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Monday, April 16, 2012

Market Thought... falling sky?

Apple is down 5 days, and there is talk about collapse. We have the same situation taking place between other tech stocks as well.

Google out performed on the 12th because of pre-earnings strength, but then got sucked in with the rest of the sentiment.

There is an interesting set up taking place:

1. Google, at 609, is currently trading with a trailing multiple of 18.4. That is a low-end of its potential trading range. (Historically it has seen a trailing multiple of 16 during times of financial systemic collapse.)

2. If factoring relatively decent earnings for AAPL, assuming a traditional 24% earnings beat, AAPL will be trading with a trailing multiple of 15 at current levels (price of 586).

So will these stock, who many like to wrongly categorize as "high-flyers" collapse?

If there is no systemic issue that materializes, then they will not collapse, and right now is a buying opportunity.

The above names, along with others with similar growth characteristics, usually lead the market down and up.  They will see a bottoming before the SP500 does, and continue their march upward before the market does.

With that said, there is concern that the market will breach its current level of support.

If the SP500 breaks the 62SMA, it will most likely see 1340. (The 1340 level is also a monthly support level.) Obviously, many stocks will go down with the overall market.

I effectively added to my Google position, and maintaining a small Apple position I took on the other day. I also took on market protection.

Apple is a bit trickier because they will report next week. If the bloggers (or independent analysts) are right, Apple numbers are going to blow passed expectations. (Then today is a good buying opportunity.) But if the street decides to focus of 1 or 2 data points (like they did with Google), they will follow market sentiment. (More on Apple in a separate, more detailed, post.)

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