How to Trade Apple's Breakdown As Negative Sentiment Grows - ONE-TWENTY TWO: Trading Financial Markets

(This is an excerpt from an article I originally published on Seeking Alpha on December 17, 2012. Click here to read the entire piece.)

Apple’s rollout of the iPhone5 in China hit a perfect storm on Friday, December 14th. Rumors were flying about lackluster interest and a reduction in orders to suppliers. Analysts released reduced forecasts and price targets. To top it all off, Fridays tend to be Apple’s worst trading day of the week.

I covered Apple’s daily trading tendencies in August in “A Guide For Day-To-Day Trading In Apple’s Stock.” At that time, I found a relatively consistent pattern of Apple (AAPL) starting the week on a strong note but ending on a weak note. {snip}

Click for a larger view…

Source: FreeStockCharts.com

The rapid change in sentiment even shows up in the short interest piling up against Apple. {snip}

Shares Short in Apple Since December 15, 2011

Source: NASDAQ.com short interest

However, negative sentiment is NOT yet showing up in the options trade which continues its heavy weight on call options. {snip}

While it seems “obvious” to trade with the current downward trend to the next level of support – especially with the current breakdown – counter-trend rallies like that in late November can happen at anytime for any reason. {snip}

For reference, I have updated the daily trading guide below. {snip}

Apple still tends to start the week trading strongly and to end the week trading weakly.
The week tends to end even more weakly if preceded by weakness
No differentiation in directional bias if the preceding day was an up day, although Wednesdays tend to be stronger and Fridays weaker if that up day is a performance of 1% or greater.