Thursday, June 17, 2010

AAPL flirts with its all-time high

Apple is currently flirting with its all-time high. Here are two long-term charts of AAPL during its sell-off in 2008 and uptrend since then. Notice that the guppy multiple moving average chart of AAPL continues to mostly show bullish signs and the stock has not violated a 7-ATR trailing stop since Apple made a new all-time high last October. Other possible entry points were when the guppy chart showed a bullish trend reversal in March 2009 (when the red lines crossed above the black lines) or when the 200-day moving average started sloping upwards in April 2009.

As always, the key ingredients were:
  1. identify a stock with a strong trend, 
  2. join the trend, and 
  3. have an exit plan that limits losses and lets profits grow thereby creating an outcome distribution that is skewed towards profitability.
An additional ingredient that I will discuss more sometime is scaling into a trade as it goes your way. For example, adding to a position each time it increases by 1-ATR from the purchase price.
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