So FORTUNE magazine has crowned a CEO of the Decade, and it's not surprisingly Steve jobs, head of Apple (AAPL). No doubt Mr. Jobs has indeed done a wonderful job, even I recently joined the iPhone revolution and it's a fantastic product.
The problem for a stock's price is that the market moves based on EXPECTATIONS, and this cover signals the bar has been raised significantly for AAPL shares here going forward. The last such cover for AAPL and Jobs came in late 2005 thanks to TIME and BUSINESS WEEK, near $70 on its way to $50 over the coming 6 months (though it was still holding its bands at 50 which caused the support there - see below).
As you can see on the monthly chart, using a twist on the traditional 20-day Bollinger Band, I plotted an 80-month Bollinger Band (with 2 standard deviations) and the 2 closes in a row over the band back in late 2004 under $13.50 a share was indeed a golden buy. But now with the stock a 15-bagger from those levels, you can see AAPL is doing battle with its upper 80-month band, now around 203. The stock would need 2 monthly closes above there to renew potential bullishness, and with the cover story suggesting the end of the uptrend is near (usually the stock can trickle up for another month after a cover, but in the following 11 months it lags the market), I'd suggest AAPL devotees consider strategies to hedge their positions over the coming year.
Apple (AAPL) Monthly Chart with 80-Month Bollinger Bands
Of course, with the money AAPL shareholders have made, the common human behavior is to see through rose-colored glasses all the things that could go right, rather than the possibility that even the slightest misstep could lead to a piling out of the stock. We'll see, but I'll bet that while the numbers on earnings and sales will still look impressive on the surface, Wall Street will find reasons to be disappointed in AAPL shares in 2010.
The problem for a stock's price is that the market moves based on EXPECTATIONS, and this cover signals the bar has been raised significantly for AAPL shares here going forward. The last such cover for AAPL and Jobs came in late 2005 thanks to TIME and BUSINESS WEEK, near $70 on its way to $50 over the coming 6 months (though it was still holding its bands at 50 which caused the support there - see below).
As you can see on the monthly chart, using a twist on the traditional 20-day Bollinger Band, I plotted an 80-month Bollinger Band (with 2 standard deviations) and the 2 closes in a row over the band back in late 2004 under $13.50 a share was indeed a golden buy. But now with the stock a 15-bagger from those levels, you can see AAPL is doing battle with its upper 80-month band, now around 203. The stock would need 2 monthly closes above there to renew potential bullishness, and with the cover story suggesting the end of the uptrend is near (usually the stock can trickle up for another month after a cover, but in the following 11 months it lags the market), I'd suggest AAPL devotees consider strategies to hedge their positions over the coming year.
Apple (AAPL) Monthly Chart with 80-Month Bollinger Bands
Of course, with the money AAPL shareholders have made, the common human behavior is to see through rose-colored glasses all the things that could go right, rather than the possibility that even the slightest misstep could lead to a piling out of the stock. We'll see, but I'll bet that while the numbers on earnings and sales will still look impressive on the surface, Wall Street will find reasons to be disappointed in AAPL shares in 2010.