• Daily Game Plan – New Highs?

    by  • January 16, 2013 2:12 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Markets are mixed yet again, but the S&P 500 is currently pressing against the highs of 1474 made back in September.  Bullish sentiment continues to grow, as Goldman Sachs (GS) and JPMorgan Chase (JPM) reported better-than-expected earnings this morning before the open.  The Nasdaq is leading us higher today, up about 0.6% amid a strong bounce in AAPL, while the S&P 500 and Russell 2000 are relatively flat.  Bonds are flat, while metals have a slight bid.

     

    CHART OF THE DAY

    The Hartford Financial Services Group (HIG) – HIG has been strong so far this year, up about 7% since 1/2.  The shares recently broke out to fresh 52-week highs and have since pulled back, offering a nice long entry.  The area of the pullback was about 23.50, site of former resistance.  This level could provide support going forward.  Despite its strength, short interest on HIG remains near all time highs, with over 41 million shares currently sold short.  Should the equity’s strength continue, there is the potential for these short to capitulate, which would drive the stock higher.  The 20-day moving average provides a good guide for managing the position, as it has acted as support since the beginning of December, and the last three pullbacks to this trendline were great buying opportunities..  I’d target a move to 27, while a close below the 20-day moving average(currently 23.30) would be a sign to exit the position.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Given the strong earnings reactions by JPM and GS, coupled with the strength in AAPL today, I’m looking for markets to break to new yearly highs this week.  We continue to probe these highs, and the more a resistance level is tested, the more prone it is to breaking.  Pay very close attention to how markets react if and when we breakout, as these strong moves can often cause capitulation, which in turn can cause reversals.  Given that sentiment has turned bullishly, a breakout toward 1500 on the S&P would surely bring in new longs, which in turn might create a short-term top.  Stock picking continues to be the preferred method to play this market.

    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/

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