A Look at AAPL

"Lost in the lines" is still a theme, I was talking about this with a few of our long term traders today and the reality of the markets. I tried to show this once before by showing you a portion of trading action in the SPX without any context and the trend was unidentifiable, then showed the entire trend with that area highlighted and if you hadn't looked at the highlighted area by itself, you wouldn't have seen anything other but an uptrend.

Getting lost in the lines can be on an intraday or a daily basis, it's really about being able to understand a historical chart by putting yourself in the moment, if you can do that, you can understand current price action much easier, you can understand that there are few things in the market that are events and most are processes. While finding the best entry/exit is always a goal we look to attain, you can see when you look at the big picture, whether you entered a percent or 2 higher or lower is irrelevant to the big picture.

In many ways AAPL is starting to take on many of the charecteristics of the original/current BIDU core short.

I know at what level the trade was entered, but I don't remember the exact date ( I can find it, but it's not really important).

Here's the area BIDU was phased in to on average at $150 for a +25% profit, the SPX during the same period has returned about 20% of that. Looking back, as long as we knew we had a high probability trade and an edge, 5 months later a day or a week doesn't matter much. The profits from BIDU as a short go in to the account unlike a long which allowed me to pyramid up the position for about another 16% gain on the profits! You can't do that with a long and over this time period, how many trades are out there that can just be tucked away and maintained once a week?

Remember also that this is a core short which means it is about 15% of the overall portfolio value and at this point carries virtually no risk.

Here's why AAPL is starting to remind me of BIDU.

 This is a bit confusing, but there's a pretty big churning day at the red arrow, this is when strong hands deliver shares to weak hands, it's the opposite of capitulation and like capitulation, is usually a defining moment even though the stock can move a bit higher (just like with capitulation of a downtrend often sees marginally lower prices).

The $675 level represented by the white line is where we see the intraday high made for AAPL and it hasn't been able to pass that $680.87 high (remember I wanted to add to AAPL >$680). From the blue arrow to present, AAPL has moved +1.12% over 2 trading weeks, for all intent and purposes a dead, flat range. If you feel like AAPL "keeps moving higher", consider that, an average gain of 0.12% a day.

From the range that developed above $675 in yellow, AAPL has moved a total of 0.10% from close to close, from intraday high to close, it's even less, a loss, less than a percent, but a loss. The point is, this area is similar to the yellow highlighted area on the BIDU chart.

 Adding a few indicators and looking from the original core short entry to present (position is still open at a loss of 10.61% on the position and about 1% of portfolio value), we see some bearish divergences. These are simple, yet effective indicators that can be used on any asset in any timeframe, in the price window is Rate of Change which shows divergences that are useful probably as well or better than any conventional indicator. In the bottom window is simple Wilder's RSI, both show negative divergences at both top areas and ROC even shows a positive divergence at the EXACT area where we saw the strong accumulation in AAPL at its lows.

 Using a daily Trend Channel (for AAPL this is good for swings of decent length), we have a stop at $659, a close below that changes the outlook for AAPL significantly for probably at least a month and it could be much more. I try to always use a closing basis stop on a daily chart. One small hint that will help you with any channel whether Bollinger Bands, envelope channels or my Trend Channel is the "Channel Buster" which at the time (Don't get lot in the lines) seems like a bullish event as volatility picks up, but it almost always is a bearish early warning, the channel buster in July brought a 6+% pullback, furthermore if you were long you not only missed a better swing exit, you probably sat through 3 weeks of opportunity cost. More important to me than the opportunity cost is the risk factor, it doesn't matter what asset/stock you own, whenever your money is in the market it is at risk' look at Mortgage Backed Securities! Who would have thought an investment tied to real, tangible property in a rising market would be the investment class that nearly destroyed our economy and we are still not much better off 5 years later. If I have money in the market, no matter how safe I "think" the investment is, I want to have a really good reason.

 Looking at the 2 min chart of AAPL not only the trend is leading negative, but the intraday trade was as well. From a trend perspective today, AAPL DID NOT perform well; it underperformed the NASDAQ 100 by 1.25 percent and it made a series of lower highs/lower lows. AAPL's +0.91% gain looks good as a function of percent, but looking at the bigger picture, it's not a gain that is worth the risk of today's performance.

 The 15 min chart has a few regular concepts, the breakout from a triangle that failed, but what I really wanted to point out was the fact BIDU was flashing distribution from a larger triangle and we waited for a breakout knowing that the environment was negative and shorting higher prices was a high probability/low risk trade/ AAPL is taking on some of the same characteristics as it flashed distribution in the triangle and at the breakout like BIDU. We have a small positive divergence and a run up in AAPL; I was hoping for $680, but the 15 min negative leading divergence changed my plans, AAPL still hasn't made a higher high.

 The white trendline represents resistance, again the 30 mi chart shows the same theme, distribution already in effect at the triangle and deeper distribution as AAPL was sold/shorted in to strength. This most recent run that didn't make $680 (at least not as of now), is also flashing warning signals.

 The 4 hour chart shows the same theme, except even worse on a more important timeframe.

 Again, today's 15 min chart showed price strength, but at a high cost of a 15 min lading negative divergence. There's only so much institutional support that can be removed before AAPL is standing on one wobbly leg.

 The 5 min chart shows the same BID theme, except in a smaller version which is fine as March-May 1 was a major topping area whereas this is more of ca counter trend move.

Finally on a close up view, the 1 min chart is leading negative.

All in all I feel fine about shorting or being short AAPL in this area and while trying to pick tops is a fool's game, we do try to get the best entries/exits based on data, but there's a risk of losing out on the trade if you are too fancy with entries. I'd much rather have entered BIDU at $148 and still have a great profit than to have missed that nice trade altogether.

This is why I said what I said about AAPL today.