What Do We Do With Apple?

Remember last summer when you couldn't think of a single person that didn't KNOW that Apple was going higher? Those were good times.

It's rare to find such euphoria in an asset class. And yes at the time Apple was actually considered an asset class. Stocks, Bonds, Commodities and Apple. How funny is that? People used to say it all the time, and no one would laugh. They would just nod and agree like it was common knowledge. True story.

Anytime I would say anything negative about it, the cult following would send me hate mail and call me names. That doesn't happen when I write or tweet something about US Steel. So you want confirmation of a bubble? See the comment section here.

Anyway, back to today. Every single bottom fisherman in this stock has been wrong. Unless of course you were in and out very quickly for a trade. But any "investor" in this name since the Fall has been wrong. Really wrong. But this gap from last January that we've been watching during this whole crash finally got filled this month. So is that enough to create a bottom that we'll be able to point to months or even years from now?

Here is a daily bar chart of the now infamous Apple. The green support line represents the gap fill from last January. I suppose this is a logical area where one can potentially start looking for an entry point:

The next chart shows two very important downtrend lines that are both still intact. The first, and probably the most important one, comes from the absolute top back in September and down through the December and January highs. You will also notice a very steep dotted line that represents the 50 day moving average. The severity of this downward slope tells the story well about how bad this name has really been. The second trendline is drawn a little bit thicker to represent the 2013 downtrend. Yes, 2013 downtrend - apple lost 20% this year as the rest of the stock market obnoxiously explodes to all-time high territory. How does it feel to be an apple shareholder now?

Next up is the very important momentum reading in apple. This is what really got me bearish in September: the fact that while apple was putting in all-time highs, momentum was rolling over on the daily chart, rolling over on the weekly chart, and also rolling over on the relative strength chart - all at the same time. The 3 amigos.

Here is the daily chart showing some slight divergences on the most recent lows this year. These aren't super pronounced, but I can't say they're not there either. I'm just not that excited enough about them to go long this name just because of this:

The Momentum oscillator we're using here is a 14-period RSI. Here is a weekly version of the same thing not showing any divergences. It's really just getting into oversold conditions and reiterating to us that Apple is in a bear market. Thanks, but I think we get it.

And finally here is the relative chart of Apple vs the S&P500. Man has this pair gotten crushed:

I just don't see any evidence yet that this thing will start to outperform S&Ps (yet). At least not for a sustained period of time. I've heard some bottom callers in this name both on an absolute basis and on a relative basis. But I just don't see it yet, I'm sorry. Look at RSI on the relative chart against S&Ps. This is pure unadulterated bear market behavior.

So getting back to pure price, here is a close up of the second chart up above with the downtrend lines drawn. To me, this recent consolidation since the March 4th "Gap-fill low" off 419 just looks too much like a bear flag as it runs into this downtrend line.

So here's what the bulls want to see. Because I'm not bullish or bearish. In fact I couldn't care less which way apple trades. I don't care about their balance sheet. I don't care about how many iPhones they sell or don't sell. Clearly the market didn't care about any of these things back in September - so why should I?

A big number to me is 440. This level would take out the first downtrend line which would open up the doors towards the longer-term downtrend line off the absolute top. The second thing it would do is take out the neckline from that head and shoulders looking thing in February. And most importantly, it would leave these recent bears trapped below 440, which could cause a little bit of a squeeze in the name.

I'm not super thrilled about this one. I think there are a lot better setups out there, on both the long and the short side. But I think this post describes my thoughts on apple pretty accurately. I get asked about this stock constantly, so I figured I do a follow up post from bad news I had last time. I wish it didn't have to be this way. But Mr. Market does a good job of punishing late longs and bubble chasers. And unfortunately for apple "shareholders", the only thing that is going to cure this crash is time, a lot of it. We may never see those all-time highs ever again. In fact, chances are that we don't. And if we do, it will be a long time from now.

This is trade, that's all it is. And I think it will continue to be just that (both long & short) for some time.

 Tags: $AAPL $SPY