|by Wes George
A Technical Analysis Of AAPL
March 29th, 1999
Last week AAPL sustained a clear effort to turn around the downward drift that has plagued the issue since the high on January 13th of $47 5/16. The volume was low late in the week but continued the beginnings of an upward trend that began March 12th near a low of $32.
Since February the price of Apple stock has been testing support at $32 and found it to be rock solid. Fortunately, support in the low 30s held. If it had broken down, there would have been panic selling down to $25. That was just what the shorts were hoping for. The support level at $32 is now stronger than ever as daytraders and market makers highlight that level in their own technical schema of the AAPL stockscape as the probable low for the year.
A beautiful double bottom has formed in the $32 range and the close above $36 indicates that the resistance encountered in mid-March at that level may not hold long. $36 is also the 200 day moving average and the close above this mark, even slightly, is another technically bullish signal.
On the other hand, a candlestick chart reveals that Thursdays candle formed a "hanging man", which may mean nothing due to the low volume from the approaching Easter weekend, but normally it would mean a down turn on Monday but probably nothing that would break the new upward trend.
These are the sort of voodoo signals that short interest looks for when trying to determine when the joy ride down has bottomed out and its time to cover with a buy. With something over 15 million shares of short interest outstanding, the ride back to 40 will be helped along by their combined buying pressure.
Indeed, Apple has one of the highest volumes of short interest on the NASDAQ for reasons that are not clear. Typically a high tech company with fantastic new products and a low PE ratio would be considered undervalued and not a profitable candidate for short positions. How much lower can AAPL stock reasonably go? Apparently, many investors do not yet believe the turn around of Apple can be extended into the next century.
Perhaps, one could look at the short interest in AAPL as a contrary indicator. After all, if one feels the only way to make money in this endless bull market is to short Apple, one is perhaps not the brightest light out there. But I digress.
Reports like this one from Bloomberg reinforced the upward technical trend, "The company said last week that demand for the new iMac personal computers, which come in five colors, is exceeding the company's most optimistic forecasts. The iMacs are the best-selling PCs in stores in the U.S., Japan and France."
The quarter has recently ended for Apple. All guidance in the way of winks and smiles from the corporate leadership is that everyone is sitting happy. April and May, and the rest of the year, are fairly packed with events that will have bearing on the direction of the stock price. This should be a nice contrast to the last couple of months of blaring silence. As weve seen, Apples stock will not move upward without news.
No use getting too excited, however, as theres a pretty strict ceiling on just how high AAPL can go in the next few months.
A number of investors who bought in the $40 range are impatient with this quarter long downturn. Watching their money sit dead for weeks in this raging bull market is so frustrating that theyll sell at their December or January entry points just to be done with the stock. This will cause some stiff resistance all through the $40s for the share price that only a really solid turn of events can bust through. And, of course, the plague of shorts will be back in full force once Apple gets back near its high.
In fact, I dont think that Apples stock price can get above $45 before the first numbers are in for the P1. The announcement and release of the consumer portable will not be sufficient to get Apple above this mark. Since the P1 isnt going to be released till May it probably wont be before MacWorld in July that we have a clear idea of how well the new consumer portable is going to do.
Further out in 1999, if the consumer portable is a homerun like the iMac and if the y2k issue doesnt panic the market and if the war in Kosovo doesnt turn into something wider and more menacing, then AAPL should easily be able to hit new highs.
AAPL is a value play right now and with people making fortunes on the Internet offerings and the whole jubilee atmosphere (should say stratosphere) of the market, AAPL is not exactly a hot property.
Its a shame that Apples remarkable turn-around in the last year looks so paltry in comparison to AOLs 600 percent rise in the same time period. Such is the hyped state of todays market that everyone wants to go with those that have the momentum regardless of the fundamentals. All have been rewarded handsomely for their recklessness.
Your comments are welcomed.
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Wes George writes about the financial side of being a Mac nut. Wes has followed Apple's finances for the last 7 years and comes to The Mac Observer every Monday to tell all about his opinions. He is, in his own words, "inordinately fond of money." If you would like to write Wes, make it nice. Someday you might own a company that has something to do with Apple, and Wes will probably still be writing for The Mac Observer...... On the other hand, Mr. George is known to love a rousing, hair-raising debate, so send him your worst!
Disclaimer: This column is for informational and entertainment purposes. While Mr. George may be sage indeed, his writings can not be construed as a solicitation to buy, nor an offering to sell any particular stock. As with any trading in the financial markets, you must use your own judgment to make the best trades that you can. Neither The Mac Observer nor Wes George may be held accountable for trading advice.