The Obvious Trade
- Posted by TheArmoTrader
- on November 17th, 2012
The market has a way of making sure obvious trades and/or “guaranteed” or “can’t lose” trades fail. Below are two pretty good examples of America’s two favorite stocks, Facebook ($FB) and Apple ($AAPL).
We had Facebook IPO on May 18. Many we’re claiming it to be a “can’t miss trade/investment”. How can Facebook go down, everybody uses it! Well, what we see over the next few months is Facebook getting demolished.
A few days ago, Facebook’s lockup expiry happened, and despite the common logic of “more supply = lower prices”, what we saw was too good, Facebook shares have rallied since the lockup, which was supposed to send the price plunging.
$FB daily chart
Sometimes the market just likes to screw with both sides. $AAPL has been on a plunge lately. I was watching it for a bounce. I knew 522 and 516 were levels. Below that, I was thinking it would test 500.
What we saw was kind of hilarious on Friday. Apple sliced through the 522/516 support levels, probably stopped a bunch of people out BUT it did not trade to 500 before bouncing. It stopped at 505. So not only did Apple stop people out, and probably get (new) shorts trapped as well, but also did not give a chance for “new meat” to step in. Perfect case of the obvious trade(s) failing.
$AAPL daily chart
(Disclosure: Long $AAPL calls)
H/t to @chicagosean for this tweet that gave me the idea for this post
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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