Shares of Apple Inc (AAPL) are slightly lower today, but up for the week. At the start of 2020, Apple was trading around $80/share. It then fell to $53/share before rocketing to $138/share. It currently trades around $120/share. So what do the chart say about this stock going forward? Below I will lay out my technical and fundamental analysis of why Apple is headed to $96.35. This Apple short trade can be played by shorting the stock or buying puts that have an expiration of March 2021 or later. As always, shorting stocks/options carry risks, understand them, don’t be a dummy.
- On a monthly and weekly time frame, Apple is still extremely overbought. A move from $53/share to $138/share on a company of that size has yet to be fully worked out.
- The top on Apple at $138/share was an epic gap higher and mega reversal day. This signals a blow off top in the stock on insanely heavy volume. These tops tend to be multi-year tops, not multi-month tops. A pull back like we have seen is not the normal pull back a stock sees after putting in a top like that.
- Apple just debuted the iPhone 12, the new 5G capable phone. This was news that analysts were excited about for years and arguably what drove the stock higher for years. That news is now over and there is a void of future positives. A sell the news event is likely to continue.
- After topping at $138/share, the stock fell sharply to $103.20 before bouncing back to the $120/share level it is at now. This bounce is what is called an in-spirit-of bear flag or inside-bar formation. It is currently bearish.
- With odds favoring a Democratic sweep, regulation is coming for big technology. The age of monopolies is likely over. Even a possible breakup of certain behemoths is likely. While Apple will not likely be broken up, there has been major unrest from companies in their app store as Apple hits them hard with 30% fees. Regulators will likely attack this and if it is lowered, the highest margin portion of Apple’s business will suffer. If that happens, valuation will need to drop sharply.
- There is an epic gap fill at $96.35 as well as a rising daily 200 moving average. As smart investors know, gaps are made to be filled. This mega gap will get filled and the rising 200MA will likely meet at that level. The 200MA has not been tagged since March 2020. The distance from the 200MA on the stock as well as the time away from hitting it as very unusual. History tells us that Apple will likely fill that gap and also hit the 200ma in the not-too-distant future.
All this makes for a strong for an Apple short trade. Look for downside to begin soon and be harsh, especially if you get an Democratic sweep.
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