So yesterday I gave a list of reasons why $AAPL finds itself in the crapper. I am an absolute and fierce defender of supply and demand and overbought and oversold levels when it comes to stocks. Even stocks that have crumbling fundamentals get to a price, (I don’t mean AAPL) where they have to bounce. In my view it will be the technicals NOT the fundamentals that will tell the $AAPL story going forward short term. We all know they have great products by now in different sizes, shapes and colors. Blah, blah, blah.
Remember $GMCR ? The stock went from $8 in 2009 to a high of about $115 a year ago. The stock was then pulverized to a low of 16 in July, famous short sellers came into the name and made their case for zero. The stock has since doubled from that low in about four months. It’s now semi sexy again, and the analysts are coming back with a more bullish view. The analysts were invisible at 17 and were way stupid at 115. As you now know, you don’t need analysts in a good market and in a bad market they will kill you.
Point is, everything has a price. In the case of $GMCR (I could give you hundreds of examples by the way), the technicals got overdone to the downside as MACD, relative strength and stochastics were all in the dirt. This may be an extreme example.
A better example may be $NFLX. Here is s stock that dropped from a high of about 300 in July of 2011. It was overdone to the upside, the stock ran into some trouble and was taken to the wood chipper. The stock traded down t0 52 in September.
Here is where it gets interesting in the case of $NFLX. On September 26, just about ten weeks ago, I saw negativity at a level that I rarely saw in a stock. The jokes were rampant. People said the stock was done, they had horrible content, Hulu, Amazon and Youtube streaming were eating their lunch on a daily basis, etc, etc. Puke.
Well, here we are ten weeks later and the stock closed Friday at 93.30. Not bad action. Almost a double. Everyone hated it. Everyone. The shorts got taken out on stretchers.
Back to $AAPL. I am seeing negativity in this name that is eerily similar to what I saw in $GMCR and $NFLX and many other stocks that find themselves in the same situation. You folks that follow the blog know I always say “Buy em’ when they”re cryin’. ” The technicals need to line up though.
My bet is that a rip to the upside is coming soon. It will be strictly an oversold technical bounce. That bounce could be huge. If that bounce can hold, then I will feel better about Friday being a successful double bottom. It’s getting time to be greedy and buy the fear.
Technically speaking, relative strength is 30 and stochastics are below 20 (it’s 15). The playbook says you when the former is around 30 and the latter is around 20 you’re a buyer. I’ve seen these readings get worse before they get better though.
So I look at two highly inferior names to $AAPL, not even close, $GMCR and $NFLX and I analyze their price action. AAPL isn’t bad coffee and antiquated movies. Apple has an ecosystem that defies logic and will probably never be broken.
Monday will be interesting. Lately when $AAPL has a crappy close it continues into the following open. Ideally, a flush lower on big volume would be perfect. The one thing I haven’t seen, which worries me, is a capitulation day, meaning volume is epic, and the baby, the bathwater and the piano player get thrown out. This would tell me that a tradeable bottom is in place.
Circle the 470-480 (weekly trend line support), if it tags that level you have to go deep…..for a trade. Even if $AAPL has jumped the shark, (I believe it has) you have to be all over it there. Everything is a trade at a price. Everything. Even bad coffee. The “buy it and forget it” days are over for AAPL in my opinion, but that doesn’t mean you can make huge money trading it. And this trade will be big. AAPL may indeed tag the low 400’s, but it wont do it in a straight line.
Gene Munster is lost at sea on this too by the way, so just watch the charts. The easy money has been made on the short side, so you need to be picking spots to get long.
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