Apple (NASDAQ:AAPL) — Earnings growth has been spectacular, averaging 72% in the past five years. However, sales growth is expected to fall to 14% for fiscal year (FY) 2013 compared with a 45% rise in FY 2012, and the growth estimate for FY 2014 is again just 14%.
The stock had a spectacular run last year, up more than 70%, to a high of over $700 from $405. But after September’s high, the stock suffered a violent reversal into a bear market, and every attempt to break the bear market’s resistance line has failed.
The latest rally resulted in closing a bearish continuation gap at $485, after which it again turned away from the major resistance line and consolidated with a new support line at $440. But the consolidation has taken the form of a head-and-shoulders, and a break below the neckline at $440 would target a further decline to under $400.
Sell AAPL short on a break of the neckline at $440. Selling short is a speculative technique that is not suitable for every investor. Use a stop-loss to protect against potentially unlimited losses. And check with your broker for any special margin requirements and the ability to borrow shares.
Note: The Trade of the Day has been consistently bearish on AAPL since Oct. 9, when we suggested a short sale at $638. The most recent short-selling recommendation was on Dec. 17, at $510, when we adjusted a prior downside target of $500 to $450.