All-Star Stock – Digesting Apple

…Apple has been on my screens for 15 months and has been in my portfolio on two separate occasions over those 15 months. The most recent purchase was last summer as it broke into the $40 range. The first screen Apple made on MSW was on 10/24/04 at $23.71 (split adjusted from $47.41 – my actual entry area). I first added Apple (AAPL) to my portfolio in late 2004 due to the strong fundamental and technical characteristics, as noted on this blog when it appeared on the MSW website. If you would like to go back and read that blog, please visit the archives from last January or click this link:

http://marketstockwatch.blogspot.com/2005/01/green-apples.html

At the time I wrote the blog entry from above, I noted how Apple had just shattered earnings estimates and had gained over 57% while on my screens. Many novice investors were just jumping on the bandwagon while I was thinking about getting off. This is what I said:

“Many people went out and bought Apple today based on the great news from yesterday (Apple shattered estimates). I am not saying that AAPL can’t go higher but I know from experience that it may be too late to join the party when the news hits the street and everybody knows, even the “dumb money.”

Guess what happened? Apple went on to peak the following month (February 2005) and then went into correction mode for the next 5-6 months while I sold my shares for a profit and watched it from a distance. Are we starring at déjà vu?

As the new base was forming, I stared to show interest to jump back into the stock in July as the right side of the cup was forming. The breakout came in August 2005 as the stock made a new 52-week high on volume larger than the previous week. At this point, I was already back covering the stock heavily on MSW and adding it to my portfolio. Two months later, the stock started to consolidate and tested the support level (the 50-d m.a. in this case). I told the entire community that I was a holder and they should do the same but the ultimate decision was up to each individual. Even though Apple (AAPL) was falling, the RS line was better than most stocks at the time as the general market was falling even more. I thought that Apple could be a leader if the major indices could make a turn-around in the fall. Besides, the stock recovered the moving average by the end of the week – a key signal of strength when looking at the bigger picture (see weekly chart below).

Since adding the stock back to the screens in July, Apple has gained over 100% and has moved up into the $60-$100 range. Overall, a long term holder from my initial coverage in October of 2004 would have a gain of 260%+. Two weeks ago, I said this to the community: “trend buyers could add shares now”. If they did, they are now up an additional 12% from the latest breakout point.

Apple will now enter the MSW All-Star list as I update certain members from 2005. The stock is looking to clear the final leg of the $60-$100 run. I rated the (AAPL) as a hold on the latest screen and wanted to mention that earnings are due tomorrow (Wednesday, January 18, 2006). Strong support sits lower in the mid $70’s but as I told one member in e-mail earlier today, never try to get out at the top. It is up to you to decide if the 100%+ gain is sufficient or if you would like to grab more. We haven’t seen red flags to this point so there is no urgency to sell but some investors get nervous before earnings are released. My gains are very large in Apple so I will hold through the release and make my decision then.

As I said last year, I love the iPod and always use it at the gym and believe that the company will continue to create innovate products but never fall in love with a stock.

Good luck and we shall see what the release brings us tomorrow. I don’t need to get out at the top when I have already met my objective!

Piranha