All eyes have been on Apple, Microsoft, and Nvidia as they reached for new, all-time highs. Nvidia achieved the feat first, with an explosive post-earnings move into $419.38. Today, Apple traded as high as $184.95 before profit takers and sellers brought it down. The quick, intraday reversal left it closing the day down -$1.37, or -0.76%.
As you can see, it’s not as though the stock closed down 3% or anything, but to hit a new high like that and then reverse, going negative on the day, is significant because it is often the beginning of a pullback.
This is especially the case when the move is somewhat news-related. In this case, Apple was trading higher into the developers’ conference. Oftentimes these kinds of moves are ‘buy the rumor, sell the news’ events.
What does that mean? It means market participants buy the stock and push it higher going into the event. But, when the event occurs, most of the excitement is priced in, so it can’t continue higher afterward. That is typically when you will see price pullback.
That can especially be the case when the news-related event leaves viewers a bit puzzled or they feel it lacks luster. It can also occur when a significant milestone (like the new high) is reached.
So, what am I doing with Apple here?
First of all, I will state that I’m an Apple investor, and I continue to love the long-term upside potential in this stock. But that doesn’t mean there aren’t pullback moves to trade within that longer-term uptrend!
Check out the video below, where I go through my complete analysis, and explain how I set up a bearish butterfly to trade the pullback.