Apple's Stock Drops 3%, Enters Correction Territory

Shares in Apple Inc. have taken a bit of a beating in the last two weeks of trading, losing some 12 percent of their value. The stock has been pressured by worries about iPhone growth, concern that Apple Watch won't be a revenue game changer, and ever-present concerns about China's economy, but what sent investors into a tizzy Tuesday was $AAPL falling below its 200 day moving average.

Five Day Chart for $AAPL Ending August 4th, 2015

Five Day Chart for $AAPL Ending August 4th, 2015
Chart Courtesy of E*Trade

This is a bit of technical gobbledygook used for a stock that declines more sharply than a 200 day moving average of the stock's price. It has nothing to do with a company's fundamentals, profits, losses, prospects, or even business—though it can be informed by all of these things—and is all about thinking what a stock will do based history.

It's sort of like investing in tomorrow by looking into a mirror over your shoulder. Technical investing isn't limited to Apple, and there are all manner of traders who follow so-called technical indicators. For a company like Apple, technical indicators tend do have short term effects on its stock, while fundamentals and performance win out over the long haul.

In fact, let's look at the last ten years of trading:

10 Year Chart for $AAPL Ending August 4th, 2015

10 Year Chart for $AAPL Ending August 4th, 2015
Chart Courtesy of E*Trade

That said, Apple's stock has officially entered into a correction, as it has lost 11 out of the last 12 trading sessions and more than 10 percent of its value. It closed Tuesday at $114.64 per share, a loss of $3.80 (-3.21 percent), on very heavy volume of 123.9 million shares trading hands.

According to Bloomberg, that was more shares trading hands than the most popular fund on Wall Street, the SPDR S&P 500 ETF Trust. The last time that happened was September 9th, 2014, the day after Apple announced Apple Watch, as well as new iPhones and other new products.

At $114.64 per share, $AAPL is more than 14 percent off its all-time high.

Long term $AAPL investors are used to such selloffs, and technical trading is likely to shape the company's stock until the next round of actual news. That could be in September, when Apple is expected to unveil new devices.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.