“SAN DIEGO (MarketWatch) — Back in November of 2011, I wrote an article about Apple for MarketWatch. At the time, I stated the following: “The bottom line is this, however; there is currently not a cheaper quality growth stock in the entire market.” In other words, I loved the stock.
I based that opinion on three important factors that I always consider before buying a stock. I like stocks with good long-term and short-term relative strength, a compelling valuation, and a strong stock chart. At that time Apple possessed all three of these characteristics.
Apple’s shares AAPL -1.71% were trading at $363.57 back then. By September of 2012, the shares hit a peak of $705, and I continued to hold my shares here at Gunderson Capital Management. At $705 the shares were not as cheap as they once were, the relative performance was stellar, and the chart was obviously hitting new highs, although it was starting to get extended.
Everyone who owned Apple at that point had a profit in the stock. It was getting hard to find much more demand, as most of had already been satiated. The stock finally started to roll over after a meteoric rise.
As a widely held, big winner like Apple begins to roll over, it goes through several stages of distribution. At first, the correction looks like nothing more than a routing pullback within the primary uptrend. The nervous Nellies and short-term traders are the first ones to head for the exit.
In the past, Apple had always recovered after a bout of profit-taking and marched on to new highs. This time was different, however. By early October, the stock broke below its 50-day moving average for the first time in six months. Early profit-taking then started to escalate into some serious selling. I sold my shares on Oct. 8 at $637 per share…..”
