Are you an Appleonian? Here’s your trading strategy on Apple (AAPL). (October 14, 2016)
AAPL
Apple ( NASDAQ:AAPL ). Why am I talking about Apple ( NASDAQ:AAPL )? I want to talk about a trading plan for this stock. First of all, do you want to own Apple ( NASDAQ:AAPL )? It is not the best stock out there. I know, even after all this time, there are still some ‘Appleonians’ out there who can’t believe that the stock didn’t pop up above this level and then just keep on going. They just simply can’t believe it. Now they are so happy it is coming back. Okay, great! If you want to buy this stock, and a lot of people do, there are a couple things to think about. First of all, 10/25, that is earnings. I am doing this video on Friday, they are coming up on the 14th. Coming up in eleven days. That would be one week from this next Tuesday, so it is not Tuesday it is the Tuesday after that. The stock is doing okay, not great. But what I am thinking here is, when are we going to buy Apple ( NASDAQ:AAPL )?
If you are really eager to buy Apple ( NASDAQ:AAPL ) this is what I would suggest: Buy a quarter of the position that you normally would take. Buy a quarter of that position, because it is kind of problematic to buy a stock right before earnings. You only want to really be holding a stock over earnings. My threshold is about 15 percent in profits; simply because if you don’t have that much in profits then you are kind of gambling. And then if the stock goes against you, you take a loss on the trade, so it is just more risky. When we get up here closer to earnings, trust me, this isn’t going to go up 10 or 15 percent between now and when they report earnings. Hopefully, if you are bullish, it might kind of trickle up a bit. So there is not a lot of upside in this stock between now and when the company reports earnings.
Now, I could be wrong. But what catalyst can there possibly be that is going to push this stock up so much BEFORE earnings are due? My answer: Nothing that I can think of. So, with that said, we are taking this risk between now and the 25th, like right there. This is literally as many days as this thing can trade. So you are buying a quarter of a position; and this is if you want to own Apple ( NASDAQ:AAPL ). If you feel like their earnings are going to be great, you are just so lucky to be getting the stock here, take a quarter of a position. If the stock then happens to gap down (the company is doing great, nice uptrend in the stock), if the stock happens to gap down to the 50-day moving average or even below it, heck, the 200-day moving average, that is when you buy more. You could certainly buy another quarter maybe even a half, because this is not a trading stock, as Cramer has said for so long and Lord knows how many other people, it is a stock to just hold. It is not a stock that I have held but for some of you, you guys like that.
The point is, you buy a quarter of a position here, you want to own the stock, you think it is going to scream, so that is why you are involved in this in the first place. Instead they get dumped. Fine, I want to go in now because now is my opportunity. Golly gee, aren’t I glad I didn’t load the boat here at 117.63? Here we are down at the 200-day moving average, I would have lost 13 percent based on just pure stupidity. So you take a quarter of a position here because you are thinking the stock is going to go up and it didn’t. Now you are dropping your cost basis down. This is one plan that you can have. I am not a fan of averaging down. When a stock goes down, “Oh my gosh! I really liked it at 120.00, so now it is at 95.00. I have got to like it even more.” No. You don’t make money buying at one level and then selling lower or continue to buy lower, and lower, and lower. You want to be making money on stocks that are moving higher. You take a quarter of a position here. If the stock drops down then you go ahead and buy more.
Now, what if you just want to load the boat? Well you can do that I guess. But how much higher can this stock go? Lets say they report awesome earnings, and all of their green energy type contributions, Tim Cook is really adamant on making the world a better place with your money, in whatever way he sees fit. How much money do you stand to make before the stock maybe comes back and tests this? Because I believe this would be a 52-week high, about 5 percent. How much further can it go? Okay, about 15 percent. So if you are loading the boat on this stock now, the reason you are doing that is because you are ASSUMING that this stock is just going to keep on going. I am telling you, that is NOT going to happen. Yes, this stock is in turnaround mode, no question about it. Everything dropped here on August 24th, right? But if you are just drawing this line like this you can see the zigzags.
Now we are here, we break out, we come back to TEST the resistance channel line. It bounces off of this, now we are going high. And this really gets to the guts of my trading plan here for you. That is, if we are dong zigzags here, right? Okay, zigzag, zigzag, zig, we are up here, we have pulled back, now we are up here again. Doesn’t it just kind of make sense that the next arrow would be down to here? Hopefully at a higher low rather than just continuing to move up like this. I have seen this kind of pattern before, it has just been on like biotech stocks. The main point is this: Manage your risk by looking at what your upside potential is right here, right now. If you are not looking at what your upside potential is, then now can you balance how much risk you are taking, because we always have the risk losing money. So if you want to buy Apple ( NASDAQ:AAPL ), a little bit now, wait until after earnings. Then if the stock does scream, you now what? You will say, “Well, at least I listened to Fitzpatrick and bought some.”
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