• Daily Game Plan – Pre-Fed Rally

    by  • June 17, 2013 1:57 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Markets are soaring today, ahead of what should prove to be a very eventful week.  Today kicks off June options expiration week, and there is also an FOMC Policy release set for Wednesday.  Going into that statement, traders will be fixated on the verbage used by Ben Bernanke, as the big question surrounding the markets lately has been “Taper, or no taper?”  By “taper,” I’m referring to whether or not The Fed will begin to scale back their asset purchases, which would likely have a dampening effect on equity prices.  However, bulls are in firm control today, as markets are higher across the board.

    Currently, the Nasdaq is leading markets higher, up about 1.5% amid strength in large-cap technology companies like HPQ and CSCO.  The S&P 500 and Dow are lagging slightly, higher by about 1.1% each, while the Russell 2000 is today’s laggard, up by 0.8% for the session.  Despite the strength in equities, bonds are holding steady, near breakeven on the session, while metals are slightly lower.  Volatility is weakening, but not like you’d expect it to on such a strong day for stocks.  At current levels, the VIX is off by about 3% today.  Many are likely positioning defensively into Wednesday’s  FOMC report, and hedging via SPX options could be the cause for such muted action in the VIX today.

     

    CHART OF THE DAY

    OpenTable (OPEN) – After a massive swoon from its 2011 highs, OPEN has since regained its footing.  The stock has been on quite the tear lately, up nearly 40% since the beginning of the year and over 50% in the past 52 weeks.  Despite its strength, sentiment toward OPEN remains skeptical.  Currently, over 17% of the equity’s float is sold short.  This could lead to short-covering rallies going forward.  Additionally, 9 of the 11 analysts covering OPEN have it rated a “hold” or worse.  This creates the potential for future upgrades, which could act as a tailwind toward the shares.

    I like a long entry here with a stop on a close below 65.  I would initially target a move back to 72, with 80 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    A continued move higher into tomorrow afternoon, and then all bets are off.  The two days leading up to the FOMC release are very bullish historically, and there’s no way I’d be fighting this trend here and now.  That said, I will likely trim all positions significantly ahead of the statement on Wednesday, as the market’s reaction could be very violent depending upon the news.

     

     

     

    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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