AT&T Out…Apple In. Is there a trade here? (March 06, 2015)


I want to just look real briefly at Apple ( NASDAQ:AAPL ) and AT&T ( NYSE:T ). The Dow Jones announced that they’re adding Apple ( NASDAQ:AAPL ) to the Dow Jones Industrial Average and they’re taking AT&T ( NYSE:T ) out, right? So you see the Dow trading down here, this is going to occur on March 18th so it’s in a couple weeks. So what does that mean?

First of all lets just look at the Dow, you don’t really want to be doing too much until we find some kind of support on the downside, that’s just in general terms here. The way this pattern is shaping up that’s the box that kind of needs to be filled. Do you know why? Because this is the box that we’re in; so look for that type of thing.

But here’s the thing that kind of concerns me, Apple ( NASDAQ:AAPL ) was up Friday morning but it essentially closed flat. This is big news for a company, when they’re added to the Dow Jones Industrial Average; it’s really big news. Why? Well, the days of the Dow Jones actually being an industrial average are long gone, there’s all kinds of crap in there now.

But there are those tracking funds that have to own what is in the Dow Jones Industrial Average, and so the idea is when a stock gets added to the Dow it’s going to be bought, there’s going to be big demand for it. Well, Apple ( NASDAQ:AAPL ) apparently is really not that big of deal because I think Apple ( NASDAQ:AAPL ) is already pretty widely owned.

There are different figures out there as far as how many hedge funds or mutual funds or this and that, I don’t know what they are, I just know that the bottom line is this; the stock gapped up on Friday morning and did not even hold the gap, I mean it’s closed down from the open. So what this is telling me is there’s not the demand for this stock that you might think because this should have been the type thing, I mean when I woke up this morning and saw that news I thought, well Apple’s ( NASDAQ:AAPL ) is going to back through 130.00 maybe even a little bit higher, and that wasn’t the case.

So then we only have one other near-term catalyst and that is Tim Cook is introducing the Apple Watch next week. There’s been so much stuff about this, you know we see pictures; we see the apps that are going to be in the watch, we see the apps that aren’t going to be in the watch. So what I’m concerned about is there’s really going to be nothing new under the sun which could in fact provide more of an impetus for selling.

So the bottom line is this, with Apple ( NASDAQ:AAPL ) right now I just want you to be careful. You want to respect the trend which is up, you want to respect those valuation guys who say that Apple ( NASDAQ:AAPL ) is still cheap. Carl Icahn, you know whatever, he totally talks his book and he’s perfectly qualified to do that, anybody can just as long as you disclose that you’re long Apple ( NASDAQ:AAPL ) and he is. He’s got 200.00, 210.00, 220.00 price target on it, but right now that’s not going to matter, if Apple ( NASDAQ:AAPL ) trades down to $120.00 or even lower from here; particularly if you’re trading options on it.

So I just want you to be careful with Apple ( NASDAQ:AAPL ) because the inclusion in the Dow Jones Industrial Average should have pushed the stock up, it did not. Now AT&T ( NYSE:T ) gets taken out. Well that stock has been performing crappy anyway. Getting taken out, it’s funny, a lot of times when a stock gets taken out of a key index or average there will be a lot of selling pressure and it ultimately turns out to be a really good buying opportunity for that stock; because those that are tracking funds, they’ve got to dump AT&T ( NYSE:T ) and they’ve got to buy Apple ( NASDAQ:AAPL ).

So watch what happens on the 18th and 19th with respect to volume on both of these stocks, I think you’re going to see a big turning on both of those. I would stay away from AT&T ( NYSE:T ) anyway; it gives you a really nice dividend, but the only time you want to be buying a stock like this, where the dividend is an issue, is when the stock is right down at support, and that is 4 percent below where it is right now. So you’re buying here, you lose 4 percent in capital gains, suddenly that turns to a 1.5 percent dividend, which is not a reason to buy the stock. Anyway, I hope this helps on Apple ( NASDAQ:AAPL ) and AT&T ( NYSE:T ).

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