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Market Psychology

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There is a certain Psychology that happens on Wall Street that is the same as the way American Shoppers shop.  I will show a few examples later in the article but first I want to tell you how I spent my day.  I watched Apple Inc (AAPL) stock.  It hit the $230 dollar a share mark which has been a barrier for it for quite some time.  Every time it hit's the $230 dollar mark it drops, it can't seem to break free.  All day long it went up to but not over the barrier (market in still open for another 20 minutes at writing of this article) of the $230 dollar mark.  It was almost like whaching a Gnat on your computer screen come up to it, fly off of it, to fly back, to jump off to fly back.

Is the $230 a share mark as high as Apple will go?  Of course not and once it closes over that $230 a share; chances are it is going to spring forward quickly.  Apple was very flat or in Wall Street terms was trading horizontally.  This would be a good indication that as companies start the fourth quarter for the year that Apple will reach that $230 dollar mark in the next few days and be a little darling of the news cycle on Friday if not Thursday.

Why is it doing this though?

Well there are several factors, there could be a lot of open orders to sell at $230 that haven't been executed but investors want that price and when it gets there they are fine with selling their shares to lock in profits.  Investors might be selling to pay off taxes (although completed in April you have until October to pay if you file an extension).  However mostly it is all in our heads.  It has nothing to do with being an actual barrier other than at $230 Wall Street investors feel the price is to high which leads to our examples.

You are at the Grocery Store you regularly shop for things like Eggs, Cabbage, Broccoli, Chicken, or Rice Krispies.  Chances are but not necessarily so; the only item that will be the same price is the Rice Krispies.  So normally when you shop you buy chicken at $1.29 a pound all good get your chicken and walk away.  Every so often the price is $0.99 a pound and at that point you might put away that Roast at $3.99 a pound and buy 3 chickens instead.  So 3 weeks later you come back and Chicken is $1.99 a pound nope your not paying $1.99 a pound for Chicken; so you finally go buy that Roast even though it is $3.99 a pound still.  Why you always have been willing to pay $3.99 for Roast but you are not willing to pay $1.99 a pound for Chicken.  This is the way we think.  Wall Street is no different.

People are willing to wait days in line when new Apple products come out they recently launched their new watch which is getting a lack luster response however it does not change the fact Apple still has an amazing plethora of products that consumers enjoy.  I personally think anyone who waits in line 3 days for something is crazy to me that is the $1.99 a pound chicken. Or when some people pay $2.00 for name brand bleach when others buy generic.  Bleach is bleach your paying for the brand name and advertising.  I am not talking about scented, or other bleaches that paying more for is reasonable because it gives you an additional value; but standard Bleach to Bleach.

Hard for me to set a price target for Apple this is not something I generally do but I expect it to be selling in the $235-$240 dollar range next week and my numbers might be to conservative with that estimate. 

Full Disclosure Writer William Staab holds positions in APPL Inc.  Price targets are speculations based on prior results and price forcasts from other news sources.  Writer is not a licenced Financial Broker and advises you speak to a licensed broker before making any investment choices.  This website is for informational purposes only and does not constitute as providing financial advise.  Email: Donations to keep website running can be made to PayPal


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