Guest Post: ExEngineer Trade: AAPL, 1/03/2007

Posted on January 3rd, 2007
Written by Prospectus
Posted in: N/A (old archives)

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I wasn’t going to trade today, as I wanted to see how the session went the first day back. But this morning I read Trader Mike, and he said he was fading the gap in the Q’s again. Trader Mike’s read on the action got me looking at going short Apple Computer, Inc. (NASDAQ: AAPL) today. The daily chart shows AAPL bumping the 20-day EMA yesterday.

Here’s the tick chart of my trade (30 ticks per bar):

chart-of-aapl.gif

I saw the price action trending toward the low of the day, below the white “max volume” bar. I went short 15 shares at $85.60, with my stop above the high of the day at $86.60, which put my risk at exactly $15.00. This also was a case of margin buying power put to good use, as my $15 ‘R’ allowed a position size that was worth about 60% more than my equity. I watched carefully as the price waffled around my entry point, but the trade was proven correct and AAPL gave way.

I was going to swing trade this one, but I ratcheted my stop down an ‘R’ at a time to protect profits as shown on the chart (at +2R, I put a stop at +1R, and at +3R I put a +2R stop). I got the idea after reading comments from Richard a few weeks back. I ended up getting “stopped out” for 2R, or $30.00 exactly, account up 3.8%. Yay me!

I think I handled this trade pretty well: A- on entry, stop management and B on the exit, and that because I didn’t max out the profit. The bottom of the move would have gotten 3.5R. I later noticed that the low of the day was right at the resistance-turned-support at $81.90. In hindsight, that should have been my target rather than the round $80.00 I chose.

Any comments or critiques are requested, especially exit pointers!

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