Wednesday, February 08, 2006

Knife Cathcher's Hell 2

My post yesterday about AAPL generated some interest so I thought I'd post today's observations. AAPL did start out with a nice upwards move which abruptly reversed itself around 11 am. I was watching my screen and didn't see an up bar for over an hour.

The positive is that one could have made a few bucks today by fading the open and covering. But today's action was much more reassurring than yesterday's with some support seeming to take hold at 67. The action in the afternoon of today's session was miserable and it seems to be a positive to me that AAPL held in the black to the close.

I took some heat for my factual error in the last post; yes, options expiration is next Friday, not this Friday as I originally had stated (I've got a vacation coming up and as a result my sense of time is a little messed up this month - I'm not perfect). But to me the gist seems intact; max pain is still just above 72 and there are only 9 trading days left until then. The big volume was still in the Feb 06 70 calls (which traded down .25 today). I'm not saying we'll see 72 by next Friday, but in general, I like the idea of aligning my trades with the best interests of the market makers. That being said, gaming max pain doesn't always work, and I don't think the action in AAPL can be attributed to market maker manipulation, it's just one thing to think about. In reality, I think this and several other negative things hit at the same time. It seems clear that one or more funds is unraveling a very large position.

Regardless, I can say pretty confidently that AAPL is a dangerous place right now for shorts or longs until the tape shows a new trend developing...


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