By: Steve Smith
Stocks are getting a bounce today. However, I’m not sure how far the rally will carry. For that reason. My Options360 Concierge Trading Service closed out another third of our Advanced Micro Devices (AMD) for a small gain and further risk reduction. We also took this opportunity to close out our entire position in the Invesco Nasdaq 100 (QQQ), described here as a combination of spreads for a solid 72% gain over the one-week period.
The Options360 is now down to just one other position that expires on Friday.
But, I’m on the hunt for new trades. At the top of the list is an Apple (AAPL) bearish position. I know many people are thinking, why in heaven would you want to short the best, most profitable company on earth?
Last Wednesday, I sent this Alert to Options360 members:
The market still looks shaky.
APPL is only 16% off its high and back to key support around the $150ish level.
“If liquidation continues, AAPL will be a source of funds. I also think the problems stemming from China in terms of both production and demand are not fully discounted.
If $150 breaks, the market will take a new leg lower.
Let’s establish a bearish position in AAPL as a hedge against our QQQ position.
Here was the chart accompanying the Alert on that day.
The next morning, we closed that trade for a 57% gain when the stock dropped to a low of $140 the next day. Full disclosure: Not every Options360 member got in on the trade as the market moved very fast that day. That’s why it’s important to make sure you include text Alerts — along with emails — when you… Sign up for Options360 Concierge Trading Service.
My very basic premise stands; We’re still in a bear market. People will need to sell what they can to raise funds. And, the situation in China isn’t being fully discounted. Throw in the fact that consumer spending is showing distinct signs of slowing. In other words, add-on sales such as a second set of earbuds and extra charges, which account for nearly half of AAPLs profits, could be negatively impacted.
Most importantly, since all Options360 trades start with the chart to identify entry and exit points, AAPL is heading back to major resistance at the $150-$155 level.
Viewing the chart below, AAPL shares broke a major trend line, which also coincided with the 200-day moving average around the $155 level about two weeks ago. The next support at $150 gave way on the day I made the trade above last week.
Now, I’m patiently waiting to see if AAPL can get back to $150 to pull the trigger on a new bearish trade. Given the resistance levels cover $150-$155 I’ll probably initiate half a position at $150 and the other half, if it gets close to $155.
We know this market can have some face-ripping rallies so the keyword here is “patience.”
I’ll be ready and waiting. Will you?