Trade of the Day: Apollo Group (APOL)

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The bears continued their assault on the market following Friday’s opening peak to fresh all-time highs and delivered a nasty bite to stocks in the process. The Nasdaq gave up the 4,550 level 45 minutes into Monday trading and traded down to 4,513 intraday. The bulls held support at 4,500, but there is risk to 4,400 on a continued pullback.

Meanwhile, the Russell 2000 got spanked for 17 points, or 1.5%, to finish at 1,129, and the S&P 500 fell below the 2,000 level an hour after the open and kissed a low of 1,991. The bears are still gunning for 1,975 and might get there this week if the bulls can’t hold 1,985.

The S&P 500 Volatility Index (VIX) surged 13% after reaching a peak of 13.98. The bears easily cleared 12.50 (now resistance for the bulls) after the open at 13.14 and held 13.50. That reopened the door for a test to 15, and any pops above this level could lead to 17.50-20.

This is a good time to put on a few new put positions; today’s pick is Apollo Education Group (APOL). I have included the two-year chart below to show you why I went short this particular name.

Trade of the Day: Apollo Education Group (APOL)

Apollo owns a number of for-profit schools, including the University of Phoenix, and was down 1.5% on Monday, underperforming the rest of the Nasdaq. My near-term target for APOL is $24, with a chance of the shares testing $22-$20. I recommend that you play this via the APOL Nov. 24 puts (APOL141122P00024000).

I have been bearish on this stock for years and have been targeting a test to the mid-teens at some point. As you can see from the two-year weekly chart above, $24 is the last line of support and represents the 100-week moving average. There is risk to $28 on a back test, but I wanted to get in on this current drop below $26.

Buy to open the APOL Nov. 24 puts at current levels, around $0.90 (I suggest using a limit order to get the best fill). My exit target is $1.70, for an 88.9% profit.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/09/trade-day-apollo-education-group-apol-nasdaq/.

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