As much as it pains me to say this, the fiscal cliff can actually have a large impact on Apple as taxes on their capital gains and dividends are likely to rise next year from the current 15% tax rate. Next years expected tax rate for Apples capital gains and dividends is 35%. Yes, this means that the giant cash pile of $120 billion will be taking some hits, and investors sure do not want to keep playing the Apple ‘miracle’ game much longer.

The stock is up 150% since the start of 2010, and if you’ve got gains like this as an investors your going to take some chips off the table. The whole point is to make money and lock in profit on the way up. So, this entire decline is a result of sellers locking in profit because they don’t want to keep all the chips on the table for next years higher taxes. And on the flip side, the buying volume is very weak because the buyers are sitting on the sideline waiting to see how the fiscal cliff negotiations turn out.

Author: Peter Nitso pnitso@yahoo.com

In short, to answer the question above, yes. LULU seems to be in a cup and handle pattern. Further examining this chart, the cup was the ‘rounded bottom’ and the handle is the downtrend since September. The chart below displays the pattern. The next chart includes a Fibonacci retracement of the ‘cup.’ LULU bounced off the 50% retracement level and has since rallied nearly 10% to current levels. The question remains, where will LULU trade to after this pattern.

The analyst community seems to be taking the bullish side of the pattern, for maybe the fundamentals will propel the stock to the upside and resolve the chart. CS, Credit Suisse, recently raised their price target to $86, but Nomura, on the other hand, kept LULU at a hold, but raised their price target to $67. LULU trades at about 44x trailing twelve month earnings. Other athletic apparel stocks, like UA and NKE, trade for 50x and 21x respectively…a wide range. With respect to PE multiples, the analyst community is expecting a PE of 29x for next fiscal year. Of the 23 analysts that cover the stock, they, on average, expect LULU to trade at $82.00/share…$10 or about 14% from current levels.

LULU will be a stock to watch, for its volatility represents opportunity for traders. With respect to the aforementioned volatility, LULU has weekly IV (implied volatility) of about 43% or an implied one standard deviation move of plus or minus $3.30.

Feel free to e-mail any comments, feedback, suggestions, or general inquiries to… Author salernoma@mx.lakeforest.edu

http://watch.bnn.ca/business-day/december-2012/business-day-am-december-13-2012/#clip826013

Incoming premier Li Keqiang, who will succeed Wen Jiabao in March, will be present at the CEWC and is widely viewed as a proponent for bolder reforms. The closely watched meeting’s focus will be on macroeconomic policy, tax reform, income distribution, and urbanization. Output from the session is expected to include plans for further monetary easing, with lowered rates to cut corporate financing costs and gradually lower reserve requirements for banks.

As China’s economic data seems to be turning a corner, one play could be avoidance of US Chinese ETFs, whose movement has been divergent from the Chinese stock market, and instead make a long play in commodities. Forecasted to slow, Chinese copper consumption could maintain 4.8% growth or improve, creating opportunities in copper futures and related equity options. 

John Voorheis
KOTM Contributor
jlvoorheis2@gmail.com