Apple's moment of truth

It looks like almost everybody's enjoying AAPL's misery. I remember many people predicting a fantastic downslide when APPL crossed 200, then at 300, then at 500, 600 and finally at 700. Now the guys who were wrong for so many years and burnt their fingers by shorting AAPL are coming with "I told you so" mantra. Unfortunately (for them), this is not the way to make money in stock market, by trying to guess tops and bottoms. 

As you remember from previous posts I "predicted" AAPL's fall when I saw clear technical signs that the stock is in difficulty. More exactly when stock crossed SMA 200 and weekly DMI turned negative.  

I told you at that time that "I don't remember when I saw AAPL so bearish". This is not about bragging about being right it's only about showing a very good example how to call a long term uptrend or  downtrend and refraining from guessing tops and bottoms which are most of the time wrong.

I am writing an article today about AAPL because is around a level I mentioned many times in the past,  the four years uptrend line, 470. This is a very solid support level. 

If it's going to be broke the next stop is probably going to be around 360, the level predicted by "head and shoulder" pattern. I usually don't put too much weight on "HS" pattern since many times is wrong but this time looks "textbook", a clear "neckline", a right leg shorter than the left one and a failed attempt to go above the neckline.

I think 470, the four years uptrend line is very important. Most of the time stocks jump up after touching such levels. This may be a very good entry point. If your even more pessimistic about AAPL then 360 is the entry level for you. I don't think is going bellow 360, at least not on this first leg down. Other potential support levels (but not that important) are previous highs and bottoms, 430 and 370.

AAPL is also a textbook example of a stock in a bubble. Remember the nice three years old uptrend channel? I've got suspicious about AAPL when broke the trading channel on the upside at 500 in the fall of 2011. While breaking the trading channel on the upside is a bullish signal and one can make a nice profit in a matter of months, at the same time it's a sign that the top is nearby. 

I have two other textbook examples of stocks at the "beginning of the end", SLV and SPX.

Otherwise, the market remains flat this week with two failed attempts to move it down. I am still waiting for decent pullback before climbing towards 1,500. 

All the best!

babaro

Very bad day for Apple

AAPL went down 6.4% today in one of its worst day in years. Technically AAPL doesn't look very good. It is bellow a flat SMA 200, weekly DMI continues to be negative and today I noticed what I was afraid a few weeks ago, the "death cross", SMA 50 crossing SMA 200 from above. Last "death cross" was in November 2008. AAPL gave a "golden cross" three and a half years ago at ... $125 and stayed bullish until today.

What I also notice from the weekly chart is a possible "head and shoulder pattern. If AAPL goes bellow 528 we will probably see the stock plunging to ... 350. At least that what HS pattern predicts. It may not go so low since there is a very strong support around 460, the 4 years uptrend line.

The reason I keep mentioning AAPL is not because I own it or short it but because the market cap of this stock is so big that it could potentially move the whole market down! 

"In other news", SPX remains slightly bullish on intermediate time frame but I worry that daily DMI refuses to go positive despite the 60 points gain from the temporary bottom at 1,348. Also EMAs look flat at the moment and SPX is barely above still declining SMA 120. On a healthy uptrend SPX was supposed to be 30-40 points above SMA 120 immediately after EMAs crossing.