The same loud and vociferous financial cable TV pundit who was out there declaring Apple (AAPL) as an "investment, not a trade!" back when the stock was well north of $600-a-share is out again saying that AAPL is "cheap" at 8.9 times earnings. This reminds us of those who declared Research in Motion (RIMM) as "cheap" when it was selling at 10 times forward estimates back in March of 2011. Interestingly, AAPL is selling at 10-times forward estimates today. When RIMM was declared "cheap" at 10x forward estimates it was selling somewhere around the 60 level back in March of 2011. The stock then went on to a log final low at $6.22 in September of 2012.
As we outlined the trade in our Pre-Market Pulse report of last Thursday, January 24th, AAPL has broken out to the downside and through the neckline of a big head and shoulders formation. The stock remains a short on rallies up towards the intra-day high of that day at 465.73. The stock is currently trading within about 2% of that high, so is within shortable range, using that high as your short-term stop. In our view, AAPL continues lower over the intermediate-to longer-term, it is just a question of how far it bounces when it bounces from time to time. We look at this current "wrong-way-pundit-fueled" bounce as a potentially shortable rally, and the closer it gets to the 465-466 level the better, although it is within what we would consider risk-tolerant levels at 2% below the short-term stop at 565.73.
Fair disclosure: we will be testing a short position in AAPL on rallies such as we see today, but could be in and out of the stock depending on how far any rally carries.