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AAPL – Apple Computer (Last:263.20)

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The glue-sniffers are loosely in command, driving AAPL toward a 283.97 target that has kept us from getting too bearish on the stock market.  We’ve used the target as a lodestone, confident that AAPL would eventually get there. And it will, perhaps sooner than we might have imagine ind after its canny handlers let it fall nearly 40% a year ago, temporarily crushing expectations .  There  were a dozen good reasons to dump the stock at the time, or so it seemed.  Apple’s move into streaming content, for one. The  sector is getting very crowded, and Netflix may have upped the ante for creative talent to a level where even they won’t be able to turn a profit. There are other factors working against Apple as well. The iPhone replacement cycle has lengthened because there have been fewer revolutionary changes from one model to the next. Also, competitors such as Huawei are offering comparable smartphones at significantly lower prices.

Despite these negatives and many others, the stock looks hellbent on 283.97, at least.  The target is very likely to produce a tradeable pullback, which would imply that the broad averages will be falling in sympathy. For now, to leverage what remains of the uptrend, and to cushion our risk when we get short, I’ll recommend buying the Dec 13/Nov 22 285 calendar spread eight times for 0.50, contingent on the stock trading 264.00 or higher, day order. If you buy it, plan on rolling the spread each Friday by covering the short calls and shorting new ones tied to the next week’s expiration. If the stock continues to rise on each successive Friday between now and December 6, we will ultimately be able to take in more in premium than we have paid for the long Dec 13 calls that anchor the position. Do NOT do this trade unless you fully understand it.  I have explained it in greater detail in the trading room. ______ UPDATE (Nov 14, 7:55 p.m. EST): I’m tracking eight Dec 13/Nov 22 285 calls, since two subscribers reported doing the trade. Although they ignored my instruction to cancel the order with the stock below 264, they judiciously lowered their call bids as AAPL fell, avoiding overpaying. For now, do nothing further. We are planning to roll the position next week by shorting the Nov 29/Nov 22 285 calendar spread for perhaps 0.10-0.20. If we take in 0.20 for the spread, that would effectively reduce the cost basis of our still-held Dec 13 calls to 0.26, with two more Friday rolls remaining to lower it still more. This will be easily possible if the stock keeps rising, especially sharply. _______ UPDATE (Nov 19, 8:20 p.m.): Cover the short Nov 22 calls at will for 0.02 or less. At that point we’ll hold eight Dec 13 calls with a 0.28 cost basis. Then offer eight Nov 29 285 calls short against them for 0.24, good-till canceled. If the order fills, our calendar spread will have cost us 0.04, with Dec 6 285 calls yet to sell to reduce our cost basis even further. _______ UPDATE (Nov 20, 9:17 p.m.): Sellers socked AAPL for its worst one-day loss is nearly a month, but we still have more than two weeks left to sell more premium against the Dec 13 calls we still hold. For now, do nothing.

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