At 271, AAPL is threatening to break out and put bears in a world of hurt. With stochastics at an overbought level (89.45) and the general market also overbought according to several indicators, AAPL seems destined for a pullback. But could that line of thinking be wrong? Maybe.
1. Quadruple witching this week will climax tomorrow, marking the end of a propped up week or the beginning of a new move up after two months of bearish activity.
2. Though AAPL appears to be overbought, it has a history of staying above 80 (stochastics) before. From late February to late April, AAPL stayed at 80 or above and shares went from 205 to 272.
3. Not a technician here, but how often does a chart show a triple or quadruple top? With bulls so persistent, AAPL simply refuses to break down. Not that it can't happen, but if we're heading into another global crisis, AAPL could certainly fall below 200, 150, even 100 again. Would it be the China real estate bubble? The second wave of US mortgage destruction? Euro discard?
So, we could be in for two months of bears screaming that AAPL is about to sell off. Or AAPL could finally complete its consolidation and launch into another galaxy. That's why I really don't see the point of shorting AAPL, especially here. Demand for iPhone G4 is massive even as jobs numbers are mediocre. The iPad is selling far beyond even the most optimistic expectations.
If AAPL sells off from here, I won't be shocked. The market isn't exactly manic with bulls here. There is simply a shortage of selling and inflows still aren't that great and probably will take a long time to rise back to pre-Flash Crash levels. But AAPL has been tagged with projections of $300, $325 and $330. Take away all the negative catalysts in the broader market, and there's no reason why AAPL can't get to 330 or higher.
With that in mind, VXX has usually been the evil twin of AAPL, rising when AAPL sells off and fading when AAPL explodes. If 271-272 is the ceiling for AAPL, VXX may be a buy here below 26.
I love me some Apples, and when I buy some again, VXX will be my hedge. For now, I remain on the sidelines, watching with 100% cash.
AAPL 1-year chart (daily)
AAPL 2 month chart (daily) vs. VXX
AAPL 5-day chart (15-minute bars) vs. VXX
AAPL 2-day chart (5-minute bars) vs. VXX
They're almost a perfect hedge against each other when paired. VXX isn't chartable, really, not like most stocks. But it's worth noting that shares touched the 200-day average and came back toward the 100-day average, bounced back to the 200, and now have dropped back to the 100, where it sits now. Also, the 100- and 50-day averages are converging here, right as quad witching beckons.
VXX 1-year chart (daily)
Shit's about to stir tomorrow, just my guess, and unless Santa Claus has a lot of early gifts for us all, I don't see a catalyst for the bull argument just yet.
AAPL: "Hold" (American Bulls)
VXX: "Wait" (American Bulls)