You guys were all right, and I was wrong. In the last month I have traded AAPL twice, both short biased defined risk put spreads. One winner (here) and one loser (here). The first I doubled my money, and the second I cut my losses last week before the breakout to new highs and lost about half my capital at risk. I can live with that, I am a trader and I suffer plenty of losses, the key is to make sure you cut them quickly, or at inflection points.
On Monday in my Notable Options post (here) I suggested the following:
There is a fairly epic technical battle taking place in AAPL, right at the prior highs, your guess is as good as mine which way it resolves itself, but I think it is safe to say the smart money is on a near term breakout:
SO you might ask, why didn’t I play the breakout if it was so obvious? As regular readers know, I am a long term, happy and very good customer of AAPL products. But I absolutely can not stand the recent mania over the stock where the assumption is it has no risk to the downside. But we can leave that discussion for another time.
In the meantime though I think it is important to note that the breakout could have legs, and won’t really look too extended until it hits the upper band of the uptrend (around $130) that has been in place for the last year:
By all accounts it appears that CEO Tim Cook’s performance at Goldman Sach’s Tech Conference yesterday (read transcript here) was off the charts, and once again it appears that sentiment towards the company and the stock is white hot, oh and management seems cocky. Maybe its because they know in April that they will raise their dividend and increase their share buyback program by tens of billions. Oh and they will release their first new hardware product in 5 years. But the problem is not what the company is doing or saying, its that the the investment world is in universal agreement that the stock may never goo down again. Sentiment is a tricky thing, but from my experience when investors start misplacing love for a company and/or product for love a stock, bad shit can happen.
The chart below is a search on Google Trends for the following: ” aapl stock price”. It seems to mirror the euphoria in the stock price, which makes sense. But let’s remember who is searching for stock prices on Google. Mom and Pop are back in! I don’t mean that to be condescending to Mom and Pop but as an indicator of bearishness and bullishness those sorts of signals of trades getting crowded often identify that we’re near an inflection point.
But it seems like we’ll see $130 in the not too distant future. A far better chartist than me will draw a lot more intelligent lines on the charts to show you where it is likely to go from there. I’m not rooting for higher or lower here, merely tracking sentiment to see when another entry point makes sense.