Add AAPL Calls

Buying the Tech Dip

By Bryan Bottarelli
Thursday, June 18, 2009 10:56 AM EDT
Thu, 18 Jun 2009 14:56:00 GMT

PLAY: Buy the AAPL July 140 Calls (APV GH) at or under $4.80, good for the day. Place a protective stop limit at $2.30 and a pre-determined sniper sell at $7.50.

Dear Bottarelli Research Member,

As Treasury Secretary Timothy Geithner is testifying on Capitol Hill, the major market averages are putting in an early day rally. Therefore, the decision to lock in gains on our DXD and UNP plays appears to be well-timed.

INDU

As you can see from the Dow chart above, we’re now coming to a very critical inflection point. The downward-sloping 200-day moving average is about to intersect with the upward sloping 50-day moving average, thus creating a very tight trading range between 8,250 and 8,500. As I watch the intra-day market action, it appears like we’re coming up on a “coiled-spring” moment. In other words, the markets are deciding whether to break above or break below this narrow range. I personally feel that we need to re-test the 7,750 or the 7,500 level, but my personal feelings are irrelevant. As I’ve said before, successful trading right now involves correctly playing market sentiment, and this leads to a new play that I’d like to enter right now.

You see, after the close of trading today, Research In Motion (RIMM – NASDAQ) is set to announce earnings. As you probably know, RIMM is known for blowing away their earnings numbers and shooting higher. You can see this pattern back in April, when RIMM gapped up and continued moving higher for the next three months. Now that the stock is sitting right at its 50-day moving average, it’s setting itself up for another such move. But having said that, I do not want to play RIMM options.

RIMM

You see, as a BlackBerry owner, I’m becoming increasingly disappointed with my device. Sure it’s great for texting and e-mail, but I’m staring to think that Apple’s iPhone is about to begin taking away RIMM’s market share. Apple’s new iPhone, the 3G S, is priced at only $99 and has high-definition video recording and editing features. In a recent survey, 44% of smartphone buyers said that they’re interested in purchasing an iPhone, compared to 30% back in March. What’s more, 66% of surveyed buyers said that they’re new to Apple products, which really makes a strong statement about Apple’s continued market share growth. Plus, now that the iPhone is down to $99, this should accelerate overseas growth in the U.K., Germany, France, and Asia. Therefore, I’d like to use the recent dip in Apple’s stock price to get positioned in July calls.

AAPL

As you can see from the chart above, Apple recently dipped from $145 down to $135, but it’s now finding a support point right above the 50-day moving average. Using RIMM’s announcement today as the catalyst, I’d like to use this dip to enter into July calls now. Here’s the play…

PLAY: Buy the AAPL July 140 Calls (APV GH) at or under $4.80, good for the day. Place a protective stop limit at $2.30 and a pre-determined sniper sell at $7.50.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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