AAPL: What Did You Do With Your Apple Shares?

| January 19, 2011 | 0 Comments

Have you ever woke to bad news from a company whose stock your holding?

Most of us have at some point…

It’s not uncommon to turn on the morning business news to see a stock down big.  And that’s exactly what holders of Apple (AAPL) woke to Tuesday morning…

Investors are in a tizzy as AAPL CEO Steve Jobs announced he’s taking a medical leave of absence.  Nobody’s sure how long the absence will be, but the news has some investors worrying.  The future of AAPL’s market leading innovation comes into question without Steve Jobs leading the company.

The unexpected news pushed shares of AAPL down 5.4% at the open of trading on Tuesday.

A drop of 5% may not sound like much…

But since AAPL was a $348 stock last Friday, a 5.4% drop translates into nearly 20-point plunge.

For many, it’s a helpless feeling to see an investment plummet from where it closed the previous trading day.  And unfortunately, most inexperienced investors react the same way… they panic.

Their temples sweat as they dump their shares as soon as the market opens.  Or worse, they put in a market order before they head to work.  They’re willing to sell their shares at any price, just to get out of a plummeting stock.

They’re succumbing to a basic emotion… fear.

Ask any investment professional and they’ll tell you panicking is the worst thing you can do.

If you tend to panic in situations like Tuesday’s big drop in AAPL, listen up…

The tip I’m about to give you may keep you from throwing thousands of dollars out the window.

You need a plan for unexpected news events moving stocks in your portfolio.  If you have a plan, you’re far more unlikely to make a rash decision… one that can knock the spots out of your portfolio.

As you can see in this 30-minute intraday chart, AAPL was down sharply on Tuesday morning.  Shares opened for trading at $329.52… down $18.94 from Friday’s close of $348.46.

For inexperienced investors, this is all they needed to see and they dumped shares as soon as the market opened.

If you sold on the open, you’re letting fear rule your investing…

You should always let 30 minutes of trading pass in a situation like this.

By waiting, you’re doing two things.

First of all, you’re giving yourself time to get your wits about you.  Having a stock like AAPL make a big downward move can give you the heeby jeebies.  Take a few minutes to relax and take a deep breath.

Second of all, you’re letting the market settle and find its intraday trend.

You see, markets tend to overreact on bad news in the pre-market.  The overreaction causes shares to open down farther than warranted.  The “gap down” may lead professional investors to step in and buy the weakness.

But sometimes the news may be bad enough that even the pros want out…

If the stock breaks the lows of the first 30 minutes of trading… then you can sell.  But at least you gave the stock the chance to rally.

Take a look at AAPL.  It never broke the lows of the first 30 minutes of trading.  You can also see the shares rallied over $11 from the open to end the day at $341.00.

Experienced investors used the bad news as a buying opportunity.  And with AAPL reporting stellar earnings on Tuesday evening, shares are even higher today.

The bottom line is this…

If you made an emotional decision and sold your shares of AAPL on the open Tuesday… you got hosed.  By simply waiting 30 minutes, you could have prevented yourself from selling at the lows of the day.

If you feel the urge to sell your shares as soon as the market opens… STOP!

Relax and take a deep breath.  Bring up a 30-minute chart and watch the trend develop for the day.

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Category: Technical Analysis

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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