AAPL has given us a SELL SIGNAL today with a three black crow pattern, which usually indicates a top. AAPL has moved lower for the past three sessions, hitting lower lows and lower highs. AAPL did start crossing through its support level of around $196-$197. I have currently set a $195 stop loss. I may either let it get triggered, sell preemptively. No matter what the outcome I will exit with a gain. Some people may have sold since the first SELL SIGNAL which I failed to catch on Friday when AAPL closed lower going though sharply the previous day's gains, however I held on, because once you have gains you should hold on as much as you can hoping the trend will resume and that it will bounce back up support levels, such as AAPL's $196-$197 support. This doesn't seem like it will be the case, but I prefer risking about 5% of my 10% gain rather than selling at a 10% gain before seeing AAPL bounce back higher and seeing it potentially giving me a +20% gain that I could have missed. My strategy implies entering positions as close as possible to support levels after the prices bounces back up these levels, and then possibly just like TIVO and AAPL now eliminate the potential of making any losses by increasing my stop loss to new and higher support levels. At these points you can simply risk gains, rather than taking the risk of making potential losses. I will possibly have my AAPL stop loss trigerred, and TIVO's also, but the goal of this strategy is not to make many small gains (+5% to +10%), but rather to not make any losses and on rare occasions make the the +20%-40%. This is how you make money, by taking the smallest losses possible (at times no losses at all). Keep in mind that the most successful traders/investors have more losing trades than winning ones. However, the losses are usually very small (limited to -7% to -8%), while the rare gains will be big, giving you potential returns of at least 20%. The goal is not to make many small gains, but rather a few big gains. I'm up approximately +50% this year with my portfolio, and this gain was mostly due to a few big winners, such as MGM back in March-April for which I made a 100% return, AIG 40%, and others also over 20-25%. However I had as much and possibly slightly more losing trades than winners. Except that they were all below -7% to -8%.
Now, back to AAPL. You can see that just about three weeks ago, AAPL had the three black crows formation also, but it was followed by a quick reversal for which AAPL managed to move higher from. This doesn't mean it will happen again, but simply that despite having signals, they can fail and that's why technical analysis should not be used as predictive tool but rather as a reactive tool. You have to react to what you see on a day-to-day basis and things can change quickly, and even within one day itself you can get different signals. That's why its best if I were to give any signals after the close. If AAPL does continue downwards, this may just mean that its minor trend in now down, but I would be very surprised if its major uptrend would be affected. If AAPL does go through $195, it may go back around $187-$188, and further fall would send AAPL to around $182. Any fall below this level under its 50 day MA would give us a major SELL SIGNAL. I would be very surprised if this occurred in the short term, as I elieve it would take major negative news to cause such a fall and break of its major trend which has been holding up since the beginning of the year. Overall, if AAPL continues downward I will possibly sell AAPL and take my +5% gain, because I'm not willing to give up the entire 10% gain I had. I may possibly come back after a few days if I see any bounces back up, even if I were to enter back at prices higher than my exit point. This is swing trading.
Long AAPL @ an average of $185.75 - Stop Loss @ $195.00
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