SubscribeProfiting from Divergences? You should be…
On December 13th, 2007 I wrote a piece, which pointed to shorting opportunities in the large cap sector. At this point in the game, Apple was trading for $189 and Google at $698. In a Chart of the Day segment titled, “Utilizing Divergences for Big Gains: Two tech giants ripe to fall,†I had stated the following:
â€It was just a day ago when I discovered two bearish divergences occurring simultaneously between the RSI and price on both Apple and Google’s charts. After an impressive run, these two plays are losing buying momentum and are at the end of the road.â€
Example setup for Apple (AAPL:NASDAQ) seen below:
As you’ll see, these companies were at the end of their bullish road. Let’s fast-forward to today and see how effective and incredibly predictive these divergences can be.
Quite a difference…
Today, the stock trades near $161 – a $28 dollar drop in one month’s time!! It didn’t take long for Apple to change trends, and it would have been an incredibly simple trade to make, especially when you consider using option strategies to capture big gains.
Similarly, Google’s stock fell from $698 to today’s price near $616 – an $82 drop and another win in the trade column.
Good investing,
Stephen Oakes
Editor, Black Sheep Trader
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