What's in a day

Well, we had quite a day in the market for sure today.  We sold our April 155 AAPL calls for a 120% profit in just 8 trading day - Not bad.  I would have held them but time was running out way too quickly - so we jumped in to another AAPL position.  It was shall we say.... EXHILERATING!  (who knows how you spell that word).  At one point I called Josh and said "hey how's AAPL doing" and he looked and said "we're up 10% already" (this was on our new position).  Then before we knew it by the end of the day our trusty ol' AAPL had retraced and closed with a DOJI!  In fact one could call it a shooting star Doji - I'm not that person though and i'll explain why.  

By definition a shooting star doji must occur at the top of a trend.  We won't know until tomorrow and maybe the next day if today is the top of this trend.  If it's not then today's doji is not a shooting start doji, instead it's what we call... wait for it..... a doji.    In fact it's not even a doji because a doji has to have the same open and close.  It's really just a small dark candle with a long upper wick - worth noting caution, but not worth freaking out over yet.  

Okay - with that rant said, let's look at what happened and why I'm NOT concerned .... yet.  

For starters let's look at the overall market:

S&P - Basically the S&P is kind of trading sideways for a couple days.  One might think it's bumping it's head on a former high, but in reality that's a pretty weak high point it's hitting.  The mark you can see a month earlier with the tweezer top is a much stronger resistance, that that too has no major significance.  1405 & 1432 on the S&P have much more significance if you look in the bigger picture. I can almost guarantee it will slow down at those spots, but the current price doesn't have major significance. Not only that, even with the small candle days the S&P is still following the rules of an uptrend - Higher highs and higher lows.  Until that breaks it's in an uptrend.  I believe what we're looking at here is actually more of a "stair step" patter.  Traditionally when this consolidation breaks it will break to the upside.  One additional reason the S&P may have slowed down today is it's coming upon the 100 day  Moving average.  That could cause some caution to some investors. 

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A quick glance at the dow and Nasdaq shows they too are in similar patterns -- while the single day perspective might be slightly scary, the big picture of the market is it's just getting an uptrend going and thus far it's following the rules.  

So what about AAPL?  Well there's a few things in play - first of all one can't ignore the fact that it BLEW through the 100 day MA today only to retrace just on top of it. The 50 day EMA is crossing over the 20, and all of the MA's are converging upon each other with the 200 Day smack dab in the middle.  Now that's moving average magic - it's also a perfect recipe for a confused day or two in the market which we saw today.  I attribute this timing to today's confusion more than anything.  

Additional reasons to have seen today's major sell off after the push up is the fact that we DID have a gap.  A true gap.  Very often gaps are filled intra-day but today's did not fill.  That means either tomorrow it might fill or it very well may be the impetus for what would be called a continuation gap.  A continuation gap happens in the middle of a trend and it is characterized by a gap in the direction of the trade.  The fact that today was a true gap UP is actually more important than the fact that has a long candle wick on top.  Ultimately tomorrow will be the confirmation for what today meant.  

An additional reason today saw a brief slow down is the fact that Jan. 22 saw today's high of around 160 as a high just before the stock continued in a major down trend.  This insight can help explain why there was some slow down.  However I wouldn't look for a long term slowdown in AAPL.  There could be - as I said, the next couple days will determine the immediate direction for AAPL.  But the 160 mark just isn't a strong enough resistance in my eyes and there's too many people believing AAPL is a 180-200 stock.  With that much sentiment behind it I can't see it stuck at 160 for too long.  

Additional reasons for continued bullishness on AAPL - Since AAPL broke out of it's box on 3-18-08  it has not traded all the way down to the 10 day MA yet.  Not only that, it hasn't even looked that direction since 3-20-08.  Today's move, even with the long upper candle wick, continues to walk the upper band of the Bollingers.  It's actually pulling AWAY from the 5 day MA, not closer to the 10.  With today's move the Moving Averages are setting up for a very nice long term trend on AAPL.  I'm sure Steve Jobs couldn't be happier.  To top that off Volume continues average or above average, the ADX indiator is Loving the move, cashflow is UP and it seems almost every day large firms are adding another buy signal to AAPL helping the larger public's interest in AAPL to be strong.  With all those things going on it's hard to see how today could be a warning sign that AAPL is about to drop like a rock again.   Granted everything could change tomorrow, but at this point all the indicators are strong.  I'd suggest setting a stop just below the 5 day Moving Average and continue trading long.  I really don't see much reason to stop before it hits 180.  A retracement or two would make a lot of sense but AAPL's recent history has shown "rest" to be something this stock doesn't care a whole lot about.  We'll see what happens.   The fact that after hours trading had AAPL trading up from the day's close is a good sign tomorrow may be a happy day for the AAPL bulls.   

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