Apple (NASDAQ:AAPL) — This iconic company’s growth has been spectacular with earnings increases of over 80% in each of the past five years. Sales growth is expected to be near 25% in fiscal year (FY) 2012, ended in September, compared with a 66% rise in FY 2011.
The stock had a spectacular run this year, up more than 70% to a high of over $700 from $405 at the beginning of 2012. But I voiced doubts as to the sustainability of the rally on Sept. 12, with the stock at $669.79, saying, “Traders (only) may want to short AAPL on an advance resulting from product announcements with a target of $630.”
And, on Oct. 3, I offered multiple possible outcomes for AAPL, one of which was: “The stock resumes its near-term downtrend, closes under $652, and thus confirms a head-and-shoulders breakdown with a target of about $605.”
On Oct. 9, with the stock at $639, I wrote: “On Monday, the third option, a head-and-shoulders breakdown, occurred following more production problems with the new iPhone 5. Despite reduced trading volume due to Columbus Day, enough sellers surfaced to drive the stock’s price through the neckline at $655 on a breakaway gap. This is a classic breakdown — it just doesn’t get any clearer than this.”
Then, on Oct. 26, I said, “Those who shorted the stock may want to take profits this morning if it opens lower. However, the stock may head even lower with its next target the 200-day moving average line at $587.”
Finally, on Nov. 7, with AAPL at $574, I wrote, “It is time to cover short positions. Those who shorted the stock on our Oct. 9 sell recommendation and continued to hold the position until now made 9% in less than a month.”
Now, closing Wednesday at $538.79, AAPL has failed to hold above its major support line at $570 for the second time, and the MACD indicator is turning down threatening to trigger a long-term sell signal called a “death cross.”
Refrain from buying shares of Apple until the technical condition changes. New short sales may be initiated with a target of $500.