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Don’t buy yet – these stocks have further to fall

Apple (AAPL)

Fallen: 7%                   Consider buying after: 15%?

In addition to the day to day jaggies that all stocks experience, AAPL also rides up and down on huge waves. These waves have a period of about 24 months, and they exist because of Apple’s huge market cap. (You can see what I mean very clearly, btw, on the accompanying 2-year chart.) Because of AAPL’s high price, it takes a while for companies to accumulate a large position, and it takes even longer for them to liquidate a position. Because nearly every institutional investor in the world owns some APPL, they act together to depress the stock price, even as they seek to get out at the highest price they can.

For this reason, we should expect to see more outflow from AAPL before the current round of rotation out of tech is over, but it can’t last too long this time, before AAPL starts to have a mind-blowingly low valuation that will pull in — strange as it may sound — value investors. If shares of AAPL fall to $130, I would pick them up with confidence.


Chart courtesy of www.stockcharts.com

Symbols: , , , ,

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.