ONGOING MARKET PLAYS

Apple: Beaten Too Hard

Wednesday, July 23, 2008, 2:20 AM ET

Apple (AAPL) shares hit on weak forecast despite strong earnings. The intra-day bottoming out as well as enormously high call option activity clearly indicate that large traders bet on the upturn and intend to push the stock higher.

Apple (AAPL) shares hit on weak forecast despite strong earnings. However, the fundamentals remain very strong: forward P/E (25) << trailing P/E (33) , PEG <1.25. On Jul 23rd, he stock dropped 12% at open but later successfully erased a half of these losses. This intra-day bottoming out as well as enormously high call option activity clearly indicate that large traders bet on the upturn and intend to push the stock higher. The overreaction offers a very good entry point. The AAPL stock looks very attractive below the 165 level

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