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Strategies & Market Trends : Ask Vendit Off-Topic Questions -- Ignore unavailable to you. Want to Upgrade?

To: Gush who wrote (4705)	2/7/2005 3:51:11 PM
From: Vendit™	Read Replies (2) \| Respond to of 8752

After reviewing the chart I tend to agree with Terry. There are better short candidates out there than AAPL. AAPL tends to trade sideways rather then down as its indicators recycle. 139.142.147.218

To: Gush who wrote (4705)	2/7/2005 8:58:53 PM
From: Walkingshadow	Respond to of 8752

A look at AAPL's relative strength compared to the market will tell you that AAPL is one of the strongest stocks in the market, and has been steadily getting stronger over the last 6 months or so. 139.142.147.218 AAPL will correct. Trees don't grow to the sky. But it's a freight train. I wouldn't try to kiss a freight train if I were you. A better strategy would be to wait a while for both AAPL and the market to correct. Then, when the market shows its hand and a resumption of the long-term uptrend begins, buy calls. How much longer this medium-term correction will last is highly uncertain. It could all end in a week, or it might take a month or two. It just depends on how fast and how furious the markets head south, and how the supportive volume patterns shape up as the indexes move down. Remember last July? 139.142.147.218 The markets plunged sharply, formed a V-bottom, and pivoted 180 degrees in just 7 weeks, and that was the end of that medium-term correction. They reversed sharply and headed north with a vengeance, fueled by a big surge of supportive volume. Now, we are beginning the 6th week of the current correction, and there are already indications that the correction is weakening. I don't think this will get drawn out for several months. Buying front month puts that expire in just a few weeks is a strategy that incurs substantial risk. IMHO (with very rare exceptions) the potential reward doesn't adequately compensate for the risk. The exponential decay of time value in Feb. puts means the stategy won't work if AAPL merely goes down, it has to go down fairly hard and fast---highly unlikely for AAPL. It is even worse if you end up being right, because that will just encourage taking positions with unfavorable risk/reward profiles, a strategy with no future. There's plenty of overbought stocks out there to short, also anything in a downtrend is a possibility. If they are both overbought AND in a downtrend, you've got the probabilities and the trends on your side, especially if the downtrend was just initiated within the last 3 months or so. JMVHO.... T

To: Gush who wrote (4705)	2/7/2005 9:49:04 PM
From: Walkingshadow	Respond to of 8752

Notice carefully exactly how much AAPL "corrected" last July, when the general markets were going to hell in a handbasket: 139.142.147.218 From the close on June 30 until the bottom on Aug. 12, QQQQ lost 14.0%, trading from $37.74 to 32.47. But AAPL lost only half that much during the same period, trading from $32.54 close on June 30 down to $30.37 at the close on Aug. 12, a drop of 6.7%. And AAPL has only gotten stronger compared to QQQQ since then, so one would expect that AAPL's downside during a correction would be blunted. That's exactly what has happened. QQQQ closed at $39.99 on Dec. 30, and then the medium-term correction began. QQQQ traded down rapidly to close at $36.53 on Jan. 24, a decrease of 8.7%. In contrast, AAPL closed at $64.80 on Dec. 30, and closed at $70.76 on Jan. 24----a gain of 9.2%. 139.142.147.218 139.142.147.218 You could go broke in a hurry shorting "corrections" like that, especially with a highly leveraged position like front-month puts, that require unusually great downside volatility out of any stock. And AAPL just doesn't have nearly enough downside volatility most of the time---the beta is 1.8, but that's mostly upside volatility. Sentiment isn't on your side either. The put/call open interest ratio and the volume put/call ratio are both about middle of the road for AAPL---there is neither excessive bullish nor bearish sentiment on the stock. So, besides the other reasons, I see no options-related or sentiment-related support for a short position in the stock. T