AAPL – Apple Computer (Last:548.71)

We continue to hold four Jan 590-600-610 butterflies @ 0.20. Our maximum loss on the position is limited to $80 plus commissions, while a theoretical gain of as much $4000 is possible if Apple is trading around $600 on January 18 when the options expire. Meanwhile, powerful as yesterday’s short-squeeze was, the peak of the opening bar failed by 21 cents to surpass a key external peak at 555.20 recorded on December 7. The stock seems likely to get past it on a second or perhaps third attempt, but the fact that it couldn’t do it the first time is reason enough to not get our hopes too high about a quick move to $600. In any event, do nothing further for now. _____ UPDATE (January 10, 1 a.m. EST):  The 21-cent failure noted above proved telling, since the stock has dropped $40, or about 7 percent, since then.  Our butterflies are headed toward worthlessness, implying a loss of about $100 including commissions. _______ UPDATE (January 14 at 8:17 a.m. EST): I haven’t touted Apple as a bellwether in a while, but the stock’s weakness is clearly a drag on the market this morning. In pre-dawn trading, on word that the company has cut back on iPhone5 parts orders due to weaker-than-expected demand, the stock has traded down to $500. This is nearly $20 beneath the 519.33 midpoint pivot of a pattern that projects to 447.55. This target was first identified in Rick’s Picks more than a month and is strongly affirmed by today’s price action. _______ UPDATE (January 15 at 11:50 p.m. EST): Although the 447.55 target that I’ve billboarded in my commentary and in the chat room remains viable, there’s an alternative Hidden Pivot support of lesser degree where bulls could attempt to regain traction. It lies at 461.64, and my hunch is that this Hidden Pivot will provide precisely tradable support. (See inset, a fresh chart).

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