After suggesting that investors sell Apple (AAPL) when the stock was near $572 late last year, we have suggested that traders buy AAPL again. This call was made last week, and thus far Apple has been performing well. Since the call was made two material events occurred.
First, Apple announced that it had re-purchased $14B of stock on the dip, and Carl Icahn backpedaled on his demand that the company buy back $100B of stock. These events do not directly influence the business cycle, product development, or demand for Apple products worldwide, but it can benefit EPS results because fewer shares will be outstanding. Of course, it is also nice not to have the risk of a battle initiated by Carl Icahn, and on both accounts the stock reacted positively.
However, the call by us to buy Apple last week was NOT initiated because of any of the above items. Instead, the call to buy AAPL was based on price. According to the real time trading report for AAPL offered by us, AAPL was ahead of itself last year when the stock tested $572, but recently the pullback was enough to make it attractive again. The call was not based on product cycles, demand for iPhones, or the likelihood of a share buyback, the premise was price.
For anyone interested in making money in the stock market, all that should matter is price. I sometimes become dumbfounded when people start telling me how good or bad Tim Cook is, or how good or great the newest iPhone is (they usually aren't bad), because in that same sentence they use that as an argument to buy the stock. That makes no sense to me.
We already know that AAPL is a good company, we already know there is a high demand for their products, and we already know that most equity based mutual funds own at last a piece of AAPL, so all we need to do to make money in the stock is pay attention to price. Price is all that matters, it is what compelled us to recommend selling shares at $572, it is what promoted the buy-signals last week, and it is exactly what will offer sell signals again in what might be the near future.
Although AAPL may now seem to be like Microsoft (MSFT) in many ways after its aggressive growth phase, the stock still moves like the wind, it is an excellent one for traders interested in making money, but at current levels it may be best for people late to the trade to be patient, because the stock has already begun to increase from the inflection parameters in our real time trading report.