The long and the short on Apple (AAPL) (April 23, 2014)

Discussed in this article: Apple Inc ( $AAPL )

Apple ( NASDAQ:AAPL ) announced earnings; finally they did something that got buyers interested. Stock buyback, like ninety-bazillion more shares or dollars, I think it’s like 300 billion, something like that. They’re going to do a seven-for-one stock split, they don’t have any new products, but apparently that’s coming; who knows what it is, but it’s going to be an “I” something or other. A great quarter, everybody liked it right, so where’s the stock? The stock right now is trading at 565.00, where has the recent high been? Let’s look at it, you can say, “Oh yeah but Dan, I told you the stock’s going to go back to 700.00.” Okay, well good luck with that Sherlock, sure, ultimately it might, but it’s not going to be tomorrow, it’s not going to be next week, it’s not going to be six months from now; guarantee you. It’s not going to be six years from now, I guarantee you. Do you know why I can guarantee you that, because they’re splitting seven-for-one, it’s not going to be up at 700.00 for quite a while.

What I care more about is what’s happening tomorrow, what’s happening on Thursday morning. I have instincts too, normal reactions, my first thought was, Wow! You’ve been waiting for Apple ( NASDAQ:AAPL ) to do something good for so long, this thing has gapped up, I’ll bet that thing will gap up and even run higher tomorrow. You know what, I’ll bet it’s a good thing to buy at the open, that could be it. In the past like other things you sell them at the open when they gap up this much, but Apple ( NASDAQ:AAPL ) could be different. Whenever I find myself thinking that way I’ve got to stop and check and say, “Wait a minute Dan, are you falling prey to the normal human instincts that actually kill us every time, because the markets rigged to take all of our money?” A lot of times the answer is yes; I will tell you this, if I had to choose, and I don’t because I get to choose tomorrow morning, but if I had to choose between buying and selling at the open, if I had to choose, had to, gun to head buy or sell, I would sell.

Why? Well because the stocks up a lot; folks that bought before earnings, the only reason they bought before earnings is because they think the stocks going to pop. The stock popped, hence sell after earnings pop, that’s the way it goes. Also this stock is up close to resistance here, that’s another reason to sell. So first thing in the morning I’m going to be looking to sell, I’m not going to sell I’m going to be looking for evidence that truly sellers are overwhelming buyers; if there’s not aggressive demand for the stock in the morning then it’s not going to open up here, that’s just the way it goes, because a bid has to be met with an offer, so there’s going to be aggressive buying in the morning. I care more about where the stock is trading at 9:33 or 9:35 than I do where the stock is trading at 9:30. At 9:30 I know the stock is going to be trading somewhere up here, but at 9:33 I know this, the stock is not going to be trading at that same level, it might be above, it might be below; ultimately the bulls and the bear are the arbiters of where the stock is going to go.

I think you’ve got to be nimble tomorrow morning, I would not be buying this right at the open, if you just get the can’t help its then just buy a little bit. If you’re long the stock and you were waiting for this, sell half at the open, you might want to sell it all, but sell half at the open and then if the stock does run you’re happy you didn’t sell it all. But ultimately and I’ve mentioned this before, recently, I think it was in the Strategy Session, the fact that this stock was trading above the 200-day moving average, it had been trickling lower here, 50-day moving average trending down, the fact that it was trading above this 200-day moving average, and I actually have an article coming out on this on “Real Money”, I think they publish my stuff on “Real Money Pro”, I’m not sure, but this symmetrical triangle above the 200-day moving average, prior trend was higher this gives you a really strong bias for an upside move. I mentioned that recently, I wasn’t pounding the table about it to where you’ve got to buy this before earnings, but what I was saying was you’ve got to have an upside bias on the stock. That’s happening, now you’ve got to look at this level and just know this, if the stock does push through this level that’s going to have been a heck of a run in a day, or two, and that is going to beg for profit-taking, so I think there’s pretty strong resistance here.

Here’s my take on this stock for the next couple of months or whatever, I think you definitely want to be buying this stock on any kind of dip; I don’t think it’s coming back down here, they had a great quarter, they’ve got some good things coming, but I want you to be careful when the company splits its stock. Look at what happened with MasterCard ( NYSE:MA ), ten-for-one, this has been an unmitigated disaster, if this thing keeps going any lower they would have been better off splitting their stock two-for-one, because effectively the price is going to be that, this has been horrible. The same thing with Google ( NASDAQ:GOOG ), or G-o-o-g-l for those of you who really care, I personally don’t because I don’t vote at shareholder meetings and they trade the same; equal volume 2.0 million, that would be two million, two million okay, so what’s the difference? Look what happened when they split two-for-one, they haven’t even come close, well I guess they came close but they’re well below this. So I want you to be careful about Apple ( NASDAQ:AAPL ), everybody gets all lathered up, Oh!, Seven for one split. My bet is, those of you that are all excited have been trading for at least 14 years, because you remember what it was like in the nineties when a company split its stock, remember JDSU, “just don’t sell us”, I had a different one, “just do split us”, I mean not company split more times than I’ve ever seen another stock split, and then of course they did a massive reverse split because it got down near zero.

The bottom line is Apple ( NASDAQ:AAPL ) is going to be trading on a much more liquid, as if it’s not liquid now, almost 14 million shares; shares are going to be easier to buy, and they’re saying, “Well you know we want to make it more affordable for the retail investor to buy.” No, they want to get in the Dow 30, that’s why they want to do it. All of this, “Well we just want to make it more affordable for the individual investor.” That’s nice for you to say, but it really doesn’t mean anything because that’s not why a company splits its stock; they have other reasons for doing it, and I think those are fine reasons; good for you, why don’t you just say, “We’re splitting our stock because we’re hoping that we can get in the Dow 30, and then we can travel along with the rest of the market instead of being mired in all this muck for so long, so that’s why we’re doing it. After all Microsoft is in there and they really stink up the joint; have you seen Windows 8, why can’t I get back to Windows 7, when it says we have a new version of Windows 8 and then there’s two boxes. Go to the store or remind me later why can’t I have a third box that says don’t ever ask me again?” That’s Microsoft in the Dow. I would love to have Apple ( NASDAQ:AAPL ) get in there instead; sadly they will probably be in there alongside of them, at which time I would absolutely buy Apple ( NASDAQ:AAPL ), and I would buy Apple ( NASDAQ:AAPL ) in Microsoft terms, in other words short Microsoft and buy Apple ( NASDAQ:AAPL ), there’s a trade for you.

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