Doctor Continues To Be On Call
Or, How the call for the top in Apple continues to be valid
In my blog article dated April 9, 2012 (see Time to Call the Doctor?), I had stated that the good days for Apple are probably over and why technicals along with socionomic indicators revealed that we should be taking money off the table in the stock. Stock dropped from a high$644 to $555 before a nerve racking opening gap of over 50 points occurred on 25 April. I don’t quite know what the reason for that gap was (surely there was something) but like I always say, it is the market’s reaction to news that is always more important. The gap cheered the side liners and got them into the stock and that was the sucker play. Prices dropped sharply from there, hitting $522 by May 18. Then Facebook bombed and everyone said, “ Oh, nothing can beat Apple” and flocked to the stock, almost like a rejected lover on a rebound finds the first mate he or she meets!.
Now comes the interesting part. The lost paramours (to Facebook) do not seem to be returning in hordes as is evident from the fact that the bounce from the mid May low is pretty weak. It could just about manage a 50% pullback of the Apr-May decline- a good sign that the downtrend persists. More evidence from the momentum indicators (see chart).
The decline has carried the RSI into a sharp fall that seems to be tripping up the bullish credentials of the stock. The rally was weak, as RSI could hardly make it to the 50 levels and now declines seem to be setting in again.
The chart is annotated with my Basic Slope trendline, a proprietary Gann method of drawing support lines. This suggests a possible decline till $495-505. That target zone would coincide with around the 50% retracement zone of the Nov11-Apr12 advance as well as the 23.6% retracement of the entire advance from 2009. Timing wise, the earliest this can be expected to happen would be by June 21.