-- Posted Wednesday, 25 July 2012 | | Disqus

Apple, the mother of all bellwether stocks, has taken a flying dive Tuesday night on news that Q2 earnings were merely sensational (i.e., up a little more than 20 percent). Presumably unaware that Samsung’s excellent smart phones have been breathing down iPhone’s neck, speculators were evidently caught unawares when Apple’s earnings report included the peevish detail that iPhone sales had slowed markedly. The ubiquitous product has accounted for most of Apple’s revenues in the last few quarters, so even a mild slowdown was bound to stampede pass-line bettors. So, because of Apple’s bellwether status, does the stock’s apparent failure to soar to new highs on this latest earnings report portend tough times for the market as a whole? Very probably, yes. Without Apple to pull shares higher this summer, don’t expect them to make much headway. Regarding Apple itself, although we’d told subscribers earlier to buy the Sep 640 – August 640 call spread for $5 as a relatively low-risk bull play, because of the way the stock is acting this evening, we’ve recommended that the order be canceled.

Meanwhile, Rick’s Picks subscribers who followed last week’s advice to short the market are enjoying what has been a painful decline for most investors. One of two trades that caught the precise top of the so-far mini-avalanche was the result of a challenge we issued to subscribers back in May to pick the perfect spot to short the Mother of All Bear Rallies. Permabear that we are, we have been top-picking for years (and also trading the rallies. Of course), never expecting to catch the actual Summit. Our goal, repeatedly, has been to get short at “a” top rather than The Top, and to make a few bucks even if we are wrong. And if we are right? This time, perhaps? That would be icing on the cake.

Judge for Yourself

Judge for yourself how we’ve been doing lately. Last Thursday in the Rick’s Picks chat room, a Hidden Pivot-eer who goes by the handle “Crusty Buttocks,” announced to all that he was shorting the QQQs at 65.26. This subsequently turned out to have been just a nickel from the recent top at 65.31. The QQQs subsequently plummeted to a low of 62.55 yesterday – a 4% decline in three days – producing a theoretical trading gain of as much as $1104 for each 400-share position. In fact, Crusty’s gain thus far has been smaller, since he took partial profits along the way. That is what makes it possible to profit on short positions even when they have failed to nail a major top, as will nearly always be the case. According to the terms of the challenge, if Crusty’s position is still profitable by today’s close, he’ll win a free annual subscription for himself and a friend, a private tutorial session, and a year’s access to weekly tutorial sessions held for graduates of the Hidden Pivot Webinar – worth a total of about $1500. Think you can’t do what Crusty did? Guess again. Many of the more than 800 students who have taken the Hidden Pivot course frequent the chat room and you can ask them yourself by taking a free trial subscription. Or click here for information about the upcoming webinars on August 1-2. Once you’ve registered, you’ll receive a hard copy of the course manual, access to all classroom sessions both live and recorded, a CD-ROM with nearly 3000 annotated charts, and assorted other swag.

Missed by 20 Cents

Incidentally, the other short entailed buying puts in the Diamonds (which mirror the Dow Industrials) at around the same time Crusty was shorting the QQQs. The DIA short recommendation went out when the DJIA was in the throes of a 500-point rally we had projected to exactly 13077. (Yes, we were bullish as all hell before the Dow reached the target.) The corresponding target for the Diamonds (DIA) was 129.51, and so we disseminated the following to subscribers, on July 16, with the Dow trading around 12727: “There’s a bigger, bullish pattern at work that goes back to early June’s lows, but the one we should focus on for now projects to 13,003. Traders can short this [rally] by buying four DIA September 126 puts if and when the underlying vehicle gets within 0.15 points of 129.51, the equivalent target. The chart above shows the 129.51 target relative to the actual top at 129.71. While it may not turn out to have been the Mother of All Bear Rally Tops, puts that could have been purchased that day for 2.04 have doubled and are trading around 4.00. To reduce risk, subscribers were advised to sell half the position and came away with 3.75 for the puts. That has effectively reduced the cost basis of the remaining puts to 0.45. Under the circumstances, it’ll be hard to lose even if the Diamonds reverse and go on a bullish rampage. A theoretical model suggests the Dow would have to rally about 1300 points to bring those puts down to 0.45!

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Trading stocks, options and commodities in these treacherous times calls for great patience and skill. Click here if you’d like to see how Rick’s Picks approaches the challenge.

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indication of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2012, Rick Ackerman. All Rights Reserved.www.rickackerman.com

-- Posted Wednesday, 25 July 2012 | Digg This Article | Source: GoldSeek.com

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