Apple Prophecy - fulfilled.

O n 21^st October 2012 I wrote “It seems that Apple may correct up to 450 – 500 levels dragging index with it.” 

Today Apple has fallen 10% today and such gap up or gap down often occurs nearing the end of the trend. When we look at the monthly and quarterly chart of apple we can see that it is nearing the support of trend line. Since this uptrend started in 2003 it would be difficult for this stock to break below the trend.

More over the stock has already corrected 246 USD or 35% from its high of 700 USD. Therefore a good pull back rally is inevitable. If we look at retracement in apple 50% retracement happens at 380 USD levels.

I think Apple will bottom out at 430 – 450 USD and may make a panic bottom at 380 – 400 USD. I think this is a very good time to buy Apple using the following strategy.

Strategy 1

Buy 33.33% stock at CMP of 455 USD,

Buy 33.33% stock at 430 USD

Buy last tranche of 33.33% at 400 USD

The average cost of buying would be 424 USD, place a stop loss of 375 on weekly closing basis (13%) and target of around 600 USD (41.5%) in next one year

Strategy 2

Alternatively one can also buy one year call expiring on 18^th January 2014 by paying a premium of 28 USD.  Average out calls at 430 and 400 Level and keep a stop loss of 375 on weekly closing basis.

I think both these strategy have potential to give 30% – 50% returns in next one year.   

Other post on Apple

11^th November 2012

19^th January 2013

Disclaimer:-

This blog is for information purpose only. Any decision based on my blog is solely your responsibility. Kindly consult a qualified financial adviser before acting on any information mentioned in my blog