Continuation from yesterday……..To summarize, Apple’s stock price appreciated 7,400% (74 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 $1.25 a share. Yet, it would not be an easy ride up. Over the last 11 years the stock had suffered a 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 rate of return on the underlying stock. Easily turning Apple’s 74 bagger into a 140 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.
The first real decline in Apple’s stock price took place during a bear market of 2007-2009. During this time the company’s stock price declined from $29 to around $11.50 a share. A 60% collapse.
Further, the mathematical/timing and technical composition of Apple’s stock during the time was almost identical to the setup of Keurig’s stock. Without repeating that analysis here, an analyst following Apple’s stock and the overall market should have been aware that a bear market was about to begin and that the company’s stock was likely to decline with the overall market. In other words, investors should have been on a heightened state of alert during this time. Ready to liquidate their long positions and to go short at moment’s notice.
Finally, Apple’s trading pattern during this time was almost identical to Keurig’s as well. In other words, we would have traded in and out of the stock in the early to mid 2008 at a net zero gain/loss. Around $22-23 a share. However, we would have been able to catch the final decline in September of 2008, going short at approximately $21 a share and ridding the stock all the way down to its final bottom of $12 a share in March of 2009.
To Be Continued Tomorrow……..
