Apple Computer (AAPL) continues to do very well even after the departure of Steve Jobs. On the October 20th edition of Fast Money on CNBC, Carter Worth (chief market technician at Oppenheimer & Co) recommended doing what the hedge funds do: sell Apple when it breaks trend.
To determine trend, Worth suggested simply drawing a line along the low prices (see the solid red line above, the top graphic shows the moving average line in solid red) to establish trend. The graphic above compares the "trend selling" approach to the attractor bootstrap 98% prediction intervals for AAPL. The logic of attractor analysis would seem to be to take some money off the table anytime that a stock is above its attractor value and to definitely sell when the stock crosses the lower 98% prediction interval on the way down. You would buy in again either when the stock crossed the lower 98% prediction interval on the way up or when it bounced off the bottom (2009 for AAPL), if you can somehow tell where the bottom is.In either approach, you would have been totally out of AAPL in late 2008 and buying back in (depending on the other uses of your money) until 2011 when you might have started taking some money off the table using attractor analysis. For the future, it's less clear that trend selling will work past the middle of 2012 when the trend line crosses the attractor.
It will be interesting to wait and see how each approach works about one year from now. It would also be interesting to compare how well these two approaches would have done in terms of a portfolio that invested $1000 at the bottom in 2009. The trick would be to decide what the portfolio's "other uses of money" might have been!
