We hold a tracking position of four March 13 121 puts @ 0.75, having shorted a potentially important rally target at 129.20 that was missed by a hair earlier in the week. I’ll now suggest stopping yourself out of the position if the stock touches 130.00. So far, the pullback from the target has been shallow and mild. This is somewhat surprising, considering the target, a ‘Hidden Pivot’ resistance, looks rock-solid and took four months to reach. Rather than trying to predict the future, however, we’ll simply wait for Apple to tell us how much more buying power is percolating beneath the surface. If the stock were to blow past such an important target within a week or so, a Hidden Pivot at 144.56 would be in play that comes from a chart pattern of even larger degree than the one at 129.20.
Whatever happens, we need to stay glued to AAPL’s technical vital signs, since it is the most valuable stock in the world, with a capitalization exceeding $700 billion. For now, that means setting a screen alert at $130, where the stop-loss noted above would take effect. If that were to occur and Apple does the logical thing, heading up to 144.56, there is every likelihood that it will drag the broad averages higher with it. On the other hand, if the stock falls hard after head-butting 129.20 for a couple more days, it would have bearish implications for the stock market as a whole. _______ UPDATE (February 22, 7:02 p.m. EST): I’ll recommend stopping out the position if Apple touches 131.00, a dollar higher than the number given above. This is intended to provide a little more flexibility, but the nuance of this guidance will be moot if buyers push the stock above 131.00 overnight. If that happens, stop yourself out when the options start to trade, but stick with the position if the stock has plummeted, or is plummeting, below $127. _______ UPDATE (February 23, 11:11 p.m.) We were stopped out of the puts, but several aggressive traders evidently used the breach of the original 129.20 target to establish long positions. Based on chat-room reports, I’ll track an initial position of four March 13 132 calls bought for 1.65. Assuming two were exited at 3.30 when their price had doubled, we still hold two calls with a cost basis of zero. Offer one of them for $4.10 and plan on swinging for the fences with the one that remains. My target remains 144.56. ______ UPDATE (Feb 24, 4:33 p.m.): After an initial feint lower on the opening bell, a bull-trap rally to a record 133.60 pushed the calls no higher than 3.75, so we did nothing. Stay the course.