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Wednesday, January 23, 2013

AAPL took a bite out of me

Today I wasn't sleeping well as I had a long position in AAPL right before earnings, I have caught this falling knife before, but I figured 3 times burned, it probably finally found a short term bottom at 500, how bad can it be.  I asked my friend for advice, and he thinks the fundamentals are solid, single digit PE ratio, what could possibly go wrong?  I guess the answer is momentum.  This stock has been falling so fast for since September, it will keep going down since now Apple isn't a growth stock anymore but a value trap, however a company with this much cash and such a great revenue stream must be worth more then 0, so where is it fairly valued?  Someone on FastMoney today put it at $425, seems fair, but do I dare at this point to buy again, wow, not really.  It has to bottom out first, it needs to be hated and remain at these levels for a while to form a base. The descending triangle of the past few weeks, turned out to bearish as it should be. Funny thing is same coworker then has me look at NFLX, up $40, ironic, same amount that AAPL dropped.

If you still want to hear more negativity about a stock that everyone owns and has nowhere to go but down, listen to Jeff Gundlach CEO of DoubleLine who makes many cogent arguments about AAPL on FastMoney. It is funny how in my paper money account I am short AAPL and bought a straddle out of mistake. It is interesting however how you can always find someone after the fact that was right about predicting an event after the fact.  From all the opinions out there, you can choose they guy who had the right one afterwards, however that still doesn't help in predicting the future.

For my own trading I have observed over and over again that when it comes to trading paper money or advising others I do much better then trading real money. I asked for Alberto Verdeja to draw the cartoon above as I really felt bitten by my belief in AAPL and the corroborating friend who I am sure feels my pain, but in the end, even if you don't agree with the market, you can't make money trading if they don't bid up your stock.  It is also a lesson of remembering what you believed in before, I have said that Apple is a sell on strength before, and yet I didn't take the bid towards the end of the day, right before earnings.  It is easier to trade paper money.

The ironic thing is I look at that red trend line that I have extended to the right, it perfectly predicts today's prices.

You can see how it came from the longer term trend since September, we are still on that downward trend.  It all became so clear after listening to FastMoney and looking at the graphs.  Apple is still a sell on strength.

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