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John Mylant
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Residing in Colorado Springs, Colorado. Has been trading and coaching using a self-developed option trading system for 10 years. Philosophically conservative, accurately trades weekly options with a strong risk management approach. Well sought after by investors around the world, he teaches a... More
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  • Apple's Transition Into A Blue Chip Company

    Apple in Transition

    Is there a transition for a stock between what I would call "a growth stock to a blue-chip stock"? For a company like Apple (NASDAQ:AAPL) it will be interesting to watch how the company progresses. This year is not supposed to be a favorable year as analysts expect revenue to decline just like it did in 2012.

    I am wondering if we are beginning to see the morph of "Apple" as we knew it into a more stable dependable long-term investment company. Its recent history identified it as a "product cycle driven" company which meant an appealing growth investment that brought "growth" investors to the stock. But the company may morph into a software and service company which would mean steady and dependable earnings as compared to hyper earnings on certain quarters. Therefore in the future the company may attract income investors instead of growth investors because it appears that sharing dividends will have more of a future appeal than growing the stock so quickly. The days of Apple's skyrocketing in price on a weekly basis are over.

    This is a good thing for Apple, investors, and the market as a whole. Can you imagine the company continuing to grow like it has for the next few years to a price that is so outrageous that when it would collapse like it is now the markets would be greatly affected, and not in a good way? As the transition continues Apple should continue to attract investors and keep its stock relevant with things like capital returns.

    This "corporate maturing process" does not mean that Apple cannot come out with new innovative products that vault the company higher. If you have watched the tech sector and as companies come out with new products, the process moves in cycles. If Apple does come out with a new innovative product that moves the industry it will take some time and this gives time for the company to mature.

    The iPad: Example of Apple's Sustainability

    Even though the company appears to be in transition, superior products will keep it on top of its industry even as it continues its research for new innovative products. Recently, the iPad was given the number one position by JD Power and Associates as the tablet with the greatest consumer satisfaction for the second year in a row. In its research, JD Power ranked consumer satisfaction in five categories:

    • Performance
    • Ease of Operation
    • Styling & Design
    • Features
    • Cost

    Tablets were ranked side-by-side on a 1000 point scale of satisfaction. The iPad came in first is 836 points followed by Amazon's (NASDAQ:AMZN) Kindle Fire Tablet at 829 points while Samsung came in at a close third with 822 points.

    Even though these scores look close there is one thing that set the iPad a part. The highest overall rating for product is called its "Circle Ratings for Consumers" and Apple is the only one that received a score of "5" which denotes the best product. The next highest score was "3." This research is important because it gives us an idea of the stability of Apple products and the ability of the company to continue to lead the industry. The study by JD Power and Associates also found that 94% of highly satisfied tablet owners are more likely to purchase other electronic devices from the manufacturer that they are happy with. This example points to Apple's long-term sustainability because of its pursuit of high quality products.

    Things Are Going Apple's Way

    Back when Google (NASDAQ:GOOG) bought Motorola for $5.5 million for its patents in development technology, the reasoning behind it was to help protect android from threats by Microsoft (NASDAQ:MSFT), Apple, and anyone else out there who would try to infringe upon the company's technology. The logic was sound at the time, but things have not panned out as Google hoped they would and the investment is just not paying off. As one example, recently a federal judge ruled that Microsoft would only have to pay Google pennies in royalties for sale for each Xbox videogame system instead of the billions in Google sought because of patent infringements. This is not the first case that the company has lost. It appears that patents from Motorola may not be as valuable as first thought.

    Even though it appears that the company allegedly has good arguments, there is no good ruling to show. The recent ruling between Google and Microsoft saw the judge strike down Google's estimate of $4 billion on the patents for videogame decoding and claim it's only worth $1.8 million. Since this article is mainly about Apple, it is important to know that Apple also won a case against Google. Trying to limit Apple's ability to ship Chinese made iPhones to the US, Google lost when the US International Trade Commission nixed Motorola's claims on patents on a phone sensor. So things are working out for Apple during its transition as a company

    What appears to us as Apple's fall from grace may not be all that bad. The company still has top-of-the-line products and is respected by the consumer for this. With high quality products and challenges going its way, I believe the transition the company is presently in may be for the better for investors in the future. Apple will always be known for strong R&D and is not a company dedicated to resting on its laurels. I believe this transition period for the company will help it become a long-term stable company that others will be able to depend on for years to come as it starts paying out its profits to its shareholders.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Apr 30 8:31 AM | Link | Comment!
  • ETF SPY: Fed Stimulus + Good Earnings Equals Good Bullish Week

    Technically Speaking

    RSI- with the latest high this week a bit lower than the last one, the RSI indicator continues to bleed weakness in the present bullish move up. But-at this point my observations strictly point to a weakening in the move but that is all. It would not be uncommon for the stock to rest a little before it continues to move up.

    MACD- the MACD indicator come buying the trend and the momentum of the trend together to help us understand how fast the stock is moving. What we can observe presently is that the momentum of the upward trend continues to weaken but it still has a bullish flavor to it so I am hesitant to commit to saying the stock is getting ready to turn around.

    Bollinger Bands- the stock has touched the bottom band the last two dips, but is also using the 50 day moving average as support. The bottom band is just starting to move sideways which strictly means consolidation and I cannot go past that. I would like to see it drop through the bottom band and drop through the 50 day moving average before I give it any more bearish support.

    Summary- the SPY still appears to be in a consolidating phase which could signify a period of rest before goes up or continued weakness and move down in the future. But present observations can't go past strictly sand there is weakness in the present bullish move.

    Current Events

    With signs of a slower economy mounting, the near-term outlook for U.S. stocks isn't rosy, but investors may find comfort next week from the world's major central banks.

    The Federal Reserve will meet on Tuesday and Wednesday, with the report of weaker-than-expected, first-quarter growth could reinforce expectations the Fed will keep purchasing bonds at a pace of $85 billion a month.

    As long as it looks like central banks are on your side and on investors' side as far as providing more liquidity, that's going to help improve sentiment.

    A strong commitment from the Fed to continue its stimulative policy, coupled with corporate earnings that have mostly exceeded lowered forecasts, could help Wall Street extend a rally despite signs that the U.S. economic recovery is losing momentum.

    A heavy slate of key economic indicators will be released next week, including personal income and spending, the Institute for Supply Management's manufacturing and services activity indexes, pending home sales, the Chicago purchasing managers' index and consumer confidence from the Conference Board.

    The market has been rallying on the fact the ECB might actually start to do something; if the U.S. market reacts in the same way, that might get the market rallying.

    Right now, markets are going through an adjustment process, trying to figure out just how robust the economy is here and overseas as well.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: SPY
    Apr 27 9:02 AM | Link | Comment!
  • EFT SPY: Watch Apple

    Technically Speaking

    RSI- the RSI indicator has dropped through the "50" line for the first time since the end of February when it had a strong turn down. This would officially marks the end of the third leg of a bullish run and I believe very strongly that it marks the beginning of a reversal or sideways movement.(click to enlarge)

    MACD- while it is true that the RSI continues to show weakness, one thing that I see in the MACD indicator is that momentum is still in bullish territory. Until I see the MAs move into bearish territory all I can say is it looks like the stock is slowing down, I cannot say it's going to reverse and turn around because momentum is still in bullish territory.

    Bollinger Bands- this is the third time we have seen this pattern as of bottom Bollinger band is now been sideways. The last two times we saw this is when the stock down like this and ended up forming a step as he continued to move up. But this time short term momentum appears to be weaker than it was the other times so I am interested in seeing if the Bollinger bands will turn down instead of sideways and then back up.

    Summary- unless the stock is built the many foundation that I am observing at the top, my experience would tell me that it's continued bullish run is at an end. I make these observations based upon many years of experience looking at different chart patterns. Time will tell.

    Current Events

    Apple may have lost nearly half of its value since its peak in September, but it's still the talk of the town. Only this time, it's all about how low can it go?

    Wall Street would normally be set for a technical rebound after a drop of more than 2 percent, the worst weekly decline so far this year. But that could easily change by the time the iPhone maker reports its earnings, which are due on Tuesday after the closing bell.

    Wall Street has been recently pressured by a slew of disappointing economic data and weaker-than-expected earnings reports from blue-chip companies like IBM. Of the companies that have reported, 67.3 percent have beaten analysts' earnings expectations, while just 43.3 percent have beaten revenue estimates. Revenue growth is seen at just 0.7 percent for the first quarter over the year-ago period.

    Economic indicators in the coming week will cover housing, manufacturing and a first look at first-quarter gross domestic product. In the housing sector, March figures for existing home sales are due on Monday and new home sales on Tuesday. Economists polled by Reuters have forecast slight gains in both March existing and new home sales over February figures.

    On Friday, Wall Street will get a snapshot of the broad economy, measured by gross domestic product, or the output of all goods and services inside U.S. borders. First-quarter GDP is forecast to have grown at an annual rate of 3 percent, compared with growth at an annual pace of just 0.4 percent for the fourth quarter.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: SPY
    Apr 20 8:49 AM | Link | Comment!
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