AAPL Amazing Intraday Gap and Recovery

Jul 22, 2008: 10:52 PM CST

There’s so much to be said about Apple’s (AAPL) intraday performance today.  From the 10% gap down to a rally to close the day off just over 2%, Apple traders were in for an amazing ride.  Let’s look at the intraday and daily chart to see where this leaves us.

AAPL 5-min:

The bulls truly turned a bad situation around in a hurry.  I watched Apple fall after earnings were released yesterday and I figured we’d have a bad gap opening and I suspected there would be at least a 50% retracement of that gap.  I didn’t expect an almost full gap recovery situation!  I tip my hat to the bulls for finding deep value in the price plunge.

Apple reported record June earnings and Q2 profit over 30% greater than Q1, yet most of this was already priced into the stock, and traders punished Apple for lowered guidance in earnings ahead.  These kinds of situations are enough to make your head spin and give you extreme frustration as a newer trader.

“But they had record profits!  Why did their stock go down so much?!?”

To make your head spin even further, Wachovia Bank (WB) reported over $8 billion in losses in Q2, that it will be slashing its dividend, and that it will be laying off over 10,000 workers and it would be almost lunacy to think their stock ended the day well.  But it did.  Wachovia ended the day 27% higher – but these points are for another discussion.

With Apple, usually the best strategy to employ after a gap is to attempt at least initally to trade against the gap, playing for a partial or full fill.  I don’t like to fade equity gaps greater than 2%, but you just never know what will happen so it’s often best to employ a consistent strategy, even if you do so with a smaller than normal position.

Anyway, as the day developed, price initially found resistance via the 20 period EMA which was then broken (and turned into support) before finding resistance at the 50 period EMA, and once it was broken to the upside as well, the ‘skies cleared’ and opportunities opened up vastly to the upside with renewed confidence.  I listed the “Highest Probability” trade as being the retest of the confluence of support coming from the 20 and 50 period EMA converging – it was a low risk, high reward situation that paid dividends for aggressive traders.

So where does this leave us on the daily chart?

AAPL Daily:

The downtrend is still officially confirmed, and price is ‘officially’ beneath all three key moving averages, including the 200 period (known as the “line in the sand”) but I’m sure Apple bulls take solace in today’s action.

67 million shares transacted today – while not a record, the activity was definitely impressive.

Let’s continue to watch this stock and how its movements may affect the broader stock market.

4 Comments

4 Responses to “AAPL Amazing Intraday Gap and Recovery”

  1. Freetoadventure Says:

    Thanks for this article, really helps makes a little sense of something that does not make much sense …

  2. Clark Kent Says:

    And pre-market is now at 164.32!

    I guess the Oppenheimer statement of amazing product transition before end of September was enough for the Apple following and greedy investors alike to recuperate their trust in “risky” AAPL.

    Many shorts and Apple enemies are crying right now, just look at them insisting on that issue of Steve Jobs’ health! They just won’t give up!

    I am now convinced AAPL will climb steadily ’til at least 190 non-stop.

    Apple will be adding 20 more countries in August 22nd and I’m sure there will be a China announcement in August, probably by then. So non-stop ’til 190 now. When they announce the new “product transition” which is expected to be revolutionary (betting it’s a MacBook Touch, no keyboard), then the stock will just fly past 200 to land in uncharted territory!

    Here’s to you, Afraid To Trade Corey, may your business flourish!

  3. burdickrobert Says:

    There is another link under the category of personal finance but it has nothing to do with finance. If you have difficulties in making payment, you can click the link named wachoviabank.com. You will have an expert helping you to fix your problems and you don’t have to go out of your home to get the service. What you need to do is to choose a button between the two “call us today” and “we’ll call you”. Don’t you think this service shows the attentiveness and consideration of the Wachovia? It’s really good in my opinion.

  4. bidding Says:

    Hi, 

    Thanks guys for AAPL Amazing Intraday Gap and Recovery.