Was AAPL Rescued (and the market) Today?

As many of you know ( I know several of you took gains on the trade today), our recent Trade-Idea: AAPL Scalp (Puts) from last Wednesday is in the green, some of you did pretty well closing it out today, but was AAPL saved?

Around 2:29 p.m. today, the Bloomberg feed started flashing SEC Reg Sho (SEC Short Sale Rule 201) which according to the SEC... does the following...

Rule 201 restricts the price at which short sales may be effected when a stock has experienced significant downward price pressure. Rule 201 became effective on May 10, 2010.

Among other things, Rule 201 requires that a trading center establish, maintain, and enforce written policies and procedures reasonably designed to prevent the execution or display of a short sale order of a covered security at a price that is less than or equal to the current national best bid if the price of that covered security decreases by 10% or more from the covered security’s closing price as of the end of regular trading hours on the prior day. Once the circuit breaker in Rule 201 has been triggered, the price test restriction will apply to short sale orders in that security for the remainder of the day and the following day, unless an exception applies.

In essence, just as AAPL was breaking down (see our earlier post about "light AAPL support" and the price alert levels that were important in AAPL seeing more downside, the first of which was $625, AAPL June $625 Put Update)...

 As AAPL breaks lower (1 min intraday) and breaks one of our key levels of $625 for our Trade-Idea: AAPL Scalp (Puts) AAPL scalp trade, all of the sudden the heaviest weighted stock on the NASDAQ 100 sees a little help as Bloomberg data feed spits out Reg. Sho alerts which effected numerous NASDAQ stocks. Within the same minute the same stock would say, "Reg Sho "In Effect", "Not in effect" and "Continued", these messages could all be seen in the same stock all at the same time, forcing NASDAQ to admit they were, "broke"...

NASDAQ declares investigation in to Reg Sho dissemination at 2:42 p.m.

 The AAPL intraday 3C chart saw some small positive divergences right before the Reg sho fiasco and right at it, but not before breaking $625 on heavy volume (thus the reason we had $625 as a price alert level, the first in fact in today's AAPL June $625 Put Update

AAPL breaking $625 intraday (1 min) and the volume we expected as that was an important area to our larger downside trade.

This is the $625 area, you can see the earlier light support mentioned and why $625 was so important to us.

NASDAQ has proprietary weighting for the NDX100, to get the current weighting of AAPL in the index, you can pay $10k a year for a NASDAQ subscription, but from past weighting, AAPL has had near 20% weight, far more than any other NASDAQ 100 stock. In fact if you took the bottom 50 weighted NASDAQ 100 stocks and put all of their weight together it would be about the same as AAPL (from past weighting that has been disclosed). So if you took those 50 stocks and they were down an average of 1% and added AAPL to make the NASDAQ 51 with AAPL up 2% on the day, even though 50 of 51 stocks in our imaginary index were all down 1% on average and 1 stock (AAPL) was up 2% on the day, the NASDAQ 51 would close in the green, up +1%, that's how much influence AAPL has had and still has over the NASDAQ 100 / QQQ.

Who knows for sure, but AAPL had just broken a significant level we were specifically looking for on heavy volume before short sale restrictions flashed like mad from the SEC itself, disseminated by Bloomberg.

Get your tin-foil hats out...