%, expanding Bollinger Bands tell you what you need to know about AAPL. (July 03, 2012)
AAPL
Dan here at StockMarketMentor.com. I want to follow up on Apple ( $AAPL Apple Inc. ), a stock that I had looked at here in the Free Chart video a few days ago. This is starting its earnings run; this is what I was talking about. The stock hit $600.00 today, right on the nose and sold off. Do you know why that is? Because I’ll bet that there were more than five or six shares for sale at $600.00. Where traders say, “You know what? When Apple ( $AAPL Apple Inc. ) gets back to $600.00, that’s when I’ll be selling my position.” Or, “That’s when I’ll short the stock.” Whatever, orders tend to cluster around the even figure. Why is that important? Because that goes both ways; if Apple ( $AAPL Apple Inc. ) starts to trade above $600.00 you’re going to see these Bollinger bands spread out quite a bit. Do you know why? Because the stock will continue to move higher, dragging the upper Bollinger band along with it, which causes a corresponding decline in the lower Bollinger bands. Do you know why that is? Because at any given time these things are centered around the twenty day or twenty period moving average; at any given time the distance from the twenty period moving average below the band is the same as the distance from the twenty day moving average to the upper band. So, as the price starts marching higher, faster and faster, it’s dragging this upper band along; it’s dragging the twenty day moving average along, but it’s accelerating, versus the twenty day moving average. So that drives the lower band down as well. The reason I’m mentioning this to you is because sometimes members have a difficult time really understanding what’s happening here. But as I look at this right now, this isn’t a bit of a volatility squeeze it’s just starting to expand. We know what the catalyst is; the catalyst is earnings right around the end of the month here. So I think Apple ( $AAPL Apple Inc. ) is going to reward you if you’re long into earnings. After earnings or when Apple ( $AAPL Apple Inc. ) announces earnings, I can’t tell you; I’m sitting here around the fourth of July holiday, you know, I don’t know. But I do know this, I’m long Apple ( $AAPL Apple Inc. ). I think this is a stock that you want to be long. It’s cheap, but I’m not going to pound the table on Apple ( $AAPL Apple Inc. ). It’s just another trade, but I’m telling you this, I think this is a profitable trade and I’ll come back and cover this from time to time in these Free Chart videos; generally speaking this is a type of thing that I’ll be talking about with members on a daily basis. By the way, speaking of which I don’t do this very often but I will; if you haven’t subscribed to Stock Market Mentor give it a risk free thirty day shot. I promise you, you’re going to learn something, even if you don’t stick around, you’re going to walk away a better trader, so get that done. Happy Fourth of July everyone. I’ll see you back here on Thursday. Free Chart