Technically, you should buy Apple (Nasdaq: AAPL) right now.

We examined the company using moving average convergence-divergence, which is one of the most popular and long-used technical analysis indicators. Technical analysis is the field of buying and selling stocks not based on the underlying merits of a company, but rather on the patterns and formulas around its price movements.

Signal line crossover is one of the more common ways to interpret MACD. It uses a series of moving averages (in this case, nine, 12, and 26 days) to look for bullish and bearish crossovers that indicate a stock has momentum in one direction or another. Below, you can find a current chart of Apple's MACD profile:

Confused? Well, that's preposterous! How could you ever be confused by something as simplistic as a moving average convergence-divergence chart! OK, we're jesting -- but in all seriousness, this is actually one of the simpler methods for technical analysis.

Still, if you'd strictly followed the rules, seeking out upward and downward momentum, you would have seen the stock move between buy and sell categories a fantastic 20 times!

A better way to size up companies
Here at Fool.com we're more interested in other measures of company value. When we look at Apple and its peers, here are the areas that interest us:

Company

Apple (Nasdaq: AAPL)

Dell (Nasdaq: DELL)

Hewlett-Packard (Nasdaq: HPQ)

Microsoft (Nasdaq: MSFT)

Market Cap (billions)

$237.6

$25.7

$97.7

$221.1

Quarterly Revenue Growth (YOY)

61.3%

20.5%

12.7%

22.4%

Revenue (TTM, billions)

$57.1

$55.4

$120.4

$62.5

Operating Margin (TTM)

29.1%

5.1%

10.1%

39.5%

P/E (TTM)

19.6

17.4

11.9

12.2

PEG (5-year expected)

1.0

1.1

1.0

1.0

Source: Yahoo! Finance and Capital IQ, a division of Standard and Poor's; TTM = trailing 12 months.

We prefer to look at the fundamental drivers of value. Investors should closely watch statistical fields like return on equity as well as qualitative values like competitive advantage and managerial effectiveness. These areas led investors like Warren Buffett and Seth Klarman to decades of outperformance. Buying and holding great companies is the best solution for individual investors to build lasting wealth and achieve their financial goals.

So when you look at Apple, don't evaluate it for crossing a momentum line. Buy or sell it because:

  • It's no secret that Apple's success is in large part tied to the iPhone. However, even with Apple's massive market capitalization, currently second in the United States behind ExxonMobil, there's still immense opportunity in the smartphone field. Leading IT researcher Gartner expects smartphone sales to continue growing at a staggering 28% annualized growth rate through 2014. In the past 12 months, Apple has generated nearly $21 billion in revenue from iPhone sales and products related to the iPhone. If the company can merely match anticipated industry growth rates, its iPhone line should generate more than $56 billion in revenue by 2014. In the past 12 months, Apple's revenue as an entire company was $57 billion.
  • In addition to massive iPhone growth opportunities, the phone drives a "virtuous cycle" for Apple. As more users buy iPhones, they upgrade to Apple's other products. Despite Apple controlling up to 90% of the market for computers costing more than $1,000, they keep growing Mac sales. What does that mean? Apple is creating a new class of users willing to spend more on their computers. As Apple continues selling buyers iPhones, the more cross-over sales they get to other products. For investors, the ka-ching of cash registers at Apple stores is music to their ears.
  • The one major downside to Apple right now is the fear of Google's Android. Google established a large alliance of partners and freely distributes Android to a growing number of handset partners. If mobile phones do turn into a platform war where one operating system receives much better developer support and manufacturers rally around one OS, that could spell trouble for Apple. Android has been rapidly gaining support, moving from 100,000 activations per day in May to greater than 200,000 today.

Want to buy Apple based on technical merits today? Technically, odds are that you should flip and sell Apple sometime very soon. If that sounds like madness to you, well, we here at the Fool agree. In every market decline, technical analysis gets its share of proponents. The cries that "buy-and-hold is dead!" get louder, and individuals race toward schemes that promise greater wealth in a shorter amount of time.

I don't deny that technical analysis could make investors money. In any random short-term transaction, you're essentially playing a 50/50 game of chance. However, at the same time, most technical analysis schemes are a relatively simple science, eliminating the vast complexities of evaluating true company value. However attractive, this theory is ultimately the wrong path for individual investors. Technical analysis relies on long-held beliefs about exploiting momentum and consistent patterns throughout the market.

However, with as much as 75% of market trading now done by Ph.D.-level programmers at massive high-frequency funds, even if opportunities existed, what chance would an individual have to sniff these deals out? With so much volume now driven by these funds, how can you be certain the same rules of patterns still even exist?

I could also point to Massey University's study across 49 countries, which showed that more than 5,000 trading rules add no value. However, the real reason to forget about technical investing is what we mentioned earlier: Apple crossed the crossover 20 times across the past year! While traders might not buy and sell with each crossing, cases of high momentum are normally short lived. The amount of trading in most technical analysis schemes racks up commission fees and short-term capital gains taxes, eating away at profits. More importantly, it takes away from the idea of holding a portfolio of great companies that can accrue wealth over a long time horizon.

That's why at Fool.com, we recommend that individual investors establish a portfolio of well-managed companies with strong advantages over their competitors. In the end, we find that to be the best contributor to long-term wealth. More importantly, it'll spare you from sitting bleary-eyed in front of a computer with a Big Gulp full of coffee, frantically buying in and out of companies. But, hey, if your idea of protecting your future is charting the ups and downs of moving average convergence-divergence charts, then Apple looks like a buy right now. Just don't expect to hold it for very long.

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Jeremy Phillips owns shares of no companies listed above. Microsoft is a Motley Fool Inside Value recommendation. Apple is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.