Here’s your trade on Apple (AAPL) (December 10, 2018)
AAPL
I am using Apple ( NASDAQ: AAPL ) as a proxy. Here’s the deal: Apple ( NASDAQ: AAPL ) was a favorite stock, for some of you it probably still is, it just goes to show you that sometimes your favorite stocks don’t always treat you well. A little reversal here and then it has fallen again. As of Friday this looked like it was heading to zero; then we get this gap DOWN today. This is what is important: Friday you get a little move down and then the stock just continued to fall. And then today you get a fairly significant move down, it was 2 percent, and then a reversal on volume that takes this thing up.
Here’s the mistake that a lot of traders will make: They will take this analysis that I just did and they will say, “Oh, high volume move here on the reversal, this is the bottom.” And then they will go big, really big into Apple ( NASDAQ: AAPL ) so they can get in on the big move higher and be the smartest one on their block. I’m telling you don’t do that. Instead, you have got to kind of game the other traders.
This is what I mean: This is a really volatile market; you just don’t know what is going to happen the next day. But if the stock opens up right about where it is, even if it pulls back a bit more, even if it comes back in a little bit, tomorrow if it opens up right around this general level, what you can expect is, the bulls to be sucked in, in the manner that I just described.
The big dip buyers, the worst is over, it’s all good, we have got to get back into Apple ( NASDAQ: AAPL ). They will push this stock up probably at least 5 points, maybe more. But frankly, think about this, I’m guessing, I don’t really know, I am just basing it on the way the market has traded. I don’t know any more than you do. So I am saying, probably push this thing up about $5.00. If they push it up more that is even better.
My trade for you is, buy this thing first thing in the morning; a small position with your stop below today’s intraday low, so you have to give this some room. Give it a lot of room, which means that you need to adjust your position size accordingly. If you have a really tight stop you can buy more shares. If you have a fairly loose stop you have got to scale back on the number of shares that you buy.
I am saying wherever you are buying the stock; let’s say you bought it at $170.00 and your stop is 163.00, that’s $7.00 per share. Whatever your maximum loss is on your trade divide that by 7 and that is the number of shares that you are buying, so you are buying really small. You are going to take this thing for a ride. Again, up 5 points, move if you can get it and then that is it, then get out of the stock or at least lighten up quite a bit.
Again, I am assuming that the pattern that I have seen so many times is going to reassert itself here. And that is, a little move to the upside, swing trade; take that trade. If the stock comes up to 180.00 and falters a bit that is when you short the stock. You short the stock up here with a buy stop above that level. You are shorting it right around, as close as you can, say, to the 20-day moving average, which this thing has not even kissed since October on the way down. So you shorted as close to this as you can and then you look for even lower lows, to 160.00, maybe 150.00.
Again, I don’t know, nobody else does either, I am just kind of giving you my guesstimations; $5.00 on the upside, maybe a little more. Close that long position. Short that stock up here. If you can put a buy stop up a little bit higher just in case you’re wrong. And then take the trade for a short on the downside. That’s your trade on Apple ( NASDAQ: AAPL ). I have seen this trade work over and over and over again. I can’t guarantee you that it is going to work this time but that’s my bet.
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