Tuesday, January 02, 2007

apple recap

Welcome to 2007! Last week was an intense one for AAPL, and the drama made for some great trading opportunities. Shortly after the rumors about falsified documents came out on Wednesday, we bought in long at about $78. The next day, the FT repeats the story and the stock is knocked down again to $80. Another buy-in opportunity and we went more long. It was a great trade, because Friday the uncertainty cloud was lifted and AAPL moved straight up to our resistance point at $85. We sold a little there but are still long ahead of Macworld.

The exit strategy will be a phased one. The next resistance point is a soft one around $90, where it held support in the face of shorts in late November. We will be selling a little of our position there.

It should be nonstop good news and rumors from here through Macworld next Tuesday, so I think there will be nothing but upside. We will be selling into strength wherever it materializes, with the goal to be completely unwound ahead of Macworld. If Jobs does not release a phone I think we will see some panicking, and the upside if there is a phone is limited.

Apple reports Q4 earnings on the 17th, conveniently after Macworld and just before options expiration. If AAPL gets knocked down because of the product announcements, I think there will be tremendous upside ahead of the reports. When I visited best buy, the salesman noted that they sold out of every shipment of macs that came in. Not only that, but the ipod case looked like an earthquake had hit it. Anecdotal evidence, to be sure. But I like the risk/reward if we're back in the 80s after the expo.

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