There’s money to be made on AAPL – but now how you think
There was likely at least one pleasant surprise in your portfolio yesterday.
I’m talking about the roughly 4% bounce from none other than Apple Inc (AAPL).
Of course, it isn’t all that surprising to see it rally when it’s the subject of headlines like this…
This is the first time in six years that Goldman has given a buy recommendation on AAPL stock.
In a headline-driven market, an endorsement from the gold standard Goldman Sachs will surely drive things higher. And if they’re recommending to buy, then you should clearly be adjusting your own calibrations… right?
Wrong.
These buyers are missing a crucial point of information. And that’s why they’re set up to fail and we’re biding our time before we rake in the cash.
I get it, six years is a long, long time. That means there has to be a good reason.
Well, there is. But unfortunately, it’s not a reason that is going to help the traders buy.
On a surface level, there’s not exactly much cause for this shift. Sure, Apple is still ideating and releasing new models of their main product lines, but there aren’t any groundbreaking, iPhone- or Airpod-level-innovations waiting around the corner.
So then, what changed for Goldman Sachs to recommend buying? Well, it’s not that something changed, it’s that something accumulated. And that’s Goldman’s shares of AAPL.
They’ve been increasing their position in AAPL with their private equity clients, with their mutual funds, with their hedge funds, etc.
This is a nice illustration of that fact…
Since the pandemic lows, this chart shows that Goldman Sachs has increased its position in AAPL by roughly 150%. That’s significant.
Although the firm hasn’t gone out and said “buy” until yesterday, it was clearly out there buying itself.
For what it’s worth, since those aforementioned pandemic lows, the value of those shares has jumped from $6 billion to $12 billion, so, not too shabby.
But I want to pump the brakes for a second and dig deeper into the fact that it took six years for Goldman to press this button again.
Because there was a lot that happened in the six years that Goldman Sachs wasn’t recommending you buy AAPL.
Namely, well, AAPL jumped 400% in that time frame. All things considered, I bet a lot of you wish you had been recommended to buy.
So when I take a look at the current climate for AAPL and what exactly could spur this shift from Goldman Sachs, honestly, I come up empty.
Let me be clear, there could be some stuff that Goldman knows that I don’t that justifies that shift.
However, from where I’m sitting looking at the technical data and fundamentals, it’s a little suspicious that this is the time it changes its tune and not at some point during that 400% ascent.
And then I saw this little nugget of information…
For those who don’t know what they’re looking at, this is Goldman Sachs’ activity with its AAPL position. And that red “110,208” on the far right means that Goldman has sold more than 110,000 shares of a stock it just recommended people buy.
As I said, there may have been good reason for that recommendation, and Goldman certainly had a significant enough position in AAPL to unload a handful without making a dent.
But there’s also no denying it made a pretty penny off of that bump.
Ultimately, when I look at AAPL and the recent activity juxtaposed against the aforementioned technicals and fundamentals, I’m not biting.
I just have a hard time believing Goldman Sachs would sell a single share of AAPL if it felt there was another 400% boom incoming.
I’ll let those people who trade headlines worry about the fluctuations that are to come. Instead, I’m going to deploy a strategy that I know works.
Patience is key here. I’m waiting until all of the hubbub dies down around this Goldman-induced frenzy, and I’m trusting my technicals.
These rallies tend to last about three to four trading days – and that’s when I short it.
The same logic applies to downgrades that applies to upgrades. If someone downgrades a stock that’s trading higher, I’ll wait to buy it on the way back up. In the case of AAPL, it was trading down for the second half of February.
But all of that sets us up perfectly for our move.
When I look at AAPL, once that downward trend from February resumes, which would cause a break below the 200-day moving average (MA200), look to buy shorts – likely at about the $150 point.
We’re targeting a price of $140 with a four-week expiration. This will allow the market to come back down to reality and right into our hands.
I wanted to make sure you got this info because I didn’t have enough time on this morning’s show to cover it.
That said, you’ll want to make a point to tune into the morning show because I’m going to be keeping an eye on this and our timeline for action could come sooner than expected.
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March 07 2023
