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Apple – Time To Buy Or To Sell?

Apple

I thought we should take a look at the technical picture of Apple stock today.

I have drawn two blue circles on the chart above to show you the two times in the past year where Apple has tested the 200-day moving average. You can see that the first time in December of last year proved to be a good entry point for those people that had not yet gotten into the stock.

The next circle represents the current level for Apple – but the question is this: Will this prove to be an equally good time to buy Apple (or add to shares you already own) or will the current difficulties with the new iPhone prove too much for the bulls and the stock sinks below the 200-day moving average into bear territory?

Unfortunately, the chart is giving us mixed answers.

If you look at the two blue arrows, these short-term sensitive indicators say that the current level of the stock price is oversold and that we should see a bounce higher. That doesn’t mean it would be a sustainable advance, just that too many sellers have overwhelmed the stock and that an imbalance exists where buyers should materialize.

If you look at the two brown boxes I’ve drawn, these two more intermediate indicators say that the current trend is down and they don’t really show a change of that intermediate trend.

My best reading says that this time, the 200-day moving average will not hold and we will likely see further downside in the stock price.

So the question we need to ask given this assessment is: should I be a seller on this short-term development in the stock or wait it out and buy when it looks to have bottomed?

Apple - 5-year Chart

To get a better perspective, I like to look at the 5-year chart. From here, you can see that the last time Apple dropped below the 50- and 200-week moving averages was during the 2008-9 crash, and buying then proved to be a golden opportunity to get into this technology/consumer product company.

You can see that from a longer-term perspective, we have not yet reached the point at today’s prices where we are crossing the 50-week moving average. There were two previous times in 2011 that we touched the 50-week moving average and those proved to be good buying opportunities.

Given this history, I think waiting to see what happens to Apple relative to its 50-week moving average is the best plan. The current problems with the iPhone are fixable and its customer base is very tied-in and find it difficult to switch. When you have several gigabytes of music in iTunes, its tough to switch to another phone – the thought of figuring out how to transfer/import that into another device is daunting.

Steve Jobs was a genius and has his customer base locked-in, to a certain extent, and that will keep people buying the iPhone in spite of its problems. Apple has a history of fixing problems and moving on (anyone remember the whole antenna issue with iPhone 4?). The safe money bet is that they do it again but the stock price relative to its 50-week moving average seems to be key to exposing consumer/investor sentiment relative to this company.

Will we see them return to the innovative company it was in 1984 when they introduced the Macintosh or will they cede the technology/consumer products mantle to Samsung? I will be watching and will keep you in the loop.


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