November 8th, 2012

AAPL Gets a Cold, the Market Gets …..?

I searched this blog to see what I may have written about AAPL over the years and found that there have been 15 individual posts since 2006, many comparing AAPL and GOOG (search other terms by using the search button in the lower left panel).

But situation is dramatically different today than it’s been at any previous time [haven't people gotten into a lot of trouble when they claim "this time it's different"?]:

  • Jobs is no longer the creative or leadership head of the company,
  • the company now has competition for its products (e.g., Samsung) and its services (iTunes vs. Pandora, Spotify and Amazon)
  •  the stock became the largest capitalized stock in the world and held a dominant role in all market indexes
  • the stock is considered “overbought” being a large position in nearly every mutual, pension and hedge fund,
  • finally, some blowback is now being heard and felt about the product introduction rate and design [note: the discontent with the connection format change and the mapping service disappointment].

So, I’d like to toss my stock chartist’s view of the “bear market” that has captured the AAPL driving it down 18% over the past two months.  Has the stock hit bottom and is it poised for a turn around (a large Wall Street firm recently called on CNBC for AAPL to more than double over the next year)?  Double it might but in the near-term it’s setting up for another 25% decline below what might be consider the neckline of an emerging head-and-shoulder top all the way down to 390 (nearly 30% from current levels).

Supporting this negative view is the long-term negative divergence existing between the trends between the two price peaks in 2012 and the comparable peaks in the OBV volume trend.  OBV indicates the relative volume between buyers (closes higher) and sellers (closes down).  In other words, as AAPL churned higher it was on less volume than those days when it closed lower.

Unfortunately, AAPL represents a large component of the major indexes so “when AAPL sneezes, the market gets a cold”.  Let’s hope that cold doesn’t turn into pneumonia.

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