I’m going to assume we’re in general agreement over the strength of the fundamentals of Apple (AAPL).  Even if you’re not, no worries… the principles of the Evening Investor Strategy can still be demonstrated.  If you’re just joining us here at Invest in the Markets, take a few moments to review the past couple of weeks of articles on “Day Trading.” It’s less to do with active day trading in the traditional sense and more about developing a strategy by which investors can spend 5-10 minutes in an evening and be successful in growing their investment portfolio.  Today, I’ll show you how it works with Apple.

The Evening Investor & Apple

Let’s take the past several months and I’ll show you how the principles of the Evening Investor Strategy would help investors buy and sell Apple to grow their portfolios, despite the record volatility and risk we’ve experienced recently.  We’ll go back to the beginning of June and I’ll assume we’re not holders.

Purchase #1 – One criteria that has to be met prior to purchasing is a rising stock price.  So, I set my purchase price at a higher price than the day before, by a predetermined amount.  I have a legend that I use… and I use it in every circumstance.  This allows me to remain as “objective” as possible and to evaluate fairly my decisions after the trade is complete. From June 1st, the stock does not go up one day enough to trigger a purchase for me until June 14th.  So, I make the purchase at my set price on June 14th.  I set my stop loss that night and the next day, it triggers on June 15th for a 1% loss.


Here’s some of the principles in action:  First, the “buy the rise” principle prevented me from buying too soon… just because it was cheaper than before or on sale.  Because the volume was not significant on the upside on June 14th, I suspect the trend up may be short lived… there wasn’t the support to drive it up.  Second, keeping “capital preservation” and “minimizing risk” in mind, I place an immediate stop loss that evening. This prevents my affection for a stock to blind me and lead me to take greater losses.  I realize I can always buy back in if it rises again, but why hold on if it drops.  Take a small loss and move on.  When I look at the markets, they are in a corrective phase… so it will be hard to buy long and hold for any length of time.  But we’ll look for the next opportunity.

Purchase #2 – The next purchase comes on June 21st, after a few days of selling on above average volume.  The price rises above my predetermined purchase price again, this time on above average volume.  I set the stop price that evening and wait.  The next day, it drops a little, but not much… and then is followed by several days and even weeks of rising prices with very minor fluctuations.  I continue to raise my stop loss and, eventually, split my stop loss into two parts.  More about that in a moment…. Notice the gap up on July 20th.  That point will become critical later for setting my stop losses. Interestingly, the volume is above average from nearly the day it was purchased. On August 4th, the stock hits my price point and I sell my position for a 16% gain.

Here’s some of the principles in action: First, the “buy on rise” principle… this time, it is accompanied by higher volume too which usually indicates it has greater potential to continue in its current pattern. Second, I split my stop loss into two orders.  One to trail a little closer and another to trail behind a little further… a practice that is developed out of the “maximize gains” and “put profits in your pockets” principles.  We can sometimes sell out a position too quickly… not allowing it the room to flex.  Stocks don’t go straight… they have ebb and flow.  Nevertheless, I want to try to get as much out as I can as high as I can, without cutting off greater returns.  Now, I mentioned the “gap-up.” This is important because it helps me create a second stop loss level if the stock doesn’t rise too far.  That is exactly what happened in this case.  AAPL rose and dropped, staying above that gap, for about 10 trading sessions… then finally crossed down.  It is at that point that I’m out completely.

Trading Results for Apple

Well, this is becoming long… so for the sake of brevity, let me just jump to the results. From August 4th to today, I’d would have made three purchases… the first for 0%, the second for a 2% gain, and the latest for a 5% gain.  Currently, based on the fact that the last day did not rise above the previous day, I’m still out.

So, overall, in the past several months, with very little risk… one loss… one even trade… and three gains, I’m up 22% using the principles of the Evening Investor Strategy.

Next, I’ll take a look at Green Mountain Coffee Roasters (GMCR) and share how using the Evening Investor Principles, I’d invest in this stock.  In the meantime, if you have any questions or comments, please leave a comment.  I’m very interested in knowing, before I go any further, if you’re tracking with me.  See you soon!