Thursday, June 05, 2008

APPL Buy Point and Negative Divergence

I am thinking about putting a buy stop in place for AAPL just above $190. As you can see from the chart, that would be the logical breakout entry.

A major concern of mine is the RSI divergence that is developing. Last year I did a study of breakouts accompanied by a negative RSI divergence. My findings surprised me. Contrary to popular opinion, the failure rate was about the same as without the divergence. However, and this is key, the rise is not as high. From where I'd have to place my stop, my reward to risk right now would only be 1.5:1.

I probably won't put in a buy stop since I can't monitor the volume with this type of entry. However, if I do so a volume surge I may jump in.

You guys can probably tell I'm conflicted about this trade setup.

3 comments:

FeirFactor said...

Apple is going lower from here. No way it gets above $200. I'm short it here.

Only way it would is if the overall market was set to rally through recent resistance. Because on truth about stocks like Apple and Google is that they trade a lot with the overall market.

ssb said...

For a crazy up day like today, AAPL would have traded with an high volume. Even the 3G iphone rumours have not propelled the stock.

As the volume action is missing and also with RSI divergence I may not wish to take this trade.

RIMM seem to be a better trade, waiting for a triangle breakout.

marketfolly said...

its risky either way just because the wwdc conference where they will supposedly release the 3g iphone. usually aapl is a "sell the news" stock. only safe way to play this is with an options straddle i think.. treat it almost like an earnings event. stock should move, but no one knows which way...