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Thursday, August 23, 2012


A lot has been written about Apple's rise to the top of the most highly valued corporation list.  There have only been five other companies to make it over $500 billion in market cap.  Microsoft had the record until Apple took it away the other day.  I thought it might be interesting to look at the charts of what happened to the other stocks.

Finally AAPL.

XOM had the smallest sell off after the final high, but it also made the smallest increase in stock price in the last few years into its top.  As far as percentage increase goes, AAPL is more inline with the other stocks that suffered big collapses.  However, it has been growing revenue and earnings so fast that valuation metrics do not show it over valued like the other stocks were in 2000.

What happens to AAPL now?  Clearly the chart has gone parabolic.  If you have looked at a lot of charts you have seen parabolic up moves and they always end with deep corrections.  AAPL is a great company, but it is over owned and has gone straight up without any shake out moves.  I read the other day on Zero Hedge that 230 hedge funds own this stock.  That would scare me a little if it is true.  Their idea of long term is not the same as most individuals.  At some point it will stop and people will want to cash out.  When that happens it will probably end up down 40-50%.  The only question is when.  Clearly this is not the place for long term investors to be buying in.  The risk is high.  If you are long enjoy the ride, just don't be the last one out the door.

When I was putting the charts together for this post I realized that the two prior instances of any stock getting over $500 billion in market cap the market made a major top.  The first four stocks did it during the massive euphoric rally into the 2000 top.  There was only one at the 2007 top.  Now we have another one.  Maybe this is just coincidence.  Maybe it is a sign of over exuberance.  I guess time will tell.



Anonymous said...

Bob, thanks for sharing these great charts. What Moving Average does the white line represent in your chart?

Traderbob58 said...

The white line is the 100 SMA. You can visit the chart setup page to see all the settings.



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