violent short squeeze is a distinct possibility in the near future.

    The chart pattern you see below is what’s known as a symmetrical triangle, which is nothing more than a compressed series of lower highs and higher lows.  The pattern appears to be breaking to the upside today, and this implies that DMND could be at the beginning of a big move higher.  Using this chart pattern as a road map, I’d target a move near the 18 level, about 20% higher from here.  A break and close back below the 14 level would be a sign that this potential breakout has failed, and it would be wise to exit the position.

    courtesy of stockcharts.com



    Continued grind higher.  It’s almost comical that markets have been behaving in this fashion for so long, but there’s still no sense in stepping in front of this.  1500 on the SPX was tested this morning, and that level held.  This indicates near-term support, and the next upside target is 1525.  Below 1500, 1474 is another potential support level.


    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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