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Straddle the Apple

Written by: Oliver Pursche 04/17/12 - 9:47 AM EDT
Tickers in this article: AAPL
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Not too long ago, Apple(AAPL) was riding high at about $644 a share. Today, it's $578, and under pressure. Has the bubble burst? Hardly.

I feel it's important to point out the during the 10% or so correction in AAPL shares, nothing fundamentally has changed at the world's largest technology company. The only thing that may have changed is how you now feel about it, and that's no basis on which to make decisions.

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One other blinding grasp of the obvious point I want to make. If AAPL share prices keep rising, you need to buy at ever-higher prices if you want to build a material position in AAPL. This can diminish your ultimate return. However, if you have the opportunity to buy on the dips, and you take it, this strategy can have a significantly positive impact on your ultimate returns, albeit with more risk.

This being tax day, I'm going to suggest that what the Tax Man taketh away, AAPL giveth in the form of an opportunity to get some of yours back in the long run.

I'm not going to prattle on about Apple's many strengths. There's not enough room here. But just to give you a little fortitude, here's some points to keep in mind.

  • AAPL is the pre-eminent technology company of our time and its ability to innovate is still intact, and in fact may be nascent.
  • Revenue growth is still there, with strong international market expansion possible.
  • The stock is up ~ 50% year to day and you shouldn't expect the same rate going forward.

    • High beta stocks can easily pull back 20%, so keeping this in mind $520, is, in my mind, the critical level. If you are still nervous and don't want to average down, or you just bought the stock, and have limited appetite for unrealized losses, you might consider using an options strategy to help you sleep at night.