In line with today’s note concerning using Apple as a bear market bellwether, I am going to start tracking the stock more diligently than before. My hunch is that if Apple’s recent high was a blowoff, then a bear market for the broad averages has begun. If, on the other hand, Apple achieves new highs, it will pull everything else along with it, buttressing institutional mindset by providing a dependable source of portfolio profits.
If I were an oddsmaker, I’d lay 3-to-2 that new highs are coming. It’s mainly a case of the recent price break being too obvious, and of this week’s partial recovery being too steep. Jesse Livermore might be short here, as charts that I received the other day from a subscriber intended to suggest, but I’d like to see a couple more corroborating signs before I dive in myself.
On the other hand, we may have seen Apple’s “Babson’s Break“. From a technical standpoint, there is no doubting the power of last week’s impulsively bearish thrust. On the 180-minute chart shown, it exceeded no fewer than five ‘external’ lows. Using the one-off ‘A’ shown yields a 587.77 midpoint support that has already been breached by a decisive $3.25. This implies that if the stock doesn’t rebound sharply into next week, it could grope its way down to the ‘D’ sibling at 555.29 before finding traction.
Whatever occurs, I’ll continue to track the stock closely and, if the perfect opportunity should arise, establish bullish or bearish positions as warranted using puts or calls. Options on this $600 stock are much pricier than we are used to trading, and so any strategy would likely entail legging into butterfly spreads centered on distant strikes. That’s the cheapest and least stressful way I know to “play direction,” and we’ll use it aggressively if conditions are ideal.