I believe I've referenced this before but a site I use to gauge the market is www.stockmarketmentor.com. I've made a ton of good trades because of the insight but more importantly didn't lose a ton of money.
Here's Dan Fritzpatrick commentary for today:
It's breaking out of a 6-week squeeze on pretty good volume. Let's say you wanted to buy Apple to capitalize on what's likely to be a run into earnings. Very, very simple thoughts to frame the trade (not complete by any means...but this is a basic thought process):
1. My thesis is that it's going to run into earnings. Since that's the thesis, I'm not concerned with fundamentals or even whether the company is going to meet, beat, or miss earnings, or what it's forward guidance will be (that's a different trade). I'm just focusing on the anticipation of the earnings event.
2. Since I am focusing on a pre-earnings runup, the stock must be advancing to confirm my thesis. Guys, it's just as simple as that.
3. I've quickly checked the calendars in the "research department" here at Stockmarketmentor.com.
4. Price targets have been raised from $150 to $175 (approximate). That gives the stock a lot of headroom to run -- no "latent resistance" (my term) created by invisible price targets.
5. Earnings, as mentioned above, are on July 21st. I have my timeframe.
6. I also checked the guidance calendar just because it was easy to do so. But it's not necessary for my current thesis of an anticipatory runup. I'll be gone prior to earnings (because again, that is my trade). Nothing wrong with holding a stock you like over earnings so long as that is part of your plan. Refusing to hold anything over earnings relegates you to a maximum holding time of 3 months. While this has been a tough market, some stocks are certainly worthy of just being held because they are working. But, as noted above, this is the trade -- anticipatory earnings advance.
7. Sell AAPL (or associated call options if that's your gig) (1) prior to earnings; (2) when the stock falls back into congestion, thus negating the pre-earnings advance thesis; (3) when the stock hits a pre-defined target...say, $160 or so??
Very, very simple trade approach. (and just one of many that traders use)
Hope this is helpful.
Hey Mark, I agree with the AAPL play on earnings, but I have to ask why take so much risk on such a volitile stock. This thing can tumble very fast (seconds, minutes). Why not play it with options? You could really box in your risk a lot better. The way I would reccomend playing this is to buy the $145 August Calls and selling either the $150 or $155 calls creating a verticlal spread. on the $145/$150 spread you would spend $2.45 per spread with a max gain fo $5 or 104%. Or depending on how bullish you are you could put on the $145/$155 spread on for $4.3 per spread and a maximum gain of $10 or 133%. Plus the initial outlay is much less and you can get more size which means more profit.
ReplyDeleteThat's another great way to play but right now I have rules to only play options that are dated further out. That way I have tighter risk management controls. I want to stay nimble and light in this market and with stocks I have more flexibility to get out because of the liquidity.
ReplyDeleteMy stop limit on AAPL is around 144. If it breaks down then I'm out.
2 questions. Do you have a stop loss order already placed? What happens if AAPL gaps down $5-10 points on the open? That would put your potential loss $3-$7 below your exit price.
ReplyDeleteI agree on Dom's thinking for AAPL. I think options is a better way to play with this high beta stock. Unless you're day trading it, you can't control tomorrow's opening price. It sounds like your stop loss is $1 below your entry point, is that right? This stock moves in $1 incriments when action gets heavy. Don't take this the wrong way. I'm not saying I'm right or that what you're doing is wrong. I'm just sharing my viewpoint. I think using options on this stock is a better risk/reward scenario than getting long a high beta stock that might be at the tail end of a huge move up.
ReplyDeleteForgot to mention that this is my Dad's TD Ameritrade account and until I can move it to IB he is not authorized to trade options. I've been lazy and haven't started the IB account process under my Advisory account.
ReplyDeleteI'm playing the breakout so my thesis is that the gap up doesn't get filled if it does I'm wrong and out. I can always buy back in.
Thanks for the play I'm considering other option play for my own personal account.
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ReplyDeleteLooks like SMB Capital likes this one too:
ReplyDeleteSMB Capital Best Idea into the Close: Buy AAPL @ 146.40-146.50, TGT: 147.00-147.50; watch for $SPY to hold below 93.00
Yes but it is an intraday play only. They don't hold positions over night.
ReplyDeleteThey are trading the mommentum.
ReplyDeleteIt's on the move this morning. Remember earnings are the 21st and given GOOG's precedent may be prudent to unload pre e-day.
ReplyDeleteI'm out AAPL at $151.50. My stop loss was triggered after stock just fell off a cliff. Have no reason why there was a precipitous fall but may look to get back if support becomes clearly defined. All in all a modest 4% gain... still feel that this stock may run up through earnings.
ReplyDelete