Biting Into Apple Could Turn Sour

To buy or not to buy

By Jessica Greene and Scott McGrew
|  Tuesday, Oct 20, 2009  |  Updated 9:30 AM PDT
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When the numbers are way, way up it's not really the best idea to hop into the market.

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After Apple Inc. announced  its fourth-quarter financials were its "best ever," investors bit into Apple stock -- shares of the tech giant hit an all-time high Tuesday morning.

The company seems to be an endless source of good news for the market. But that doesn't mean investors will benefit from the profit-taking.

Revenue jumped 47 percent, the company announced Monday, thanks to sales of iPhones and Mac computers. Buyers rushed to purchase shares, violating one of the basic tenants of investing: buy low, sell high. It's sort of like the housing market -- don't buy at the height of the market.

Even though it's tempting to get into the hot stock, most analysts advise buying stock before a surge. Steven Mallas, of Blogging Stocks, warns:

"Although I feel bullish about Apple's future prospects, I would definitely ask anyone to consider waiting for the shares to consolidate, at least a little, before either starting a position or adding to one. If Apple does close at a new 52-week high, and if the volume is sizable, then it technically should be ready to continue in an upward direction. Even so, I'd watch the price action over a few sessions to get confirmation that the market is still on Apple's side." 

Many tech companies see Apple's recession-proof peformance as further encouragement to chip away at the company. The blog Daily Finance thinks the improved Windows 7 will help stall the defections from PCs, and Verizon's latest Google phone may keep some customers to switching to iPhone and AT&T.

"The free ride could soon be over," Alex Salkever writes, "as Apple finally faces a real battle for the hearts and minds of the unconverted."

Investors are expecting even more growth from Apple when the iPhone launches in China at the end of this month. And, oh yeah, the holiday season is just around the corner and iPods fit nicely into stockings.

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