• Daily Game Plan – Tepper Sparks Rally

    by  • May 14, 2013 2:23 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET WATCH

    Futures were largely flat coming into the morning, but legendary hedge fund manager David Tepper’s interview on CNBC sparked a fierce rally off the morning lows.  On the show, Tepper declared that he is still bullish, and the market remains very cheap.  As a result, the S&P 500 rallied over 20 points off its lows, and remain a few points off the highs of the session.  Currently, markets are being led higher by the Russell 2000, which is up about 0.9% on the session.  There is notable underperformance in technology today, as AAPL is currently off nearly 2% for the session, despite strength in equities.  Bonds are weak yet again, down 0.6% today, while metals and miners are slightly lower.

     

    CHART OF THE DAY

    QUALCOMM (QCOM) – The chip maker has traded in a fairly tight range so far this year, but its performance continues to lag that of the S&P 500.  QCOM has been guided for most of this year by its 50-day moving average, a trendline that it is bouncing into at present levels.  Despite it lagging the broad market, sentiment toward QCOM remains very bullish.  In the front three months’ option open interest, there are nearly 2 calls for every put.  Additionally, short interest on QCOM is currently less than one percent of the equity’s float.  Should QCOM continue to lag its peers, this creates the potential for new bears to initiate short positions, which would act as a headwind toward the equity.

    I like a bearish entry here, with a stop on a close above 65.50.  I would initially target a move down to 62, with 58 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Pullbacks should continue to be bought.  Today’s rally caught many off guard, as rumors surfaced yesterday that Tepper would actually talk bearishly on CNBC today, when he actually took the exact opposite view.  Stick with what’s working — despite today’s big move up, there exists a great deal of opportunity on both the long and short sides of the market.

    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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