i haven’t commented on AAPL since adding it as a short on friday (entry price was effective on monday’s opening price of 679.99). however, the price action since then has only confirmed my suspicions, and the technicals, that AAPL might have reached a near-term level of buyer saturation. basically, there are only so many mutual funds, hedge funds, and individual investors out there as potential buyers of AAPL and once all willing buyers (generally speaking) have bought their last share, then the supply & demand dynamics shift in favor of the supply side (more willing sellers than buyers in the marketplace).
immediately following the Samsung verdict late friday (the US case), headlines such as “this verdict is a game changer in the smart phone industry; a huge win for AAPL; etc..” were pouring out everywhere. the first potential sign of buyer exhaustion was the less-than-stellar gap that following monday. then, the fact that AAPL couldn’t even manage to expand on those gains and closed below the opening gap price that day was another indication. since then, the stock has continued to drift lower and faded the entire gap and then some.
as you can see from the updated daily chart below, that gap was (so far, knock on wood) the perfect short entry from a technical perspective as AAPL gapped right into the top of that wedge i had shown on friday’s post (first chart below, 2nd chart is today’s updated daily chart zoomed in a bit). this trade is still only up just under 2% and still has a lot of work to do but as the case has been made here recently, if AAPL goes down, it will almost certainly drag the market with it. first things first though, and that would be AAPL falling to the bottom of that wedge pattern (which an initial reaction on is likely) and ultimately a break of that wedge to trigger a more powerful sell signal on AAPL as well as the broad markets.
