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Post by lovemyipad on Oct 6, 2012 17:34:47 GMT -8
Credit for this thread goes to PikesPique...
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Post by Tetrachloride on Oct 6, 2012 17:43:14 GMT -8
Cash is the best hedge.
Patience and peace of mind.
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Post by stkstalker on Oct 6, 2012 17:45:08 GMT -8
Margin calls totally suck!
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Mav
Member
[img style="max-width:100%;" alt=" " src="http://www.forumup.it/images/smiles/simo.gif"]
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Post by Mav on Oct 6, 2012 17:47:38 GMT -8
Uh...I'm still in the market, so I don't think I've learned it yet.
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Post by PikesPique on Oct 7, 2012 6:28:17 GMT -8
Poker as Analogue to Trading, Part 1:
You don't have to win every hand in order to make money.
As I've played and studied poker as a ardent amateur, I've learned many useful (profitable) lessons. The more I learn about investing and trading, the more I see parallels between the two activities. So, from time to time, I will present some of those lessons learned from poker as applied to trading.
Many new poker players think "you can't win if you don't play." While this is technically correct, it is only part of the story. Yes, you must play in order to win. However, most new players take this to the extreme. They play almost every hand. The seasoned player knows that only a very small fraction of hands are worth playing, and the rest are long term losing hands. Sure, any hand CAN be a winner, but the odds are against most hands actually being a winner. New players (or should I just say, unskilled players) seem to think winning a lot of pots is the goal. Skilled players, on the other hand, know the real goal is to win money.
I've watched many unskilled players playing every hand they are dealt and winning many, sometimes even most, of those hands and still go bust. Meanwhile, the skilled players who only play 15% - 20% of the hands they are dealt and only take about 1/3 to 1/2 of those to a showdown walk away with the most money. How can that be, the unskilled player thinks. "I won 60% of all the hands dealt and went bust, while that guy only won 5% of all the hands dealt and he doubled his money? The poker gods must hate me and love him. Lucky bastard!"
How does this apply to trading? The unskilled trader thinks he must always be trading. He must be "in action." He is typically not only fully invested, but also fully margined. All trades seem like potentially good trades - until they are not. The skilled trader knows that only certain trades, at certain times, are likely to be profitable. She trades less often, but makes more money.
It's hard to sit on the sidelines waiting for the right conditions. It's hard to fold every hand or pass up every trade until the conditions are just right. Patience is hard. It's more fun to play, right? Well, the skilled player/trader knows it's not about having fun, it's about making money. And what can be more fun than that?
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Post by stkstalker on Oct 7, 2012 8:07:23 GMT -8
Poker analogy continued ...
Even when you have the nuts, you don't always get paid off (an Evil Overlord scenario)
One can have the best possible hand given the cards in play or will be in play, but if your opponents fold, you don't get value for your bet. Usually, a mis-sized bet or obvious revealed cards make the situation visible to your opponents and they muck. So timing your bets is critical. It is also possible that even holding the nuts, you can be bluffed into folding if you don't read the cards correctly.
Apple is in an extremely strong product release cycle right now, but the stock and options have not been paying off for the past few weeks. FUD and minor issues like Mapgate and Scuffgate along with purchases delayed for the arrival of the iPhone 5 have weighed on the stock. Weak hands are folding and bearish bets are being placed. So, after the flop, there is a perception that APPL is in trouble and Mr. Market is trying to get you to fold. I look at this as building the pot for me to win later.
However, we still have the turn and the river cards to be dealt. First we have several items in Oct that will strengthen our hand. Next week's event and earning release will provide some clarity to the deal. Second, in January, we will get the actual results of the Christmas quarter and at that point, the nuts will be reveled. Our opponents will need runner, runner to make a second best hand and we will be sitting comfortably with the nuts.
Given short term volatility in the stock price this quarter, I have placed my bets in the Apr 13 options. This should allow for a righteous pop in the stock as the 13Q1 results are digested and still have some time value as a cushion.
Since the market is not a closed system like a poker deck, there are wild cards that can disrupt the best plan. China mobile, real labor disputes or other events could deal us a joker, but I am comfortable being pot committed going forward into this and next quarter. I think I have the nuts vrs the EOs for this hand.
Shuffle up and deal!
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Post by doubledraw on Oct 7, 2012 20:45:01 GMT -8
I used to play poker "professionally" and it was my sole source of income for over 4 years. My username is a reference to my favorite type of poker situation to be in. I joined the workforce in september of 2008 when the economy collapsed, figuring the games were about to get a lot harder.
I have also found many many parallels between poker and trading. One of the hardest things to do when learning to play poker competitively is disconnecting short term results with correct strategy. Oftentimes, you will have made the correct play and still lost the hand. Other times you will win a hand when you clearly did not make the right play.
How does this apply to trading? Sometimes you will make a trade that is a good trade, but doesn't work out well for you. Stock trading is a partial information game and you need to evaluate the decision making process and whether you made a good decision or not rather than evaluate the results. Many trades that lose money or don't make as much money were still good decisions and using the same strategy will net you money in the long run.
I'm glad to see there are other poker enthusiasts here!
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Post by PikesPique on Oct 8, 2012 6:45:03 GMT -8
Thanks for sharing that insight, doubledraw. I'm sure you can attest to this next installment of
Poker as Analogue to Trading, part 2
It's a hard way to make an easy living!
While I may have had the "chops" to become a pro poker player, and I certainly had the bankroll, I decided long ago it was not really worth it. To the casual observer, professional poker looks easy. At what other job could you sleep until noon each day, sit around playing a fun game, drink free adult beverages, eat for free, and take home gobs of cash each night? What a life!
Well, for a true pro, it's a lot harder than it looks. To really master the game and play your best you must constantly study the game, both at the table and away from it. Many pros spend hours each day "running the numbers." Using spreadsheets or special software, they will input various scenarios and run simulations to determine the odds of winning. When similar situations occur at the table, they can be prepared with the knowledge gained in those sims. At the table, they do math, quickly in their heads, while at the same time reviewing their opponents' actions in the current hand and in previous hands to try and "put them on a hand" or a range of hands. They look for tells (body language or verbalizations that give away the strength or weakness of their opponents' hands). They have to think on multiple levels (e.g., what does he think that I think that he thinks I have.), and have to quickly determine which level of thinking is appropriate for each opponent. He must formulate a plan for each hand, then execute that plan boldly, while at the same time constantly reassessing the plan as the hand progresses.
The pro player may have to travel to many, sometimes exotic, places around the world to ply his trade, especially if he is a tournament pro. That sounds like fun, right? Except, the pro usually only sees the inside of a casino on those trips. Not so much fun.
Playing in casinos can be soul crushing. They are often smokey (less so nowadays), loud and poorly lit. The food available is often of poor quality and usually bad for you. Sitting for hours a day can be bad for your heart and for your legs/knees. Sitting for hours on a plane or at the poker table can lead to blood clots in yor legs that could break and get lodged in your heart or brain. Poker is not a cardio workout. Many poker players are overweight and flabby.
Constantly pitting oneself against other people intent on bashing your brains in, figuratively, and taking your money, literally, can be either exhilarating (when winning) or dispiriting (when losing).
Many unsavory characters hang around casinos, looking to scam, steal, or borrow from the successful and not so successful players, alike. This adds constant pressure to remain vigilant and can lead to paranoia.
While at the table, the pro player must not think of the chips in front of him as money - they are simply ammunition with which to wage battle on the felt. Thinking of them as money can cause you to make the wrong plays (e.g., "I really should raise here, but that's going to cost me a month's rent, so I'll just call"). On the other hand, after thinking about chips as ammo versus money all day long, the player may not be able to manage their money properly when away from the table. "I'll spring for that bottle of Dom, since it's really just a couple of big blinds."
Money management is hard, and often overlooked by most players. They fail to calculate their win rate, determine the proper size bankroll to minimize the "risk of ruin," play sessions with too large a percentage of their bankroll, and don't keep their working capital separate from their "wages" and living expenses. Most players are underfunded and have a high probability of going broke. When that happens, they may resort to borrowing to stay in the game and can quickly find themselves in hot water.
I'm sure doubledraw can add more, first hand, knowledge to this description.
Do you see the parallels to trading? It looks easy and when the trades are going your way it can certainly seem easy, but making money and staying emotionally (and physically) fit during good times and bad is extremely hard.
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Post by doubledraw on Oct 8, 2012 11:13:10 GMT -8
Poker is the hardest way to earn an easy living that I know of. Playing poker was the hardest job I've ever had, for many of the reasons you list. Many people have no idea how many hours are spent examining hands, opponent's strategies, tweaking your own strategies and reading books/forums.
I generally dislike casinos, mostly for the reasons you mentioned, so I played 90-95% of my time online. I tried to play at least 100k hands per week, which gets incredibly repetitive and can be emotionally draining when you are putting in those kinds of hours and manage to lose money or break even over the course of a week. This kind of time commitment and possible lack of results definitely applies to trading.
I enjoyed working at home, but found it hard to maintain social relationships with people who worked a normal 9-5 job and went out on the weekends. Weekend nights were by far the most profitable time to play, so I had a hard time justifying going out with my friends. Additionally, I usually felt like social activity was expensive since I could have been earning my win rate during that time. This doesn’t generally apply to the market since the market is open when most people are at work or school.
One of the largest things to consider when deciding to go pro is if it is worth it. You could work a 9-5 job and play 15-20 hours of poker a week and still win quite a bit of money in addition to having the security, stability and routine of a 9-5 job. The same thing applies to trading. You can still find time to execute a few trades a week while working at an office job. How much more will you make by being involved in it 40-60hrs a week instead of 10-15?
I'll write/post more as I really enjoy this topic but now I gotta get back to work!
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Post by mbeauch on Oct 8, 2012 18:52:19 GMT -8
I also love to play poker, usually at the Venetian, sometimes Caesars, sometimes MGM, but Venetian is my favorite. One thing I learned is that if you desire to be a poker pro, you have to put in way to much time. I enjoy poker and I know the saying that if you find something you love to do you will never work a day in your life, but to me it would ruin poker for me if I had to put in the hours. As for casinos, there are many teams out there. If you find yourself at a cash game and feel like you are being pinched, guess what, you are, by a team. Right now we are being pinched by a team, the EO's. Emotion in both, you bet. Conclusion, poker and the market, both gambling.
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Post by lovemyipad on Oct 9, 2012 4:35:03 GMT -8
Lessons learned:
1) Trade on technicals; invest on fundamentals;
2) Anything can happen short-term, even (especially?) the improbable and illogical. Avoid front-month options, especially unhedged. Avoid "playing" earnings. Don't fight the tape -- "the market can stay irrational longer than you can stay solvent." Trade what you see, not what you expect to see. More time = more wiggle room to be right eventually.
3) Every quarter has a WTF sale. If you aren't scared and/or saying "WTF?!" then it isn't a WTF sale. Reserve $$ for the dip that keeps dipping.
4) The distance between two prices is the same up and down. Short-term hedges take the edge off downwaves. Bearish trading profits finance bullish investments.
5) EOs are equal-opportunity hunters: the market is manipulated to the upside as much as the downside;
6) Sentiment drives markets; markets drive news. Sentiment is cyclical.
7) Watch the charts, not the news. Charts don't lie. Charts aren't biased. Charts show what's happening as it happens -- informative, not predictive.
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Post by mbeauch on Oct 9, 2012 9:03:02 GMT -8
Excellent and so true. The world is always on the verge of coming to an end in the media. Good news does not sell. You don't see the story about how an area of Atlanta has gone from one of the worst crime areas in the country to a fantastic community. (All private funding) No, you are going to constantly see riots in Greece. Greece of all places. The media is used to sway opinion since it seems most can't have their own without watching Letterman. here is the little secret that the media will not tell you, the markets have to go up over time. It is not an, if they have to. There is so much money tied up in paper assets that if they were to decline for more than a couple of years we would have worldwide anarchy. The media insures that the little guy wil have a hard time getting ahead. I have quit watching NBC, all they have for their viewing it seems are shows portraying world governance and the new one "Revolution" which defies physics.
Lovey always goes back to looking at what you see. Simple but awesome advice.
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Post by PikesPique on Oct 9, 2012 9:28:12 GMT -8
Re: NBC's "Revolution" defying physics
Absolutely agree! If somebody could "turn off electricity," they are effectively negating one of the fundamental forces, electromagnetism. They might as well just show a black screen for an hour, since negating electromagnetism will also negate visible light, which is electromagnetic.
Want to generate an electric field? Simply pick up a magnet and wave it around. Easy peasy!
Sheesh!
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Post by mbeauch on Oct 9, 2012 13:30:38 GMT -8
Re: NBC's "Revolution" defying physics Absolutely agree! If somebody could "turn off electricity," they are effectively negating one of the fundamental forces, electromagnetism. They might as well just show a black screen for an hour, since negating electromagnetism will also negate visible light, which is electromagnetic. Want to generate an electric field? Simply pick up a magnet and wave it around. Easy peasy! Sheesh! I was wondering how my comment would be received. The whole show assumes people won't think about electricity and accept their premise. It is not about the power going off anyway, it is about how they envision society. I can tell you already, survival of the fittest. Just look at Africa and you will have your answers as to how society would devolve.
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Post by PikesPique on Oct 9, 2012 15:23:41 GMT -8
The show is just NBC riding in the coattails of a popular film, The Hunger Games. They just had to come up with a new, albeit stupid, way to create a post-apocalyptic world.
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Post by mbeauch on Oct 9, 2012 17:01:35 GMT -8
The show is just NBC riding in the coattails of a popular film, The Hunger Games. They just had to come up with a new, albeit stupid, way to create a post-apocalyptic world. We watched the Hunger Games a few weeks ago. Not a very good movie IMO. I do see the resemblance.
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Post by lovemyipad on Oct 13, 2012 8:19:39 GMT -8
More lessons learned:
1) Every bull feels brilliant in a bull run and cheated in a bear run; 2) Every bear feels brilliant in a bear run and cheated in a bull run; 3) Don't fight the tape -- you will lose more often than win; 4) Trading is like playing chess: gameplan = if/then strategies.
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Mav
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Post by Mav on Oct 13, 2012 9:27:12 GMT -8
Accept that you will lose sometimes, and will lose more often the more you trade.
Active traders without that mindset do themselves no favors.
It IS possible at key moments for sentiment to work to your advantage. See: iPhone 5 news sparking an AAPL rally.
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Post by lovemyipad on Nov 2, 2012 13:39:49 GMT -8
When we were 1/2 this price, we had 1/2 this trading range. IMHO, the up begins next week. So, lessons learned anyone? Here are mine... This is what I've told myself ever since the drop from 644: The next time we hit an ATH, and the permabulls say no way is AAPL ever seeing xxx.00 again, don't believe it! We will go up to new highs, as we always do, AND we will give *at least* 38.2% of it back, as we always do. So next time we hit ATHs, get some hedges on and watch for bearish divergence...do NOT ignore the short-term technicals no matter how rosy the fundamentals look. And never, ever ignore long-term fundamentals no matter how scary the short-term technicals look. WHEN we see the next unfilled gap up, remember that level. No, not all gaps are filled...just most of them. So when we're sitting at the next ATH, buy some cheap way OTM bear spreads 3 mos. out with strikes around the unfilled gap area. On the next down wave, swap those bears for bulls...to stretch your dip-buying $$. Optimally, don't start swapping until we hit the lower BB on the daily -- always hard coming off an uptrend, but it's the ideal. I sold way, WAY too early after the JUL'12 earnings miss, but I had that 585-ish unfilled gap in the back of my mind, and I was just pissed off enough (at myself) to belligerently set aside that same amount of capital to repurchase everything I sold, should we ever see 585 again. Well, I have everything back now...the equivalent positions with further expirations...and the EOs will have to pry those holdings out of my cold, dead hands before I'm shaken out prematurely again.
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Post by Xphilos on Nov 2, 2012 13:59:29 GMT -8
When we were 1/2 this price, we had 1/2 this trading range. IMHO, the up begins next week. So, lessons learned anyone? Here are mine... This is what I've told myself ever since the drop from 644: The next time we hit an ATH, and the permabulls say no way is AAPL ever seeing xxx.00 again, don't believe it! We will go up to new highs, as we always do, AND we will give *at least* 38.2% of it back, as we always do. So next time we hit ATHs, get some hedges on and watch for bearish divergence...do NOT ignore the short-term technicals no matter how rosy the fundamentals look. And never, ever ignore long-term fundamentals no matter how scary the short-term technicals look. WHEN we see the next unfilled gap up, remember that level. No, not all gaps are filled...just most of them. So when we're sitting at the next ATH, buy some cheap way OTM bear spreads 3 mos. out with strikes around the unfilled gap area. On the next down wave, swap those bears for bulls...to stretch your dip-buying $$. Optimally, don't start swapping until we hit the lower BB on the daily -- always hard coming off an uptrend, but it's the ideal. ^ this! When we were at 700, my wife was urging me to sell, and a small voice in my head was telling me "dude, to hold long positions now, or to get into new ones, is to assert that we will never see the 600's again." I didn't listen to either and have had to ride out this entire stomach churning dip. Thanks to your advice, I bought lots of time.
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Post by Rupert on Nov 2, 2012 14:07:24 GMT -8
When we were 1/2 this price, we had 1/2 this trading range. IMHO, the up begins next week. So, lessons learned anyone? Here are mine... This is what I've told myself ever since the drop from 644: The next time we hit an ATH, and the permabulls say no way is AAPL ever seeing xxx.00 again, don't believe it! We will go up to new highs, as we always do, AND we will give *at least* 38.2% of it back, as we always do. So next time we hit ATHs, get some hedges on and watch for bearish divergence...do NOT ignore the short-term technicals no matter how rosy the fundamentals look. And never, ever ignore long-term fundamentals no matter how scary the short-term technicals look. WHEN we see the next unfilled gap up, remember that level. No, not all gaps are filled...just most of them. So when we're sitting at the next ATH, buy some cheap way OTM bear spreads 3 mos. out with strikes around the unfilled gap area. On the next down wave, swap those bears for bulls...to stretch your dip-buying $$. Optimally, don't start swapping until we hit the lower BB on the daily -- always hard coming off an uptrend, but it's the ideal. I sold way, WAY too early after the JUL'12 earnings miss, but I had that 585-ish unfilled gap in the back of my mind, and I was just pissed off enough (at myself) to belligerently set aside that same amount of capital to repurchase everything I sold, should we ever see 585 again. Well, I have everything back now...the equivalent positions with further expirations...and the EOs will have to pry those holdings out of my cold, dead hands before I'm shaken out prematurely again. Great post iPad I am going to frame and put it next to my computer. Will read it every day. Thanks
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Post by nkmho on Nov 2, 2012 15:18:52 GMT -8
When we were 1/2 this price, we had 1/2 this trading range. IMHO, the up begins next week. So, lessons learned anyone? Here are mine... This is what I've told myself ever since the drop from 644: The next time we hit an ATH, and the permabulls say no way is AAPL ever seeing xxx.00 again, don't believe it! We will go up to new highs, as we always do, AND we will give *at least* 38.2% of it back, as we always do. So next time we hit ATHs, get some hedges on and watch for bearish divergence...do NOT ignore the short-term technicals no matter how rosy the fundamentals look. And never, ever ignore long-term fundamentals no matter how scary the short-term technicals look. WHEN we see the next unfilled gap up, remember that level. No, not all gaps are filled...just most of them. So when we're sitting at the next ATH, buy some cheap way OTM bear spreads 3 mos. out with strikes around the unfilled gap area. On the next down wave, swap those bears for bulls...to stretch your dip-buying $$. Optimally, don't start swapping until we hit the lower BB on the daily -- always hard coming off an uptrend, but it's the ideal. I sold way, WAY too early after the JUL'12 earnings miss, but I had that 585-ish unfilled gap in the back of my mind, and I was just pissed off enough (at myself) to belligerently set aside that same amount of capital to repurchase everything I sold, should we ever see 585 again. Well, I have everything back now...the equivalent positions with further expirations...and the EOs will have to pry those holdings out of my cold, dead hands before I'm shaken out prematurely again. I'd say this should probably go into the Lessons Learned thread so we can find this again in the future.
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Post by payrolldude on Nov 2, 2012 22:51:55 GMT -8
I was saying to myself earlier today that this is the reason that I LOVE trading Apple. this type of range is what makes it so fun! Thanks iPad for helping me articulate it!
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Post by Xphilos on Nov 22, 2012 9:38:56 GMT -8
How do I know I'm bullish on AAPL? I would much rather be stuck with bull leap spreads bought right at the top just before a correction than bear leap spreads bought at the bottom of a correction.
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Post by rickag on Nov 22, 2012 11:11:59 GMT -8
How do I know I'm bullish on AAPL? I would much rather be stuck with bull leap spreads bought right at the top just before a correction than bear leap spreads bought at the bottom of a correction. thank you, made me laugh
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Post by Xphilos on Nov 22, 2012 13:16:35 GMT -8
How do I know I'm bullish on AAPL? I would much rather be stuck with bull leap spreads bought right at the top just before a correction than bear leap spreads bought at the bottom of a correction. thank you, made me laugh lol actually I was being serious, but re-reading it after a couple glasses of Guinness, it does sound kind of funny But I am building this principle into my trading strategy. I have come to accept the fact that I won't be able to reliably call the tops and bottoms, but I might have a chance at calling the middles. On the way up this time, I want to be out of my swing trades when we exit the middle area, then do short term momentum trades using leap spreads all the way to the top. I'm planning to be "stuck" with 20 percent of my account in leap spreads when we reach the next top, and those will have to ride out the next big correction.
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Post by lovemyipad on Jan 9, 2013 12:42:07 GMT -8
Yes, AAPL can crash even when the broad market doesn't. Even when the broad market's near 5-year highs. And AAPL can crash without dragging the broad market down with it.
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Mav
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Post by Mav on Jan 9, 2013 13:04:47 GMT -8
Disagree.
AAPL can go _down_ without taking the market with it. But we've known this for a while.
We'll see market composure if AAPL actually loses big levels. I'll admit the bias is more in favor of a market shrug-off, but that assumes AAPL really tanks. It has, but in the bigger picture it hasn't. It's just a big retrace.
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Post by mbeauch on Jan 9, 2013 19:29:53 GMT -8
Yes, AAPL can crash even when the broad market doesn't. Even when the broad market's near 5-year highs. And AAPL can crash without dragging the broad market down with it. Considering the size of AAPL it is hard to believe, but we have seen it play out.
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Post by lovemyipad on Jan 9, 2013 19:53:39 GMT -8
We already crashed. The market didn't.
I would not have imagined AAPL taking a 30% haircut while the market is at five-year highs.
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