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1. Sold 250 $54.00 QQQ October Puts @ $4.05
2. Sold 350 $380 Apple October calls @ $16.45
3. Covered 350 $400 Apple October calls @ $8.90
4. Purchased 700 $370 Apple October calls @ $21.30
5. Sold Short 700 $380 Apple October calls @ $16.30
6. Purchased 1,250 Shares Long the SPY ETF @ $107.85
7. Purchased 175 Apple January $400 Calls @ $21.70
8. Sold Short 175 Apple January $420 Calls @ $15.20
9. Purchased 240 Apple January 2013 $450 Calls @ $41.05
MODEL PORTFOLIOS CURRENT POSITIONS
1. The Bullish Cross Apple 2012 10-Bagger Model Portfolio
OCTOBER POSITION: (350 contracts) Apple $380 – $400 Call-Spread @ $9.26
OCTOBER HEDGE: (250 contracts) $54.00 QQQ October Puts @ $0.99
JANUARY POSITION: (175 contracts) Apple $400 – $420 Call-Spread @ $8.55
APRIL POSITION: (350 contracts) Apple $410 – $430 Call-Spread @ $9.30
Enter Portfolio Here
2. The Bullish Cross 2013 Apple $400 – $500 Model Portfolio
JANUARY 2013: (581 contracts) $400 – $500 Call-Spread @ $17.20
Enter Portfolio Here
3. The Bullish Cross SPY Model Portfolio
LONG 5,000 [50.0% allocated] in the SPY ETF @ $110.50 a share
LONG 1,250 [12.5% allocated] in the SPY ETF @ $107.85 a share
Enter Portfolio Here
4. The Bullish Cross Long-Term Portfolio
CASH Position: $292,210.00 (28.13% allocation)
LONG AAPL 1,250 Shares @ $317.18 Cost-Basis (45.89% allocation)
LONG CAT 1,500 Shares @ $95.83 Cost-Basis (10.66% allocation)
LONG QQQ 1,000 Shares @ $53.88 Cost-Basis (5.05% allocation)
SHORT TLT 1,000 Shares @ $113.69 Cost-Basis (12.26% allocation)
Enter Portfolio Here
KEY POSITIONS ON WATCH
Positions “On Watch” are those position which we are considering. It doesn’t mean we are taking these positions for sure. We are just entertaining the idea.
1. The Bullish Cross Apple 2012 10-Bagger Model Portfolio
January $400 – $420 Call-Spread at $5.00
October $370 – $380 Call-Spread at $5.00
2. The Bullish Cross Apple 2013 $400 – $500 Model Portfolio
3. The Bullish Cross SPY Model Portfolio
Long 1,250 Shares @ $108.00
Long 1,250 Shares @ $104.00
Long 1,250 Shares @ $102.00
Long 1,250 Shares @ $100.00
4. The Bullish Cross Long-Term Portfolio
Long CAT 375 Shares @ $70.00
Long CAT 375 Shares @ $60.00
Long GLD 650 Shares @ $150.00
Short AMZN 350 Shares @ $250.00
Long NFLX 500 Shares @ $100.00
Long UUP 5,000 Shares @ $20.00
THE LIVE BLOG 9:30 AM – 4:00 PM
9:28 AM — Alright. We have a bunch of different things going on today. If you haven’t already done so, you should read the three articles we published last night which all can be found under the “articles” tab of the website. Everything we publish ends up under that tab. So if you check that tab, you should never really miss anything. We published an article on our Apple repositioning, on our thoughts regarding the Bullish Cross Long-Term Portfolio and on our plans to take a more intermediate/long-term position in the SPY during this move down.
Today is going to be a somewhat busy day.
9:48 AM – Right now, I’m looking at a few different things. First, I’m looking to exit my QQQ $54.00 Puts and then I’m looking to exit our Apple $380 – $400 October call-spread. From there, we will be looking to buy the $370 – $380 call-spread. So be prepared for that. We are also going to be adding to our SPY long at $108.00 and we will later be taking a look at adding to our CAT position.
Full October Spread Repositioning: We repositioned our October 10-Bagger Position from $380 – $400 + $54 Puts to $370 – $380 spread.
10:00 AM — Ok. We’ve done a ton of positioning here. We sold our $380 – $400 call-spread at $7.55 a contract. We sold our $380 calls at $16.45 and our covered our $400 calls at $8.90. That position yielded $264,250.00 for us. Then we sold our $54.00 QQQ puts on the QQQ which has acted as a hedge thus far at $4.05. Those puts yielded us $101,250.00. That gives us a total of $365,500.00 for our October position. We have used that capital to buy 700 $370 – $380 October Apple call-spreads at $5.00 a contract. We bought the $370′s at $21.30 and sold the $380′s against for $16.30 for a $5.00 spread. That cost us $350,000.00. We have $15,500.00 left over.
Position Taken: We have purchased 1,250 shares long in SPY model @ $107.85.
10:03 AM — We just bought 1,250 shares long in the SPY model at $107.85. As we explained yesterday, we’re going to add to our intermediate/long-term SPY model position on the way down during this correction. If you read the Bullish Cross weekly, we lay out our framework. The next place we are going to be adding to our position is at $104.00. Then again at $102 and at $100.00.
10:10 AM — Now here’s why we sold our QQQ $54.00 puts today and why we repositioned out of the October $380 – $400 call-spread and into the $370 – $380 call-spread. We think the market is getting close to a bottom here. Not a final bottom, just a near-term bottom. But a near-term bottom is all we need. We only have 13 or so trading sessions until October OpEx. All we need is a natural rebound that lasts 7-10 days and Apple will be deeply in the money. A $50.00 test of the QQQ makes logical sense as we explained yesterday. So that’s another reason why we’ve sold our QQQ $54.00 puts. The most likely place for the QQQ to see a short-term bottom is at $50.00. You can see the deeper reasons for why we’ve positioned this way in the three articles we published last night.
10:20 AM — Take a look at this. The QQQ has opened entirely outside of its lower b-band. I’m very rarely bold. But that’s pretty much at least a short-term bottom. We should get a bounce to $53.00. But if you read last night’s report, you would know this without having to look. That’s what I do. Everything is in the back of my mind as I make decisions. So I know this is what the chart looks like before I even open it:
Here are the three Article we published last night by the way. I know its a lot of material to get through. Imagine how I feel after doing a Bullish Cross Live post all day and then spending hours putting that material together. As long as it takes you to read that, it takes me at least 5-7 times longer to write it:
10:42 AM — Today is going to be a pretty long day I can tell. One thing we’re going to be looking at today is purchasing the January $400 – $420 call-spread if Apple happens to fall apart on the iPhone event and if we see Apple fall under its b-band. Right now, that spread costs $7.50 which is remarkable. Very good investment. But I think we can get a little more greedy and we can get that for maybe a little cheaper. Let’s see what happens. Right now, at $7.50, it yields a 150% gain 2.5-bagger if Apple closes at or above $420 at January expiration.
Now the last few pieces of information that I’m going to need to put out my earnings preview — and I’ve convinced Elmer-DeWitt to wait as well — comes in today’s media. I’m going to look for some indication or slipping from Apple about what unit sales might look like. A lot of times in these media events, Apple will conveniently pretty much tell us how many units they sold by inference. So that’s what I’m waiting for. Yet, after we get that info, we will be publishing our updated Fiscal Q4 2011 earnings outlook.
11:08 AM — We’re now getting our anticipated rebound. One thing we didn’t discuss yesterday is the fact that there was no other period in Apple’s recent history — since 2005 — where the stock was down as much as it is now in the 2-week period ahead of a media event. This was by far the biggest. I think there is a very small possibility that Apple could actually rally on the event and that this morning could be the low. But right now, I consider that a small possibility. I still think the more likely outcome is probably a sell-off that tests today’s lows at the very least if not set new lows somewhere in the high $360′s.
Yet, believe it or not, this now the fourth time they’ve tried to push Apple below $370 on a closing basis and have failed. Even the Steve Jobs news wasn’t able to do that. So that is overall very positive and helpful for the Apple bottom scenario. Moreover, if you take a look at this intraday chart of Apple, you will see that it’s obvious that Apple is bottoming here at least for the short-term.
11:32 AM — Now we’re in wait and see mode. We have to wait to see how the media event goes and whether the market is done selling off. I’m pretty confident that the market will probably try to retest the intraday lows at some point today before putting in some sort of a short or intermediate term tradable bottom.
12:36 PM — Alright. We can now say that Apple is very very well positioned today. We’re heading into the iPhone even at $380.00 a share. Which is great because even if we see a sell-off after the event, at least its from $380 – $381 and not from $373.00. So this is overall extremely positive for all call holders right now.
The overall framework is tilting in favor of Apple probably closing above $400 at October OpEx. As we explained, we believe the stock would bottom today or tomorrow at the latest and would likely go on a big rally up to the $400 – $405 level ahead of its earnings results. So the $380 – $400 October call-spread is still a very good trade right now. The only reason we moved to the $370 – $380 spread today was because we had the opportunity to do so given our hedge. The QQQ hedge allowed us to be able to roll over our spread to a much more probable one. There’s obviously an inherently higher likelihood that Apple closes above $380 than it closes above $400 at opex just like there’s a higher likelihood of Apple closing at $400 than it will close above $420.
But our move to go into the $370 – $380 doesn’t reflect on our outlook for where Apple is headed. We’re just getting to the same result with a lower risk spread. But again, I think Apple is very well positioned here going into the event. It’s much higher going into this event than I thought it would be.
1:03 PM — I’m just going to watch the event right now and then we’ll take a look at the $400 – $420 January spread from there. If we get a steep sell-off, an opportunity will arise as Apple is now pretty oversold. Either way, it doesn’t matter what happens, we’re probably going to see a $400 print very soon — as early as next Friday I think. We’re nearing a bottom one way or another.
1:11 PM — By the way, for those who want to watch this event, I’ve always found that engadget has done the best with the coverage. Here’s a direct link to the live blog.
1:20 PM – I think Tim Cook points out a very important point regarding Apple’s long-term outlook. As successful as the iPhone is as a smartphone, there is still a massive way to go. The iPhone only comprises 5% of the overall mobile handset market. While the iPhone is dominate in the smartphone industry, the entire cell-phone industry is a 3 billion handset a year market. Apple only owns a microscopic portion of that. So there’s a long-way to go until Apple as an investment has run its course. I think we have another 10 or so years before Apple’s growth really begins to stall. And even then, the company might innovate further.
1:41 PM – As a reminder, here is our original expectation for the direction of Apple’s stock price. We drew this up a while back. It’s starting to look like we may be getting this outcome unfortunately. I was kind of hoping we would get a rally. But the market can’t help itself. These events are just overall not very positive for Apple:
1:45 PM — Here is a picture of the daily chart for Apple. Notice its’ getting very very close to it’s lower b-band now. We’re getting there.
2:05 PM — Just as the iPhone event is starting to unwind, Apple begins its capitulatory descent. The stock is now down $54.00 in 10 sessions. That’s far too fast but not unexpected in this event. We had some hope in the morning, but that is now gone. Now we have to see if the stock gets to our $365 target which is a few points below the lower b-band. We want to see a sell-through down to this level because we’ll get our capitulation and the stock can now work on repair from here.
2:15 PM — Have to disclose that we just purchased the $380 – $400 January 2012 call-spread in a personal account for an unrelated strategy.
Postion Taken: January $400 – $420 Call-Spread @ $6.50 cost-basis
2:20 PM – Bullish Cross purchased 175 contracts in the January $400 – $420 call-spread at $6.50 a contract. Thanks for the free money.
Long 175 Contracts January $400 Calls @ $21.70
Short 175 Contracts January $420 Calls @ $15.20
Total price = $6.50
2:22PM — Keep a cool head right now and think clearly here. Apple is trading at less than 10 times January earnings. You think they will keep this at a sub-10 P/E in January? Good luck.
New Portfolio: The January 2013 $450 – $550 Leg-In Model Portfolio. Position taken.
2:26 PM — Bullish Cross is starting a new portfolio that is an example of how to execute a leg-in strategy in the 2013 $450 – $500 or $450 – $550 call-spread. We are buy the long option first. The portfolio will have $1 million as an example. We are buying the $450 January 2013 calls at $41.05 a contract. We’ve purchased 240 calls at the price level for $985,200.00. Obviously, there will be a point where we sell the $550 calls against our position in the future. This is a long-term position used for a leg-in strategy.
2:33 PM — Now I want to make it clear that the new model portfolio is all about people who are new to Apple and want an example of a leg-in strategy that can get them essentially the same result as if they had purchased Apple back in June. You have to learn how to recognize capitulation when it happens. I have a lot of experience with this. Today’s sell-off was 100% exactly the same in every way as the sell-off we saw in June from $320 to $310.50. Like in June, we are taking positions despite recognizing that Apple could go lower still. Why? Because $360 is such a good price that I would rather take the drawdown potential and be in at $360 then miss the boat and watch the stock run from here. Good chance that this is capitulation. So being long Apple here makes a ton of sense. It will probably prove to be very lucrative. WE expected to see a move to $365.00 today if you look at our October game-plan. We said this was a possibility. So Apple overshot by $5.00. Who cares? It is what it is. I think this was the bottom. We may get a retest of that bottom tomorrow, but I think if that happens, it’s pretty much going to be a firm clear-cut bottom. Here’s what we outlined as being possible several days ago:
So far we have this action pretty exactly. Now here is where we are right now:
2:45 PM – Take a look at this chart below. Focus on the purple-pink circles. Notice how pretty much every other bottom has occurred in the past 2-years. Notice Apple is getting very close to oversold on the 14-day RSI. That is very rare for Apple. This is a rare blessing. I would do anything to have my fund up and running right now. This is a once in a year type opportunity we have here. Especially given that we know the earnings outlook for October and January. This is completely nuts. It’s just as nuts at $310 in June.
2:46 PM — If you wanted to get long Apple, this is your opportunity. Right now. You might see $355 – $360 tomorrow, but that could very well not happen. WE can be at $379 tomorrow. So you have to think about this. Is the potential for $5-$7 worth missing such a huge opportunity? This is called acceptible drawdown theory. Right here, you can take a drawdown if necessary.
Now I also want to be clear that this is not a place to deploy all of your capital either. For example, you should still be holding 20% for the 2008-type scenario. You want to keep that capital because there are times where things just get stupid. You want to have some capital for that.
The positions I took today where for defined portfolios. For example, as we explained yesterday, the way you want to play Apple is to (1) have a core holding that you can bet on. That could be a long-term 2013/2014 call-spread or common stock. Then you want to have a hedge against the upside. That could be something like the 10-bagger strategy or some far out of the money call-spread. Like the $550 – $600 spread for example. Then you want to have cash on the sidelines — like 20% cash — for a potential holy shit situation. We don’t have that today. Today we just kind of have a pretty big bottom. We have these a few times a year. But you want to have 20% to allocate in a situation where you can buy the $400 – $500 call-spread at $15.00. Right now, they’re at $30.00. So we don’t quite have that situation right here.
What today is about is for people who don’t have any core positions in Apple and for the 10-bagger strat. That is what today is all about. The January 2013 $400 – $420 spread we took today was a great position because $6.50 a contract means that it is a 200% gain from here. So we had to take that position. But it’s not a day where you deploy all of your capital.
I will tell you when that time comes. It could come on this correction in the market or it can come 2 years from now. We were there in June. We’re not there today. The last time before June was August 2010. The time before that was March 2009.
3:00 PM — Now as we head into the last hour of trading, I think it’s important to realize that this is what we want to see. You don’t want to see dilly dallying because that is far more dangerous when you’re holding a spread. What you want is a clear cut bottom like we’re getting here. Because then it gives us time to get the needed rebound.
Now for those who were unhedged with the $380 – $400 call-spread, you’re going to want to be thinking about an exit strategy on the rebound. When we get a rebound, it’s going to create a lot of value in those spreads. Yet, depending on how the rebound goes, there’s a chance that you might want to call it on that spread and move that capital to a more accomplishable spread for a double. That was the original chapter 5-7 strategy. I’ll be putting together a report on this strategy this evening. It’s very important to follow our model as closely as possible.
Because from here, we have an excellent shot of seeing a double in our $370 – $380 spread. That’s exactly where you should be positioned today.
3:04 PM — Here is a chart of the S&P 500. As you can see, we are getting our retest of this morning’s lows as we explained earlier today. But things are far far far x 100 too over-extended now. The S&P 500 is way below its lower b-band. As you can see in the second chart, the same goes for the NASDAQ-100. We’re hours from a firm bottom and big rally now:
Here is a chart of the NASDAQ-100. Way below its lower b-band:
A lot of interesting opportunities are arising in the market right now. The GLD is starting to come off quite a bit. We’re still just going to wait until $150.00. But here is the chart of our current outlook on the S&P 500. As you can see, things our following our traced line:
3:10 PM — Alright. The stock is now hitting two major lines of support. One is the $355 level and the other is the 200-day moving average which are both down here in the $353 – $355 area. This is a fear driven sell-off. We also have the NASDAQ-100 testing the $50.00 level at the same time. Yet, the SPY has yet to make new lows on the session yet.
Now the key from here is to see Apple close far off of its lows of the day. That is the most important thing. For example, if $354.00 is the low, then you want to see Apple close somewhere in the $365 area. That would be a good sign that our low is in. We want to see that in the last half-hour of trading. Otherwise, the alternative is a red open tomorrow, followed by a huge bullish hammer reversal and a +$10.00 up day. Those are the two scenarios we see here.
3:25 PM — Another disclosure. I took probably something like 5-6 different positions in personal accounts today. Different spreads all at different ranges when Apple was trading in the $355 area and $360 area. So just a disclosure. This is how I go shopping. I knew today was going to be like this.
As soon as you realize that things don’t break like 2008 once but every 100 years, then you can make some very confident decisions. As long as you know to keep 20% cash on the sidelines for a 2008 scenario, you can go shopping in these types of situations.
All of the positions I took today are going to close up well over 100% each. Some will close up 200-300% when all is said and done. There are two things you need to realize on days like this. (1) we will see much much much higher prices in the near and intermediate term future; (2) you’re going to take drawdowns because it’s going to be very difficult to nail the absolute and final bottom. But anyone who took positions between $375 and $355 is going to make huge gains in the intermediate term. So the drawdown doesn’t really matter.
I can sense the fear in the market and obviously sense the fear in some of our subscribers from the comments. But there’s no place for that here. That’s why we do things like hedge and then move into lower risk positions etc. To avoid being put in that situation. The last thing you want to do is something catestrophically stupid like sell.
Believe it or not. A lot of funds actually did that today. Fund manager who simply in the position to manage money, sold their Apple today. How dumb is that? We’re super oversold and we’re going to obviously get a bounce. Even if you hate Apple, you’re a f’ing idiot if you’re a fund manager selling here. Like you should lose your job if you do that shit.
3:38 PM — What a long day. As we explained earlier, the important thing today is to see a strong close. If we get a few more points from to close at like $367 that would be huge. That would be pretty much a hammer. So we need to see the stock hold on to this bounce and add a little more to it.
3:50 PM — Notice how the media is blaming this sell-off on the iPhone 4S. You told you this would happen. But if you were listening to Mike Abramsky this morning you will see that the real Wall Street expectation is that we were going to get a 4S all along. That is what I expected. The iPhone 5 speculation and failure to deliver has zero to do with this sell-off. At least from those in the know. The proof is also in the pudding. Apple sold off $10.00 before the presentation even began. So that tells you right there that a sell-off was going to happen either way.
But like June 2011, right here Apple is trading at too great of a discount to both October and January earnings. When people ask me how I was able to call the July $400 move, it’s because I know that smart fund managers know that the stock is about to deliver an EPS number that will be dropping the TTM by an extreme amount.
Well that’s basically what we have going on here. Apple is going to have $29.50 under its belts in TTM once it reports earnings in about 10 trading sessions from now. At $354.00 a share, Apple would trade at a 12 P/E ratio in October. If you go to January. We have an even more extreme outcome. We believe the TTM will be at around $35 – $37 in January. If we get the upper end of the range, the stock would trade at a 9.56 P/E ratio in January. That’s why we know that this price action is very short-term in nature because the value is too good to pass up. People are going to come in to buy this on a value basis.
Now when it comes to the October $370 – $380 call-spread, we’re probably going to clear that pretty easily. Apple is going to bounce from here and will probably be well above $380 when it reports much less when it goes into expiration. We probably still have a good shot at $400 despite today’s total collapse down into the $355 area. That was mostly the result of a few funds losing theirs minds and capitulating.
We have 10-minutes left. Let’s see if Apple can close at the $370 level. That would be quite a big statement.
3:54 PM — And I think we can say clearly that today is capitulation. Our QQQ puts that we sold are now down to $3.00. The Dow has reversed course from down 250 to up 54. Our SPY long position is now deep in the green. We took that position right near the lows today. I think today could be capitulation not only for Apple, but for the entire market. This is a pretty big reversal after quite a bit of fear.
We have 6 minutes left. WE want to see Apple close above $370 today. That would be huge. Remember, that would mean it was 5 separate attempts to keep this stock under $370 on a closing basis which has failed. Apple fell deeply below the b-band today, it tested key support at $355 and it tested the 200-day moving average. It also got down to the 30 RSI on the daily which is very rare. That is as many earmarkings as you could ever want to call a bottom. Today is a bottom. Give me a close above $370.
3:59 PM — Well I hope everyone has had an opportunity to watch my performance today. We’ve been one step ahead of the market on every move. Apple probably bottomed. The market probably bottomed as well. We went from down 250 to up 150 on the dow. That is a clear sign of capitulation.
I’ve got to take a break because this has been a long day. Need to go get some breakfast now lol. Things are looking great.