2012-11-08

$AAPL - Another day another support broken

550 Support is now broken.... 520-500 is next possible area to watch.


The trend remains firmly short for the stock market darling $AAPL. In some sense, the success of the company has somehow become the curse for it. On fundamental ground there are still some good reasons to buy AAPL given the cash pile, low forward earning multiple and the relentless growth story. However nothing can go on increasing at exponential pace, except Fed balance sheet :-). AAPL as a stock is present in practically every US investor account including leveraged to the hilt hedge funds. Also it would be one of the few things showing healthy profit if it was bought at good time - something which can be liquidated easily in case of the dreaded margin call. Being high beta, it has been a popular proxy stock for chasing market performance. So when the time to exit comes, the exodus is not expected to be smooth.


There are some signs of panic selling now emerging in the charts. Once the selling is over and every one has thrown in the towel, the stock fundamentals would come into play and may be then it would signal a buy again. If 500 is broken as well, next support zone would be much below (400-460 area). 

Meanwhile the competition is catching up fast on AAPL and its consumers are getting more and more cost conscious. The newer products launches lacked the "killer" innovation which was the hallmark of AAPL and mostly the magic sauce was missing. Much has been made of the cash pile at AAPL but unless it can be put to good use, it can easily be squandered away on a foolish acquisition OR some similar hubris. So far AAPL's track record in managing the cash pile is prudent but that could be credited to Steve Jobs paranoia after first near bankruptcy of AAPL. After Jobs is gone, it could be easier for squabbling management to start eyeing the cash pile under pressure to improve earnings or show growth. Another point to note is that cash pile growth rate has started declining, given the increased cost of components AAPL is not adding as much cash as it used to.