AAPL and momentum

Posted by: FSM

AAPL and momentum - 02/20/08 06:33 AM

most stocks tend to move in trends. there's a chart that measures this momentum called the MACD. if you look at AAPL over the past year and past 3 months you can see the trends in momentum:<br><br><br><br><br><br>actually, AAPL has very little momentum below the red line so they aren't a good stock for this MACD (i even mislabeled when to buy in the chart above because i was just looking at the 3 month rather than the whole year chart). but right now, AAPL is in it's down trend . . . presumably it will head up soon; although, it had UP UP UP for so long that it's hard to tell. i am reading a new book on short term stock trading. the book is trying to make things safer (also reduces the potentially for a big gain). they recommend waiting until the momentum hits the the middle in this chart, so not buying now is what they'd suggest even though the stock is priced so low (perhaps now is the time for long term traders though). so i'd be buying at a little higher rate and selling probably a little lower than i could make, but i'd be playing the momentum trends and i'll typically gain in this model over the shorter term (though, Poly and others will hate me). many people use this MACD for selling short (so they can make money when the stock drops in price, for example). my book explains that, but i don't understand it enough to trade that way yet . . . plus, it's apparently not very accurate so i likely won't do that.<br><br>i am far from using this for trading (maybe 6 months or so of playing with paper money), but i think it's interesting to see how these momentum swings work even if i was just using it for simple straight forward short term trading (e.g., 1 day to a few months). here's more info on MACD -- http://www.streetauthority.com/terms/macd.asp<br><br>