-- Posted Tuesday, 2 October 2012 | | Disqus
We dodged a bullet yesterday, exiting a bull calendar spread in Apple for a nice theoretical gain just before the stock tanked. AAPL was up about $7 in the early going, trading for around 674.00, when we put out a bulletin to sell for $8 some Nov-Oct 730 call spreads we’d purchased earlier for $7. The spread was trading for around $8.30 with Apple near its intraday highs, but we’ve recorded a 7.90 sale officially — for a theoretical gain of $720 on the trade– because it is our practice to use the worst price actually reported by a subscriber.
Apple finished the day at 659.51, down $7.46 — a nearly $25 reversal from high to low. But even when it was buoyant in the early going it felt like the stock was being distributed, and that’s why we decided to ditch. Our position was initiated when Apple looked like it would blow past $700 a couple of weeks ago. Playing the 730 strike for an October expiration seemed like a good bet at the time. However, when the stock wasted five precious days of would-be “rally time” in a power dive last week, it was time to bail.
From a technical standpoint, AAPL became an odds-on bet yesterday to continue lower to at least 649.74. If it gets there, we’ll put out an intraday guidance to help subscribers stake out yet another bull calendar spread, possibly buying December 700 calls and shorting October 700 calls against them. But we’ll have a better idea of how much to pay for the position if and when the stock approaches the target. (Want to join us in real time? Click here for a free trial subscription.)
Why So Punk?
So why has Apple looked so punk lately? Perhaps because the stock could never have lived up to the hype and hubris that preceded the debut of iPhone5. However, putting aside the inevitable fawning reviews from mainstream critics like the WSJ’s Walter Mossberg, the worst thing we’ve heard said of Apple’s latest phone is that only the power cord has been improved. Even if true, that wouldn’t have stopped buyers from lining up outside Apple stores to buy iPhone5 the day it hit the shelves.
Power cord aside, here’s another factor that could weigh on Apple shares in the months ahead: the company is going to have a far more difficult time negotiating lucrative deals with the television industry than it did when Steve Jobs used a take-no-prisoners approach to soften up an already moribund record industry.
Given its #1 bellwether status, if Apple were to slog lower in the weeks ahead, or merely even churn sideways, it would surely exert a drag on the stock market as a whole. If Google shares were to turn mushy as well – heaven forbid! — it would add even more weight to the possibility that U.S. shares have made an important top. Regardless, the 14969 Dow high we’d projected here just a short while ago looks like a non-starter. We’d thought the Indoos could reach that price as soon as November, just ahead of the election, but it now seems more likely that stocks at best will meander until then. The target remains viable nonetheless as a longer-term play, but the odds could change for the worse if the broad averages start to trace out downward retracement patterns that exceed ‘d’ targets identified via Hidden Pivot Analysis. We’ll keep you posted!
-- Posted Tuesday, 2 October 2012 | Digg This Article
| Source: GoldSeek.com
