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Stock Ideas Investors Daily Edge AAPL (Apple, Inc.) Technical Stock Watch
Stock Ideas Investors Daily Edge AAPL (Apple, Inc.) Technical Stock Watch 
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| AAPL (Apple, Inc.) Technical Stock Watch |
| Monday, 31 December 2007 | ||||||||
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All you seem to hear about lately is Apple, and frankly, when a stock is so widely discussed and owned you have to start thinking about whether it is reaching a peak. That said, the stock is a Christmas powerhouse because... I did not meet one person who was not getting something Apple for someone at Christmas. Just look at the MacBook: it was Amazon's top Christmas seller. Knowing this we were looking for an opportunity to enter some Apple ahead of the holiday season. AAPL peaked its last sizable run in early November and fell back hard as its new products did not inspire a lot of new buying and it failed to announce a stock split. Before that it had made us a great pile of money on the run from its September breakout. After that drop, however, we were not looking elsewhere, but instead looking at an opportunity for more positions ahead of what was going to be an Apple Christmas. It bounced off the 90 day SMA in November, testing that level one session and then jumping back up. We missed that move, but we knew there was more upside. So, we put in a new buy for when it came up off the 50 day EMA, the support it held at and worked laterally on top of as it regrouped from the disappointment and prepared for the next move higher. It jumped higher on 11-26-07, showing a solid volume jump as it gapped higher, tested intraday, and then resumed the move. That is when we bought in with some stock positions at $175.11 and some January $170 strike call options at $14.95. The options were a bit expensive but we bought in the money because we were looking for a rather quick 'holiday' play and wanted a lot of bang for each dollar the stock moved. By buying in the money we were able to get a higher delta and thus more movement in our options when the stock rallied. It did rally. The next session Apple jumped $5.41. It added $4.07 the next day. The following session AAPL gapped higher to $187.34, rallied a bit to $187.70, but then started to waffle. A great quick break higher; just what we were looking for. We banked part of our option position, selling some calls for $21.15 or a 41% gain ($620/contract). Not bad for less than a week's work. After that move we expected a pullback, and Apple did come back to the 10 day EMA to test, but then it gapped higher again on 12-5, rallying $5.69 that session, then adding $9 over the next two sessions.
We thought about taking more gain off the table, but we still had another 15 days before Christmas. We waited, but AAPL struggled a bit, unable to hold the 10 day EMA on its next test of the run. A quick intraday trip to the 50 day SMA on 12-18, however, set the bottom for the final pre-Christmas move. It rallied 16 points in 4 sessions, pushing to a new all-time high. The day after Christmas it rallied once more but then faded, showing a doji on the candlestick heading toward the close after it tapped but could not push through psychological resistance at $200. That can mean a run is over, and with the nice gain in the stock we decided it was time to lock in some more gain. We took part of the 13.5% stock gain when we sold some stock at $198.90, and we sold the rest of the January options for $30, banking a 100% gain ($1505/contract) on those positions. Now THAT is a holiday rally, exactly what we were looking for from a leading stock that would benefit greatly over the holiday buying season. As it is, it easily paid for Christmas around here.
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