AAPL Trade Idea Follow Up

Lots of posts for AAPL this week thus far.

We started with Monday's, AAPL Update which showed AAPL and a potential set up, it was and still is far from my favorite trade because it is transitioning like MFT did from a growth stock to more of an old blue chip dividend type stock, just look back at the last 20 years of MSFT history and you'll see the same story being played out in AAPL, from a monster growth story to a Blue Chip, more defensive type of asset.

The trade set-up was based in Wednesday, November 26th's triangle which looked like this as of Monday's post.

Given the profit potential for AAPL as it transitions, I wanted a better entry for a short above the triangle, which is or was probably the NDX's best hope for some better relative performance as you could see from the A.M update this morning, the NASDAQ 100 futures did NOT have the same or any positive divegrence which is why I said I expected them to be the laggard yesterday and why I continued to feel like their best hope was an AAPL bounce which would also set up a better AAPL short entry with lower risk, this has been talked about at length (Index weighting and AAPL's weight on the NDX).

However AAPL itself never developed much of a divergence either. Then came yesterday's early AAPL update, AAPL Trade Set-up and by the end of the day in the Market Update AAPL was already seeing negative divergences in the 2 and 3 minute timeframes migrating or gaining strength and moving through longer intraday timeframes which could meet up with the intermediate which would be the only reason I'd consider an AAPL short. With Tech being the laggard among the S&P sectors yesterday, last night I mentioned the possibility of it rotating in today, maybe helping the QQQ, but since late yesterday...

As of this morning, things are not looking any better for AAPL despite its price gain/gap up...

 It is the 10-15 min AAPL charts that would cause me to even consider an AAPL short, but on short term price strength that can be shorted in to with deteriorating 3C charts.

This is the 2 min chart that went negative yesterday. At #1 we have last week's late weakness in 3C causing the Monday morning decline and a very early (10-a.m. or so) 1-day short term oversold event at the large volume spike (#2). There's a very slight, weak positive divergence there and that's about it. Since at #3 and #4 AAPL has seen deterioration in the short term timing 3C charts, but not the price gain ABOVE the triangle on the first chart above this one.

However "IF" AAPL's charts keep falling apart at this pace, then a swing short may be justified even without the move above the triangle which I still hope we see, but don't have much reason to believe in other than Tech's poor performance yesterday and the often seen rotation the next day.

AAPL's 3 min chart also saw a building negative divgernece yesterday as the 2 min grew stronger and migrated to a 3 min chart.

This morning...

AAPL's 5 min chart is now starting to lead negative. This will make it quite hard for AAPL to make much upside headway unless it is specifically ramped as other levers fail , to goose the Q's higher.

 It is the intermediate 10 min chart above and 15 min chart below that would even cause me to consider an AAPL short. They go from in line or price/trend confirmation at the green arrow to negative divergences late last week leading to Monday morning's decline and since, an even deeper leading negative divegrence so the 2, 3, and 5 min charts are now migrating to the stronger 10 and as you'll see below, 15 min charts.


 While not a screaming short, there's a clear change in character from in line (green) to a couple of negatives on a pretty strong 15 min chart, given the 30 min below...

Also showing a change in character, AAPL may become a short even without the head fake move above the triangle where I think it offers the best short entry. The simple fact is AAPL simply may not make that move. Alternatively, if these charts which were not as weak Monday, which is why I required the better entry higher with less risk, continue to degrade at the pace they are currently, we may have a new reason to short AAPL , a reason that wasn't present Monday and that's the longer charts showing heavier distribution.

I still have upside price alerts set and would still not rule out AAPL being used to ramp the Q's and rotate to Tech, but this is also an interesting development worth keeping our eye on.

Even if you are not interested in trading AAPL short, it is a bellwether so what it does is important.

AAPL-The Crowd Mentality

I have been warning about AAPL all of 2012, the late April decline I said was a defining moment for AAPL and only in the future looking back would people realize it; we are now below those levels.

Here's the area I was talking about...

I caught a LOT of flack from AAPL longs and lovers for saying what I said because everyone thinks in terms of what a stock did this afternoon or the next day and if AAPL was up, well then whatever you say is dismissed and when AAPL falls, then it was just a lucky guess.



However AAPL has been on an uptrend for at least 10 years now.

Note the change in volume, a healthy uptrend sees expanding volume, declining volume is a warning sign.

As for the warnings and AAPL's performance...If I said anything the response was, "AAPL just made an all time new high". I wonder how those longs are faring now?

Take a look at AAPL performance...

The performance up to about the time I started seeing major trouble brewing long term for AAPL and the performance since.

And what was the problem I saw in AAPL? I couldn't tell you then what the real fundamental problem was, but someone saw something and as always with underlying trade, if you wait for the reason for the signal, then you have certainty, but you don't have profits.

Here was the problem (unfortunately many of the hints were on timeframes that we can't see as we have 5000 bars of history and in some of the intraday timeframes we can't go back that far.

Longer term the problem is pretty clear and when it even started, you have to remember how Wall Street thinks, "He who sells first, sells best", selling in to higher prices in a bubble is what they do, I'm not saying they were out of AAPL by 2009, not at all, but the nature of their holdings changed dramatically. A 5 day chart tells us a lot about the overall health of a company this big, but it's not tradable information, maybe long term investable.

 This 3 day chart puts a little finer point on the problem, but doesn't identify the area where something really changed.

 Here on a daily chart, the leading negative divergence in April of 2012 was really the first time it was really apparent something was changing and this is when I really started warning people about AAPL, by the top, you can see a lot of money was already gone.

An hourly chart puts an even finer point on it.

As to why, you could say the passing of Steve Jobs, you could say what I said when the IP5 came out, "This is the first release that is evolutionary rather than revolutionary" and that is what is dragging AAPL down early today, talk of declining IP5 demand.

However more than anything, I think AAPL got too big for their britches and forgot how finicky the crowd is and how strong the crowd mentality is, just ask MSFT or RIMM.  When AAPL started demanding exclusive rights to content, one of the best examples is AAPL TV which will probably never be what it could have been because of AAPL's need to have exclusive rights to content. They made a mistake with the IP5 just like MSFT did with Vista, they were laying catch up to AAPL as AAPL was playing catch-up to Samsung, then the whole Samsung, "Bite the hand that supplies" debacle. Now we are hearing about an affordable AAPL I-phone, so everyone can own a piece of the status symbol, but that's when it's no longer a status symbol.

I can see a point not too far away in which we hear about AAPL stores closing in areas, AAPL in my opinion has just found out how far they could push accommodation for mass demand while trying to maintain an exclusive status symbol and they crossed the line, once that happens the crowd can turn finicky pretty quick, Tim may be well advised to take a close look at the Blackberry, once called the "Crackberry".

No bubble lasts forever and I really do wonder how many people have lost a lot of money on AAPL since I first started warning there was trouble and how much more they'll lose in the future thinking that with AAPL, "This time it's different". It's never different with bubbles,  the growers of a rare diseased Dutch Tulip could tell you that hundreds of years ago.

AAPL Not So Conventional Update

OK so we know the trend table for AAPL, our Short term trend expectations, our Sub-Intermediate (maybe even Intermediate term) and our Primary trend (maybe even our "Secular Trend"). If you re a really new member you might not know all of these, I'll be glad to explain any questions you have via email.

*As always, if the information changes and probabilities are changed, then trades are reassessed. If information changes so much that probabilities are not just effected, but flipped 180 degrees, we go with that. No one here is trying to win a big stuffed Teddy bear for guessing when AAPL will enter a Primary trend, we are trying to understand the information we have and use it to our advantage.  We do want to follow the message of the market, we aren't looking to have the best guess and call ourselves "Gurus" because we all know it would be nothing more than a lucky guess. This is the entire essence of the saying, "Do you want to be right or do you want to make money?", some people really can't distinguish between the two concepts.

So lets take a look first at the normal AAPL update and what we have, you know which way I think our first trend is going to take us and how that sets up our next trend.

 First you my remember me warning about AAPL and the looks of the parabolic nature of trade in 2012, I wrote many warnings about AAPL and always mentioned the parabolic move in 2012 being a change in character and that these moves almost always end badly. Before AAPL ever started down, we knew something was wrong. It took 8 months to create this parabolic move on a 5 day chart, it took only 2 months to erase 2/3rds of the gains. Remember Fear is stronger than greed?

Just as a few examples because I certainly can't remember them all and each post is quite long:

AAPL Update (April 2, 2012)... "the VERY parabolic move that actually started since 2009 has become EXTREME since the start of 2012, everyone knows how I feel about parabolic moves either up or down, they tend to end badly and we have seen the evidence of this on numerous occasions, but this being a weekly chart, it carries special importance toward the longer term trend in AAPL. I want to show you MSFT when it was behaving in similar fashion..."

AAPL Update (April 24, 2012) EARNINGS... "As you know, the indications have suggested Tech wants to rotate in, despite having some fierce head winds...everyone knows and has known forever that AAPL guides VERY conservatively, therefore they easily beat-except once not too long ago....The market is most likely sticking with the trend, AAPL guides low, comes out with a head line beat, Wall Street takes apart the earnings report and everyone realizes after a few days that AAPL growth is probably not sustainable at the past pace. Thus if there's a volatile short term bounce, which industry group is likely to lead it? Tech....This is and always has been (so long as it has been there) the great hope pinned on AAPL and thus a tech led bounce, a 15 min positive leading divergence. The 15 min timeframe sounds small, but it is very influential and has moved more than just a swing trade.

Please though, whatever happens in AAPL, keep in mind how deeply leading negative the 60 min chart is, this fits perfectly with the parabolic move on the weekly chart. If AAPL does manage a huge move up, I'll be looking to sell short in to it for as long as I can."

We were right on the AAPL (earnings) led Tech move in to rotation, that was the last day at the lows for Tech and it saw about a +4% move up over the next 5 days. AAPL gained over +9% the next day on after hours earnings reported on the 24th,  as mentioned above in the last paragraph about selling in to any huge move up, AAPL spent 1 day there before starting a decline over the next 17 days, taking AAPL -14% lower!

AAPL Update (Sept. 13, 2012)..." Recent price action has been choppy and range bound, sometimes the back of a stock is broken before price reflects it, the red arrows are what I consider to be important days for AAPL....  Intraday from yesterday's rise and this a.m.'s gap up with flat prices forming a triangle, we have a perfectly shaped bull flag and volume confirming it, traders will front run expectations and buy this pattern in advance as it suggests another leg higher about the same as the first (+3.5%) once the flag breaks out to the upside, this is where we often see traps set as technical traders follow TA like it's the bible."

In fact, from the 13 our target of approximately +3.5% was just about where AAPL topped in  late September.

Nothing Much Changed In AAPL (September 26, 2012)..." AAPL with a parabolic move up on a 7-day chart, these moves are spectacular, but they also have the "Bubble-Effect", the belief that these kinds of gains are sustainable, this time it's different, etc. I think we've seen enough of those moments over the last 12 years that we should be wise enough to know that it's never different, a bubble i a bubble and they all burst... With the way things stand now, if anything, I'd be looking to sell or short price strength in AAPL. Believe it or not, AAPL wasn't the first market darling that everyone was in love with and saw a parabolic move up. Anyone remember MSFT?"

I can't spend all night looking for posts warning about AAPL, but there were plenty. Lets look at AAPL from here forward and see what the probabilities and opportunities are as well as interesting concepts.

 This is the 5-day "Channel Buster" concept, the trend that was there for 3 years all of the sudden got very volatile and broke the channel to the upside. While this "seems" bullish, this is almost always a major red flag, upside volatility gets very heavy just before a top is formed and ultimately these Channel Busters see a second break, the one through the bottom of the channel. "Changes in character precede changes in trends"

 I often mention ROC (Rate of Change) as one of the ;east appreciated indicators that can give enhanced signals to just about anything you add it to. Here on a 9-day chart I added a 10 bar ROC to price, note the couple of divergences it calls out on this long chart (a shorter chart will have more details and divergences, but the longer chart has the more serious ones). Note the negative ROC price divergence at AAPL's recent top, it's by far the sharpest and largest on the chart. Below a 5 period (because of the 9-day chart) Wilder's RSI also calls several signals including the most recent top. Add ROC to Wilder's RSI and see what you get!

 Locally for near term trade, here's the 1 min chart showing immediate distribution on the gap up in AAPL this morning and basically every other place we looked. The very small positive divergence late in the day really doesn't mean much when you look at the big picture and it may very well just be run over on such a short timeframe.

 Here's the 1 min trend, but a little longer view, you can see AAPL is leading negative and has been distributed at both recent gaps up.

 Here's an even longer 1 min 3C trend, the leading negative divergence is a lot bigger than you might have thought.

 On the intraday (but more important) 3 min 3C chart, we see a few positive divergences at lows so they can lift AAPL and sell in to the price strength, which also creates demand by retail that smart money can sell to. Today's leading negative divergence was not pretty in AAPL.

 On the 10 min chart we see a green price/trend confirmation arrow and then a leading positive divergence at AAPL's lows, the move higher has seen distribution with a leading negative 10 min divergence hitting a new low. It seems pretty clear what smart money has in mind for AAPL in the near term and they appear to be positioning for it, just as many of us did last week.

 The 15 min chart shows several divergences to the left, just so you appreciate them and not only see a small arrow, I told you how long those divergences lasted, 6 and 5 days. Then as AAPL moved in to its highs we see distribution in to higher prices, while retail thinks AAPL is bullish and they are buying, smart money has a different opinion and are more than happy to sell their shares at a higher price and in to healthy retail demand. On the right we have downside confirmation with 3C and a recent leading negative divergence in to this last pop up, I originally suspected the market would put in a pullback, strong, but a pullback; I'm starting to think it may be uglier than that.

 Here's a closer view of the 15 min chart in the recent swing up, it' leading negative.

 The 30 min chart tells us a lot, to the far left is the first time we shorted AAPL as a core short and aw a 16% gain on the position before accumulation took place. I had warned before and right after that I suspected AAPL would have one strong accumulation period and they would use that to push AAPL higher and sell in to the entire trend higher; you can see where they really started distributing. You can also see this is the first positive divergence since May, so there is a longer trend we are looking for, not yet, but we do expect it to materialize; there's always a reason why Wall Street sets up cycles like these, for instance, push prices higher and sell in to strength and demand, most likely there are too many shorts on the same side of the boat and Wall St. doesn't make money trading with you. We make money trading with them!

Here's a closer look at the 30 min chart making the top VERY clear as well as the recent longer term positive divergence, we do have a local negative divergence within this leading positive 30 min, but that's part of our trend expectations. 3C should let us know when to move in and out of positions to take advantage of these different trends. Above I mentioned a bull flag that nailed the absolute top, although it took 5 days or so and was a 3.5% advance (it may not have seemed bearish at the time), it ultimately may have called the final top in AAPL.

Lets look at the longer term...

 This 2 hour 3C chart shows when we went short AAPL earlier this year in Q1 and when we covered at the May lows. The May lows also turned out to be the large accumulation area we had anticipated so smart money could sell in to higher prices and demand, this original position may have been fairly large, but nowhere near as large as the distribution the uptrend allowed. The 2 hour leading negative divergence at the September top was as clear as it gets. On this chart notice our 30 min positive divergence doesn't show up here, that's because the 2 hour chart shows much larger money flow than a 30 min chart, while there was accumulation for a move up, it was not so much that it hit the 2 hour chart so we know it's not likely to be a primary uptrend.

Finally this 5-day 3C chart of AAPL again shows some interesting divergences way back to 1984, the first red distribution arrow at the far left may seem small, but that is a 16 month divergence, after that a year and a half positive divergence that sent prices up 170% over the next 6 months! We can see some large accumulation areas in 1997-1999 and 2001-2003, we haven't seen accumulation that size since, by late 2009 distribution of these large accumulated positions were being distributed in to demand and fantastic profits, The leading negative divergence really gets sharp through the parabolic price move during 2012, this is by far the largest distribution stage on the chart, this is what drives our primary trend outlook, perhaps even a secular trend. Luckily , just as we can see several different trends forming high probability trades now, in the future AAPL will not move in a straight line, counter trend rallies during bear markets or primary downtrends are some of the sharpest, largest, fastest rallies you'll ever see. We should be able to take advantage of those trends as well as they develop.

AAPL Update

The Jan 535 AAPL Puts were bought for $25.15 and closed at $27.80 for a +10.5% gain, but the gain wasn't the point, the probabilities of the trade were the point. I knew at some point AAPL was going to get complicated as the longer term charts started to clash with the shorter term charts (bullish/bearish respectively, but in different timeframes).

Lately we've been seeing some very complex timeframe trends developing, AAPL is one of them so for now I'm going to try to keep this as simple as possible, but many of you probably remember a longer term timeframe trend building on the positive side since late September for most of the market and October for AAPL specifically, I mentioned it was there many times, but it wasn't ready to act on and said, "We'll cross that bridge when we get to it".

Well we are getting closer to that bridge, but there are still some things I'd expect to happen in the market first, having year end trade to complicate things just makes the waters that much more muddy, but as I always say, when you are unsure, go to the longer term charts.

As for closing AAPL puts, first let me say I'm not ruling out additional downside, I'd like to see it, but technically AAPL did do what I expected even though it didn't do it in a way that I liked, it did do it. I expected AAPL to make a new low before any of this longer term trend business would come up and AAPL did that. I can't rule out another new low as the way I see it, the broad market still owes one.

The AAPL Put trade closed

 AAPL1 min intraday went leading negative last Thursday and Friday gapped down, you may recall I closed part of the AAPL position Friday.

 Looking at today's intraday trade, there was a leading negative divergence intraday in AAPL, it pulled price lower, but then the divergence lost its strength, it's this point in which I decided to close the rest of the AAPL Puts as I NEVER want to be in options trades 1 minute longer than I have to, any kind of suspicion with them and I'm out of there, it's too much leverage not to be SURE.

 Here's the 30 min (much more important and larger trend) 3C chart for AAPL, you see the leading negative divergence at the top to the left and what happened to AAPL since, but around October a relative positive divergence started forming, it gained more momentum in November and went to a leading position since-this is the short term and long term clashing and the long term should eventually win out, even though I must say the charts longer than 30 mins show the even bigger picture as very negative for AAPL, it all depends on the timeframe you are trading and when, but at some point AAPL should make good on this positive divergence.

I'll post a much more in depth analysis of AAPL, but right now the critical mid term 3-10 min charts where transition occurs are not giving great signals yet.

The 15 min chart went from our November 16th rally low to AAPL's high with a leading negative divergence sending AAPL back down, I expected AAPL to make a new low on this move, technically it did, right in to a positive divergence. The reason it's positive, the former support of November 16 is where all the stops and limit orders were so AAPL only had to trigger those orders and it provided enough supply to accumulate so I believe this is part of the tactical movement regarding the longer term 30 min strategic chart (see chart below).

The daily AAPL chart with volume shows the November 16th low as the rest of the market put in the same low, then remember the bear pennant that I said would likely be a head fake move-you can see it above and the break, it is there that AAPL broke support and triggered all of those orders, look at volume. This is how Technical traders are manipulated everyday because they are so predictable, they put stops and orders just below support as if it were some protective barrier and Wall St. knows this, why do you think the volume is higher the first day of the bread at the red arrow than the next day? Because all of the accumulated orders were wiped out. We're still in head fake territory on the break below the bear pennant as Technical traders expect that the break below the pennant should have led to the next leg down, instead we are still lateral.

This is an excellent lesson about stops and how Wall St. uses Technical Analysis against the crowd and how you can use their predictability to your advantage. Study the charts above, they're pretty simple.


Short term we probably will see more volatility, but it's time to be patient with AAPL and let the market tell us, when, where and how.

I Want to say, "I don't get it", but I do

I think most of you can attest to the truthfulness of the statement that there's probably no stock out there that I have written more about, warned more about and posted more charts than AAPL.

Even when AAPL was moving up it was exceptionally clear the stock was in huge trouble.

Now it seems almost like a daily event of notable hedge fund managers taking HUGE losses and many because their #1 or in their top 5 was AAPL.

I want to say that I don't get it, but I do. Hedge Funds aren't much different than retail when it comes to the "sheep mentality". Several months ago it was only 11% of all hedge funds were outperforming the S&P, the last I heard it was only 8% and the reason why? If you are a fund manager/owner you are getting between 1.5 to 3% of AUM a year just for management, for a fund of $100 mn that's $1.5 to $3 million dollars a year. Then there's a performance fee usually of 20% of any money they make above the high water mark, so if they make 10% or $10 mn that year, another 20% of that is theirs- $2 mn and this isn't a huge fund at $100 mn, there are funds out there above a billion in AUM. Some funds even make 50% as an incentive fee so they get half of that 10% they made plus the yearly management fee, it's a good job, leave early on Fridays, lots of 3 and 4 day weekends, lots of money.

If you are a fund manager, you don't want to lose your clients, but more importantly you don't want to lose your job. This leads to the herding mentality, they all buy and sell the same stuff, that's why we can see it so clearly when they are really active.

Today, if you watch CNBC you know him, Whitney Tilson of T2 released his September 30th 13-F and guess what his top 2 positions were? AIG and AAPL. Remember when I said there are too many owners of AAPL all trying to fit through too small a door at once? It was only about 2 months ago.

In any case, with me saying today that an AAPL buy may be very close at hand, I think I should be clear about AAPL and what I see as probable and where I stand because it's not "Long AAPL", that's just an opportunity because something seems to be going on right now.

You may recall when Paulson's fund lost somewhere around 56% last year with his big position being BAC. Right as he finished selling his BAC position, BAC took off and nearly doubled in the next 2-3 months.

Any way, lets look at AAPL and see what the real problem is, where it is and where AAPL is likely headed.


First I like AAPL right now as a trade, it's not a position I or anyone has to take, there are ways for it to prove itself and if it does, then it may be worth taking for a trade, if it doesn't we just look for the next opportunity. In this post I explain why I like AAPL now and specifically NOW, meaning I think a position is probably very close.

Here's 1 chart that sums it up...

This 30 min 3C chart went from up with AAPL to a clear negative divergence at the top, since then it hasn't let up on the downside or shown any really strong divergences, this is the first with a leading positive that formed in 2 days, it's above the last 2 3C highs and almost at the level in which AAPL was trading for $650, I wouldn't consider AAPL if I thought this was going to be a 10 point move. However as you all should know, the real trade I want to see is shorting AAPL in to price strength.

 This 2 day 3C chart shows where there have been MAJOR events in AAPL, 1985 was a big year for accumulating AAPL, 2003 (the start of the last bull market) was another large accumulation area and then 2011 and 2012 showed us something never seen in AAPL before, distribution. Remember these funds are so large, their positions so big, they can't sell on a dime like us, it takes time and demand.

I made an argument for AAPL's 2012 parabolic move up and how these never seem to end well and how AAPL will likely see just as nasty a parabolic fall on the right side of the pattern which we already see. In fact I even went so far as to say there'd be a small "U" shape on the 5 day chart to the reversal.




On a daily chart, this is that "U" shape reversal that you see on the 5 day chart. At first this looked a lot like a complex H&S top with 2 left shoulders, a head and at least 1 right shoulder and I was hoping for a second, AAPL fell from there and this could be considered a Broadening top as well. The normal volatility shakeout after a break like this never came for one simple reason, the sellers were too desperate to get out anywhere they could and they are still trying to get out, but at this point a lot of them are going to need a bounce in AAPL so they can get out with something left to their hedge fund.



Below this 2 hour chart was one of many I showed you making the case this was a top, even volume analysis was used to verify the top.

The daily chart was used as well, this is a great example of the basics of 3C, price is higher yet 3C is lower, there's less money coming in to AAPL at a higher price than there was at a lower price. This tells us what underlying trade looks like, money is moving out.

Here we see at the red arrow the H&S top shown above, but that's not the real problem in AAPL, the real problem is around the yellow arrow.

On a daily chart, this is where the yellow arrow is. For the size of the uptrend in AAPL, this is the proper top formation meaning it is likely AAPL runs up to the $600+ level before making a bigger, stronger leg down.

On a weekly 3C chart we see a few large accumulation areas, again the start of the 2003 bull market is an area of huge accumulation, but here look where the divergence is and where the trouble really starts, in 2011 and 2012, there were a lot of AAPL longs over the years and since 2009 volume has dropped off badly, it takes a lot longer to get out of a big position now than it did pre-2007, this also should give you some idea of how bad the downside in AAPL is likely to be as this 5 day chart is leading negative.

I'm guessing the $350 area is the eventual target, but it wouldn't surprise me one bit if that was overshot on the downside as the market always swings way too far one way and then way too far the other. You think it can't happen? MSFT was trading over $150 and is now at $26.83!

So that' the game plan with AAPL.

One other note, when the FED finally withdraws their policy tools as they will have to at one point, the market may see an even bigger shock, just look at tech during 2000.

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.