Apple overload – a Zak Mir technical special

I have to say that analysing the average length of time it takes to get over the death of a loved one for the analysis I did on Apple (AAPL) in my book – Lessons From The Financial Markets for 2013 was something that proved very insightful for me. Research on www.caring.com was done a year to the day after Apple CEO Steve Jobs had died, and the shares were beginning to top out and so what I am really trying to do is think of something original to say regarding the world’s most written about company.

The theory I came up with was that some 12 months after the death of Jobs was effectively a grace period in which the bears could not / were not likely to win. However, quite amazingly, as soon as the 12 months were over Apple shares not only sold off, they fell off the proverbial cliff (and not the fiscal one), wounding retail investors in their droves.

But, stepping back from the latest carnage, it may be worth looking at shares of the iPhone maker via its monthly chart – a timeframe that gives us a true perspective on how the group became  the world’s most valuable company in 2012. In fact, the fun began at the end of 2004 as the positive effect of the iPod breakthrough transformed the company’s fortunes.  But it could be said that it really was the start of 2009 – 18 months after the iPhone launch, that the technical outperformance became noticeable. Perhaps the real warning of a major peak being formed began last year when the ascent in the shares became close to parabolic. Such iPad induced gains were never really going to be sustainable unless, or until, a fresh killer product was soon to follow. Thus far it has not. What is interesting now from the monthly chart is that while some support has come in at the grey 20 month moving average at $509, you would probably be favouring a test of the 50 month moving average, presently at $338, to echo the prior test of this signal in 2009. Clearly, this would not be good news for those still long of the stock now and hoping for salvation.

Moving onto the weekly chart of Apple and it may well be that this is the timeframe that dazed bulls of the tech giant wish to cling to. This is because it can be seen that so far, the shares have almost exactly bounced off the floor of the 2009 rising trend channel at $483. On this basis those caught long here, or those looking to bottom fish have a decent technical pillar to lean on – given the idea of placing a stop loss just below a 4 year weekly chart trend line.  The implied upside would be towards the 50 week moving average currently at $583, even if this proves simply to be an intermediate dead cat bounce.

Unfortunately, I am not so sure that the longs will be let off the hook that easily. To my mind, Apple may have milked the latest phase of technology and gadget mania to its limit, with pricing power, competition and the good luck of the late Steve Jobs sadly passing on with him. In fact, the daily chart has the most bearish interpretation of the present technical’s. From the configuration here it could be argued that the initial September / October decline from $700 to $500 was the first instalment of a major correction for the shares. There has been a less than 50% rebound from the November $505 swing low, with a second potential $200 decline already in progress from the $594 December peak. Obviously $200 off this would hint at a target close to or just below $400. If pushed, though, I have to admit I would probably only be chasing $400 if we saw the break of $483 described above.