Apple Computer – Price Correction Creating Uncertainty or Opportunity?

Received this tweet from Kushal

Tweet from Kushal

Tweet from Kushal

When the great American financier, J.P. Morgan was asked what the stock market would do, he answered: “It will fluctuate.”

Fluctuating is what is happening with Apple Computer at the moment and it seems to have a lot people perplexed, especially the business media.

No need to be perplexed!  Stocks can and will fluctuate all the time.  All a reader or user of model price has to do is consult our model price charts to see if the price move is relevant or significant. Stocks can and will roam within our EBV zones all they like without meaning.  However, once the stock transits either positively or negatively an EBV line, this act is transmitting important information to the observer.

Let’s consider Apple.

Here is the short-term model price chart on Apple Computer.

Apple Computer with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

Apple Computer with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

For those interested, a daily updated chart of AAPL subsequent to this post will be maintained on Facebook, here.

I tweeted on October 26, that Apple had a down transit of EBV+6 or $704 – EBV+6 at the time. Here is the tweet and my suggestion of possible resistance.

Tweet From ModelPrice Guy

Tweet From ModelPrice Guy

Well seven weeks later, you can see Apple bounced off its calculated model price.  How did I know?  Easy, this is what Apple has been doing over the last year and a half.

Hopefully it wouldn’t be a surprise to anyone that Apple’s price will probably test support at EBV+5 or $496.56.  Can you imagine the reaction when Apple breaches the $500 mark!  Well, again for model price users this shouldn’t be a big deal; knowing support is just a few dollars away.

Let’s look at the long-term chart of Apple for even more perspective.

Apple Computer with monthly price bars, EBV Lines (colored lines) and model price (dashed line)

Apple Computer with monthly price bars, EBV Lines (colored lines) and model price (dashed line)

As you can see Apple has traded between EBV+5 and EBV+6 since March of 2009.  Yes, stocks do fluctuate including Apple.  What is important is model price and EBV+5 will be one year from day.  As you can see from the chart we calculate model price to be $677.36 and EBV+5 at $648.93 – substantially higher than the current stock price.

As I have said in a previous blog I care about outcomes.  In order for users of model price to make money in the equity markets one has to think more rational.  Would the purchase of Apple shares above its model price or worth be rational?  Would you over pay for a car, or any other consumer item?  Better yet, wouldn’t it be more advantageous for you the investor to purchase shares closer to EBV+5 than EBV+6?  Of course it would.

Equity markets can create anxiety and uncertainty and are the enemy of profitable investing.  Especially when you listen or read the business press.  The market, as markets always do, is going to give you an opportunity to buy any company, including Apple, when everyone is hitting the sell button.  Conversely when buyers can’t buy enough shares of Apple at EBV+6, and the analysts and business press is touting even higher prices, yes you lighten up your Apple holdings for the eventual correction to EBV+5.

For those of you who are successful, rational about investing using model price charts, you can help others through blogs and tweets of your own.  Just a business idea from me to you; you could set up your own blog on when to buy and sell Apple shares with a high degree of predictability for your followers.  You could become an expert on all things Apple (or any other stock for that matter) including when to buy or sell.  People helping people, using model price charts for illustrative purposes.  Just saying!

Thanks Kushal for the tweet!

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