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Apple is a Buy… At 60 Per Share

When Apple Inc. went public at $22 a share in 1980, it instantly made about 300 people millionaires. 35 years and 4 splits later, Apple stock reached an all-time high of $134.54 in April, 2015, which valued the company at over 700 billion. Apple’s stock price is currently hovering around $117 a share after a plunge below $90 in May, 2016. According to probably the most popular investment strategy – “buy the dip” – it is a good time to add Apple stock to your portfolio before it climbs to a new historical high. Well, it depends. If the correction is really over and the uptrend has resumed – jump on board. But what if it is not? Let’s use the Elliott Wave Principle and see if it is safe to to buy some Apple stock.
Shown above is a monthly log chart, which shows the whole uptrend since the company’s IPO nearly 36 years ago. As visible, the stock is far from a complete five-wave impulse, so we need to determine which phase of it is currently under construction. It all started with a leading diagonal for wave (I), which took until April, 1991 to develop. Naturally, a retracement in wave (II) followed, which bottomed out six years later – in 1997 – and gave the start of wave I of (III), which culminated in March, 2000. The Dot-com crash did not spare Apple’s stock, causing a plunge of about 85% in wave II of (III). But the company was among the handful of survivors. Wave II bottomed out at $0.91 in split-adjusted prices and gave the start of the stock’s strong bull market in wave III of (III). On the chart, the 2007-2009 market crash fits in the position of wave (2) of III of (III). Then, waves (3), (4) and (5) finished the entire wave III in 2015. Which leads us to the conclusion that the weakness to $89.47 should be a part of wave IV of (III) down. Just a part, because it is far too shallow to be all of it. Fourth waves typically retrace back to the termination area of previous fourth waves. In Apple’s case, wave IV should be expected to decline to the level, where wave (4) of III ended – $55.01. It would be an exceptional coincidence, if the price declines exactly to that same level, so let’s just say that the area between $60 and $50 is likely to be the bears’ next target. It turns out that, if this is the correct count, Apple stock should get roughly twice cheaper than it is today. Why rush buying something, which could lose half its value from now on?

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