How Low Can Apple (AAPL) Go...$420's?

The Changes Taking Place with Apple (AAPL)

Outside of the impact the election has had on the markets since President Obama was declared the winner of Tuesday’s presidential race, Apple (AAPL) has, no doubt, been the biggest story. 

Just this week alone it has dropped from $584 down to the current price of $543. And remember this was a stock that back in September, was breaking through $700 per share. 

Apple’s Sell-Off

One of the most impressive things about AAPL’s decline to date has been how well it has led the 8-day exponential moving average, without so much of a break. 

However, if this stock fails to hold the $522 price level, I believe AAPL’s share price is really going to fall through the floor. Not all at once, but eventually, it will likely test that $420 support level (the nearest one in site after $522), which is also home to one major unfilled gap up. 

If that’ happens you are talking about a major sell-off from it’s highs of $705. In fact it would be a $285 sell-off in all. 

Another sign of concern for me in this stock is the increasing volume throughout the downturn. Typically when we’ve seen sell-offs in AAPL in the past, it has been because retailers were getting skittish and selling their shares to the funds. This time, it isn’t just the retailers but the funds too that are selling – the likes of which hasn’t been seen since 2008. 

Now, on the weekly chart, AAPL has dropped seven straight weeks. That is hard to do… in fact it’s VERY hard. The 50-week moving average which has provided lots of support in the past, has failed to hold price. The last time AAPL was trading below this moving average was in 2009. So yes, there is a shift in sentiment for this stock. 

But with that said, I can see this stock moving higher in the very near-term, simply as a dead-cat bounce. On the weekly and daily time frames, AAPL is oversold. As I just mentioned, a stock that has dropped seven straight weeks, also inclines itself to some short-term buying. When that happens, I don’t think that suddenly, perception of this stock will have changed. 

I know that I’m going to get some irritated AAPL investors – and that’s ok. I could be wrong, and have been many times in the past (I thought Mitt Romney would win the election – Ha!) but I can only trade off of what I know, and Apple is violating every stronghold technically, and once it gets below $522, I believe there will be an additional wave of buyers running for the exits. 

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Ryan Mallory is the co-founder of SharePlanner Inc, a financial website devoted to Day-Trading, Swing-Trading (both long & short) and exchange-traded funds. Ryan makes a strong emphasis on risk mitigation strategies, trading transparency, and trader education – not to mention a great set of stock screens as well.

Be Sure to Check out Ryan’s Site at Shareplanner.com

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