Take a Bite of Fear and Greed Out of Apple

by DAN Strongly uptrending stocks always bring out the extremes of emotions. If we’re long, we get a bit greedy and want to stick with the trade as long as possible. But at the same time, we are fearful that we’ll lose out on some of our profits. And if we are on the sidelines, we are fearful that, unless we buy now, we’ll miss out on the rest of the run — and that fear of missing out directly implicates greed.

So the two emotions of greed and fear go hand-in-hand so much so that I’m not even sure you could characterize them as opposites. They are really closely related, and are greatly impacted by your current position.

Let’s look at Apple (AAPL) and see this concept in action.

Notice how AAPL has been overbought almost since it broke out from $95 in April. During the ensuing $30 run, the stock has hugged the upper Bollinger Band, and the RSI indicator has been at an extreme high. This is what strong stocks look like, and whenever you’re long such a stock, the conflicting emotions of fear and greed run rampant.

But as long as the stock continues to run along the upper Bollinger Band, there is really no reason to close the position unless you just feel guilty about making money. Instead, let those who fear missing out on the upside push the stock higher. Their buying will eventually exhaust itself and the uptrend will reverse.

In order to ride the stock as far as possible, just protect the position with a trailing stop that is follows the stock through the rest of the move, and be mindful that the iPhone will be released on June 29th. If there was ever a catalyst for a move, that’s the one.

For a video analysis of the chart, click here.

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