Why Shares Of Apple Are Technically In Trouble This Time ($AAPL, $QQQ)

morpheustrading

Active member
166 3
After just a one-day bounce off its lows on November 1, the Nasdaq 100 Index ($NDX) plunged right back down to pivotal, long-term support of its 200-day moving average just one day later. Why is the Nasdaq displaying such relative weakness to the rest of the major indices? Blame it in no small part on the persistent bearishness and downright ugly chart pattern of Apple ($AAPL), a former market leader and heavily-weighted stock within the Nasdaq 100 Index.

Last Friday (November 2), AAPL sliced through crucial support of its 200-day moving average for the first time since June of 2011. Now, AAPL is also in danger of losing horizontal price support of its prior “swing low” from July of 2012. If it does, it will become the first convincing “lower low” that AAPL has formed in years. As an example of just how negative recent price action has been, notice on the annotated chart below that AAPL plunged 3.3% last Friday, well below its recent low, even though the main stock market indexes still retained a portion of their previous day’s gains. AAPL has become a clear example of a stock exhibiting bearish divergence and relative weakness to the broad market:

121105AAPLchartpattern.png


Although our bearish analysis will undoubtedly anger the loyal army of Apple fanboys, we are merely being objective by saying that recent price action of AAPL (and quite a few other former market leaders) indicates a changing of the guards is on the horizon. However, the big problem is the replacement guards have not yet arrived. Until new leadership stocks start popping up, there will likely be no impetus for a sustainable broad-based rally. Therefore, if you've been holding AAPL for a while, did not sell on the breakdown, and are still holding out hope that the stock will recover, be warned that you are playing a very dangerous game. We personally view any substantial bounce in the stock as a chance to sell into strength and/or initiate a new short position, as the technical are indicating further downside to come.

The broad-based decline of November 2 put the overall stock market in a rather precarious position. Specifically, each of the major indices will now kick off the week following the formation of a bearish engulfing candlestick pattern. This chart pattern forms when an index or stock opens above the previous day's high, but sells off to close all the way below the previous day's low. This bearish pattern can be clearly seen on the daily chart of PowerShares QQQ Trust ($QQQ), a popular ETF proxy for trading the Nasdaq 100 Index:

121105QQQchartpattern.png


As we’ve mentioned several times over the past two weeks, we’ve been monitoring both PowerShares QQQ Trust ($QQQ) for potential short sale entry on a significant rally into resistance. However, the major weakness of November 2 already sent QQQ right back down to near its recent lows. As such, there simply is not a positive reward-risk ratio for selling short this ETF at this time. Nevertheless, we are now targeting ProShares UltraShort Real Estate ETF ($SRS), an inversely correlated “short ETF,” for potential swing trade buy entry going into today. Detailed trigger, stop, and target prices were already provided to newsletter subscribers.

As for the bullish ETFs, a handful of Emerging Markets ETFs continue to hold up well and show relative strength. But as the November 2 price action demonstrated, the broad market simply remains much too weak to attempt any bullish entries right now because current breakout attempts, even in stocks and ETFs with decent relative strength, have a high likelihood of failure. This is typical of overall price action when our stock market timing model is in “sell” mode.
 

HKT

Member
63 1
Lol at "bearish candlestick pattern". What kind of mumbo jumbo hockus pockus is that? Look at fundamentals to determine value. Fundementally Apple still looks relatively attractive to me, and pretty much a "must have" for any large cap US investor.
 

babymonkey

Active member
112 7
I personally can't believe that Apple has come this far. How can you be beaten in every vertical that you engage in, and still be "the most valuable company in the world". I know you guys like charts, head over to StatCounter Global Stats - Browser, OS, Search Engine including Mobile Market Share. Its a very good way to determine market share in my opinion. Apple is losing on every chart Mobile, Browser, and OS.

I wonder how long the world can sustain this level of crazy over such a weak company.
 

Vicorka

Active member
246 7
Lol at "bearish candlestick pattern". What kind of mumbo jumbo hockus pockus is that? Look at fundamentals to determine value. Fundementally Apple still looks relatively attractive to me, and pretty much a "must have" for any large cap US investor.

So, What is the real value of AAPL??? can you tell??? As I understand you are assuming that it is worth more than it is traded at.
 

babymonkey

Active member
112 7
Fundementally Apple still looks relatively attractive to me, and pretty much a "must have" for any large cap US investor.
Agree that it is a must have, if you are short on it. :) j/k
 

Trader6868

Junior member
43 0
After just a one-day bounce off its lows on November 1, the Nasdaq 100 Index ($NDX) plunged right back down to pivotal, long-term support of its 200-day moving average just one day later. Why is the Nasdaq displaying such relative weakness to the rest of the major indices? Blame it in no small part on the persistent bearishness and downright ugly chart pattern of Apple ($AAPL), a former market leader and heavily-weighted stock within the Nasdaq 100 Index.

Last Friday (November 2), AAPL sliced through crucial support of its 200-day moving average for the first time since June of 2011. Now, AAPL is also in danger of losing horizontal price support of its prior “swing low” from July of 2012. If it does, it will become the first convincing “lower low” that AAPL has formed in years. As an example of just how negative recent price action has been, notice on the annotated chart below that AAPL plunged 3.3% last Friday, well below its recent low, even though the main stock market indexes still retained a portion of their previous day’s gains. AAPL has become a clear example of a stock exhibiting bearish divergence and relative weakness to the broad market:

121105AAPLchartpattern.png


Although our bearish analysis will undoubtedly anger the loyal army of Apple fanboys, we are merely being objective by saying that recent price action of AAPL (and quite a few other former market leaders) indicates a changing of the guards is on the horizon. However, the big problem is the replacement guards have not yet arrived. Until new leadership stocks start popping up, there will likely be no impetus for a sustainable broad-based rally. Therefore, if you've been holding AAPL for a while, did not sell on the breakdown, and are still holding out hope that the stock will recover, be warned that you are playing a very dangerous game. We personally view any substantial bounce in the stock as a chance to sell into strength and/or initiate a new short position, as the technical are indicating further downside to come.

The broad-based decline of November 2 put the overall stock market in a rather precarious position. Specifically, each of the major indices will now kick off the week following the formation of a bearish engulfing candlestick pattern. This chart pattern forms when an index or stock opens above the previous day's high, but sells off to close all the way below the previous day's low. This bearish pattern can be clearly seen on the daily chart of PowerShares QQQ Trust ($QQQ), a popular ETF proxy for trading the Nasdaq 100 Index:

121105QQQchartpattern.png


As we’ve mentioned several times over the past two weeks, we’ve been monitoring both PowerShares QQQ Trust ($QQQ) for potential short sale entry on a significant rally into resistance. However, the major weakness of November 2 already sent QQQ right back down to near its recent lows. As such, there simply is not a positive reward-risk ratio for selling short this ETF at this time. Nevertheless, we are now targeting ProShares UltraShort Real Estate ETF ($SRS), an inversely correlated “short ETF,” for potential swing trade buy entry going into today. Detailed trigger, stop, and target prices were already provided to newsletter subscribers.

As for the bullish ETFs, a handful of Emerging Markets ETFs continue to hold up well and show relative strength. But as the November 2 price action demonstrated, the broad market simply remains much too weak to attempt any bullish entries right now because current breakout attempts, even in stocks and ETFs with decent relative strength, have a high likelihood of failure. This is typical of overall price action when our stock market timing model is in “sell” mode.

AAPL is going down sharply...I am short selling it...waiting appropriate time to cover the deal

Bud
 

HKT

Member
63 1
So, What is the real value of AAPL??? can you tell??? As I understand you are assuming that it is worth more than it is traded at.

Look at the earnings. Look at the PE. It still looks relatively fairly priced to me.
 

morpheustrading

Active member
166 3
Thanks for everyone's comments. Nice to see the post generated a variety of opinions.

It's apparent from a few comments that it is not understood I am a technical trader, not a fundamental trader. I couldn't care less about the P/E ratios or whether or not the stock is "undervalued," for example.

In the end, price action is THE ONLY THING THAT MATTERS, as fundamentals such as P/E ratios are already reflected in the price. Technical analysis is not "hocus pocus." Rather, chart reading is simply a graphical way of reflecting the levels of greed, fear, hope, and regret in a stock, and these are the elements that determine the price and direction of a stock. Nothing magical about it.

Anyway, $AAPL down about 3% more since I started this thread on November 5, so it appears the technical break of the 200-day MA that I pointed out is indeed having its typical effect of leading to new lower lows.
 

Trader6868

Junior member
43 0
Thanks for everyone's comments. Nice to see the post generated a variety of opinions.

It's apparent from a few comments that it is not understood I am a technical trader, not a fundamental trader. I couldn't care less about the P/E ratios or whether or not the stock is "undervalued," for example.

In the end, price action is THE ONLY THING THAT MATTERS, as fundamentals such as P/E ratios are already reflected in the price. Technical analysis is not "hocus pocus." Rather, chart reading is simply a graphical way of reflecting the levels of greed, fear, hope, and regret in a stock, and these are the elements that determine the price and direction of a stock. Nothing magical about it.

Anyway, $AAPL down about 3% more since I started this thread on November 5, so it appears the technical break of the 200-day MA that I pointed out is indeed having its typical effect of leading to new lower lows.

And I made a short sell on Oct 27...Now, closely watching its movement and wait for signal to buy to cover it
 

Vicorka

Active member
246 7
I think that I will close the short position for AAPL whithin next week.

You could be right. It is close to its May's support and there is the possibility it may stuck/bounce there. I'm still waiting for some strong volume to the price downside like we had in the middle of April 2012. It would tell that the big players ("smart money") start buying from those who sell in panic. As of now, I do not see any panic on this stock which suggests more room down. On the other hand, it is down enough to set a trailing stop at least. We should be more cautious when we play short.
 

isatrader

Senior member
2,963 134
You could be right. It is close to its May's support and there is the possibility it may stuck/bounce there. I'm still waiting for some strong volume to the price downside like we had in the middle of April 2012. It would tell that the big players ("smart money") start buying from those who sell in panic. As of now, I do not see any panic on this stock which suggests more room down. On the other hand, it is down enough to set a trailing stop at least. We should be more cautious when we play short.

You can see the split between the institutional buyers and retail buyers by using the free Effective Volume tool on chartmill. See attached which shows the large player and small player volume separated in the red and blue, and the combined version in the green at the bottom. It shows that large players have been selling this time as well, which is a notable difference to the May pullback, but they still own more stock than they did at the April highs.

attachment.php
 

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Vicorka

Active member
246 7
You can see the split between the institutional buyers and retail buyers by using the free Effective Volume tool ...

I'm a little bit sceptical about this split of large and /small payers because I worked for a while with raw and tick data.
1. You may only assume and this chart is build on big assumptions
2. In many cases big orders are split is small orders in order to be filled
3. Volume is always 2-side transaction: somebody sells and somebody buys
4. Large players do not always mean "Smart Money"

One more, when volume remains about the same and number of traders goes up, by simple arithmetic it should mean that the number of small traders goes up???
Total Volume = # of traders times average volume per trade
But is is not on your chart....

What is the point of having smal/large players split if you do not know what do they do: they are selling or buying
 
 
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