AAPL: WHY SO PRECARIOUS?
The questions about AAPL have been raining on me this weekend like my name is Destiny and I'm 3 feet away from a chrome pole. As an observer of market history, I become concerned when assets of the investor class are so heavily allocated into one idea as they seem to be in AAPL. The story never ends well. That's the bottom line.
Apart from my admitted chronic skepticism of AAPL as an investment, I am willing to deliver some short to intermediate term analysis in order to clarify the picture. AAPL was an extremely accommodating investment on a technical basis as it HAD BEEN behaving in an extremely symmetrical manner for most of 2012. That symmetry allowed me to make multiple calls on AAPL throughout the year that made me look like I had a long grey beard, pointy hat with stars and a wooden cane.
Well, guess what? The symmetry in AAPL is dissipating quickly. AAPL is poking its head in places it shouldn't. It is doing so frequently. It is doing so on greater volume than it should. The investment that is AAPL is becoming much more difficult to gauge than it has been for all of 2012.
Here is the problem with an investment like AAPL when it becomes difficult to gauge: You can't quantify the risk. And I'm not talking about saying that AAPL is trading at 9 times 2013 earnings so it can't have more than 10% downside. That is the articulate incompetent means of gauging risk. The markets thrive on abusing those who utilize miscellaneous gauges of value to determine risk levels without looking at what price action is saying first. It is why most value managers are absolutely putrid at their chosen profession. Moving on.
From a price/technical perspective what is your downside on AAPL versus upside? There is no answer to that question at this point. That is my problem with AAPL. It is not isolated to AAPL either. I will not invest in any vehicle where I cannot quantify my risk within 20 seconds of looking at the instrument. It is the first thing I look at. It is the last thing I look at. AAPL just so happens to be the Beatles of the stock market and the current generation of investors are 17 year old girls, wearing plad dresses and those funny looking pointed eyeglasses girls used to wear in the 60s. You know the ones.
From a purely short-term perspective, I will say that the volatility and volume we are seeing at these levels if indicative of either (A) a change in trend back to the upside taking place in the week ahead OR (B) an acceleration to the downside that will be violent in nature.
I just so happen to think from a probability standpoint it will be choice (A). The problem with attempting to catch AAPL, however, is that it is so crowded that it will be prone to some serious head fakes before it begins rising. It could break 500, swoop down to 490 and then close at 510+ before deciding to move back up. It could just start rising Monday. If you do choose to be Indiana Jones here, you had better know where your exit point is just in case your are entering The Temple Of Doom.
Here is a technical look:
click chart to enlarge
AAPL
