Trading Update April 17th

Markets completely reversed course from yesterday’s bullishness with the DOW dropping around 150 points by the close. Banks took a beating today with Goldman Sachs GS & JP Morgan JPM putting in some serious red candles. Citigroup C remains somewhat strong despite the weakness in the sector. Along with the Financials, just about every other sector took it on the chin today and we saw major technical breakdowns in several high profile names. The largest being Apple AAPL of course, finally dropping through recent lows of $420 and temporarily plunging through $400 during the lunch hours.

Honestly, just by breezing through the stocks on my watchlist I want to believe that the top is in for now and we will start trending lower but that theory has been crushed so many times as the market continues to break back higher. It’s like a cockroach that can’t be killed. This time around will things be different?

Unfortunately, all you can do is make your bet and live with the consequences. We’ll see going forward if dip buyers are eager to climb back in and scoop up some of the weakness across the board. If they don’t come back though, then most definitely this could be a top.

For tonight though, we’ll just take a look at the monster short trade that took place in Apple this morning.

I think the key for this move was recognizing that the gap in the morning and the complete disregard for the rally that took place yesterday as the SPY pushed back to $157. This morning the stock was basically hovering right over $420 and once you saw the weakness off the open in the indexes, that was basically all the catalyst you needed. Within the first few minutes the stock plunged down to $416 and there was maybe a 1 minute consolidation where we saw sellers continuing to hold the stock down and come back for more rounds. This was all the proof you need here and the weekly puts skyrocketed from the $415 strike all the day down to the $400. It being a Wednesday it was ok to move down to the $410 on the hopes that the stock would test that $400 level.

I really don’t have to explain much else here except to make note of the fact that all attempts at rebounds were subsequently sold off. There was a big spike in premium once the stock dropped through $400 but seconds after she did, buyers came roaring back and it turned out to be a nice setup for those late to the short party. Again folks, this game is all about anticipation. If you come in after the fact and are looking for similar returns, you will get sliced in half that is for sure. Notice after the morning move, pulling profits become ridiculously complicated…

Make sure to register for our FREE WEBINAR tomorrow after the close where we discuss your trading rules and why you always seem to break them.

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