• Daily Game Plan – The Beat Goes On

    by  • February 12, 2013 2:10 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Markets continue their slow grind higher, as many eyes are fixated on the 1525 level overhead on the S&P 500.  Stocks have seen steady buying all day, and the Russell 2000 and S&P 500 are currently near their highs of the day.  The Russell is leading today, up 0.6%, while the S&P (+0.3%) and Nasdaq (-0.1%) lag.  After a decent 3-year note auction at 1 PM today, bonds are only slightly lower, off 0.3%, while metals are flat on the day.  There is some noteworthy strength in miners, however, as FCX is up nearly 1.5% and the GDX is up 0.6%.

    Much of the weakness in technology can be attributed to the disappointment surrounding the Apple Computer (AAPL) event, where CEO Tim Cook presented at the Goldman Sachs Conference.  After rumors yesterday of a new iWatch in the works, expectations were high into this event.  However, nothing earth shattering was released, and the equity sold off on the lack of “Wow” factor.

     

    CHART OF THE DAY

    PPG Industries (PPG) – In mid-December, PPG announced that it had acquired AkzoNobel Coatings, effectively making it the largest coatings company in the world.  The shares gapped higher on that news, and ran up to nearly the 150 level in late January.  Since then, PPG has pulled back near the 50-day moving average, a trendline that has guided the equity higher since late 2011.  In addition to support from this trendline, the recent pullback closes the gap up seen on January 2.  This gap could offer an additional layer of support to the upward-sloping 50-day moving average.

    On the sentiment front, short interest has skyrocketed up 633% over the past month, and currently represents over 23% of PPG’s float.  While much of this increase could be attributed to a hedging strategy from the recent merger, there could be some speculative shorts that have entered over the past few weeks.  A continued move higher by PPG could cause capitulation by these bears, and this would act as a tailwind toward PPG.  I like a long entry here, with a close on a stop below 134.  I’d initially target a move back to the 143 level(site of the gap down from 1/28), with a breakout to new all-time highs being very possible.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    With my 1525 SPX target right overhead, I’m looking for a push into that level and then some consolidation.  Above there 1550 and 1576(the all-time high on SPX) are within reach.  Given the risk/reward tradeoff offered at current levels, I’d prefer to keep very tight stops and trade on a shorter time frame.  If you have open positions that are profitable, be sure to trail stops and don’t let big winners turn into losers.  Until some sort of shock enters the market, cautious optimism remains the way to play this trend.

    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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