Wednesday, February 15, 2012

AAPL...Was today the TOP?

I do not believe so. Today was an excuse to take profits. The stock has run 37.60% in approximately 9 weeks and needed to take a breathe. Antsy traders got an excuse to take profits and the bears piled on short positions spooking other weak holders into selling. While the stock did seem to exhibit characteristics of a climax run, the action was too flawed.

Climax runs tend to culminate

a move over twelve plus weeks, usually out of a late stage base, with a final 2 - 4 week 25% or more advance. Typically the stock will have its biggest one day and week point and percent advance in its entire run, on the highest volume of the entire run, daily and weekly. While daily volume was the highest within the most recent run, the daily and weekly volume were nowhere near the highest days and weeks in its entire run, did not have the highest daily or weekly price and percent advance of the entire run, and it has taken the entire 9 weeks to achieve the 37.6% move. Today's high volume reversal failed to even break hard below the 10 day moving average, indicating controlled panic.

Put into the context above, it no longer appears to be climactic action. Just a scary looking, well needed, pause from a powerful leading stock that has the attention of all stock market participants. We can't fully discount the possibility of an early climax, but based on the overall action of the market and majority of other leading stocks, Apple has to be given a chance to prove itself through its first pullback before deciding to sell.

Apple still holds enough ammunition to surprise the stock market with law of large numbers defying growth. If it can deliver another round of products, IPad 3 and IPhone 5, that are again must haves and must have upgrades for even the IPhone 4s and IPad 2 crowd, Apple will defy the law of large numbers and maintain its growth rates.  Also, continued rumors about a real Apple TV set could keep a support level below the stock. If the product is real, revolutionizes TV, and wows buyers right out of the box like Apple does, the dollar margins on the premium Apple will charge, would give them the ability to maintain defying law of large number growth rates even further then anyone imagined.  Based on current valuations, it is attractive to both value and growth players.  There could still be alot of possible pent up demand for the stock.

Of course there are the possibilities that Apple stumbles. The products don't deliver the pizazz Steve Jobs has gotten everyone used to, growth rates decelerate significantly, and users start migrating to the cheaper quickly catching up competition.  There could well be institutions anticipating this result and looking to exit while the liquidity is high.  The first disappointment out of this company could be forgiven as Apple being conservative or in between product lines.  But there will be no room for a second disappointment.

Bottom line...Apple needs to keep delivering surprises and pizzazz to maintain Wall Street's and Main Street's infatuation with the company and stock. If it delivers surprises and the pizazz Wall Street and Main Street are used and more, we could be talking about the first Trillion Dollar Market Capitalization company in the US within the next few months. It will also be trading above $1,000 per share. BUT BUT BUT they MUST MUST MUST continue to surprise and delight us all. Did Steve Jobs leave us one or more surprises?

Full Disclosure: I have not owned any shares of Apple during the current advance.
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