How to Trade Apple (AAPL) as All Eyes on iWatch

The AAPL Watch “event" saw the much-anticipated Apple Watch concluding with Tim Cook’s presentation.

Yesterday the AAPL Watch “event,” if you will, started at 1pm EST time with the launch of the much-anticipated Apple Watch concluding with Tim Cook’s presentation somewhere around 2pm EST. Keep in mind that the broader markets had a slow and precipitous selloff on Friday, albeit with the jobs number being released creating a general concern of sooner-than-expected rising interest rates.

AAPL rallied into the news to be up over $2 on the day, stopping short of $130 before “selling the news” and pulling back some $4 to go slightly negative and then closing positive on the day with good volume.

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The markets, for the day it seemed, discounted Friday’s action, at least by media standards, leaving the question for traders and investors: “What to do with AAPL?” We will give a trader’s point of view and for now we view it as a “no play.” Any other stock would be considered a no play because AAPL finished positive on the day with traders taking profits and the shorts not taking command, take PANW (arguably a similar chart) which had a decent range with material news that, yes, had good volatility and volume.

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Of course any stock, AAPL included, that had range, volume and good price action will most likely be a decent trading stock because it’s in play, but the time for us to look at AAPL as a short is when forgoing trying to pick the top. Those traders that have been attempting to do so have probably been getting scalped to death, hopefully on small share sizes.

iwatchThe trade for us and what we want to see is AAPL down 3-5% on the day and maybe even more. We will give away the trade on trying to pick the top and capitalize on bigger share size when and if AAPL does have that big down day with 2-3X volume. Then will we start to leg into a good short position, keeping in mind that the trend of the markets are cooperating. As of Tuesday morning, the inside day from last Friday, seems to be following through. We aren’t analysts and aren’t here to predict if the AAPL Watch will indeed propel the stock higher, but as a fund manager put it yesterday, he didn’t know he needed to have 1,000 songs in his pocket when iPod was announced either.

So whether it is AAPL or any similar acting stock and/or indices, if and when AAPL does have its big down day, we will let the stock rest and then look to take a position if the above criteria is warranted.2 As for the opening trade Monday morning, with the Nasdaq down over 1.2%, AAPL is down $1-$2 or so; Hardly an endorsement to start a short position at this point. But if market stays weak and AAPL starts to crack closing weak with good volume, then we will address it.

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