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Apple: For now still the same old monster stock story with a few added chapters.
- With Apple proving in court that Android is a copy cat and Samsung being told they must pay $1 billion in patent infringements to Apple , the stock shot up to all time highs in the post market on Friday. All time highs is where I like to be, no overhead resistance and every one that owns the stock has made money.
- When a stock is rocketing to all time highs century mark numbers tend to be new levels of resistance. With longer term holders selling at these round numbers as profit targets. $700 is the logical price target and we may see little resistance on the way up to this number.
- Apple now has protection from plunging with a $10 billion buy back program. At the current price that is about 15 million shares removed from float, which will at the same time drive up earnings per share with less shares publicly available. So that is a twofer.
IBD’s Rules for Investment Success #17. Check into companies buying back 5% to 10% of their stock and those with new management. (2% is not a bad buy back for the biggest company in the U.S.) - Apple dividend signals the end of growth and beginning of stagnation? Does Apple quit dominating and growing because of a dividend? They paid a dividend because they just had way to much money on the balance sheet and nothing productive to do with it all but give it to share holders. This opens the door to whole new buyers, the income investor and the mutual fund managers of all the funds that can only hold dividend paying stocks.
- An Apple market cap of $615 billion is not too high when they are holding 1/5th of that in cash and growing earnings at 78% a year. The fact that people believe it is too big to grow is what keeps the P/E multiple down, when they are proven wrong the stock reprices after earnings.
- When a stock is at all time highs and everyone has made a profit, holders are not eager to sell, but people on the sidelines are eager to get in. This creates major support at key moving average levels, the 5 day ema, the 10 day sma, and the gift of the 20 day simple moving average are all excellent entry points if you act fast. With Apple you can buy into price strength and still make money with higher highs.
- Contrary to belief this stock is not a mania, it is not parabolic, and is no where near euphoria, it is a story of fundamentals and earnings and sales growth that has rewarded this stock. Anyone who thinks this is a bubble needs to go back and study real bubbles like the tulip craze in Holland, The Great Crash of 1929, or the dot com bubble of 1999 and 2000. This is a real company, valued based on real earnings, that has innovated and taken over entire industries not some speculative stop pricing in potential future earnings, they are here now and growing.
- If the past Apple earnings miss can not stop it from it journey to $700 what can?
- Apple is only 7% above its $619.97 break out of a cup with handle chart pattern that has a high success probability. Stocks usually run much farther than this after overcoming all sellers in the cup part of the pattern and emerging to new all time highs.
- Expectations for earnings from the release of the iPhone 5 and the mini iPad should keep buyers interested and holders sitting on their shares.
With all these things going in Apples favor it is a very high probability that we see $700 in this stock and likely sooner than we think.
With all this said we still must trade the chart, cut losses short risking no more than 1% of our account on any one trade. Always remember ANYTHING can happen in the stock market and you have to go with the flow and not be stubborn in your opinions if you want to win.