Thursday, April 23, 2009

A Trader Favorite - Apple Computer

In the spirit of our chartapalooza which will end this week, let's take a look at Apple Computer from the March low. Apple is a favorite of traders - it is liquid and highly volatile. Plus it disproportionately impacts the Nasdaq 100 Index so there are many strategies one can employ using the stock such as a strategy we highlighted a few years ago - spread trading.

Apple's stock has been on a moon shot. It is up over 50% in a little over a month. This move is being driven purely by traders playing this price channel. They are shooting for $129-ish on the stock. We shall see if they get there. From the high yesterday, we are less than $4 away.

As you can see from the red linear regression line, price is losing some momentum relative to its price channel. Buy and hold investors off of the March lows are likely to get their butt handed to them. As we have highlighted quite a few times, this stock is a pig.

Yapping hubris about iPhones, iPods and iMacs has no foundation in reality. The company has great products but what does that have to do with the stock? The reality is Wall Street has pumped the Apple story to drive liquidity and main street investor participation. Not because the stock is a good investment.

My downside target remains somewhere south of $38 as we have highlighted numerous times.
posted by TimingLogic at 7:43 AM