Apple (AAPL): Buy the Rumor, Sell the News

December 17, 2012 3:33 PM EST
There's an old saying on Wall Street - "buy the rumor, sell the news." It essentially says investors should buy in anticipation of an event happening and sell once that event has occurred. Strangely enough Apple (NASDAQ: AAPL), the world's biggest company by market value, still falls victim to this old Wall Street adage.

If you look at the chart of Apple ahead of key events like earnings or a product announcement you will see the run-up into the event and the sell-off after. The most recent example is the iPhone 5 launch. Shares tapped its all-time high of $705.07 on September 21, the day the new device launched. It has been all downhill since.

The recent 27 percent sell-off from the highs has left Apple investors asking what's the next catalyst for the stock. Put another way: What's the next rumor. Let's face it, Apple needs a good rumor to get the stock going again.

Well, just in time for Christmas there is a new Apple rumor making the rounds amongst the smart money on Wall Street, although this one is not related to a product offering.

You see, much of the recent downside in Apple is being blamed on fiscal cliff selling and other tax loss selling. The talk on the trading desks it to let Apple do its thing, step to the sidelines and watch. Once the year finishes buy all you can.

With the suggestion that after the end of the year, tons of smart, big money investors will be buying Apple hand over fist, what is one to do? Front run them of course.

In effect, the rumor of smart money buying at the start of the new year could create real buying now, giving the stock a rally into the year end. Once the new year starts then more selling.

Long live "buy the rumor, sell the news".

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Sebastian on 2012-12-17 19:37:11
Mark as Spam | Reply to this comment

Please re-read the last two out of three sentences you wrote. Did you have a train to catch while you were finishing?

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