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Another Perspective on Apple

I have been following Todd Harrison (founder of Minyanville) for years. He is a well-respected trader and an even better person. He is one of the best when it comes to revealing the "other side" of a trade or investment. This comes from both a keen intellect (to simultaneously understand and extrapolate conclusions from multiple directions) and a sincere humility to consider and respect both sides of an argument (knowing what he knows and more importantly, what he does not know, so he can prepare for either direction). It doesn't hurt that he also often tends to pick the right direction for a trade (but is always willing to let others learn from him when he does not).

So when Todd posted the following note and chart (see below), I thought it apropos to pass along:

"The second—and sure to be unpopular—observation is the Head & Shoulders pattern in Apple, which "works" through a pure technical lens, to $360 (don't shoot the messenger).  I'm not piling on after a 35% decline—I currently have no position—but we strive to see both sides in the 'Ville and now you do."

Todd is not, and I am not, recommending that clients build a short position in Apple at this time. Nevertheless, it is important that we respect the downside potential in the stock from a purely technical standpoint.

Bottom Line: My recommendation to clients (and the strategy I am personally implementing) would be to open a buy limit order for Apple at approximately $370 (good until cancelled) so that we can catch a potentially lower low in the stock. Apart from the technical analysis, I still favor building a longer-term position in Apple at current levels in the mid $400s, but would not mind building a larger position at even lower prices if we get the chance. I have no idea if it will trade that low, but I would love to own it there if it does.

Here is a link to the full article containing the context in which the comment was made:

Long Position in Apple

Written By: Joshua Ungerecht

AAPL, Apple, Head and Shoulders, Minyanville, Todd Harrison