"Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare there are no constant conditions."
Sun Tzu

Saturday, November 17, 2012

An Aggressive Trade: Long AAPL

One of the 12 setups in my playbook is the "One Day Reversal". Apple showed this pattern on Friday, so I took a long position in the Covestor Model Portfolio. This setup is a pure mean-reversion trade (most of my setups are actually combined momentum/mean-reversion structures) and is easy to recognize: the stock manages an intraday reversal on high volume after a major decline. The edge from this pattern lasts for just a few days, so this is a very quick and also aggressive trade. AAPL did setup in an almost textbook-like fashion, so I couldn't resist taking a position: