Trade Idea: AAPL Short (Puts)

Wednesday I opened a partial AAPL position using puts. The reason I didn't go with an equity short as I would have preferred is that AAPL's longer term charts except for the primary trend, don't have me convinced AAPL will put in a serious trend lower, but I do think it will put in a move lower thus the puts allow more leverage to increase the profit potential.

Remember, AAPL lost -45% off its 2012 highs in only 8 months. I have pointed out numerous times how similar MSFT pre-2000 and AAPL pre 2012 top are, both hit major highs (MSFT even more so than AAPL), then declared dividends and went from explosive growth stocks to large cap range bound dividend stocks, their yield is nearly identical. When AAPL declared a dividend that was the first comment I made, "The growth story is over, look for AAPL to become a MSFT large cap, ranging stock". Thus I don't feel it's the best trend trade as it was when we we warning during 2012 that it was about to collapse.

I will go ahead though and fill out the Put position opened Wednesday, AAPL March (monthly) $535 puts.

 1 min chart...For a reversal process (rounding top), the chimney part of the "igloo" should look exactly like this, the deeper distribution is done as a higher high is made above the rounding top as it opens up new demand and is easy to short in to, this tends to be the last sign in the reversal process before the actual reversal. The concept if fractal in any asset on any timeframe, 80% of the time there will be a head fake move (in this case a higher high that should fail) just before a reversal.

 2 min chart's trend

3 min chart's trend, note they all get worse in the chimney area.

5 min chart's trend, I view this entire rally as a counter trend rally, I'm just not convinced of another 45% decline.

Another reason I wanted to go with puts (still having to do with the concerns about a trending trade) was the longer term charts not being in as bad a shape, they certainly were at the 2012 top and we got a -45% move, but again I have doubts we see another move like that, I think it's more likely AAPL moves to a low that will likely define a range over coming years.

30 min chart

This is the daily, we see confirmation on the move up and a 2012 divergence, this was huge on 1, 2 and 4 hour charts, it was as clear as day that AAPL had topped.

If you look at the current signal, this is why I think this move up from the gap down is not only a gap fill, but a counter trend rally. The trend should reassert itself, but I don't think it has the downside of some other assets like PCLN.