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Jeff Pierce
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I’m a swing trader of momentum stocks with a holding period of anywhere from a few hours to a few months. I run a number of screens to locate the strongest/weakest stocks out there, using technical analysis to determine my entries and exits. Trying to calculate the intrinsic value of stocks in... More
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tradewithZEN
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  • Can The Markets Rally Without Apple 0 comments
    Oct 10, 2012 3:29 PM | about stocks: AAPL

    It's a valid question because no one stock should really dictate the direction of the Nasdaq, even with a weighting as large as AAPL. Since we all have really short term memories it's easy to say that the Nasdaq cannot go up without Apple, but when you view the monthly chart (last one) below, but it wasn't until 2005-now that Apple has gone on a ballistic run that has catapulted it to the top of many mutual fund's holdings. That in itself could be bearish if you subscribe to the theory that when everybody is on one side of the boat then it's close to the time when something bad is about to happen.

    About the only way I see the markets rallying is if we start to see some serious sector rotation going on to pick up the slack should Apple's stock start to slump and go into some sort of a longer correction. A few days ago I thought Apple had survived it's 50 day ma test, but Friday's action seems to suggest that isn't the case as sellers resurfaced.

    There is a head/shoulder pattern forming on the 60 minute chart and my own indicators say that Apple is heading to $560 as part of a larger correction that needs to take place. The weekly chart is top heavy and nothing rises forever. We may bounce and rally up to resistance as the loyal Apple enthusiasts believe their stock is invincible….but all stocks eventually fall under their own weight and Apple has a long ways to fall.

    Even though I am suggesting Apple is about to undergo a correction, I personally would not short it. I never short strong stocks and I never buy stocks in severe downtrends. That is my preference and all traders must do what suites their personality.

    Short term we are seeing weakness in Apple which hasn't completely dragged the Nasdaq down.

    (click to enlarge)

    Last 16 months these two charts have been a mirror image.

    (click to enlarge)

    Apple's run is unsustainable.

    (click to enlarge)

    List of funds holding Apple.

    From an article in USA Today last March.

    Normally, enthusiasm for a particular stock can be worrisome: If most funds already own the stock, there may not be many more buyers lined up. And mutual funds aren't the only Apple fans: Institutions, such as pension funds, own $310 billion of Apple. The total fund industry owns $156 billion, says Morningstar. Wall Street currently values the company stock at $550 billion.

    Stocks: AAPL
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