Disclosure: Long for the Near-term

My preferred style of trading stocks is Swing Trades. You can think of Swing Trading as something between Day Trading and Trend Trading. It’s a medium term strategy, looking to hit your intended target price anywhere from a couple of days to a couple of weeks.

Swing Trading carries a bit more risk than Day trading because you hold positions overnight, and a good deal more attentiveness to market conditions than Trend Trading because of the shorter time frame that a position would mature. In all three of these disciplines, a certain level of market stability is necessary to be successful. Well right now there’s zero market stability. For all intents and purposes, the market has gone hyperbolic.

SO, what’s a Swing Trader, or any trader that wants a piece of Apple to do? Well, on two separate occasions over the past month or so, I have tried and failed to act on solid technical analysis to buy into an AAPL position. Which is really weird to say. Not because I failed twice, but because I only had two trading opportunities over that time period. In normal times I might have 5 to 10 opportunities to develop positions.

So I sat back and thought about it for a bit. One thing is for sure. Apple is at a price point that is so compelling, that trying to find an entry is meaningless. I figure to come out a huge winner over the next few months if I buy AAPL at any price between $75 and $85. And a very big winner between $85 and $95. That’s a $20 spread where I’m reasonably certain that Apple will pay handsomely in a few months time. This is assuming of course that we will have some form of a counter trend rally.

So, what I’m going to do is put Technical Analysis aside, for the most part, and start buying AAPL. I say for the most part because I need some sort of base line from which to develop a buying strategy. And my baseline is the assumption that Apple will find strong price support at the $74 level, and it is unlikely that it will drop below, and if it does, probably not for very long. Also, it’s my assumption that Apple will spend less time near $74 than it will around the $86 level. The $86 to $88 range seems to carry some significant sentiment with the market and represents historical price points where past battles were waged. So that range will provide support while the price lingers above, and fairly strong resistance if AAPL’s price drops below that range.

Buying Strategies
Ok. Now the next part of the strategy is to select positions based on risk. Let’s start with low risk positions and finish up with higher risk plays.

If I believe there’s little chance that AAPL will break down below $74 then I’m going to take a bullish position with a Bull Put Spread, where I sell a put near the money, say at $75, and buy an out of the money put at $70. I would think that Oct 18 and Nov 21 contracts would both work well here. This would be a relatively low cost trade , as it minimizes margin requirements, and in fact it costs nothing as it’s a credit spread, meaning the premium from the writing of the naked put would be deposited into your account. All you have to do is wait for the option to expire and you keep the premium.

If AAPL plunges through the $86-$88 range in the near-term and indicators show oversold conditions, which may tell you the price won’t hang out at that level too long, then purchase cheap out of the money calls with near term expirations for a quick move out of that range and quick profits. If the prices decides to hang out and drift in the $74-$86 channel for a bit, then I would try and catch dips as close to $74 as possible and purchase various deep in the money calls with high deltas and near term expirations. This would ensure good price action. I would take quick profits from these calls, and roll the profits into cheap out of the money calls or leaps.

Alternatively to all these option strategies, I would just buy straight stock by scaling in. If you buy above the $86-$88 range, then protect your position with an ETF that shorts the market by 2x, like the SDS UltraShort S&P500 ProShares. If your AAPL shares drop in value ,he SDS will increase in value and offset the loss. If you hit support at the $74 level, then sell the ProShares and purchase more AAPL with the profits.

Sooner or later the market is going to experience a strong counter rally. And better to have cheap AAPL shares in hand than not.