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Friday, May 2, 2008

Can't Resist Apple: Way Too Ripe, Way Too Juicy.

I couldn't resist... Apple (AAPL) looks way too ripe and juicy for a nice fat short.

I like the $180 level as my short entry. I'd add more around $190 and then again $195... should it come to that. Stop out would be new highs. This rally from the lows of $115 to $180 has been fast and furious. I'm calling this 50%+ rally as 'too far too fast'. A correction to $170, $160 areas are easily possible. I can even envision a drop to $150 in the near term.

Puts are the safest and easiest way to get short AAPL... especially now that volatility has come in.

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11 comments:

Anonymous said...

So that fact that it took a matter of days for AAPL to drop from 200 to 118 back in January doesn't affect this at all? Seems like that was an over correction and this climb back up (which has taken 2 to 3 times as long as the fall) is more like it's natural equilibrium.

Of course, I could be wrong. Likely we both are. But I think your analysis is pretty short-sighted / incomplete.

Anonymous said...

(RE prior comment) The fact that it drops so fast and takes so long to recover is a good thing for a short.
However, a $25 stop looking for a $10 minimum target, risk/reward is a bit off and for now its a counter trend trade and you are top picking! With all that said, its not a bad trade. Good Trading Ninja. :)

Ben Bittrolff said...

Anonymous,

Shorted-sighted? Yes. I trade. This is a trade. Not an investment. I'm talking about a couple of days, maybe a couple of weeks.

Incomplete analysis? Nah. Quick and dirty to be sure. I'm looking purely at the charts here, but that's more than enough. I trade 'symbols', not 'companies'.

I'm not always right and I don't need to be. In fact, I'm right barely 60% of the time. With the proper risk and money management parameters that is more than enough to be quite profitable.

Ben Bittrolff said...

Anonymous,

"However, a $25 stop looking for a $10 minimum target, risk/reward is a bit off and for now its a counter trend trade and you are top picking!"

The trade does not have a $25 stop with a $10 profit target. It is more complex than that.

I have begun to scale into my position. Initial entry is $180. I would add at $190 and $195. Should this be necessary I would have an average entry of of about $189. Now I intend to trade around that position. So I would take some money off the table on pullbacks if I am able.

Price action is important. Should AAPL rise to my prices of $190 and $195 in a way I interpret as dangerous, I would NOT add to the position and may even stop myself out right then and there.

Generally speaking, a 50% rally will result in a pause or pullback with sufficient frequency to make this trade worth my while.

Anonymous said...

Sounds good!

Price Action, my favorite words. I daytrade only and thats about all I use.

Bryan said...

I wouldn't short right now. The overall sentiment is really bullish despite the deteriorating fundamentals. Warren Buffet just came out saying he thinks the worse is over.

I'd wait until LIBOR rates go up and several more banks blow up.

Speculative money is flowing back into commodities which will cause increases in the cost of living. As the middle class starts pinching their wallets, you'll have increasing defaults. Banks will go belly up. Rinse, repeat.

eh said...

I don't like to short profitable, growing companies, especially media darlings like AAPL, although I understand the temptation (and the thinking, i.e. that slowing iPod sales will slow further, and Mac sales growth will likely slow too). In fact, I went long when it fell below 120 not that long ago, but became frustrated by the action -- it hung around sub 120 for a while -- and got out. D'oh!

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