Posted by: stockscooter | February 15, 2012

Is Apple a Low-Hanging Fruit?

Apple is a leader in it’s field and in the markets.  They are doing great things.  However, does that mean it’s a good investment?  Investing means buying something with intrinsic value, which will be worth more at a later date.  Therefore you receive appreciation.  Shrewd investing occurs when the value of your investment doesn’t take a a big hit, right after your purchase.  That’s when you are never “sweating it.”  Does Apple fit the bill as that type of low hanging fruit?  Let’s take a look.

The markets tend to surge and correct in psychological fashion.  The 3 blue lines indicate surging advances.  After the first surge there is a correction, where those who didn’t get in the first time begin to accumulate shares.  This sets the stage for a typical large second advance, which often times is the largest.  The correction after this second advance  is where the final advance takes place.  Those buying this advance are those that typically come late to the party.  They  probably have heard about the stock in the news and are typically the naive investor being lead into the slaughter.  They need to be nimble and take profits quickly before things get really ugly.  You will also notice the incline of each blue line is steeper.  This is indicating more volatility, as it advances quicker.

How much gain could you possibly expect out of this? If APPL runs to $600 form here, that’s a 14% gain.  Is it worth the risk?  If you get caught in a correction from here, your loss might be up to 50% from it’s highs (a common corrective ratio).  And it could take you a long time for that correction to finish, let alone advance back to your cost basis.  Is that a good risk/reward scenario?

The natural times to buy are at the bottom of these corrections, where the new blue lines begin.  Since we are in the more latent stages of this last advance, only speculators should be buying here.  True investors need to find the next great company, or wait for this to go through a very long. long correction.  Since this whole advancing structure encompassed about 15 years, once the downward correction begins expect the correction to take take multiple years to digest these gains.  Possibly 5-7 years of downward to sideways price movement should be anticipated.

Now this monster has not stopped the last advance, yet.  It’s still rocketing higher for now, but when the inertia stops on this, it won’t be pretty.

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