Apple: It's The Week We've All Been Waiting For (Part 1)

| About: Apple Inc. (AAPL)

Well, it's not really what I've been waiting for since I'm thousands of miles away and I wouldn't have a clue what they would be talking in tech lingo. What I've been really waiting for was a trading signal to buy Apple (NASDAQ:AAPL) again (if you were to "trade" it). At the time of writing, Apple closed at $580.32 after retracing from its 52 week high of $644; we can blame it on the "subsidy" fear (i.e. carriers were rumored to cut its iPhone subsidies in order to improve their margins). I'll write more about this when I come back to civilization!

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Remember when I wrote this...

Trying to sell AAPL is not easy. This is where you have to decide whether you want to "trade" it or "invest". If you were "trading" it; our stops have taken us out already. If you want to "invest"...we will have spots where we can add more. $550 is where I'm pegging it to bounce IF ever it goes there. We will be range bound for a while as it will be seasonally slower for AAPL during the next few months. Adjust your strategy accordingly.

Today, the mechanical system that I've followed since 2005 with the sole purpose in trading Apple gave me a "buy at open" signal. This has been the first signal since it closed its last long position on March 2012.

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How has this black box fared? How does 31 winning trades versus 6 losing trades since 2006 sound? The largest losing trade was 23%.

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I can't really complain; here was the trading signal last year amidst the Greek debacle when I wrote my first SA article on Apple :

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Obviously, this article is not to suggest that you should go out there on Monday and mortgage your house to buy the shares. Instead, what I'm trying to share is that Apple is probably one of the best stocks that you can trade using your own algorithms. I don't like to "think" too much when it comes to my trading accounts; having a system allows me to ignore the noise. The caveat? You have to trade every signal and I have no idea how it will perform on a moving forward basis. The system isn't optimized nor were the variables subjected to a Monte Carlo simulation; it is as raw as you can get.

Regular readers of my articles also know that I also like to use "tipping points" to make trading decisions on the stocks that I follow. Is there a strong correlation between Apple's stock and what is announced at Apple's annual Worldwide Developer's conference (aka WWDC)? For those who are not familiar with this annual "love in" of the MacMorons (as I'm told), this is when Apple provides a hands on showcase of its new technologies; tickets go for $1,599 each with limited availability.

So, is there really a direct correlation between the trading signals generated within 30 days (before or after) the WWDC event?

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Since 2006, of ALL the 7 buy signals generated within the event; 6 were winning trades (what stock didn't tank in 2008?). Of all the 5 buy signals generated within 30 days (before or after the event); 4 were winning trades (again, 2008 wasn't being nice). There were 5 buy signals in 2008; only 1 was profitable - that pretty much sums up how crappy 2008 really was.

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My simple takeaway from this? A nasty macro event won't save a good stock from going down. However, based on the historical performance of this strategy, it appears that the odds are in our favor. Your mileage may vary; it may dip during the conference and thus giving you better entry points. Unless Apple provides some mind blowing stuff at WWDC, I'm not expecting the stock to test a new high within the next 4 months (happy to be proven wrong). Having said that, my trading vehicle of choice would be Jan 2013 ITM LEAPs. Alternatively, if you are more conservative, you may want to wait and see how the stock reacts after the WWDC is over.

Good trading to all; I must say that a Macbook Air is a joy to travel with!

Disclosure: I am long AAPL, XIV, PKT, LVS, PCLN.

Continue to Part 2 >>