AAPL, short chart analysis

I've taken a break from all things stock related for a while, I'll be back here and there in the future I expect as I can't help but play about with the charts. Less or no day trading, all longer term activity.

I received, and completed, a survey from Apple regarding the recent purchase of my iPhone.

Another email contained a stock chart for Google indicating a high price and that "they" have been long GOOG since whenever. I checked "their" stats and they are wrong more often than they are right.

The two emails spurred me to look at the Apple stock chart and see what is up. It's one of those stocks that is followed by, "I wish I had bought when....", but I could have bought and didn't for any number of reasons. The prime one was underestimating the product loyalty of the Apple crowd.

Here is the AAPL chart for the last three years with my notations according to a typical trend trading plan that I have used in the past. Of course this one could be played a few ways and I noted an alternate to the buy and hold plan with the green and red arrows, explanation follows.

At the point where the 50 day Simple Moving Average (SMA) crosses above the 200 day SMA, the stock is trending up and can be bought with a few plans in mind. Obviously buying and just holding would work, but seldom is that known so early on.

The alternate is to buy and set a tightish trailing stop (below the 50SMA), then plot the mean for the trend once it establishes placing the stop below the 200SMA which makes the trade profitable even if it stops out. The upper trend line can be plotted equidistant from the mean on the top side of the price at this point. Effectively, this is a mean reversion channel with a non-standard standard deviation of somewhere greater than 1 and creates a very wide trading channel or a safety stop for buy and hold.

Buy and hold:

Buy at $120 in May, 2009
Value now at over $400 or $280 paper profit, 233% ROI

Trend trading using the channel, ideal trades and only long, no shorting and no buy/sell optimization:

Trade 1 = $120 to $200
Trade 3 = $200 to $270
Trade 4 = $240 to $310
Trade 5 = $320 to $400
Trade 7 = $360 to $420
Realized profit = $360, 300% ROI

Other trades that MAY have been taken (circled in green):

Trade 2 = $190 to $270
Trade 6 = $360 to $410
Realized profit = $150, 125% additional ROI

I'll post a separate entry for an option for those who might like buy and hold with an investment twist.

Jeff.