We often discuss gravity in relation to the stock market in general but, in honor of Sir Isaac Newton, I think it is apropos to discuss gravity as it relates to one particular stock – Apple.
As Sir Isaac discovered, when an apple gets to a certain mass, the weight of the Apple becomes greater than the strength of the stem and gravity causes it to break off the tree and fall to the ground (I know, Duh!, but modern physics is based on this guy figuring it out).
When you want an apple you can either wait for nature to take it’s course or you can try shaking the tree to knock a few Apples loose, even though they weren’t quite ready to fall just yet.
A stock is much like that, Apple computer’s stock in particular looked ripe and juicy (overbought) and there were a lot of people standing around under the tree thinking it would fall to a more reasonable price any moment but the tree (the overall market) just kept growing and the Apple stock just got further and further away from what they wanted to pay (myself included).
Since the Apple stock wasn’t really falling on it’s own, some people got impatient and tried to shake the tree, using rumor and innuendo in a quiet market week when they thought no one would be watching. They did manage to shake out a few shares but, in the new age of rapid electronic media (REM), rumor mongering will only get you so far…
I’m very proud of the discussions that were held on my web-site as well as much good, factual reporting I have read around the web that kept this little incident from depriving our readers of their shares with what looks to be "much ado about nothing."
While I have been a huge advocate of "wait an see" while the Apple tree was shaking and we have done very well grabbing calls during the panic, I am still glad we did cover those bets by selling other calls against them. The real issue, the SEC investigation, is still not over so we will have to wait a bit today, perhaps pick up a few higher calls with our profits from our earlier trades as momentum plays but let’s not lose our heads as we are not out of the woods yet and that’s still…