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September 11, 2012 / redman59

Apple Fans or Apple Cult?

This is in response to a recent blog post titled “Is Apple Stock About To Crash?” written by J.C. Parets @allstarcharts.  I, like many others, had to click on the link to see what he had to say about America’s beloved stock.  After reading it I thought he raised some good points and made the reader aware of reasons to be cautious of upside price in the future.  I also was looking forward to the comments session, why?

I have noticed that if you post anything negative about AAPL, “they” come out.  I have been deployed overseas to a third world country and have worked in a jail interacting with some foul people but these hardcore AAPL fans at times scare me more than any of those other people.  I have noticed that if a day trader posts that they are short, people come out berating them about how healthy the valuation metrics are or how many products they have sold.  Makes absolutely no sense.

Here are some points risen by @allstartcharts:

  • daily and weekly charts of $AAPL making higher highs in price, but lower highs in Momentum
  • currently not a bad risk/reward with a stop above the highs that the bulls couldn’t hold on to
  • “I’ll take a 1.5% risk with the prospects of a few hundred point correction any day” (his risk tolerance at that point could be totally different from others)
  • It’s all about finding good risk vs reward opportunities
  • and at the end “And the best part is that I don’t care about how many iPhones they’re selling. I care even less about the $100B cash on the books. And the P/E ratio? My computer shuts off automatically if I ever type that in.”

In reading this I can tell already that his style is not from a fundamental approach but from a technical approach (the last bullet point clearly tells me this).  I can also read this as he is spotting a same pattern that in the past (looking back to April 2012) has shown a drop in AAPL stock price and right now his risk to reward tolerance tells him that an opportunity is present.  Could this be wrong and the price shoot up, certainly.  But this is why we trade with risk and reward in mind as traders can expect to lose often.

So why in the comments are there mentions of fundamentals or iPhone 5.  No where in the post are these things mentioned.  Also who’s to say price is baked in or price is not baked in, no matter what there will be some reason for price action.  You can’t trade reasons, you can only trade price action.  Needless to say I thought he brought an awareness to current structure that gives a warning to traders on how momentum indicators are not confirming price action, simple as that.  Also keep in mind the writer’s perspective.  How do you get a reader’s attention that only sees the blog post title?

I personally don’t heavily allocate to divergence but use it as that, a warning and that it might be wise to take profits or leg into a position.  This post was written to show how powerful the fan base of AAPL is.  I almost find it scary that people are so attached to a product and leave comments as if you insulted their kid or someone close to them.  Read the post or any in the future for what they are.  Remember there are thousands of traders out there and everyone’s style is different.  Keep in mind the writer’s style and time frame.  In the end when the position is closed and you both make money, what’s there to complain about?

Also I have no connection what-so-ever to the author @allstarcharts.  I am merely a reader of his blog site.  I wrote this because I previously experienced similar reaction to posting a negative news bit or thought about AAPL and receieved criticism to the point where I had to check my account to see if I was short AAPL and displayed it publicly.  In a sense I find it humorous how attached some people are and will criticize when one has nothing to do with the other; ie. day trading AAPL having a long time holder telling me I’m an idiot….apples to llamas.

2 Comments

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  1. JC / Sep 11 2012 9:24 pm

    very cool redman. thanks. interesting reactions aren’t they? It will be cool to look back on this in the future and see how it all turned out

    • redman59 / Sep 11 2012 9:35 pm

      Thanks and yes I agree. I respect the responses to everyone despite what they had to say. Sometimes the whole purpose of the post is missed when people have such a strong opinion. Based on what I’ve seen in the past I almost want to believe there are AAPL blog/twitter attack bots out there…nothing shocks me anymore.

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