Our StocksInDemand (SID) system is flashing a buy-on-weakness signal for AppleAAPL, -0.01% and now the question is how cheap can the value players buy it, as price drops after earnings to test support? Our six-month case study is available to the public, and it shows Apple bottoming and now bouncing up. Some well-known value players published that they were buyers at the bottom. Now those who wish to join in after seeing the reversal in the Apple trend, are seeking to buy the pullbacks.
Our latest chart shows both fundamental and technical factors for the shares. There are three signals at the bottom of the chart that identify the buy-on-weakness signal. Our overall SID grade includes the factors mentioned above. It is our most important signal ranging from 0 to 100. You can see we “red line” the acceptable grade at 61, and Apple just makes it. The lowest passing grade is 51 and is blue lined. So this is the buy signal.
Next you will see our short term, purely technical demand/supply signal at the bottom of the chart. You can see it has dropped below the red line into supply. This triggers the buy-on-weakness signal as supply takes price down.
Finally, we have a purely fundamental signal at the bottom of the chart. It is our proprietary Implied Return calculation based on analyst targets and ratings. You can see the calculation is near 27%. That is well above the red-line hurdle rate of 10%. It reflects analyst enthusiasm and thus may be too optimistic. The consensus analyst target is more conservative, near 130.00, and at 115.00 that implies only a gain of 13%. But even at this conservative level it would seem that near-term support levels would hold. What are those levels?
A quick check of our chart shows the 50-day moving average support at 112.00 and price support at 110.00-111.00. Price is currently testing these support levels. If those levels don't hold, we have blue lined a price-support level at 106.00. The worst-case scenario, one possibly created by bad news in the election or a Fed rate increase, would be a test of the 200-day moving average currently at 102.00. If price levels reach that low, I would expect the value players to swoop right back in again.
We will look to play the upside when our supply signal starts improving. That will signal that price is finished testing the downside.
Disclaimer- we are not investment advisers and never recommend stocks. Our system and signals are purely for educational purposes as is our six-month case study of Apple.
By Tom Lloyd
Source : http://www.marketwatch.com/story/has-apple-become-a-value-play-2016-10-31?mod=MW_story_top_stories
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