Skip to content

AAPL news

December 27, 2006

Following the line of thinking in the last post, it’s interesting to see the major gap in AAPL today come after a more severe sell-off than AAPL has seen in months. Perhaps the stock is just tired and all of the technical analysts saw the stock put in a lower high and then break horizontal and diagonal support and this accelerated the selling.
(Click image to see it larger)

(Kind of amazing that the stock gapped down to open right at the old resistance/support just above 78, no? Do you think other people watching AAPL are also drying lines on charts?)

Maybe it’s all just a coincidence as often seems the case with Technical Analysis. But maybe someone or some very broad collective of smart people (the market) smelled something fishy and knew it would be good to sell some AAPL. The news today is of a further development in the options saga that seems to be sweeping the tech companies in particular. “The Recorder, a San Francisco-based publication owned by American Lawyer Media, reported late Tuesday that federal prosecutors are looking into forged documents at Apple related to administering stock options.” Steve Jobs has apparently hired his own atttorney, independent of the company’s legal team. Here’s a link.

Again, perhaps it’s just coincidence, but it’s very intersting that news like this comes out after the stock has been selling off and not in the midst of a great rally.

So if you owned stock in this company, what would you have done to preserve your profits? I suppose it depends on your time frame and where you bought it. If you bought any time in the last 4 months, I would think a break of intermediate term uptrending support line and the horizontal support from old resistance would have been a pretty good place to get out. But if you owned the stock for longer and were playing it on a much broader time horizon, the trend support line on the 5 year chart would be reasonable to use and still be in the stock. All the same, looking at the weekly chart we see decreasing volume on the latest rally and the weekly candles show a clear turnaround and break of support on heavier volume. Selling covered calls on your position or even buying puts as a hedge would have been very reasonable. Maybe it still would be.

As I write this, the stock has recovered pretty impressively, up over 2pts. from the open. The market may well shrug this news off now and buy shares at this discount. What we’ll now look for as trend traders is to see what happens when the next lower high is put in. That could be the more attractive bearish entry for a short term trade.
The Long term trend is still bullish, trend unbroken. It’s worth observing, though, that the most recent high is not very much higher than the last high in January. The short term is definitely bearish and the intermediate term is right on the cusp of becoming bearish.
Whatever happens, we can play it in either directiton as long as we choose our entres wisely and manage our risk more so.

One Comment leave one →
  1. Anonymous permalink
    December 27, 2006 9:47 pm

    Your blog is very interesting. You have good insight, and I think you’re wonderful 😉

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: