AAPL

AAPL

Hamilton

AAPL apr 2012

AAPL dropped almost $100 over the past two months and did so in a near perfect a-b-c. In itself this has no predictive value as the stock could either shoot straight up down depending on the reported earnings. Again they were pretty stellar and the stock had already reached $601 in after hours trading. The question now is whether or not this a-b-c is all of the correction, or just part of a more complex correction that still has some ways to go. In any event chances of a new high in the future have improved considerable. How much higher remains to be seen.

aapl apr 2012 b

Given the performance, 6 fold in two years and virtually vertical the past 6 months, still must make a prudent investor wonder if it is smart sticking around much longer.

AAPL, Apple Inc.

Hamilton

aapl

Yesterday, on BNN, there was this fellow who, without batting an eye, estimated that Apple will trade at about $1645 by the end of 2015. Roughly, that is an increase of 3x in another 3 years. If you extrapolate the above chart in a linear manner you will obtain substantially higher levels. According to Bigcharts the stock has a p/e of about 17 but you should not look at that for this stock. More important is the price to earnings which is “really” only running at about 2.5 X and could easily double or more just to catch up with the peer group.What peer group would be a reasonable question since it is a universally accepted fact that this company has no peers. When mathematics or logic enters into the equation you can rest assured that the result is wrong.

From a EW perspective there are possible 5-waves up. The ratio’s between them are roughly 1:1.62:1 a common thing. In the great recession this stock was cut in half and then some. Earlier in the decade it had lost more than 90% of its value. Things happen, they always do. Hold on to the stock by all means, but make sure that you are operating with a tight stop.

AAPL

Hamilton

For the first time they did not beat expectations. This is just a joke as it is they that create the expectations in the first place, anyway here is the chart:

aapl oct 2011

I think it has reached it’s top. This is a pure momentum play reaching its limit. It is like your mother-in-law telling you she likes you. Too good to be true , so do not believe it. I would get out fast.

AAPL and RIM

Hamilton

I have suggested a pairs trade on this couple before. It was a complete disaster which is why stop-losses should be used whenever and wherever  possible. Stocks in these markets are often traded on momentum , that is that they are bought on the simple expectation that there will be a greater fool down the road. There is until there isn’t. NFLX seems to fall in this category.

As predicted, before the recent earnings came out, AAPL went through $400 in after-hours trade and today it did it during normal trading hours. RIM on the other hand announced that it will lay-off 2000 employees and is suffering from minor palace revolutions. The stock is in the doghouse. Here are the charts;

aapl july 26 2011 rim july 26 2011

As you are aware from previous blogs, I think AAPL is topping and RIM is bottoming. For one thing AAPL is now worth over 300 bln, the second largest capitalization after XOM (Exon) at a little over 400 bln. However you slice it, it is difficult to make sense of that. RIM in the meantime is suffering from “confirmation bias”, according to David Olive in today’s Star. I had never heard of that term but I assume it is what you get when non-thinking people get together with like minded colleagues and go through the “misery loves company” exercise. We already know that stocks are the only thing that sells better at a higher price than a lower, but maybe this has gone too far. In the same article Olive gives the following facts; RIM outperforms Apple in return on equity 41.4% against 35.3%; in terms of R&D spending  RIM spends $1.4 bln or 6.8% of revenue for essentially a single product, Apple spends $1.8 bln or 2.7% of revenue on a multitude of products. Rim trades at a p/e of 4.5, Apple at 15.8. Rim has the ultimate security, Apple does not. Anyway , apart from fundamentals the chart tells the story. Here the two are combined;

RIM and APPLE

RIM is in beige and Apple in black. RIM has a count that supports the idea that it should go up from here. Apple  can be counted as having a top here. Most importantly is the difference which on BigCharts can be shown in the bottom window. Notice that for most of the past 10 years RIM consistently out-performed. That changes after 2009 1/2. The critical thing is the vertical distance between the two; it has never been wider! You can try the pairs trade again. Sell one AAPL and buy 8 RIM roughly, but keep a stop at whatever your tolerance is, 10%??