Monstrous Apple run up almost over?
November 27, 2014 MarcoTrade
It is no news that Apple continues to amaze everyone with their innovation and their brilliant design and marketing resulting in incredible brand following. Anybody that has tried to find arguments against the company or its products, well, it has just been wrong most of the time if not all the times. The stock is on a tear. Apple is the biggest company in the world with a market cap that just pierced $700 billion dollars. The stock has enjoyed a terrific run up over the last 2 months. We benefited from it as well with our long call trade which we posted right here. Many people in the business suggest that AAPL is a stock to own and not to trade.
If you read my blog you are probably somewhat familiar with my line of thinking. I tend not to embrace the buy and hold strategy. The goal is really to catch the best uptrends and maybe sit on the sidelines for the rest of the time. I do not profess day trading, however I believe that most positions should be held for a period not longer than 3 months, unless one of the stocks you own is not giving you any reason at all to sell. See, my point is that after a strong run-up in a stock (or call option) in a fairly short period of time, why would anyone sit through a long period of consolidation or even worse watch its stock give up some or most of its gains? That money might be better used somewhere else, or maybe it might just be better being cash while you enjoy a nice vacation.
Same goes for Apple. I still own some shares and given the strong momentum in the stock, there is no reason to sell them yet. Iphone sales predictions are incredible (71.5 millions for the current quarter), holiday sales around the corner, upward earnings revisions will probably follow soon. I am selling some out of the money calls against it however, just to limit my exposure. Another great strategy might be to buy some protective puts given the low volatility on the stock and the fact that they are pretty cheap. If my calls will be exercised so be it. It means I made some extra money. If AAPL consolidates then at least I am collecting rent on the stocks I own.
Be aware that Apple will not rise indefinetely. At some point all earnings growth will be priced in and a correction in stock will happen. Maybe it will be short lived, who knows. It is impossible to call a short term top, however look for an exhaustion gap to happen or several new highs on low volume. That means the happy times are over.
Categories: Market Direction
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