I have been a huge Apple Bull since before it broke out above the 50 day moving average and ran 160 points in 2012. I have been in the stock with call options all but five days in 2012 each day fully leveraging my account capital to return the whole up move in the stock sometimes positioning my account to double the move of Apple with in-the-money call options on multiple contracts. What was my complex technical signal? I used the 5 day exponential moving average as my signal, I was long as long as the price stayed above the 5 day ema at the close. I also got out on the days where the daily range exploded like today and the first day that it ran up to $528 and then crashed back under $500. I do not hold a stock that moves over $20 in a day both up and down that is not a good sign of an up trending stock.
Do not get me wrong I would not short Apple in this bull market, and I believe completely in their culture, the company’s potential for continued huge earnings and sales growth. I also believe that with no forces acting on this stock it is possible that it hits $1000 based on earnings in three years. But alas, I am not a fundamental trader, I trade price. I am a trend follower and I am always looking to find where the capital is flowing and flow with it. Today we had an exit of capital.
Today my beloved Apple not only lost the 5 day ema but also the 10 day sma temporarily along with many other market leaders getting draw downs greater than the major indexes. While we no doubt snapped back quickly we took another plunge down later in the day. This is not the kind of price action I want in my top stock holdings and for that reason I am out. I may buy back in at the 10 day sma if it provides support going forward or if we reverse and take out all time highs I will be back in with size. It appears longs that are sitting on huge profits are now trying to sell and book profits before the major product announcement this week. I am on the sidelines watching the show, that is my favorite stock. For the first time in a long time not owning it.