Apple: Naysayers Are In The Crowd

Includes: AAPL
by: Stock Traders Daily

Our recent prowess with Apple (AAPL) has many investors interested in what we think given the recent weakness in the stock. Late last year, we pinpointed Apple as a sell near $572, but about a month ago buy signals were triggered and we advised clients to buy shares of Apple on the heels of that weakness.

Recently, many investors in Apple have been concerned for one reason or the other. They're complaining about growth rates and competition, and where just a few years ago you could not hear anything bad about the company, now there are naysayers that are much more vocal in the crowd.

Before, when everyone was hyping this stock, I was one of the lone naysayers in the crowd, but my determination was based on valuation at the time. Shares of Apple are not currently as overvalued as they were when I was a vocal naysayer, and the people that I hear complaining about Apple today seem to be doing so based on an ill found desire to see growth rates what they were when Steve jobs was running the show.

Although the company is still innovative, growth cycles like the one experienced when Apple basically invented the Smartphone are few and far between. People who are invested in Apple should not expect growth like that again. If it happens, be happy, but product innovations do not seem to be the driving force behind Apple in my opinion. The company is serving its client base, try to grow market share and open doors to new selling channels, but I do not see anything on the horizon that could make Apple run like it did back then. That does not mean that Apple is a bad company by any means; it's a great one, investors simply need to moderate their expectations if they intend to hold it. If they want something with pizzazz, Apple may not be the best choice.

With that said, those words are directed towards investors, and investors should respect the difference between Apple a few years ago and Apple today. In addition, I hope traders are respecting Apple in the same light because Apple, a stock which once did nothing but increase, is now offering us excellent trading opportunities in both directions.

Based on the real time trading report we have, Apple triggered by signals and Stock Traders Daily advised its clients to buy shares about a month ago. Since then, the stock initially increased solidly, but this week it pulled back and we have handled quite a few concerning emails because investors and traders are worrying more now when the stock fails to increase and follow through.

Interestingly, however, the pullback in shares of Apple did not cause breaks of the buy signals that we observed a month ago (our stop loss was not hit). Instead, the stock merely tested our longer-term support level as that is defined in our trading report for AAPL, and support held. By rule, we are buyers when support levels are tested, and those support levels also act as our risk control.

Therefore, anyone late to the trade had an opportunity to enter right on our longer-term support level, because that level was tested almost exactly this week. We are still in the trade, we are now much more comfortably in the money than we were a few short days ago, and our target remains longer term resistance as that is offered in our real time trading report for Apple.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. AAPL has been recommended to clients of Stock Traders Daily at longer term support levels (we do not chase stocks).

Business relationship disclosure: By Thomas H. Kee Jr. for Stock Traders Daily and neither receives compensation from the publicly traded companies listed herein for writing this article.

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