AAPL Synopsis

As you know I have AAPL as a core equity short and put positions in AAPL, today's very thin market I suspect is behind the "mushy' signals seen earlier in the day and a little toward the end of day. However I think there are some decent signals in AAPL today, which put in the needed pivot that wasn't only resistance but a variety of bull flags/pennants on multiple timeframes, with a Doji close yesterday and what looks to be a lower close today, however the closing numbers don't quite do the underlying trade signals justice.

As you know, in June I had to make a decision, take substantial profits on core short positions including AAPL or hedge them with some longs. Normally I'd trade around a situation like this, cover the shorts, go long and look to re-enter the shorts at better prices. I instead decided to hedge the core shorts with longs and hope to make money on the longs, hedge the shorts and maybe add to the shorts before a reversal to the downside, my reasoning was simple; we are seeing a market WAY more volatile than what we saw the first 3-4 months of the year and we are seeing some explosive events in the EU that could produce a Black-Swan on some quiet Tuesday.

One of the positions that showed the logic of not trying to trade around these positions was the recent move in PCLN which is a core short entered at $761.79.

While the 1-day drop of over 17% is one example, the thinking was simply that we are in a fundamental environment where the second shoe can drop any time. Since making that decision, we've seen Greece fall apart even more, we've seen Spain on the verge of a sovereign bailout which there are no funds to cover, Italy will be right behind them, the spirit of cooperation (that never got anything done in the first place) in the EU is destroyed, there's a north vs. south mentality in the EU and the once tight relationships between Germany and France and Germany and the ECB are in ruins.

The fundamental reasons for hedging the shorts rather than trading around them have proven to be what I expected and even worse, even 3C can't predict what Merkel could say overnight that sends the market crashing down.

As for AAPL...

 Intraday 1 min chart saw a deep negative divergence, much deeper than the move in price, if you compare relative price and 3C position at the trendline vs relative price and 3C position now you can see how much underlying damage appears to have taken place today. This is what sets up drops like what we saw in PCLN, when the underlying support is so eroded that there's no institutional buyers and retail can no longer hold up the stock (not to mention institutional short positions), you get a break of an important support level that hits stops and creates more supply, sending prices lower until the next stop is hit-it's the snowball effect and AAPL is well-positioned for such a move.

 The 5 min chart is where the timeframes move from intraday to more institutional activity. Do you notice anything interesting about the dramatic change in character in 3C and what might have caused it? AAPL moved above some resistance levels (a bull flag breakout and a resistance area) which brings in buyers allowing shorts to sell short in to price strength, the same thing we did with AAPL or PCLN, it's not easy, but it's actually less risky. This is not coincidental that 3C went deeply leading negative as price moved above key levels that would bring in retail buyers.

Here's the mechanics of it, what is needed is demand to sell in to or short in to.

Volume at key breakouts, before this volume in AAPL was dwindling away to nothing, not conducive to selling in to higher prices.

 The 15 min chart negative at the highs, interestingly today, all of that damage on a 15 min chart (usually they take longer to move) was done today.

The longer the timeframe, the more institutional activity is exposed and the heavier that activity, again note 3C never made a higher move after AAPL made that pivot breakout, on the 30 min chart to the far right, all of that damage was done today.