AAPL Update

Lots of emails as I'd expect on AAPL today. I opened a core short position in AAPL some time ago and decided to keep it open by hedging the core shorts, the question facing us immediately is AAPL earnings today after market.

First, the market may take AAPL earnings on a knee jerk reaction and celebrate them as AAPL is WELL KNOWN for guiding very low and then always coming up with a surprise beat, it's not so much a beat as it is them setting expectations very low to start with, so AAPL could very well see a knee jerk reaction to an earnings beat that is dissected Wednesday to show that the AAPL earnings really weren't all that hot.

Ever since AAPL declared a dividend, I have thought that it was most likely the end of the growth story for AAPL, the same thing happened after MsFT declared a dividend, yes MSFT was once a big momentum stock.

In any case, from what I see, (although I want to keep an eye on AAPL throughout the day and also check the Tech sector as that has been a "tell in the past ) I'm not going to be closing my short, but I also don't see any compelling reason to trade AAPL' earnings. Earnings are a wild card and unless we have a VERY strong signal that intimates a leak, they are like gambling (although with AAPL you can almost be assured they'll beat, but then be dissected in the days after and that reaction could be quite different).

In any case, here are the charts for AAPL as of now...

 First of all, AAPL has a VERY obvious bullish bull flag in place right now, for technical traders, this suggests AAPL is about to break out to the upside and put in the next leg higher which is usually about the same distance as the height of the flag pole (from about $565 to $618/$620). Volume is not perfect or really even close to correct for a bull flag, but you can bet AAPL longs are transfixed on this bull flag. We know from experience that if there were to be a downside reversal in AAPL, we'd expect a pattern like this to show up and about 80% of the time we'd have some variation of a head fake move, whether that be a quick break above the flag followed by a move below the flag or whether it be a longer break above the flag pulling in more longs and then a drop below the flag putting them at a loss, a new high even or just a total failure of the flag with a move below the flag tomorrow, we ALMOST ALWAYS see some head fake move; so needless to say I find the appearance of a bull flag in the most watched stock in the market, on the day of earnings to be a little suspicious and that bull flag was born from a bullish ascending triangle!

 Looking at the 1 min chart, especially today, I'm not impressed with what I see, this chart is leading negative which suggests there's distribution (although on a light scale) taking place; this isn't always bearish-if AAPL were going to beat and move higher, you'd want to knock price down and accumulate as cheap as possible, I just don't like the overall look of the chart, but again it's only a 1 min chart.


 The 2 min chart looks like 3C was lagging a bit as the flag-pole portion of the bull flag was formed, during the flag section I don't see any areas of really heavy accumulation/positive divergences, in fact, the chart looks like it's in a simple consolidation with no bias.

 The 5 min chart shows a positive divergence JUST BEFORE the flag pole was created, the positive was near the lows and as the flag pole played out and we moved in to the flag, you can see where it looks like there were negative divergences every time price reached the top of the flag and small positive divergences when prices reached the bottom of the flag. I don't see what I would call heavy accumulation or distribution activity, what I see almost looks like the intentional formation of a bull flag.

The 30 min chart which is a more important timeframe shows the positive divergence just before the flag pole was created, it also shows the negative divergences at the top of the resistance trend line of the flag, however it does not show any positive divergences at the lower support line of the flag, that's only seen on shorter term charts. In fact, the overall view I get of the flag on this chart is a leading negative position.

 You might remember way back when and I reminded you yesterday, I said I thought AAPL was having a 1 time large accumulation event and I wouldn't expect to see much in the way of big positive divergences, just the selling of the accumulated shares, well to the left is that large accumulation event and I believe that is what has been driving AAPL ever since, but other than just before the flag pole was formed, there are no other large positive divergences that stand out and I'd call the flag portion of the pattern leading negative on this 15 min chart.

 You can see the accumulation even on this 60 min chart and AAPL trading mostly in line, there's no positive divergence before the flag pole on this chart, the divergence wasn't strong enough to make it to this 60 min chart, however, the overall position of 3C in the flag is leading negative, even though it does have a positive divergence at yesterday's lows. This could be for a head fake move to the upside, I'll be keeping an eye on it today as we have seen some major tell signals on earnings just 15 minutes before earnings.

The long term trend in AAPL and the reason I keep the AAPL core short open can be seen on the trend of the 60 min chart, it went from up trend confirmation to a sharp and fast leading negative divergence at AAPL's highs and that 1 time large accumulation event (white) I mentioned, but overall the recent action is still within a leading negative position.

Personally I with what we see now, I wouldn't take any earnings trades in AAPL. To me it looks like the primary trend will reassert itself as bearish in time, but before we get major reversals we almost always get head fake moves and with AAPL it would likely be one of the biggest, there's just no way to tell what it might look like (go back and re-read all o the different scenarios I mentioned near the top)  and therefore I'd rather just sit it out, see if any opportunities open up and otherwise be patient with AAPL.