Tag Archive for: AAPL

The Apple has fallen (AAPL Part 6): 04.18.2011

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The Apple has fallen…look out below!

The decline by Apple today has completed a major reversal head and shoulders pattern. In the process I have now sold the final 1/3 (another 100 shares per $100,000 of capital) of my short campaign.

A close above today’s high at 328.14 and especially above the Apr. 13 high at 336.14 are required to negate the bearish interpretation of this daily chart. A close below 322 would confirm the top and establish an objective of 280. Retests of the neckline at 325 to 326 are probable, but the neckline should offer significant resistance.

As detailed by earlier blog postings and communications on StockTwits, my position is now short 300 shares per $100,000 of capital (100 at 338, 100 at 332.41 and 100 at 322.88). I am risking 100 shares to 328.32 and 200 shares to 333.41. So, my risk on the entire short position is 20 to 25 basis points. My potential gain is 1500+ basis points. This trade now has a reward/risk ratio in excess of 70 to 1.

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Apple Computer, Part 5: 04.15.2011

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Is a weak Friday close a sign of weak earnings?

Next week is earnings week for AAPL. The weak close expected today could be a “tell.” The H&S continues to form. I am short two layers of AAPL, waiting to place the final layer at the completion of the top. The rally on Wednesday sets an excellent opportunity to lower stops on my entire current position to 336.31. This locks in a net profit for the short position of 200 shares per $100,000.

At this point I have zero risk on the trade unless the earnings report results in a strong up gap. This H&S top is classic in form, symmetry, volume profile, and behavior. The symmetry of the pattern projects a pattern completion for early next week. However, right shoulders can become extended.

It is important to remember that a top has not yet been confirmed. A close below 322 is needed to firmly set an objective of 280 to 285.

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AAPL Part 3, It’s All About Risk: 04.11.2011

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It has nothing to do with Apple as a company!

This is my third blog posting about Apple Computer in the past week. The first post suggested strongly a possible top in AAPL. The second post detailed a three-part shorting strategy for AAPL. I executed the first two parts of that shorting strategy last week.

I have received hate email for even suggesting that Apple’s stock is subject to a sizable correction.  It has been as if I touched the third rail. People have pointed out to me that no bearish analysis should even be considered. I have heard all about the pending changes in accounting procedures for the iPhone…about low forward P/E ratios…about the sales potential in China and Asia…etc.

To my critics I would just say this: “Get a life…I mean no personal insult…I could care less if AAPL goes up or down in price.”

When I see a great signal set up on a chart, I could care less what company it is or what its fundamentals are. In fact, I could care less if I will be right or wrong in the trade — in truth, I assume I will be wrong (I am wrong about 65% of the time). The only important thing to me is the risk/reward profile of the trade.

I shorted 100 shares last week at 338, anticipating a 3-month H&S top. I shorted another 100 shares at 334.38 when a small flag was completed.  If the H&S top is completed I will short more AAPL. My protective stops are at 336.19 and 340.51. I am risking 61 basis points on the trade currently. That is 6/10th of 1%, or $600 of each $100,000. I have the potential to make 1400 basis points on the trade, that is a 14% gain on a single trade.

Successful market operations have little to do with correctly picking the direction of a stock — and everything to do with managing the relationship between risk and reward. I will take trades with a 20 to 1 risk/reward relationship any day of the week. I could care less if the trade is in AAPL, or Gold or tapioca futures.

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