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.