A technical look at Apple stock - and the indicators are bearish
I should have written this article a month ago. I've been telling my Apple-loving friends and colleagues for at least that long that the stock is overhyped and a bubble and the stock price is about to collapse and – jokingly – that it would will collapse to 200. But can it?
If we start to look at Apple on a weekly chart, then the last major correction occurred in Q2 2012. That is where Apple currently is trading. One could also argue the pre-peak occurred in Q4 2011 at around the 400 price level. Then we still have some way to go.
The stock has building up RSI divergence and it formed a Doji Evening pattern in mid-September. Since then we have seen a massive sell-off going through the Fibonacci 23.6 support level at around 557.50.
When looking at a monthly chart like we did on Nasdaq Composite, then I would be even more worried if I were an Apple investor. We had the two possible pre-peaks that we were looking at on the weekly chart, but on the monthly chart we have a huge correction in 2008. Compared to the 2008 correction, the other two only look like small adjustments on its way to the stars. Some analysts predicted Apple would go to 1000!?
Since the big 2008 correction, Apple has been building up a divergence on RSI. It is the same picture we see in almost all other bubble scenarios. It has also formed a Doji Evening Star-like formation, with October month’s candle engulfing the previous two months bodies -a strong bearish reversal signal.
So now the big question is: Can Apple collapse to level where the 2008 pre-peak, was which is at around 200? That remains to be seen, but looking at previous bubbles, it is certainly a possibility. The next question, then, is how fast can it go? It took 3-4 years to go from 200 to 700, and since bearish trends usually move faster, the 200 level could be reached within the next 18-24 months.