• Daily Game Plan – Profit Taking

    by  • July 16, 2013 2:16 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 1 Comment

    MARKET CHECK

    After the seemingly endless run-up in stocks over the past couple weeks, stocks have hit a stopping point near their previous all-time highs and are selling off today.  Given the huge move off the lows from Bernanke’s tapering announcement, you would have to suspect that many long players are now positioning accordingly ahead of his testimony tomorrow morning, and locking in some gains.  Currently, the Russell 2000 and S&P 500 are lagging all other markets, with each index off by about 0.5% on the session.  Today’s relative strength leader is the Nasdaq, which is lower by 0.1%.  Metals are seeing a small bounce today, but miners are significantly higher.  The Market Vectors Gold Miners ETF (GDX) is up by over 4% on the session, and is higher by about 15% since making fresh 52-week lows at the end of June.

     

    CHART OF THE DAY

    Omnivision (OVTI) – The electronic component company recently soared on better-than-expected earnings, and has since consolidated back near the 17 level, site of former resistance from late 2012.  This level also coincides with the 50-day moving average, which could also act as support going forward.  Despite its strength, short interest on OVTI remains an elevated 12% of the company’s float, and could create sharp future rallies.  This combination of strong price action amid tepid sentiment offers a nice contrarian long.

    I like a long entry here with a stop on a close below 17.  I would initially target a move to 19, with 22 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    While I still think the S&P 500 will take out its former all-time highs, the risk/reward tradeoff here for longs is far from ideal.  Going forward, look for larger pullbacks that what we’re seeing today to get fully long.  I would initially look for a move down to 1650 to start nibbling on the bull side.  You can still stock pick in this environment, however.  Keep a close eye on the market’s reaction tomorrow, as Ben Bernanke could certainly say something to spark some volatility in the near term.

    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 – Profit Taking

    1. Brandon Gilkey
      July 16, 2013 5:20 pm at 5:20 pm

      great points…you mention nibbling at the 1650 level, where/when would you be looking to add more?
      Also, I’ve been building some positions in the last two (ish) months based on your “outlook” and those alone are up 35%…hmmmmm

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