Monday, September 23, 2013

Apple in the balance

It’s not my normal practice to comment on the action of individual stocks in this section of the report, but I found it interesting that billionaire investor Carl Icahn told CNBC today that he purchased “quite a bit” of Apple (AAPL) shares after the stock’s heavy sell-off.  Shares of the tech giant fell over 5% after Wall Street was disappointed with the company’s pricing of its latest iPhone.  Icahn said that loading up on Apple shares was a “no brainer” because they’re “extremely cheap” and are one of the “best brands.” 

What’s significant about AAPL is that Icahn’s high-profile bullish comment occurred just as the stock tested the widely watched 50-day moving average (see chart below).  While the 50-day MA doesn’t figure as prominently in my moving average methodology as does the 60-day MA, it’s nonetheless a significant trend line by virtue of its being widely used among hedge fund managers.  

The 50-day MA is also heavily incorporated into the computer algorithms of high frequent trading operations.  It would not surprise then to see Icahn’s bullish near-term forecast on APPL prove to be self-fulfilling. [Excerpted from the Sept. 11 issue of Momentum Strategies Report]