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Andrew Han
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Independent trader based in Singapore with global experience in Australia and the U.S. with a degree in Economics from Macquarie University, Sydney, Australia. Works for a U.S. manufacturing multinational with experience in treasury, credit risk management, financial planning, and accounting. ... More
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  • Is Apple Having Butterflies? 2 comments
    Jun 21, 2010 9:26 AM | about stocks: AAPL
    Apple 
    While reading an article on Butterfly patterns on forex today, I noticed the bearish butterfly pattern under discussion looked vaguely similar to how AAPL was looking especially after the run up over the past two weeks on positive news about iPad sales topping 2 million in the two months following its release and with the announcement of iPhone 4.  All "ka-ching" type of news to me justifying a move up and with second quarter coming to a close, add in window dressing to your list of reasons for AAPL to trend higher. Who would not want to tell their investors that they are holding great company like AAPL?

    This leads me to one of the primary reasons why I take this bearish pattern seriously, because more than likely after June 30 will we see some profit taking and a pull back in the price.

    Looking at the chart with another pattern - Cup With Handle, we could argue that profit taking will lead to the formation of the Handle at which point it will attract buyers to come in again and pushing AAPL above $270 and break out.
    AAPL-Cup With Handle Pattern
    With the pre-markets reacting positively to China's announcement on the revaluation of its currency, we are seeing AAPL push higher along with it.  I was Long AAPL puts already and will be watching this trade for the pull back or for the bulls to continue at which point I will cut bait.

    References
    The Butterfly Pattern
    S
    tock Charts: Cup WIth Handle


    Disclaimers

    1. This article is not intended to provide investment advice and is an expression of my own opinion. Readers act upon this information at their own risk.



    Disclosure: Long AAPL Puts
    Stocks: AAPL
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Comments (2)
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  • DerekNJND
    , contributor
    Comments (27) | Send Message
     
    no, you had it right the first time....its a bearish butterfly. Doesn't meet any requirements of a cup/handle continuation--the biggest of which is that a handle easily equals a 15-20% pullback. But the handle has to stay alongside the upper half of the cup, and if AAPL pulls back say even 15% to 240ish, its almost under the cup. Simply stated, the 'cup" in aapl's chart isn't deep enough, long enough or gradual enough to be a continuation cup/handle.

     

    No need to wait til quarter end to sell or short this pig either. Theres no window dressing going on this quarter, institutions/fund mgrs have pulled the plug, and either dumped or loaded up on put protection (or sold calls) to keep the portfolios in check while they cross their fingers and hope their 10 yr treasuries can hang onto that ripe, bountiful 3% yield. :)

     

    Back to apple though- it could easily have a 38.2% retracement back towards its 2008/09 lows within the next 1-2 weeks. Buying some july/aug deep out of the money puts around $220, 210 and on down could make you enough to take the rest of the year off, because you're looking at options you can buy for under a buck that would be worth $10, $20 maybe more, EACH if apple gets back to the 225 area.
    25 Jun 2010, 06:06 AM Reply Like
  • Andrew Han
    , contributor
    Comments (8) | Send Message
     
    Author’s reply » Great comments DerekNJND! Thanks!
    25 Jun 2010, 09:20 PM Reply Like
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