Tuesday, April 5, 2011


If there is one stock I never trade it would have to be Apple.  This beast is simply one that defies logic and somehow only trades in one direction.  Yes, admittedly I missed the bottom around $86 just a mere 2 years ago, so perhaps I am sore about that, but there are times when we must look around and examine trades that go against the grain.

Please review the article in Business Insider which contends that there is a shift going on in the smart phone and smart gadget business where the Android operating system is dominating.

Overall, the article is suggesting that the Android is becoming The Standard and now controls about 1/3 of the market share and it is gaining at the expense of the other players.


The post got me thinking about other things that Apple should be concerned about and I've compiled a list that just jumped out to me.

1)  AAPL is priced for perfection (despite it's recent $20 drop).

2)  The NASDAQ 100 is repositioning and is reducing the percentage that AAPL represents which will force all indexers to reduce their holdings of AAPL.  Right now, APPL represents about 20.5% of the index, it will be rebalanced to fill only 12.3%.  http://money.cnn.com/2011/04/05/markets/apple_nasdaq_rebalance/?section=money_latest

3)  Steve Job's health is still a factor

4)  Despite being a late technology adopter, Goatmug still owns only 1 Apple device (IPOD shuffle) and has no intention of buying a Iphone.  I am going to get an EVO in the coming weeks though.  I have heard the EVO SHIFT is decent so perhaps I'll go that direction too.

5)  Ipads look awesome, but I have no desire to sign another contract to hook me into more monthly costs for telecom services.  At this point my telecom and data costs are almost $400 a month, why add more?

Now don't get me wrong, I'm not calling for the death of Apple.  My kid likes them and loves to download new stuff all the time from their Itunes store.  However, this doesn't mean that they can't correct a bit.  Have a look at the chart.

Even a test down to the lower portion of the channel due to pressure from the rebalancing mandate could take the stock down another 10% to $305.00.  A stop at $358 would be a good place to keep you from blowing up if you were planning on shorting.

While I see this as a pretty good opportunity to go short, I probably won't have the guts to engage Apple here.  Just so you know, the ones I study and don't trade typically tend to be the homeruns.

Oh yes, I almost forgot.  While playing with fire is fun (shorting AAPL for instance) it might just be safer to short the other loser in this scenario.  Yes, RIMM, the maker of Blackberry.  As Android based phones catch the interest of business users like myself the clear loser will be RIMM.  Think about it, I not only ditch my Blackberry, but I also ditch the $10 connectivity fee they charge monthly.  (Yes, Sprint will get me somewhere else). 

As far as trading a short on RIMM goes, it is really at a critical place.  A move below $55 could me a drop to $44 with almost no pause.

Be Careful!


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