Could Apple Offer a Buying Dip This Week?

Jan.18.11 | About: Apple Inc. (AAPL)

Apple (NASDAQ:AAPL) faces its first negative news test since it was discovered that you can’t always hold an iPhone and make a phone call. AAPL rebounded with an unqualified vote of acceptance and AAPL has reached new highs recently. The news of Steve Jobs may be taken a lot more seriously than a defect in one of AAPL’s loved products.

It is hard for me to imagine that AAPL will not initially sell of Tuesday from this news and looking at the late night futures trading it already appears to be set in motion. While the Dow and S&P futures are down to flat, the Qs are diverging downward, desperation of correlation. If AAPL can bounce back after the initial shock is absorbed into the market I think we could see AAPL actually make new highs this coming week.

Last week I was talking to other traders about AAPL and shorting it. The overall consensus was not to short it. To which my reply was that if we all agree AAPL was not to be shorted and everyone and their brother owns it that it must be getting close to the time to short it.

Tuesday and Wednesday will give us a very good indication of how well the market will discount negative information. And I feel that if AAPL can make new highs this week it is not ready yet to be shorted and perhaps has a way to go high and it is not too late to get on the train.

On the other hand if AAPL cannot get past this news and cannot make a new high it would appear to me that AAPL has already made its move and is now as of Friday been priced for perfection and at risk for a change in trend. While this is obviously negative news it is a mere scratch or dry run - if you will - to what will happen to the stock if some really bad news would hit the wire like a miss in earnings or a sudden loss of a key executive.

Based on my trading experience and the way AAPL is running on all cylinders I anticipate a dip in the morning and a better afternoon and again a better Wednesday of trading. A dip on Tuesday if buyers step up to buy at a discount could prove to be a real buying opportunity from a perceived negative news story that at face value really should have no impact on product or earnings in my opinion. The nine day moving average is about 339.76, which would be the first level of support that I will be watching to see if it holds. Next is a ways down with the 60 day simple moving average at about 319 and the 200 day simple moving average wasn’t last touched since the flash crash back in May. If AAPL does make a move down to that level the landscape may take a very big change if it would close under the 200 SMA. That seems highly unlikely but I would be stepping up to buy even if it was small because that would appear to be all panic and stops getting run over.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AAPL over the next 72 hours.