Mon 3/19/12 3:41 PM – Should You Buy Apple Now?

Friday I made a very brief case for Apple stock being undervalued but probably overowned right now. Let me finish that thought.

When stocks get so far above their 150-day or 200-day moving averages, and Apple is 40% above its 150 day moving average, most stocks will sell off before very long. As I mentioned, AAPL is up 43% YTD as of last Friday and is up another 2% today. It was up over 4% earlier today.

Carter Worth, technical analyst for Oppenheimer said on CNBC today that AAPL has been this far above its 150-day moving average 12 times in its history, going back to the initial public offering in 1982. Nine times it has continued higher for the next 1 month and 3 month periods. But, he thought this would be one of the exceptions because so much good news has already been announced, including the company instating a 1.8% dividend, just announced today.

I agree with Carter. AAPL may indeed go higher for the next few days or maybe a few weeks but the mania over AAPL is too hot for my tastes. I do own AAPL stock but I may take profits before long and buy it back after a decline. That’s speaking for me alone and my individual investment personality. It is not a recommendation that you necessarily do the same.

When even mutual funds that by prospectus should not own AAPL do own it, for example small cap funds and when AAPL is very frequently in the news on a “wow” basis I think it is time for it to cool down. If it does, its size will pull down the S&P 500 and Nasdaq indexes too. As I said Friday, AAPL alone accounts for half the gain in the S&P 500 this year and that works in reverse too. As a tech stock alternative you might want to look at PayPal owner eBay (EBAY) or mobile phone technology leader Qualcom (QCOM), though I would to see a market pullback before heavily buying either stock.