Apple (AAPL) has had a great run over the last year. The stock price started 2011 at $322.56 and increased to $405 by the end of the year. It has continued to make gains in 2012, especially after a great earnings report in January to the February 7, closing price of around $468.83.
If you had bought the stock back in January 2011, you would be pretty happy with a gain of 45%. But, if you were able to take advantage of some clear trends in the way Apple stock moves on a daily basis, you would have been able to make an even better return.
Like a lot of stocks that are trending up, Apple sees a lot of days when the price gaps up overnight. This is borne out in the numbers. I compared the AAPL price performance overnight versus the intraday moves in the stock.
All of the net gains during this period took place overnight, from the close to the following open. Indeed, if you only traded the intraday moves, you would have had a net loss of $12.23. If you only traded the overnight move, you would have had a net profit of $155.42.
Leaving money invested overnight adds a layer of risk, since many of the moves occur based on macro events or earnings releases. You still could have generated big profits by trading intraday if you limited your trades to the right days of the week.
|Day of Week||Net Intraday Gain/(Loss)|
From the chart above, clearly, Mondays and Tuesdays were by far the best day to buy Apple stock at the open, and the rest of the week was time to stay away, or even risk a short. There are a number of Monday holidays as well, so the average net gain is even higher than it appears. Daytrading is required for this method, so there are commission costs, but the potential for gains is large.
There is no guarantee this pattern will continue in the future, but even if you look at the first five weeks of 2012 only, the pattern still holds. If you want to get away from just the standard buy and hold mentality, it is worth considering.