Search This Blog

Wednesday, February 15, 2012

A review on AAPL

Never say buy and hold is dead.

There is currently an impressive positive feedback loop within Apple that is resulting in the stock to be up everyday for the last week and a half.

It places a mockery on to one's discipline, but it is what it is.

The very bullish arguments represented in this positive feedback loop existed for the last three years, however they were all ignored resulting in multiple compression. (I highlighted it here weeks ago.)

Since the technical factors that have successfully guided me in the past are now failing because of this positive loop, I ask myself the ultimate question: what will spark the consolidation?

The unsatisfying answer, when the market decides to stop pushing it higher.

The technicals are suppose to anticipate when the market will stop pushing it higher, but the technicals are over come by the positive feedback loop.

Apple being extremely overbought, and approaching extreme weighted positions on the Qs again, when will the market decide to consolidate the stock?

1. The most obvious answer is after Apple unveils the iPad 3.  The reason being, all rumors are already anticipating the 'wow' factor. (In this case, the wow factor would be access to the 4G LTE networks.)

2. The less obvious, when the Qs decide to reduce the weight of Apple on the index, which will cause hundreds of closet-index funds to do the same. (This will cause selling pressure.)

At current levels, imo, dividend becomes irrelevant. Its trailing PE is currently 14.90. In relation to the market multiple, the value boys do not care for this stock anymore.


  1. "which will cause hundreds of closet-index funds to do the same."

    Is a "closet index fund" afraid to admit they own AAPL? Why?

  2. No, they are just scared of sun light so they stay in the closet :) Im sure no one will be ashamed to admit owning aapl is go around.

    Just a mechanics-of-the-market thing. There was selling pressure last time there was a re-weight in the Q index. Many funds are marketed to investors as a play on the 'technology' or the Qs. Those funds will mimic the actions of the Qs.

    1. You're still kinda spooky, y'know.