Sep 052015
 

Following up on my last post: Not only did we get a slightly lower low, but then the market did fall apart shortly thereafter, taking AAPL into a panic deep dive to 92. That was much lower than I thought possible. The most important aspect of that dive to 92 is how quickly price recovered higher. As I annotated on some of my charts, AAPL spent only 8 minutes under 100. That’s a firm rejection of a share price that low.

So we now have three weeks at these low valuation levels. AAPL is “Finding Valuation Support”. To the extent that the overall market remains under pressure, AAPL will too, in search of reinforcing the valuation support levels being created now. So what can we learn about the level of valuation support that has been created so far over the past three weeks:

First up, let’s look at the CPE Charts. Notice how many days have bottoms near the CPE 12 level. We can ignore the panic bottom day, with the deep dive to 92. More important are the lows under normal market conditions. And we have evidence that CPE 12 is valuation support.

Next let’s look at whether CPE 12 has historical significance by examining the Valuation Range Chart. The answer is yes. I even had CPE 12.2 already drawn in as valuation support from 2014. CPE 12.2 was the lowest valuation level during 2014, twice. Therefore CPE 12 as valuation support now makes sense.

Lastly, a quick look at my AAPL Valuation Model shows that this same valuation support level represents the bottom of my fair value range.

Looking forward: If CPE 12 proves to be support, CPE 14-15 should be reachable in the coming months. A CPE range of about 3 is common. That also represents the size of the fair value range in the Valuation Model.