Corrections are normally defined as around a 10% pullback off the most recent high. Some corrections do go deeper than that (to near the 20% bear market territory). Given that the overall market has seen gains of up to around 30% (like in the S&P 500) from between October 2011 to April 2012, a breather is all but natural because there will be those looking to take profits.
This is where the whole technical analysis aspect comes into play with moving averages (50 and 200 day moving averages), chart patterns, market sentiment, volume, volatility, and trends where short term, the movement of the market becomes a self-fulfilling prophecy.
Likewise, the anticipated correction in AAPL (Apple) which I previously mentioned, is also taking place. I believe there’s a few more percentage points to the downside for the stock. Back on March 30, the stock had briefly dipped below $600 (where there seems to be huge support) so I expect it to re-test this area (possibly Monday). If support fails, then I’m looking at around $575-590 (there’s a nice gap at $570-589 which could possibly be filled). Regardless, I see this as a buying opportunity (as part of my ongoing accumulation strategy) to put the proceeds from my divestiture of GOOG to work.
In the interest of full disclosure, my first set of purchases executed at $610 on April 13. I have additional limit buy orders in at $600 and $580 (I’m not certain if it will even get here to where the previous gap is located unless there is significant negative external factors which affects the overall market sentiment). Regardless, with 12 month target prices in the $750 range, anything below $600 now looks very attractive to me since from $600, this represents a 25% return on investment.
