What Should You Do with Apple at Current Levels?

 
on April 22 2013 8:24 AM
Apple iDevices
According to an industry analyst, three of Apple’s upcoming devices of this year will likely be delayed than previously expected, due to some complex “technical challenges.” Apple

Do you spend your weekends soaking in all of the investing news you can find?

Many of us do, but did you notice that there was an almost mind-numbing amount of Apple (NASDAQ: AAPL [FREE Stock Trend Analysis]) articles over the past couple of days? Even for Apple, it was out of control.

“Here’s why this is a perfect buying opportunity”, “Here’s why Apple’s going lower,” “Here’s how you should trade the earnings,” and that’s only the first couple of hundred.

It makes sense, though. It was the perfect storm of a giant drop in the stock price along with earnings this week but the question on everybody’s mind is, “what should I do?”

Block out the Noise

If you invest in Apple and you set out to do your Jim Cramer-appointed one hour of research per week, what you’ll find is a lot of media noise. Much of it holds very little value. Instead of reading that Apple will once again be a $700 stock because of the iWatch, spend your time reading about real metrics or the tech space where Apple operates. 

Forget that it’s Apple

Because of the company’s size, exposure, and huge gains over the past few years, Apple has taken on its own set of investing rules. If you’re trying to decide whether to buy or sell the stock at current levels, forget that it’s Apple. What would you do if it were any other name?

Don’t Trade the Earnings

CNBC reported Monday morning that options traders are pricing in a 7.5 percent earnings move. A $30 move would make a day trader salivate but you better be on the right side of that trade.

You’re going to hear a lot about how Apple is such a beat down stock that a bad earnings report is priced in. The fundamentals would support the claim but the technicals don’t. There’s plenty of technical downside at these levels.

There will likely be a post-earnings trade that sets up. A 7.5 percent move to the upside would put it within striking distance of its 20 day moving average while a move to the down side would place the stock near strong support around $360, based on current levels.

Let others take the outsized risk while you wait on the sidelines for the better setup.

Apple will do what Apple wants to do

Think back through the past couple of years. Have you noticed that Apple has a history of making huge moves regardless of the headlines? That makes Apple a hard stock to trade and that’s why any position should be hedged.

If you’re trading the stock, make it a pairs trade. If you’re trading the options—a spread. Be happy with only capturing some of the move. In Apple, that’s often enough for a successful trade.

Disclosure: At the time of this writing, Tim Parker was long Apple.

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

 

 

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