December 18th, 2012
Written by William Kurtz
What's up with Apple (NASDAQ:AAPL)? Three months ago Apple hit an all-time high over $700.
Apple shares made a Low of $505.58 last Friday, thereby nearly hitting my target of $500 - for the second time. By coming below the $505.75 Low of November 16 (even by less than a dollar), the upside move from November 16 has been confirmed as an upside correction, which by definition is countertrend. I believe that Apple will drop below $500, eventually to $450, or even lower.
The ascent of the price of Apple shares was fueled by a mania which began about a year ago. You may remember that the approaching peak of the mania was chronicled many times in these pages; so that when it happened, it was not a surprise. The ensuing fall has not been a surprise, either; although my stated target of $500 seemed preposterous to some folks (when I issued it, just after the Top), just as was my call for Crude to fall to $85 when it was at $190 and others were predicting Crude at $250 and to the moon thereafter. In retrospect, those were easy calls.
Now comes the hard part - assessing what Apple shares might do next. There is still adequate "room" for the Dow to fall further. The 15-minute chart shows a gap-down Opening on Friday - a possible "Exhaustion Gap," which could warn of an impending Low; four failed attempts (within an hour) to drive prices higher; and a bullish "Tokyo Express" reversal warning pattern. The gap - all of it - represents upside Resistance. So, the patterns conflict with each other. We're not looking at an obvious Reversal point now.
I don't see this as an optimum time for the "ordinary investor" to establish a new position. (That's history; the best entry points would have been either at or near the Top in September, or at or near the Low in November, or at or near the rebound High in December).
The long-term trend is Down. I think that if you're Long, you should be extra-careful. If you're Short, you might well choose to stay with your existing position, but consider the desirability of having a safety buy-stop in place.
The market could be ignited, in the short term, by an agreement between the President and Congress relative to the so-called "fiscal cliff." The opposite could happen if there's no agreement by January 1. (Will the Congress be working right through Christmas? That might be a "hard sell" at home, which might be the best incitement for a "solution" in time for Congressmen to catch the last plane home in time for the arrival of Santa).
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