Price leads fundamentals, and Apple
(NASDAQ:AAPL) is a perfect example of this idea. Apple, by some measures is a relatively cheap stock; today the stock is trading around $560. It is trading about 9.5 times forward 2013 earnings and is still growing earnings by 20% as of last quarter. While that may seem like a bargain to anyone who buys purely on fundamentals, the pricing of this stock is not that simple.
AAPL stock has had a hard time trading with the premium due to investor skepticism of the company’s ability to keep its dominance in the marketplace. It's impossible to tell the future, however most people only care about the bottom line and their profits. So why would anyone think they can predicate the future of the price of a stock? No one can forecast price movements.
However, we can quantitatively measure price movements that will allow for a higher probability of winning investment outcomes.
The 1-5 scale is the buy rating and we rate Apple a Sell (2). The countertrend measure reads Overbought/Oversold. There are only two ways we would go long Apple: if it moves back to a Buy (4) or if hits an Approaching Oversold level.
At this juncture we still are not dipping our toes on the long side of Apple until we see those readings. When we do, we will certainly alert readers.
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No positions in stocks mentioned.
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