Posted on January 20, 2020
A little friendly advice to begin…
Clarence Darrow once wrote that –
“A criminal is a person with predatory instincts without sufficient capital to form a corporation.”
And he was certainly on to something.
But we’d like extend it a step further to include anyone “…without the wherewithal to get himself elected.”
And if we might importune upon our good reader with a further admonition – that anyone who aspires to a position higher than the pie-baking group of the local welcoming committee should be viewed with extreme prejudice, and is more than likely a sociopath, if not worse.
There. It’s out.
We’ve got a bang-up trade for you this morning, friends. It involves one of the five largest companies by market cap in the U.S. of A. – Apple Inc. (NASDAQ:AAPL).
Incidentally, those five companies are comprised of Facebook, Microsoft, Apple, Google and Amazon.
Or, as Hillary likes to put it –
Anyway, Apple is currently trading at the top end of analyst estimates, and we’ve had two downgrades since just New Year’s.
Not good news.
Trailing P/E is a sky high 26.9, yield is less than 1% and Price to Book is a whopper-doozy 15.8.
But more than that, the technical picture is miserable.
This is the last six months’ truck on the stock –
Yes, AAPL has risen like a phoenix, but she appears destined for another fiery flameout within days.
As we’ve discussed here many times, an RSI overbought read presents a danger to investors.
But a weekly overbought is outright carcinogenic.
If you’re an Apple long at this stage, it’s probably better not to take a bite of your profits, but to pull out Aunt Betty’s Nutmeg Apple Crumble recipe and make a family-sized batch of it all.
Here’s the weekly –
And the breakdown –
With utmost care.
Apple may have higher highs waiting down the road, but the current jig is up.
Fact is, investors as a whole are in risk-taking mode. And that’s a dangerous phenomenon. When it occurs, it’s best to keep your distance and prepare for a rotation into a safe haven asset when the screaming begins.
And that’s precisely how we’re playing it.
We’re pairing Apple with the long bond, as represented by the iShares 20+ Year Treasury Bond ETF (NYSE:TLT), because the disparity between the two is almost comic.
See here –
When the snap-back comes, we’ll see a good take from this pairing.
A Jew and his Money recommends you consider selling the AAPL September 18th 400 CALL (now 25% OTM) for $4.60, and purchasing the TLT January 15th (2021) 142 CALL (now 2.9% OTM) for $4.65. Total debit on the trade is $0.05.
With kind regards,
Hugh L. O’Haynew