Anyone who has read my blog knows that I have been a huge bear on Apple because I knew that many of the biggest mutual funds and hedge funds were dumping this stock over the last 3 months.
Yet I never mentioned the fundamentals of Apple, which everyone already know about how they have the best balance sheet in the world, a great dividend that’s higher than the 10 year treasury and growing, and now a perfect technical trading setup on the chart.
See I am an opportunist, I might have hated Apple over the last 3 months, but that does not mean I am not always looking at the stock every week to see if there are any signs of a bullish reversal.
Well we finally have one Apple is starting to form an incredibly bullish pattern its called an Inverse Head and Shoulders Pattern. Almost everyone knows what a Head and Shoulders Pattern is, it is probably the most common technical analysis pattern in trading. An Inverse Head and Shoulders pattern is an extremely bullish reversal pattern, it occurs when a stock forms a bottom buy printing a series of 3 lows. Whats important about this pattern is volume, volume must be heavy on the lowest low, because that signals a wash out- an exhaustion selling, where are the sellers have sold their position and this is exactly what has occurred in Apple.
Just look at the Chart below,
Now the second reason I think Apple is bottomed is that there is a catalyst which propel this stock back up to the $545 area, which would be a 25% move from Apple’s current share price of $433.
Here is the catalyst, Tim Cook the CEO of Apple, for the first time has come out and lobbied for Apple verbally in the public domain. This is a sign of leadership major hedge funds have been waiting for. Mr. Cook is going to congress and try and work with the US Government on repatriating the billions of dollars that Apple has overseas back into the US at a lower tax rate. I think the US Government will work with Apple and Mr. Cook on this. Why? well as Mr. Cook has said Apple is a huge taxpayer already and a huge employer of US Citizens, so they have a lot of power to negotiate and therefore I believe Apple and the US government will cut a deal on this offshore money.
Why is this bullish for the stock? Well besides the obvious cash issue, market players (hedge funds, mutual funds) hate uncertainty. As I told you these funds like to bet on sure things, and the reason they have not been buying Apple recently is the uncertainty over Apple’s offshore cash hoard. Now that this issue is coming to the forefront with Tim Cook going to congress to discuss this, the cloud of uncertainty will start to disappear. When you combine that catalyst with the bullish Inverse Head and Shoulders Chart Pattern, it means Apple has bottomed. Let me repeat that I am calling the bottom in Apple today 5/18/2013.
Just remember who told you this, remember three months from now how I was the only one who was telling you to sell Apple over the last 3 months, and now I am the only one calling the bottom in Apple.
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