• Daily Game Plan – Sellers Back in Control

    by  • June 4, 2013 2:35 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    After a strong open this morning, sellers stepped in and took markets back near levels seen on Friday’s swoon into the close.  Equities remain in their choppy, volatile range ahead of what should prove to be an eventful end to the week.  Starting tomorrow, traders will be greeted with a slew of important economic data, including Friday’s jobs report.

    At current levels, the Russell 2000 is today’s relative laggard, down 1.5% on the session.  The S&P 500, Dow, and Nasdaq are all off by about 0.8% today.  Bonds are seeing more selling, off 0.4%, but are significantly off their lows for the day.  Metals, similarly to all other asset classes, are lower for the day, with gold and silver both about 1% lower.

     

    CHART OF THE DAY

    Coach, Inc. (COH) – The luxury retailer has been trading in a very narrow range as of late, and looks ready to make a big move.  The shares have faltered at the 60 level, site of the gap lower from January.  Despite this narrow range, short interest on COH is near multiyear highs.  Additionally, options are currently priced in the bottom tenth of all readings taken over the past 52 weeks.  This creates a nice setup for a volatility play.

    I like buying the July 57.50-strike straddle here for about $4.25.  This position will profit on a move above $61.75 or below $53.25 by July 19.

    WHAT I’M LOOKING FOR

    A continuation lower toward 1600 on the S&P 500.  Friday’s lows are very close, and if that level should break, there will be a “snowball” effect lower.  Many traders likely bought ahead of today’s Tuesday winning streak on the Dow, and could be in for a big surprise should those levels get breached to the downside.

    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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