Wednesday, April 4, 2012

Scavenging for golden apples

I do regret selling positions at AAPL awhile back. Bought at 95. Sold at 106. Bought at 214. Sold at 257 (after riding it down to 190 or so). My faith in AAPL was supreme. So why didn't I just hold to 629? It's a question I keep asking myself. I know I'm not alone.

For now, logic dictates that AAPL's climb is far from over. The company is eating competition for breakfast, lunch, dinner and midnight snacks. Only Uncle Sam could slow Apple Inc. down, and that would be so temporary.

The latest run started at roughly 397 and peaked at 629 yesterday. A Fibonacci pullback (my version) of 38.2% of this runup would take AAPL down to about 542. Entirely reasonable as a new floor or level of support for the next massive leg up. AAPL is trading around 623-624 in premarket today. A pullback is due, but with all sorts of funds ready to unleash rivers of stagnant cash into the market, AAPL will benefit from value investors and tech traders alike.

Maybe it never smells 542. Or 592. But I'm glad to be waiting for a significant dip rather than chase it. I suppose that's one of the reasons I never got back in after selling at 257. I was greedy and wanted back in cheap. That just hasn't happened, but even here AAPL is less than 18x earnings — lower than the market average of 21x earnings.

If I had to guess, 600 would be the support for AAPL. Human psychology is predictable that way. With iPad sales exploding and iPhone 5 around the corner, the masses will probably view 600 as the "old" price soon enough. The economy still sucks and people spend like crazy for their iPads. That is truly power to the nth degree.

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