Overnight AAPL traded down to about $121, losing about $60 billion in capitalization. Perhaps it was this odd lot trader from Papua New Guinea who got taken out of his 1 share stop-loss order. Perhaps there was real demand/supply. Whatever the case it demonstrates that a single trade resets the value of everybody’s holdings; you can get killed on no volume!

On April 28 we suggested this stock was really a sell, no ambiguity. Our friends in Gainesville followed suit a few weeks later with the exact same chart with the same triangle shown . We now have 3 tops at roughly the same distance from each other. They are about a dollar apart with the one in the middle the highest. This fits the very technical concept of a “rounding top”. In that situation the way down reflects the way up. That is not typically how it works as the downward path is normally much steeper, taking about 1/2 the time or even less..

AAPL missed by one million on 50 million units sold and 1 billion on 50 billion in sales. If my math is right that is about 2% which is why the stock is down 8%.

So AAPL reported yesterday evening. All but one minor number exceeded expectations. This is a fabulous money making machine. Their gross margins are unheard of, their metrics like P/E etc, at the low or high end of where they should be. They are seriously looking at other enterprises (maybe) and just became members of the elite 30 DOW club ensuring that all the closet indexers are under invested. The cash pile they are sitting on is a dime away from $200 bln. which, by the way, is equal to the capitalization of Royal Dutch and may be used to buy back stock or other such nefarious things.

    What is interesting here is not what happened, but what did not happen. Despite a few dollars up in overnight trading and early this morning, the stock is down on the day. There is also a very nice bearish engulfing candlestick pattern, which would fit with the triangle EW pattern. So far the stock has traded more below than above our recent sell level. Time will tell if this continues.

It sure seems to be, and now the biggest company on earth at 748 Bln. cap.

Arguable only a fool would go against the grain and suggest that this stock is a sell. But then, on the other hand, this stock did drop by more than 50% over the past seven years, twice in fact. If it did that again it would be down to about $60. Suppose the stock ignores its channel and manages another $20 or so to the upside, it would still drop back to $75 under these circumstances. Only if the stock manages to climb to $240 would you be indifferent to holding or selling if another 50% drop lies in the near future. Seen this way, only a fool would continue holding it. And that is precisely what momentum stocks get their energy from, the ingrained notion that there will always be a greater fool to take the stock off your hands at a higher price.

    In EW terms we can count a clean 5 wave sequence from the bottom (but not necessarily from the start of the company in 1976). So it is reasonable to expect a pull back somewhere around here that would correct this entire move, that is down 50 to 62% or to wave 4 of previous degree. Even wave 5 itself subdivides nicely into 5 waves. The RSI is not supporting the recent, almost perpendicular moves up and, the MACD is hitting its head against the ceiling. For those that ever wonder about “fractals” the two charts provide an excellent example, essentially the are self-similar patterns that occur at different degrees. You will notice that the 5th wave looks pretty well identical to the whole thing.

    Fundamentally, and we pay very little attention to this, success is invariable the basis for a downfall. It has a blinding effect on management at all levels and tends to close the mind. In this case none of that is readily apparent but there are rumours of starting a car manufacturing line of business, perhaps even an instant one as in buying Tesla. Apart from that, AAPL now represents something like 10% of Nasdaq , nowhere near the 30% that Nortel represented on the TSE or the 60+% of Nokia on the Finnish index, but still a pretty respectable amount. With Nasdaq less than 200 points away from the 5132 intraday high of 15 years ago (see below and previous blogs) things are getting a little stretched. We would definitely step aside.

Would 1000 points, or 25% in 5 months not be a decent gain and if it is why hold out for even more?

So we guessed incorrectly. Here is another guess.  The stock came from $688.66 and dropped to $380.06, so the distance travelled is $308.60. Multiplied by 0.382 gives $117.88. Add back the low of $380.06 and you arrive at $497.94. Given that other services have the high more like $702, the result is remarkable close to a minimum rebound level. Insider trading is defined as trading on info that is not readily available to the public. How that works when a hedge fund has a chat with the CEO and then tells the world is not entirely clear. In any event it may be time to step aside. Big buybacks are the equivalent of pulling yourself up by your bootstraps which, according to a lot of financial types, is the equivalent of a fat dividend and therefore good. The only minor fly in the ointment is that it can also be viewed as recognition of the fact that there is nothing left to invest in, not what you want to hear from a company that supposedly keeps creating it’s own future. The pot now sits at $146 bln. A sell nevertheless.