Is it Time to Jump Back In?

Normally I don't recommend chasing gap ups. I had suggested yesterday to play it safe, because the market was in flux. I said sit on the side lines. At the same time I suggested that we could see a rally the next day because of the negative divergences on the 20 year bond (as well as the Yen) versus the positive divergences on the US dollar. Clearly a bullish sign. And boy did it play out. Not only was it a gap up, but it was a trend setter! Unfortunately I didn't capitalize on any new positions due to the lingering uncertainty. No fowl though, because I've been holding AAPL for the past several weeks, and it shot straight through its resistance!

So, is it time to jump back in, or not? I say yes, with a caveat that I'll explain later. I say "yes" because this was a trend setting day. All the indexes shot through their 50 day moving averages, and with gusto. The NAZ smashed through the neck line of the inverse head and shoulders pattern that has been setting up forever, and advancers left decliners in the dust! So, I would say all that combined makes for a pretty compelling story that there's great momentum left in this rally, which is no longer a rally, but an uptrend. At least for the near term. It remains to be seen if this means we have reversed the overall downtrend that began at the beginning of the year.

So, from an AAPL perspective, what's important to me? Well, to start, there's iPhone shortages propping up everywhere. There's analysts, and rumors of an early arrival of 3G. And there's that story last night about the Taiwan manufacturer that claims to have 10 million third generation iPhones ready to ship. Also, there's reports that iMacs are flying off the shelves, and RIM is reporting earnings tomorrow. If RIM does not disappoint, that's good for Apple, because it confirms a healthier than expected corporate market for iPhones. All indications are that RIM is doing very well.

Here's the caveat. Tomorrow the market will likely go up, but it will also be come very over bought if RIM reports well. The next day the oscillators are going to have to be reset. So, I anticipate a slight correction. That's the buying opportunity. As far as the AAPL position goes, if you're holding, I would trim anything approaching 152 and change. I think the following day the resetting of the oscillators should bring it back down some, maybe to 148. That would be a good time to re-enter.

Of course this is speculation, but I think that's how it will play out. If the opportunity is right, I'll put out some plays over the next couple of days, to supplement your AAPL.

-zach bass