Tuesday, January 18, 2011

Today's Apple Game Plan

By Eric Jackson
RealMoney Contributor

1/18/2011 9:36 AM EST
Click here for more stories by Eric Jackson

Anything that Apple (AAPL - commentary - Trade Now) announces relating to its new products is major news. So you can imagine that when the company announced Monday just before 9 a.m. EST that CEO Steve Jobs was taking a medical leave, it sent the blogosphere and mainstream media alike into fits trying to figure out its implications on various scenarios.

We need to think of the trading implications here, and specifically how the stock will trade today.

Yesterday's announcement led to an immediate 6%-7% drop in Apple's German-traded stock. Here in the U.S. the stock has traded above $330 for most of the premarket, which signals a 4% loss -- not as great.

However, I expect a down move within the first hour of trading today. There are many retail investors, mutual funds and hedge funds that will likely be quick with the trigger finger, especially if the stock does move below $330.

Despite a move down at the start of trading, I expect it to quickly reverse and the stock to start to immediately draw in buyers looking to get some of the stock on a discount ahead of the earnings later tonight. As buying slowly sends up the price from any initial lows, look for copycat buyers to keep pushing it up. Apple is certainly a one-sided trade: You don't come across too many bears on Apple, and this is especially true among the larger institutional buyers. Those fans will start to come out of the woodwork as the day goes on.

You can also expect many shareholders to come on CNBC and Bloomberg today talking about Tim Cook and how he is a "known quantity" this time as opposed to the last time Steve Jobs left the company. This is true (even though it's a simplistic analysis). Cook has emerged in the last seven years as a trusted voice with investors and someone who has competently led the organization to its current position.


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