• Daily Game Plan – Upside Break

    by  • November 29, 2012 1:30 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 2 Comments


    After gapping up about 0.5% on the open this morning, indexes have whipped around in a volatile fashion, but remain near levels seen on the open.  Currently, the Russell 2000 is leading the charge higher, up about 1%, with the S&P 500 lagging, up about 0.4% on the day.  Bonds are flat on the day and commodities are significantly higher, led by metals and lumber futures.  Since breaking resistance at the 1410 level, the S&P 500 made an intraday high near 1420, which happens to coincide with the highs seen in April and also August.  Keep a close eye on this level going forward, as the 1420-1425 area could be a key battleground for bulls and bears.

    There have been numerous comments made by politicians today about progress that has or hasn’t been made regarding the fiscal cliff, speculation as to what is going to happen, etc.  Given that we’re still weeks away from actually “going over” the cliff, it’s a little surprising to see markets hanging on every single word spoken by those in power.  Should the present environment continue, it could be a very frustrating December for traders.



    CBRE Group (CBG) – CBG is a commercial real estate play, and as you can imagine, it has performed well this year.  Since January it is up about 20%.  What I particularly like about this chart is how it based near the 17.50 level, site of previous resistance in August, and is breaking out of that base on nice volume today.  The 21 level is a reasonable initial target for longs, and a broad-based move in the overall market could take this name to 24, a key support/resistance zone on a monthly basis.  Should CBG break and close below 18, it would be prudent to exit the position and limit losses.

    courtesy of stockcharts.com



    While I maintain my upside bias, initiating new index long positions here and now is a bit tricky from a risk/reward perspective.  Continue to focus on stock picking and not market timing.  The current political tug-of-war could make it tough to get a defined trend in place until there is some resolution to the fiscal cliff.  That said, the mean reversion trade is in play until there is a definitive plan of action that surfaces out of Washington D.C.


    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.


    2 Responses to Daily Game Plan – Upside Break

    1. Mark
      November 29, 2012 1:37 pm at 1:37 pm

      Would a bull call spread be an option strategy to consider here?

      • Brysapp
        November 30, 2012 1:45 pm at 1:45 pm

        Absolutely. In choppy environments like this, being long premium can be tough, so offsetting it by selling some premium against a long makes sense. The obvious tradeoff here is that your gains are capped should you get a big move in your favor.

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