2013-01-11

$AAPL – 480-460 next target

Short setup is still in play

Disclosure : Last set of shorts remaining on trailing stops.

AAPL seems to be losing its magic. Since hitting all time high at 705, the stock is lagging the broader market. Technically the charts have turned bearish with the stock well below its 200 DMA. On relative strength basis too the stock is lagging with broader market putting an impressive rally since 31st December 2012 but AAPL has already given up all the up move from that day. There was a time when AAPL was a key stock for “alpha” – to catch market out performance and several traders used to be long AAPL and short S&P as hedge. Those trades are underwater for sometime.

Fundamentally there is nothing wrong with AAPL. In fact AMZN is making new highs on lousy fundamentals but hey – who said stock markets are “rational”.
With AAPL likely to close below 522 today, the short setup is still firmly remains in play even though AAPL is currently trading in strong long term support area and merits a caution in carrying large positions. 507 area has acted as strong support in past but at the same time its been attacked vigorously and each bounce has produced lower highs, increasing the probability that next attack at support is likely to breach.
As long as AAPL is below 550-560 area, shorts are safe and next target for profit taking on shorts is 480-460 region. For a long side, one of the on going short setup needs to break first before fresh new long positions can be created. May be earnings on 24th Jan can create such catalyst. Who knows.