Apple (AAPL) Redux. (October 28, 2015)
I want to talk about Apple ( NASDAQ:AAPL ). Yesterday I covered it after hours when they reported earnings. Lets just say I wasn’t exactly long on the stock, or I wasn’t really bullish on it, not necessarily bearish. Just kind of, I’d stay away from it, because it’s not really doing too much. Here, true confessions, towards the end of the day today I actually took a position in Apple ( NASDAQ:AAPL ). It’s true. And the reason is, frankly, look at the chart. This chart looks GREAT now. We didn’t get the type of post earnings fireworks that we had come to expect of Apple ( NASDAQ:AAPL ), at least what I have come to expect of Apple ( NASDAQ:AAPL ).
I think probably the biggest reason, I forget exactly when they did it, somewhere up in here, was a 7-for-1 split. Now that will take the wind out of anybodies sails when it comes to volatility; very liquid stock now. But if we just look at this trend, I’m just going to draw a couple lines. Ultimately what I’m getting to is this, lets reverse engineer this thing. This tight little trading range, it’s like I said, ultimately that’s where I’m getting to. This is what I’m talking about, ‘Triple Top’, channel, breakdown. This, along with everything else except inverse ETF’s, bottomed back here. And then we’ve got this sideways consolidation that’s been gradually getting tighter, right?
The stock’s in this little volatility squeeze, up and down here. Below the 200-day moving average. Below the 50-day moving average, until a few days ago. So now what we’ve got is, if you’re just looking at the moving average, this is not going to have to run that far before it breaks out above the 200-day moving average. And when that happens there will be a lot of alerts that are fired off on trading desks. You know you see those cheesy automated articles posted on Yahoo Finance about, “Such and such broke through such and such a moving average in a bullish manner.” So you’ll see a lot of that stuff.
The bottom line is this: when the stock does break above the 200-day moving average it’s probably going to go higher from there. We’re getting into the holiday season, they reported good numbers. They gave kind of cautious guidance. Okay, so that’s the news backdrop. Fundamentals, “shumdamentals”, I don’t care about it, but I do care about the news, and that’s the backdrop. They had good sales, they’re cautious in their guidance going forward, and the stock’s up. It was up basically all day long, gapped up a bit and it had traded both ways in the after hours. But it’s up over 4 percent and just barely just poking above this last level.
So I’m going to almost end with where I began, which is, this is the box that’s meaningful to me. It’s a higher box on the price scale, like 115.00, than this box was. I’m big on box drawing. Do you know why? Because that’s how you trade. Read Nicolas Darvas’ book; there’s such a thing as the Darvas Box, I’m all over that. By the way, my first job was a box boy at the grocery store, Alpha Beta. So anyway, this is now up above this last high, coming out of a box. My bet is, and I have bet with my money, that the next move is going to be higher here. I think Apple ( NASDAQ:AAPL ) is done going down and now it’s starting to move up. I would want to be long there.
Now, the question is, “Well Dan, what’s going to make you change your mind about that?” Not exactly good risk management here when I say this, but what’s going to change my mind about that is this: if the stock starts falling below this level, and this is just the nature of stops guys and ladies, if the stock starts falling below here, Great! I’m long since a little bit under 120.00. Now we’re down a little over 5 percent. Not a huge amount. And now you’re selling the stock because you hit your stop? Now you sell the stock because it hit your stop, and you get that kind of thing.
So this is one of those stocks, frankly, that you have a choice here. You can buy this stock and then have a stop that’s basically a risk management stop. Or, you can buy this stock, and I’ve mentioned this, actually we had a little conversation in the forum today about stocks that you just kind of have a strong commitment to and what I say is, “You know what? Screw it! I’m going to do it. I like this company. I’m going to hold this stock, and if I do a Thelma and Louise on it, that’s okay, but I LIKE it.” I like this company. The P/E is reasonable, yada yada yada, but basically I LIKE this company. If that describes you and you’re an “Appleonian” then I’ll say it, don’t have a stop. If the stock starts falling you’ll figure it out as it goes. But right now I’m just telling you, after this kind of breakout over the last four days, one, two, three, four, this is a stock that you want to be long.
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