Recently I have really gotten into the series The Walking Dead. I love the story lines, the character development, the imagery, and most of all, the plot twists.
But even as the dynamics of the series change on a weekly basis, there is this overwhelming, foreboding feeling I get, that at the end of the day when the final episode is aired, everybody gets wiped out. It just seems inevitable.
That’s what I feel is going to happen to the masses of $AAPL perma-bulls out there. They are the walking dead, but they don’t even know it.
This multi-year run in $AAPL is more than long enough to teach a whole new generation of Kool-aid drinkers that “buy-the-dip” is the best way to make money in the stock. They are convinced that no matter what happens to the markets, or to other stocks, “that won’t happen” to their beloved $AAPL.
They make the iPhone….remember?
But those that have been in the markets for longer than it takes to get a college education know that the music will stop eventually. It always stops. And when it does, those without a seat are going to get their heads handed to them.
And the thing is, it won’t even take a massive haircut in the price of the stock to wipe out the $AAPL infected. Margin will wipe out most of the faithful $AAPL bulls. The pattern is always the same.
Buy the first dip using SOME of your capital. Buy the second dip using ALL your capital. Buy the third dip using SOME of your margin. Buy the fourth dip using ALL your margin. You never get to the fifth dip. Those of you who are already on full margin in $AAPL and were down 10% today at the lows know what I am talking about.
For more thoughts on “buying the dip” and avoiding ending up a trading zombie see “The Importance Of A Trading Methodology, Or What Not To Do In Vegas After Getting Shitty Drunk.”