• Daily Game Plan – Tech Dispersion

    by  • January 15, 2013 1:47 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 7 Comments

    MARKET CHECK

    Markets today are all over the place, as tech giants pull us in different directions.  Apple Computer (AAPL) continues its plunge, while Google (GOOG) rallies after today’s big Facebook (FB) announcement.  At 1:00, FB rolled out their new “graph search” feature, which many are considering a disappointment considering the buildup into this event.  Yesterday, GOOG was hit on rumors that FB would be rolling out a new search engine, but the stock is rebounding nicely today.  AAPL continues its plunge, and has broken the key psychological 500 level.

    Indexes are mixed yet again today, with the Russell 2000 up 0.3%, the S&P 500 flat, and the Nasdaq down 0.5%, largely due to weakness in AAPL.  Metals are bid yet again today, with gold and silver both up about 1%, while bonds are also strong, up 0.7% despite markets shrugging off the morning selloff.

    What’s particularly noteworthy is how well the market has held up despite AAPL, the largest component of both the S&P 500 and Nasdaq, being in freefall since late last year.  We continue to probe multi-year highs, as markets shrug off one piece of bad news after the next.

     

    CHART OF THE DAY

    Helix Energy Solutions (HLX) – the offshore energy exploration company is rebounding nicely off the 21 level and 20-day moving average after five days of selling.  Although HLX has recently been weak, the company has seen a year-over-year gain of about 30%.  The  20-day moving average(blue trendline) has been a good guide for HLX since last October, and today’s bounce off it provides evidence that it will be supportive going forward.

    What I particularly like about HLX is the pessimism that has crept in despite the stock’s recent strength.  Over the past 10 days, puts have been bought at over a 4:1 clip versus calls, and total short interest on the name has increased by 31% over the past two weeks.  This recent pessimism could be the catalyst to spark a strong rally in the name.  The company was upgraded by Morgan Stanley today, and other shops could soon initiate coverage on HLX, as only 4 analysts are currently covering it.  I like an entry here with a target of 25, and a close below the 20-day moving average(currently 20.64) as a sign to exit the position.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    An outsized move into Friday.  Since the huge rally on 1/2, the S&P 500 has traded in about a 2% range.  The overbought conditions have “worked themselves off,” and we’re poised for another leg higher into tomorrow’s big bank earnings.  Keep a close eye on JPM, GS, and USB tomorrow.  The numbers are important, but the reaction by each stock to those numbers is more important.  Should these names rally on either strong or weak data, it is likely that we’re going to make new highs on the indexes.  If the stocks have a weak reaction, I’m looking for a test of 1450 on the S&P’s.

    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/

    7 Responses to Daily Game Plan – Tech Dispersion

    1. SharleeDog
      January 15, 2013 7:08 pm at 7:08 pm

      From: ORVILLE COX

      Sent: Tuesday, January 15, 2013 2:44 PM

      Subject: Comments 1/15/2013

      Tomorrow is the 12th day of this trading cycle. Next Tuesday, the first
      trading day of next week, will be the 15th day of this TC and late enough for a
      left-handed bearish trading cycle top to occur.

      * I look for lower prices to begin next week.

      * The NDX is likely to lead the way down as it always has.

      * From my view point, the only thing that has held the NDX up since Monday
      morning is DELL. See the first chart. DELL is being taken private and will leave
      the NDX within the next week or two which will deny the NDX of it’s positive
      influence.

      * See chart of DELL.

      (I left it out deliberately)

      * This is AAPL. It is the largest strongest most influential stock among
      the NDX 100 stocks. Once DELL is gone, we will be left with this as the NDX
      leader. Somehow I do not think that is a positive for the NDX ( ? )

      * I plan to go short between now and Friday’s close looking for a cyclic
      low on or about February 19th.

      (I left the chart out deliberately)

    2. akabeachguy
      January 15, 2013 4:34 pm at 4:34 pm

      Is it just me or is anyone else noticing this pattern that seems to be repeating a lot lately. Markets are up big and then start to pullback after 2 PM. It appears that gains will be given up but then markets turn on a dime – make a U-turn usually around 2:30 PM – 2:45 PM give or take – like they are being backstopped – and then lift into the close with no profit taking to speak of. Seems to happen mostly on days like today with no volume which is most days these days. Just wondering if anyone else has taken note?

      Seems like something is rotten in Denmark to me!!

      • Brysapp
        January 16, 2013 2:14 pm at 2:14 pm

        I tend to agree with both of you. Check out my latest entry today where I discuss the potential for a breakout then reversal. That said, I’m riding the trend until there’s any hint of exhaustion.

        • akabeachguy
          January 16, 2013 5:03 pm at 5:03 pm

          I pulled this from another blog which pretty much agrees with your outlook:

          “Bottarelli Research Tip: The XLF seems to have a bad case of the “Topped Out Market Flu.” The last time we saw this sort of “Pop-and-Pause” pattern, the ETF peeled away -7.99% over the next ten weeks. Every trader I speak with expects a support check at the 50-Day Average at $16.22. So, it seems like we have a “sell the news” situation unfolding in the financial sector.”

          Good numbers from banks today but no lift. And then there is the Russell which looks totally gassed out.

          • Brysapp
            January 17, 2013 9:07 am at 9:07 am

            One thing to keep in mind from a contrarian perspective-the more often you see people supporting a particular case, the less likely it is to actually happen. Just playing devil’s advocate…

            • akabeachguy
              January 17, 2013 10:19 am at 10:19 am

              I totally agree. More so than ever. With algos and hfts dominating the markets, not to mention a Fed that just keeps pumping more and more liquidity into the system, you just have to go with the flow and the flow for now is up, up and away. Is the reason why my few trades these days are to buy on any pullback to support. Have tried a few short scalps (TZA and FAZ) and for most part (other than a recent HLF short) have lost on them.

            • akabeachguy
              January 17, 2013 11:56 am at 11:56 am

              1/17/2013 – FAS not participating in the rally today – has to be a concern – markets close weak, and the earlier tip by Bottarelli could very well play out.

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