Apple Top?

I saw this first on Peter Brandt’s blog about three weeks ago. Jesse Livermore might say Apple (AAPL) has a speculative chart with a possible topping formation, as illustrated in C. M. Flumiani’s 1965 book, The Stock Market Secrets of Jesse Livermore. I previously wrote about how Apple was surging over its multi-year trend channel and the action resembled a blow-off top (Apple Inc Is Getting Overbought). 

Fundamentally perhaps competition is finally starting to exact its toll as Apple begins to struggle with the law of large numbers. The common question arises: how fast can a company grow with $128 billion in revenue? Reggie Middleton of BoomBustBlog spells out his negative thesis that Apple is losing market share in iPads to Android devices.

The technical setup shown above creates a decent trade setup. The idea would be to wait for a weak short-lived bounce (from the recent dip) in Apple shares on the daily chart and enter a short position on the first down day with a tight stop at the high of the day. If the original timing is wrong and the trade stops out, it could be worth trying once or twice more (i.e. entering on a down day). The downside target would be the top of the gap formed on January 25 around the 444 level, close to the 200 day moving average.

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About jstradingnotes

I spend a lot of time analyzing the economy and securities. The effort has enabled me to generate multi-thousand percent returns on my trading capital over the past twelve years. The next few years offer an incredible opportunity to take outsized gains from the markets. Large structural imbalances in the major western economies will result in enormous market volatility as the imbalances get resolved, offering generational money-making opportunities. The major imbalances are excessive sovereign debt, crazy risk concentration in major banks, and enormous derivative exposure in the financial sector. A systemic shock can easily create a default cascade through the financial system where one failure precipitates another and another and so on. Central banks are very aware of the risks, and they are filling the financial system with liquidity by printing new money, risking massive inflation in a few short years for the United States and Europe. China has 2-3 trillion in dollar exposure, and they would like to have far less for fear of continued currency devaluation (they've lost billions holding dollars as the value erodes). As the size of their holdings prevent them from rapidly liquidating their dollar assets (which includes U.S. treasuries), they are instead spending their dollars on resources (copper mines, rare earth metal mines, oil wells, etc.). Lately they have been accumulating gold assets, perhaps with a view to making the Renminbi convertible into gold and displacing the U.S. dollar as the international reserve currency. Their gold buying is enormous and presents an easy investment thesis: ride the Chinese horse and buy gold and gold stocks. In this blog, I'd like to share some of my trading ideas and insights on the markets as these exciting times unfold.
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