An AAPL thought experiment

How's it going?  AAPL stock had a rough Thanksgiving week, dropping about 1.65%, especially on the back of the huge selloff Wall Street saw during Friday's abbreviated trading window. This morning, the stock is slightly up but trending back bearish. So watch it carefully today. If you're in the Perfect Apple Trade, check out today's daily update for the latest information on trades I'm considering. Even with the recent selloff, AAPL is still up over 6 percent over the last month, and 28% over the last six months. So I thought it would be helpful to do a little bit of a thought experiment, looking back at the growth overall this year. In the month of September, AAPL broke sharply lower for the first time since spring. Right before that, we saw an interesting phenomenon on the chart: Right there, I've highlighted what's called "bearish divergence."  That happened because the stock itself hit a high, then another higher high, while the MACD (the two crossing lines at the bottom of the chart) had a high and then another lower high. What's compelling here is that back in 2012, we saw almost exactly the same thing take place. The stock had a lot of positive momentum that year, too. Then there was bearish divergence ahead of a selloff. A major selloff. That year, the stock dropped around 45%, largely because of increasing competition for the iPhone from Android devices. The thing is, right before that happened, do you think anyone was expecting a 45% drop-off in the stock?  There were signals in the market, but no one heeded them. The reality is, sometimes, what you least expect to happen still happens. Now, I'm not saying that everyone should go out and spend their money on puts. I think sometimes, it's just helpful to do a thought experiment. Not that it will happen, but what if it does happen? The news of the omicron variant actually came right at the high of the recent uptrend and sparked a harsh and immediate selloff. Today will be an important day to watch because if we break lower, we really could enter a bearish cycle. I ran the calculations, and if AAPL broke 45% lower again, as it did back in 2012, that would see it drop all the way to $89. I'm not saying that is going to happen. But if it did, what would you do? These questions aren't designed to scare anyone. But it's important to ask them, especially if you have a strategy based on trading one stock in particular. The first two weeks of December tend to be a bearish period for AAPL.  So that's another thing to keep in mind. All of it taken together means a selloff is certainly possible. If it happens, we'll be prepared. But, again, today will be an important day to watch and see where the mood of the market is. Until then, trade safe! Micah Lamar *Disclaimer: The profits and performance shown are not typical and do not guarantee future trade results.   Investing is inherently risky. While a potential for rewards exists, by investing, you are putting yourself at risk. You must be aware of the risks and be willing to accept them in order to invest in any type of security.Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell securities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site.The past performance of any trading system or methodology is not necessarily indicative of future results.CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY.SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.All trades, patterns, charts, systems, etc., discussed in this message and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations.

 

                                                           

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