Once again I couldn't resist myself from writing about Apple (AAPL), when there are so many other stocks in the tech space that deserve timely attention. This time I have made sure that I write about Apple with completely new reasoning. First, a word of advice to Apple Bulls: Stop banging your horns on the wall!
I will be discussing my technical view point on recent price action and will provide you with reasonable supporting arguments from a fundamental view point. Please bear with me if I don’t make you laugh this time.
I am sharing my quick technical take on the stock price action that Apple has witnesses lately. But, do read the supporting arguments in the second half of the post. (click on the chart for a larger view)
1. You can see a long support line that held all through 2009 till early 2013. The extended part of that trend line should now act as a resistance. This extended line exactly collides with current stock price of the stock around $500.
2. Recently, the falling 50 day weighted moving average (WMA) fell through the flat 150 day WMA and then came the rally which was triggered by external news flow. That’s a classic sucker pattern as there is nothing bullish in such a crossover.
3. My view is that this rally is short lived and will be followed by huge declines that will take the stock below $450 without any alarming bells. Beyond that, it could slowly trend lower and retest support around $380. This retest could take easily take 2-3 months time.
By the end of 2013 we could see apple trying to find support around $350 level. That’s also my year end price target on Apple's stock. But that’s not the end of it; I feel this will continue to remain all through next year as well. I had explained that scenario using comparisons in an old post. Apple price Target by 2015
Supporting arguments from a fundamental view point
It’s the consumer electronics especially iSeries of launches in past years that took apple to where it is now. The real question investors should ask now: Can it do it all over again? No wonder bullish investors are enjoying the rally since the past few days, but they should not ignore the obvious that Apple simply cannot repeat what it has done in the past.
Why it could be a Sucker Rally in Apple (AAPL) this time?
Currently the stock is trading around $500 and it’s becoming clear that it’s the hope of fresh announcements that is pumping the momentum. With its price to earnings ratio around 12 many argue that it’s trading dirt cheap. I don’t share the same view, for the simple reason that that they lack innovation and their upcoming products are likely to face challenging times as the competitors are cornering Apple from all sides.
I seriously doubt the sustainability of the recent rally that was partly ignited by Carl Icahn. I can’t imagine how this stock will react if the company disappoints with its announcements in the coming weeks. It you are betting on the success of iWatch, then better be prepared to get disappointed as that product can’t appeal to anyone but tech freaks. Seriously, can that get as big as the iPhone? Moreover, Samsung (SSNLF) is expected to join the race in the smartwatch battle. So far, the sales are good from the iSeries of products, but the concerns of a tipping point in sight are genuine. To make the matters worse, It’s the growing relationship between rivals, Google ($GOOG) and Samsung that further makes wonder if Apple will be able to keep it up. No kidding, this relationship makes strategic sense as the common goal is the punch Apple in the " i ". I really doubt if Apple can continue to grow its brand presence amid choking competition. Last thing you should believe is Carl Icahn’s logic of investing in Apple. You buy it, he benefits!
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