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Apple Investors: Capital Preservation First, Maximum Profits Second

by: Zach Bass August 27, 2008 | about stocks: AAPL / QQQQ    

Zach Bass

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I’ll be the first to admit that in the last couple of weeks my technical analysis has been all over the map in terms of near-term market direction. My long-term is solid, the markets look good after Labor Day and in the coming months. But today put a little shiver in me, even with the ultra low volume. We are at the precipice of a major breakdown in the markets. I’m not saying we will break down, I’m saying we’re peering over the edge.

My most recent analysis from Sunday evening (August 24) pointed to an uptrend was likely, particularly with Apple (AAPL) and the Nasdaq (QQQQ), but Monday a confluence of market nasties has nearly wiped clean that optimism. So in times like these I revert to my mantra, my time honored and trusted philosophy:

Capital Preservation First, Maximum Profits Second

Here’s what I saw Monday (August 25). It started with futures slightly down, then when the market opened a wave of pessimism penetrated throughout, fueled by the continuing credit woes. We gapped down, successfully backtesting the rising wedge we broke out of last week, and we never looked back for the rest of the session, a solid red candle. 

The good Housing report had little to no affect, with any gains it produced quickly sold off. Market internals were dismal too, with Decliners pummeling Advancers by more than 3 to 1 on both the NYSE and the Nasdaq. The S&P 500 hovered above critical support at 1260, the Naz skated across thin ice near 2360, and AAPL just kept stepping down showing no leadership among the Tech heavyweights. If we lost these levels, there would be massive breakdown. The Bulls would crawl into their carapace and the Bears would have full control.

So what do you do if you’ve taken long positions? You set very tight stops, buy protective puts, maybe straddle your position, or simply get out entirely until the market decides which direction it’s heading. I expect a small bounce in the morning, we’ll see what the futures hold, so there should be ample time to take defensive measures. Hopefully this storm will pass, but until it does… Capital Preservation First, Maximum Profits Second.

EDIT: Oil futures down big Tuesday morning as of 8:31 AM EST, looks like disaster may be avoided. I would still take the defensive measures that I have recommended. 

Stock position: Long.

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This article has 6 comments:

  •  
    Aug 27 08:07 AM
    Average it out and you, with your charts and strewn entrails, have been about as accurate as a thrown dart while blindfolded. What can you hang your hat on?
    Reply
  •  
    Aug 27 10:02 AM
    Put away the charts and take a look at the economic fundamentals. Wall Street is whistling past the graveyard and hoping that the folks at home don't notice. Doesn't matter, forced liquidations are coming and all this back and forth is prepping the traders to pick up some of that overvalued paper on the "dip".
    Reply
  •  
    Aug 27 10:27 AM
    as a 'buy and hold' investor, the charts don't mean much to me for a company as financially secure, innovative, and with a huge reputation moat like Apple has. i do think the recession hitting europe will cause some problems...but...it's a chance to buy more on the dips. Apple will expand into demand abroad, even during a down time, just like it is here. since i don't understand all those people at the slots in Vegas, i sure don't understand day traders. but for people who invest in quality companies that have strong financials, Apple is a great buy.
    Reply
  •  
    Aug 27 11:05 AM
    Useless blathering
    Reply
  •  
    Aug 27 11:45 AM
    Zack, nice to read that you're the first to admit that you talk out of both sides of your both. Inference to be drawn is that you really have no idea what you spoo on this blog on a daily basis. More likely, it appears to be some cathartic release for you to rationalize you constantly changing position in AAPL. It would be one thing to take a long term position & share with us your rationale, but it's a completely different thing to explain yourself on such a short term basis, as such thinking makes a market.

    Bottom line, you're such a small fish that what you have to say is of absolutely no value nor consequence. Spare us unless you have to share your longer term views of the stock. TIA.
    Reply
  •  
    Aug 27 04:05 PM
    Useless info. You may have zero talent as a stock guru but you are one hell of a self promoter.
    Reply
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