BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Profit-Taking and the Apple iPhone Trade

Following
This article is more than 10 years old.

One of my favorite pictures right now is an artist's conception of what sunrise on the planet Mercury might look like. First thing this morning, taking a quick look at Yahoo! Finance to see what's making the news headlines to start the week, I found myself looking at what might be the stock market's version of the same:

"Apple iPhone 5 Sales Top 5M in First Weekend"

Apple (NASDAQ: AAPL) continues to dominate both the stock market and the news about stocks. For however long news from Europe or China or the Fed manages to knock Apple off the front page, traders, investors and those of us who write about the world of trading and investing know that there is no stronger mean reversion than the return of Apple to the stock market headlines after any brief spell spent playing second fiddle to the rest of the world.

In the opening minutes of trading on Monday, shares of Apple are trading lower by 2% in what appears initially to be a true "sell the news" moment for the World's Greatest Technology Company. As I have suggested, a significant pullback in the stock would be a welcome change of pace - especially for those traders and investors looking for an opportunity to get a piece of the Apple action.

*

That said, if you blink, there's a good chance that you'll miss it (note, as I write, Apple has cut those early losses in half).  Short-term pullbacks in Apple have not been common, to say the least. The last time the stock was trading in oversold territory was in late July during a relatively modest pullback that took AAPL lower for three out of five sessions (though Apple shares did retreat to a new, two-week low). From that last oversold finish two months ago, Apple has gained just over 20%.

Image via CrunchBase

Traders and investors with a hunger for tech stocks, but no appetite for Apple may want to look at sell-offs in other major techs - from Cisco Systems (NASDAQ: CSCO), which has closed lower for three out of four trading days heading into Monday's session, to Oracle Corporation (NASDAQ: ORCL). Shares of Oracle are trading lower early on Monday after closing in the red for the last four consecutive trading days.

And please, try not to stare at the slow-motion trainwreck in tech that is the sell-offs in both Hewlett-Packard (NASDAQ: HPQ) and Intel (NASDAQ: INTC). While both stocks are oversold in the near-term, any short-covering bounce these stocks enjoy over the next few days does not appear likely to last.

*

The Stock List

Listless trading in the stock market at the end of last week provided cover for a number of stocks that have been featured in The Stock List to make their moves.

To the upside, shares of Automatic Data Processing (NYSE: ADP) rallied by more than 2% six days after being targeted for The Stock List roster. October calls in ADP were even more impressive, gaining more than 50% over the same five-day time span.

Most of the stocks in The Stock List are stocks that are vulnerable to reversals back to the upside. But when the broader market is overbought, many of the better potential opportunities can be found in stocks that are vulnerable to near-term reversals back to the downside, as well.

An example of this is the move in JC Penny (NYSE: JCP). Shares of JCP had been on a tear since mid-July. Heading into September, the stock was very overbought in the near-term, and earned a spot on The Stock List roster as a stock that could be on its way lower.

It took almost a week and a half, but eventually JCP sold off, plunging for three days in a row and losing 10% from the time the stock was targeted and tweeted from @need2knowstocks. October puts in JC Penny increased in value by more than 67%.

Want more stocks? Follow The Stock List @need2knowstocks.