After the last two days of the market consolidating inside Tuesday’s range it’s time to consider buying something down.
However, a few conditions should be in place before we buy.
Today’s trade idea could be a big winner, because I’d consider holding it as long-term buy if it doesn’t get stopped out.
Read below for the details
The chart of AAPL below may look a little scary, but that could work in your favor if you’re a buyer now.
When markets fall fast, they can more easily rally back to their highs.
But that’s not a reason to buy.
QQQ is well below its 50-day average and AAPL is sitting on its 50-day average, so that demonstrates good relative strength.
An upward sloping 50-day average is also generally a good point look to enter big swing trades.
Additionally, the $200 level has been a pivotal level for AAPL, so if it moves over this level it could indicate a bottom.
However, the most compelling reason to buy AAPL is that on 7/31, it was reacting very bullishly to its earnings announcement when the general market got in the way.
The general market selloff has pulled AAPL down.
Admittedly, the AAPL can be viewed as a company that will be hurt by the trade war with China, at this price level, I think it’s worth a trading risk.
Like the market, APPL has formed a well-defined 3-day range. We can now use this to set up a trade.
If AAPL trades over $201 it will be out of the range and over $200, and it’s a buy.
If you’d like to be more conservative wait for a daily close over $201.
For a stop there are two choices. My bet is that AAPL will not trade below $192 so that is one option for a stop.
If you prefer to take less risk, another option is to place a stop under $196. This is a smaller dollar risk, but the odds of getting stopped out are higher.
The market is still in a very dangerous condition. If the market breaks below its 3-day range, it will be very bearish, but until then it gives traders a good low to trade against.
This AAPL trade is an example of this tactic.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation