Continuation from yesterday…...To summarize, Apple’s stock price appreciated 3,700% (37 bagger) between its 2003 entry point and today. In fact, as our earlier analysis showed, we would have taken a position in Apple, Inc stock in May of 2003 at $2.50 a share. Yet, it would not be an easy ride up. Over the last 11 years the stock had suffered a 60% drop in 2005, another 60% drop during the financial crisis of 2007-2009 and a 45% drop in 2012-2013. Leaving us, once again, with two primary questions.
- Would most investors be able to hold on to their Apple stock while going through such massive sell offs?
- Should investors trade out of their positions and even go short when such declines occur?
As discussed earlier, most investors would not be able to sustain such massive drops without first getting out. Most likely at exactly the wrong time. That is why a proper application of set trading rules becomes so important. So much so, that in many cases it can easily double or triple the overall return on the underlying stock. Easily turning Apple’s 37 bagger into a 60 bagger over the same time length. Let’s now take a closer look at Apple’s trading history to ascertain if we would have been able to trade in and out of the stock at the right times.
Our first significant decline in Apple’s stock price originated in February of 2005 at around $12.71 a share. The stock price then proceeded to collapse to $6 a share within a week, only to bottom at $5 a share a few weeks later. Delivering a rapid 60% loss to Apple’s shareholders. Unfortunately and as mentioned earlier, fundamental analysis would not have helped us anticipate this collapse. We have rely entirely on our technical and mathematical/timing analysis in order to foresee such moves.
Between our May of 2003 entry point and February of 2005 top, Apple’s stock price had already ran up from $2.50 a share to $12.71, a 400% increase in little over a year and a half. Even though the company’s iPod sales were surging as well, any investor should have been wary of his or her stock appreciating that much and over such a short period of time. Particularly, after Apple’s stock price went parabolic in mid 2004. It was a clear warning sign.
To Be Continued Tomorrow……..
