• Daily Game Plan – Risk On

    by  • September 11, 2013 2:01 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments


    The recent rally continues to show no signs of slowing down, as markets are higher yet again today.  Today’s open was slightly weak, but buyers stepped in early this morning, and have since pushed stocks to their highs of the day.  The Dow is leading markets higher, up about 0.7% on the heels of strength in tech giant IBM.  The Russell 2000 and S&P 500 are each about 0.2% higher on the session, while the Nasdaq is lower by about 0.2%.  Much of this weakness can be attributed to a big move lower by AAPL, which is off a whopping 5% on the day.  Despite today’s equity strength, other asset classes are rallying as well, as bonds and metals are both higher.  Bonds are up about 0.7%, while gold is flat on the session and silver is higher by 1%.



    Phillips 66 (PSX) – The oil refiner has been relatively weak this year, higher by only about 5% despite a strong bull market.  The shares have entered a very choppy range as of late, but there are signs that it could be ready to move.  Despite its weak price action, sentiment in the options market is near a bullish extreme.  This creates the potential for a bearish unwind going forward.  Additionally, short interest on PSX has plummeted, and is currently near multi-year lows.  As most have been squeezed out of their bearish positions, this creates an opportunity for new bears to emerge, which could drive the shares lower.  Lastly, fundamentals in the refiner space are deteriorating.  Many key profitability spreads are narrowing, which could affect margins going forward.

    I like a bearish entry here with a stop on a close above 60.  I would initially target a move down to 52, with 48 as a stretch target.

    courtesy of stockcharts.com



    Given that I’ve completely missed the recent rally, I’m hesitant to either buy or sell the indexes here and now.  There’s still looming macro headline risk with Syria, and also the FOMC meeting next week.  Additionally, a few sentiment indicators such as the equity put/call ratio are showing signs of extreme optimism in the short term.  Despite that bullish sentiment, stocks continue to march higher.  Stock picking remains the best way to play the environment we’re in  for the time being, and be very sure to mind your risk going forward.


    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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