My expectation for the past week or so has been that AAPL would break to new highs and offer another 10-15 points of upside. So each day I spend some time thinking about how to best enter an AAPL trade so that I will be in a position of strength when the breakout actually occurs. Based on the price action for the past few days it made sense to me that AAPL should be bought on a volume breakout above 226. Today, I was also was keying in on the late morning low from yesterday of 224.16.

This morning AAPL dropped below 225 and quickly headed towards the 224.16 level. I noticed a nice size bid at 224.10 offering some protection so I bid 224.12 and got long. I placed a stop order at 224.09 and moved on. I wasn’t interested in watching AAPL again unless it got close to the 226 level where it had failed to break above on the Open.

A couple of hours went by and I commented to Gman that AAPL was approaching the 226 level where it had sold off from this morning and that the up move had very little volume so it would probably fail to trade much higher. Gman responded by saying something to the effect that he wasn’t interested in shorting AAPL at the 226 level because AAPl was so f#@$n stupid that the volume would begin to come in and he would get stopped out above 226. He couldn’t have been more right.

At 1:19PM there was a huge spike in volume that propelled AAPL cleanly above the 226 level. There was nothing on the tape prior to this spike in volume to indicate that AAPL would be breaking out today. It made three dismal attempts right on the Open to trade above 226 and the up move from 224 was nothing special.

Exactly one hour later at 2:20PM the volume began to accelerate again and AAPL traded above its intraday high of 226.75 and ran another two points.

I failed to make much money in AAPL today because I became so enamored with how feeble the tape was on the up move from 224 to 226 that when the tape changed I was not aggressive enough to take advantage of the late day rally. As a trader you need to always be mentally prepared to change gears when the tape changes. In the case of AAPL when the volume surged through the 226 level I should have had more size and an expectation for at least a two point move.