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Stockhaven’s Market Take 1/31/13

The indexes wavered today as markets seem to be caught in a holding pattern in need of a positive or negative catalyst to trigger the next technical move. 1,495-1,500 support was tested today but not with much enthusiasm. What I mean by that is even though 1,500 broke, we didn’t see a quick flush right down to 1,495 (though the bears do deserve some credit for closing SPX below 1,500). There’s really not much to talk about today as much of what I said yesterday still applies but on an individual stock basis, an old friend might be ready to make another big move.

AAPL has traded in extremely tight ranges the last 3 days. Dating back to September, tight ranges 3 days in a row haven’t been followed by a 4th, so I’m expecting a big move on Friday. The day AAPL gapped down following earnings, it put in a high around $465. The last 3 days AAPL’s highs have ranged between $459-$462.20 while failing to notch a close above $460 each time. To me, this is an extremely weak sign in AAPL. Sure AAPL hasn’t sold off any more, but I find it very bearish that it has been this close to the top of its gap down and hasn’t yet attempted to fill it. Proverbially speaking, AAPL is a horse that has been brought to the river, but so far it isn’t showing any signs of wanting to drink any water.

Recent history suggests that AAPL’s next big move should be lower and that is how I am positioned going into Friday. What is the risk to this trade? At this point I don’t think I’m the only looking to lower prices in AAPL. While the short trade was controversial above $500, it seems that most traders agree AAPL is done so to say. Therefore, I’m open to the possibility that I’ll have to take a loss right away if the move lower doesn’t materialize within the first 15 min of the open tomorrow. Why first 15 minutes? Well, AAPL hasn’t traded below $452 within the first 15 minutes of the day the last 3 days so if the big move lower is going to happen tomorrow, that’s what you will see.

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