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Volatile Apple May Be Predicting a Dull Summer

By Rick Ackerman Posted on April 30, 2012, 6:53 am EDT Last Updated April 30, 2012, 1:49 pm EDT

We wrote here recently that as Apple shares go, so goes the U.S. stock market. How has the stock fared?  Last week there was quite a bit of excitement when the broad-tossers who manipulate the stock for a living short-squeezed the bejeezus out of it after the close, leveraging a strong earnings report that could have surprised only Wall Street’s clueless analysts. Moments after the news hit the tape, AAPL gapped up 9% in a blink, recouping two-thirds of the losses it had suffered the previous two weeks, when it plummeted $90 from an all-time high at $644.  From a technical standpoint, what was interesting about the  decline is that it reversed from within 29 cents of a “Hidden Pivot” correction target we’d disseminated to subscribers a few days earlier. For if the stock had exceeded that number by more than a couple of dollars, it would have held bearish implications for the short-to-intermediate-term. However, because the pivot survived, there was no way to judge the mettle of bulls until Apple rallied out of the hole.

This it did, in spectacular fashion, with last week’s gargantuan short squeeze. The goosing instantly added $50 of value to each share of the world’s most valuable company. Nothing like a little volatility to keep the crowds coming back for more, right?  Putting aside the comical spectacle of a $600 billion whale flopping around wildly in NASDAQ’s bathtub, the rally put Apple shares in play once again as a bull-market bellwether. That said, we have our doubts that new all-time highs will be achieved any time soon. Notice in the chart how last week’s gap-up rally, powerful as it was, narrowly failed to surpass peak #1.  If buyers had more guts, shouldn’t they have taken on that last, niggling resistance before settling back triumphantly? That’s the way we look at it, and although the logic may seem somewhat subjective, it becomes less so in the context of tens of thousands of similar patterns we have observed over the years. To put it simply, stocks that are about to come roaring back – and in Apple’s case, leap to new highs – do not hesitate in this way.

What to Look For

Not that we see the AAPL falling apart. Far from it. It’s still a great company with spectacular margins and business that is growing around the world. But it would be no surprise to us if the bullish trajectory flattens, leaving Apple’s price little changed six months from now. Meanwhile, we’ll be watching closely for signs that the world-beating manufacturer hasn’t lost its mojo after all. What would it take to put shorts on the run again?  Most immediately, a pop this week above the “external” peak #2 labeled in the chart.  In the parlance of Hidden Pivot Analysis, this would “refresh the bullish impulsiveness” of the hourly chart.  If, on the other hand, the stock is unable to muster the required push, look for it to meander the summer away. Although that would reduce the odds of a stock-market crash before the election, it would also restrain the Dow Average from wafting toward all-time highs near 14,000 recorded in 2007.

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  • gary leibowitz April 30, 2012, 7:12 pm

    A stock that went up 80 percent in 12 months having a correction? You call that a problem? Wow, 2 percent move in a day? Even this 4 year run on the SPX recently had a 2 percent daily move.

    Call me old fashion but I would call that normal. It’s forward P/E ratio is certainly not pie in the sky. In fact after such a run up I would expect the forward ration to be a lot higher.

    Keep looking for Space Martians, Gremlins and UFO’s and I am sure you will find them. I expect an even larger drop over the next month but will assume it to still be nothing more than a correction. A cockeyed optimist.

    • Rick Ackerman April 30, 2012, 7:51 pm

      Recent price action in the shares of Apple, by capitalization the largest company in the world, would hardly qualify as ‘normal,’ Gary. Whack-o and/or sleazy are more suitable adjectives.

      As for “Space Martians, gremlins and UFOs,” it is you who are hallucinating, since Rick’s Picks forecasts are based on nothing more or less than impulse legs. The important thing where paying subscribers are concerned is that forecasts for Apple have been precise, properly bullish and more or less errorless going back…years.

    • gary leibowitz April 30, 2012, 8:13 pm

      I don’t question your technical method, only the comments on this board regarding how everything is pure manipulation until it falls hard.

      AAPL had a very negative article in the NYTimes this weekend. Pertained to their ability to skirt local tax.

      The SPX had 2 percent days also. I would call that a bit more capitalized than just one company yet it still looks like normal rotation. When the price of anything goes straight up, even in a great bull run, fear and greed comes into play. Wanting to lock in those gains on any sign of trouble is normal.

      Based on fundamentals it is in great shape. There is nothing in their report that suggests they will not meet their next quarters projections. Would you expect a growth company to have a 10 P/E in an environment where growth is still there? I personally see instability from the EU causing temporary problems for this market over next couple of weeks. Internal growth has been for the most part on par. Spending, wages, and savings are up. I would say internal growth is set to accelerate.

      I find it peculiar to ignore fundamental data when proclaming an imminent crash. Had the EU stalled sufficiently, the SP500 companies would be announcing this shortfall in earnings. They derive on average 40 percent of their profits from them. That is one data point I would look for.

      &&&&&

      Everything IS “pure manipulation,” Gary — and I say that as someone with twelve years of floor trading experience. Regarding the NYT article, I read it as positive toward AAPL, even if the left-tilting ‘Times’ didn’t intend it that way. As the story noted, and several readers acknowleged, AAPL is on the cutting edge in finding perfectly legal ways to reduce its tax bill. The result is that it pays a tax equal to about 9% of income versus, for example, Safeway’s 23% (if memory serves). From a purely economic standpoint, you might say that every company that is not Apple is in the wrong business. RA

    • Bam_Man April 30, 2012, 8:24 pm

      Look at the trading range for AAPL each day.
      It is at least 2% EVERY DAY and 3% on most days (including today).
      For a company with a market cap of over $500 billion, this is “normal”?
      If the stock is behaving like a Hedge Fund/HFT plaything, maybe that’s what it is.

    • gary leibowitz April 30, 2012, 11:02 pm

      In the 1990’s there was one day where the NASDAQ went down 12 percent and ended the day up 1 percent. That was a 25 percent move in ONE day.

      In the past 4 years we have had 2 percent daily moves in all indices. A stock that moved up so fast surely can have moves like this. To suggest otherwise is to actually suggest manipulation. A smooth non-volatile stock for 12 months is kind of hard to swallow.
      Since there are huge mutual funds with 5 percent exposure to this ONE stock, if they rotate out or into AAPL it will have big moves. Like I stated if the whole NASDAQ can have a 25 percent move in one day, SPX 2 percent daily moves, surely AAPL can.

      The higher the stock goes without much support (Time) the more likely it will have volatile days.

      Most here not only doubt AAPL’s move, they doubt the last 4 years. 4 years of manipulated stocks and earnings? Sorry but you have to draw the line somewhere when it comes to accepting manipulation theory. A theory that ignores 4 years of spectacular returns.

      Think about it for one moment. If 4 years ago you were correct and they did try to manipulate the market BUT FAILED we would be at a P/E ratio of about 4 or 5 today. Not exactly in the norm during growth. With zero return on your money elsewhere it would be IMPOSSIBLE to mantain a 5 times price to earnings on the SP500 today. Now I would call THAT manipulation.

    • Cam Fitzgerald May 1, 2012, 2:34 am

      One thing we might agree on, Gary, is that European instability will be playing a role in a market correction this week. I believe the dollar is about to rise with gold finally falling below 1600 and silver sub 30. A thrust higher in the Dow looks unlikely this week while a metals decline looks predictable in conjunction with a weakening Euro…..I could kick myself for missing out on the Nat Gas impulse because it was so damn obvious in coming. It is not over yet though. All is not lost. But the charts are telling most of the story, Gary, while the real meaning is not always easy to divine and sometimes get lost in the theater of fundamentals and news feeds that are oddly (and often) timed to perfection.

  • Bam_Man April 30, 2012, 6:11 pm

    It is kind of strange to see the stock of the world’s most profitable and valuable company moving by at least 2-3% every single day.

    If I didn’t know better, I might be tempted to think that the stock of the most valuable company in the world is nothing but a Hedge Fund/FT plaything.

    • Seawolf April 30, 2012, 6:26 pm

      The herd stampeding in all their glory.


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