AAPL Update

AAPL Puts were opened last week I believe, March $535's, as of the 14th of February they were down 29% so I'm sure as of the close yesterday that was quite a bit more if not double, today they have recovered a lot of that and are only down 1%, these options can cover a lot of ground fast and we aren't even in to the move I'm looking for in AAPL yet.

I like to show this at turning points because it gives you an idea of how the majority of retail was positioned, remember this is a broad tracking portfolio, not a trading portfolio which means every options idea I put out there is tracked, it's not the way I'd trade because gains are diluted with so many positions, but it still gives a good idea of a slight change in the market and how that effects rank which tells you a lot about the majority of the crowd (as you know, I like to set up positions ahead of time and short in to strength/buy in to weakness, so when a turn comes our positions are already in place).

For the week the options tracking portfolio is #17 of 609 competing portfolios which puts us in the top 3% and you also know that I don't swing for the fences with options, but rather use them as tools. Obviously the vast majority of the crowd was positioned long/calls in to this week.



Here's what we have...

 This is the daily AAPL chart, this isn't the worst divergence out ther, as I have mentioned several times, I believe AAPL is transitioning in to a MSFT which use to be an even stronger growth stock than AAPL, then they issued a dividend and became a range bound large cap dividend stock, I think AAPL's growth story is over and they'll start to look like a MSFT.

In any case, since AAPL already saw a -45% decline from its highs, I don't think it has as much downside as some others, thus one of the reasons I chose to use some leverage with AAPL Puts rather than an equity short.

I also want to point out the rally in yellow, but look at 3C already in a deep leading negative position. For the most part with a chart like this, we can assume the probabilities of the rally in the yellow box being anything more than what you see there are very low and the probabilities of downside and a lower low are very high as the primary divegrence is already in place.

The concept is akin to a bear market counter trend rally, it can move sharply to the upside, but you know the probabilities are heavily skewed in that rally failing and the primary bear trend resuming, this is what I was trying to say in the last post when I said,  "3C is in line with price, it doesn't need to be negative because it already is".

 This is another example, the 15 min chart which shows the accumulation that fueled the run up (and note there's almost always a proportionality between the size of the base and how far the base can carry the asset before a failure) and now we have a much larger, stronger leading negative divegrence, this tells me that when looking at AAPL now vs AAPL back during that accumulation period,  a lot more shares were sold and sold short recently than were accumulated, of course we wouldn't be able to have a price reversal if that were not true as smart money would still need upside to sell/short in to.

 The 30 min charts that I thought would hold together until the SPX breaks down below the 200-day moving average are all falling apart. Today's distribution alone is significant on this 30 min chart, it's pretty clear to see the leading today.

 As far as migration, where we see divergences first and how they flow, this 5 min chart (as I said in the last post) was already negative so there's no need for "Extra negative", price has a long way to go on the downside just to revert to the 3C signal.

 The 1 min chart shows a negative yesterday morning and today we have in line on the downside move which is what we want to see.

The 2 min chart also negative, has a small intraday positive, stocks rarely move in a straight line so it's likely we'll get another minor wave that rolls up and then rolls down as the larger tide continues to move out.

These kind of signals (if they materialize in to a move) are very useful as tactical entries that give you a better entry with less risk as you already know the more important charts show the probabilities are very bearish.

 the 3 min chart, also very negative yesterday and before and also a small positive forming. For March AAPL puts, this small positive is no threat at all, unless it was much bigger I won't even trade around the options position. If I were to close the put to trade around the positive signal, it's more out of Theta or time decay while we wait for that move to complete than it is about any worry that the expected trend is in trouble.

The 5 min chart again, but a closer look at the positive. You can also judge the size of the negative vs. the positive and since AAPL hasn't moved anywhere near what the negative divegrence implies, you have a pretty good idea that any intraday price strength or bounce from a positive like that is best used as a short entry (sell or short in to strength, not chasing it on the way down).