Tuesday, October 2, 2012

We hold eight December 40-45 call spreads risklessly, having legged into them for a cost of...zero.  The stock has since traced out a gratuitous 'vee' on the hourly chart, but the important thing to note, technically speaking, is that the spiky peak that trapped bulls yesterday morning also generated a healthy bullish impulse leg when it exceeded the 40.28 peak recorded on September 21.  Now, a pullback to at least 38.71 (see inset) would presumably set the stage for a fresh push into the low 40s.

Rarely have the E-Mini S&Ps been more precisely predictable, with patterns both large and small, impulsive and corrective, consistently making their turns at Hidden Pivot swing points since early August. Check out the chart accompanying this morning's E-Mini S&P tout for a compelling picture and a new rally target.

The next thrust should take the futures to the 1477.50 target of the pattern shown.  If achieved, that Hidden Pivot will be short-able with a 1478.25 stop-loss, since it has been corroborated by yesterday's stall precisely three ticks from the sibling midpoint, 1450.75. Larger patterns appear to be working with equal precision, as the chart shows. Notice that after peaking in mid-September at a record recovery high of 1468.00, the futures pulled back almost exactly to the midpoint of the pattern, 1424.75 (the red line).   (In as little as four to six weeks, you can learn to do this stuff yourself. Click here for  free trial subscription to Rick’s Picks.)

I've reproduced the AAPL chart noted in today's commentary, but with some proprietary details included. We'll look to bottom-fish if and when the stock falls to the 'd' target at 649.74. However, if it rallies first to the 665.95 midpoint, camouflageurs shouldn't hesitate to attempt shorting there.  _______  UPDATE (11:10 a.m. EDT):  After rallying $9 from yesterday's low, Apple has topped so far this morning at 666.35, just 40 cents above where I'd projected a tradable peak. If you got short, cover half the position now, at around 660.50, and let me know in the chat room so that I can establish a 200-share tracking position for your further guidance. ________ UPDATE (3:03 p.m. EDT): A subscriber has taken me to task for the update, writing as follows: "Like, subscribers should have each invested $266,540 in this stock? Really?"  In fact, day-trades can be margined at 25%, so it requires only about $16k to short 100 shares of Apple.  In any case, when I have not provided an explicitly detailed  strategy, it is my intention that subscribers use my targets and tracking guidance in whatever way suits them -- including leveraging swing points with puts and/or calls. _______ UPDATE: My forecast subsequently caught the low of the day within less than $1, so anyone who shorted the high should have covered the position.

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